Risk Management in

Micro-Finance
Micro-finance involves lending small amounts of money to people who do not
have access to traditional banking services. Like in any other industry, micro-
finance is exposed to risks. In this presentation, we will explore the different types
of risks and the importance of risk management in micro-finance.

by Lyca Felicisimo
Micro-Finance Overview
Definition of Micro-
Finance
Micro-finance is a financial
service that offers small loans,
savings, and insurance to people
who lack access to traditional
banking services.
Mission
Our mission is to empower low-
income people by providing
financial services that enable
them to create a better life for
themselves and their families.
Vision
Our vision is a world where
everyone has access to the
financial tools they need to
improve their lives and support
their communities.
Types of Risks in Micro-Finance
Market Risk Credit Risk

The risk that changes in market conditions will The risk that borrowers will default on their
negatively affect our financial performance. loans, leading to losses for the micro-finance
institution (MFI).

Operational Risk Social Risk

The risk of loss resulting from inadequate or The risk that external social, political, or
failed internal processes, people, or systems. environmental factors will affect the operations
and reputation of the MFI.
The Importance of Risk Management
Investor Confidence
Institutional investors require a
comprehensive risk management plan
to ensure the safety of their investment.
1 Financial Stability
Risk management helps preserve the
financial stability of the MFI by
2 identifying and mitigating potential
losses.
3 Regulatory Compliance
MFIs are regulated by financial
authorities and are required to have a
risk management plan in place to
comply with regulations and avoid
sanctions.
Key Principles of Risk Management
Responsibility: Allocate risk responsibilities at all levels of the organization.
Documentation: Document all risk assumptions, controls, and decisions.
Control: Establish strong systems and controls to manage risk across the organization.
Monitoring: Monitor progress against risk management objectives and identify new and emerging risks.
Risk Management Methods in Micro-
Finance
Data Analytics
Use data analytics to identify risk
patterns and mitigate risk
proactively.
Collaboration
Work with other MFIs and
relevant organizations to share
risk management best practices
and collaborate on innovative
solutions.
Compliance
Adopt a compliance-focused
approach to ensure regulatory
compliance and avoid
reputational and financial risks.
Conclusion
1 Effective Risk 2 Collaboration is Key
Management is
Vital
Proper risk management
is essential to ensure the
long-term sustainability
and success of a micro-
finance institution.
3 Continuous
Improvement
Collaborating with other
MFIs and organizations is Risk management is an
critical to learn from ongoing process that
others and to find requires continuous
innovative solutions to improvement and
complex risk adaptation to emerging
management challenges. risks and challenges.