> Posted by Madeleine Dy and Danielle Piskadlo, Program Specialist and Senior Program Specialist, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
It’s heating up—maybe not in terms of the weather but certainly in terms of growth and competition for many microfinance institutions (MFIs). And as growth and competition rapidly increase in many countries, there are many potentially serious risks and impacts that MFIs need to take into account. As we have seen in the crises in Andhra Pradesh, Nicaragua, and Morocco – to name a few – microfinance is risky business, and it can be argued that many industry failings result from poor risk management and oversight. It might also be fair to say that risk management didn’t garner much attention before because times were good, but now, as more markets heat up, it is important that we learn from past mistakes, and focus the necessary resources to implement preventative risk management measures.
To provide MFIs with the risk management resources needed to help tackle this challenge, we are excited to announce that Risk Management was recently added as a “Hot Topic” on the Microfinance Gateway! The risk management resources now available through the Microfinance Gateway were compiled by a dedicated team of Credit Suisse Virtual Volunteers¹ in coordination with the newly established Risk management Initiative in Microfinance (RIM)², which was created to raise awareness as well as develop best practices and appropriate standards for risk management in microfinance globally.
On the Gateway’s new Risk Management Hot Topic, in addition to recommended readings and tools, you’ll find information on the main risks facing the microfinance industry, the major challenges for implementing risk management, and discussions on topics such as risk appetite, stress tests, and the role of the board. This Hot Topic is meant to be a helpful starting point for MFIs to access resources to support their efforts and initiatives around sound risk management.
Have you read?
A Journey to Understanding Risk as a New Board Director in “Governing Banks: MFI Edition”
Staying the Course When Risks Rise: Advice for Board Members
Ten Questions for Every Board Member
[1] CFI’s Investing in Inclusive Finance program greatly appreciates the generous time and knowledge contributed by the Credit Suisse Virtual Volunteers: Tristan Faber, Vice President in Commodities Quantitative Strategies, Sabine Winkler, Director in Fixed Income Research, and Alex Sbityakov, Director in Emerging Markets Trading.
[2] Founding RIM Members include: Appui au Développement Autonome (ADA), Calmeadow, Center for Financial Inclusion at Accion (CFI), Mennonite Economic Development Associates (MEDA), MFX Solutions, Microfinanza Srl, Oikocredit, and Triple Jump.