Risks Inherent in Microfinance Bank
Tunde Raji - June 2, 2016

In every organization, risks cuts across all board but measures taken in managing risks is worthy of note. Hence, risks in microfinance banks cannot be over-emphasized. While some risks are avoidable, some risks are inevitable.

For instance, the risks inherent in credit administration of microfinance bank include: direct lending risk, contingent lending risk, issuer risk, settlement risk, clearing risk, equity risk, price risk, liquidity risk, disclosure risk, and documentation risk.

30 thoughts on “Risks Inherent in Microfinance Bank”

  1. Quality and proper due diligence is prerequisite to successful loan performance. MFBs must improve the quality of their assessment, invest in training and re-training of staff. This will help to reduce the inherent risk.

  2. Good site! I really love how it is simple on my eyes and the data are well written. I am wondering how I could be notified whenever a new post has been made. I’ve subscribed to your RSS which must do the trick! Have a great day!

  3. Risk is an inevitable factor in business and it’s an every day occurrence in the life of any organization. Risk is worth planning for in order to avoid being taken unaware by unforeseen circumstances of life. To achieve any business success, we must encounter with risk of different dimensions which I may not have enough time to mention all here but the most common of risks in business are operational, liquidity, investment, credit and managerial risks. And microfinance banks or institutions are not exceptional.

  4. But the stronger your risk base is, the more you don’t lose cash but the higher you loose customers. To me, there should be a bit of flexibility. Thank you

  5. The Chinese defines risk as a mixture of Danger and Opportunity. Risk is embedded in all our activities in the banking sub-sector. Hence, individual organizations should put in place a strong Risk management team who will be saddled with the responsibilities of risk identification, profiling, mitigations amongst others. The CBN prudential guidelines have also provided or considers risks in a consolidated basis and grouped them into; Credit, market, Operational, Liquidity, Legal & regulatory, strategic risk. Unfortunately too, majority of MFBs concentrates majorly on credit risk leaving other types of risk unattended to. The result in the end is an undesirable one. The first MFB in Nigeria didn’t go down in year 2009 because of credit risk, but on other kind of risk which was not given needed attention. On the final note, if we don’t do risk management, crisis management is inevitable.

  6. Most MFB don’t know this; Applying Risk Management Process: identifying, analyzing and evaluating the risk itself. And also, transfer the risk to the third party e.g insurance etc
    Lastly, decision and approval by management to accept remaining risk after treatment process is concluded which the risk must be communicated and monitored.

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