Standard Chartered and MicroSave Launch Risk Management Toolkit for MFIs

Keeping in view the current status and challenges of microfinance industry Standard Chartered and MicroSave on December 13, 2010 launched Risk Management Toolkit for Microfinance Institutions.

The launch drew attention of various stakeholders of the Bangladesh microfinance sector and participants represented banks, MFIs, regulators, donors/investors and government agencies. The Toolkit was launched by Mr Shafiqual Haque Choudhary, President, ASA followed by a presentation by Mr Manoj Sharma, Director, MicroSave and an engrossing panel discussion on current risks faced by the MFIs and measures to mitigate these risks. The launch was followed by a three day training course delivered by MicroSave.

It is evident that risk is inherent to any business, but what makes microfinance special is absence or near absence of traditional risk mitigation mechanisms like collaterals and guarantees. The Risk Management Toolkit addresses these aspects in totality while keeping in focus on risk mitigation. Management of Credit Risk, becomes important for the MFIs. Dispersed and decentralised operations are a special character of microfinance, making management of Operational Risk also very important to the management of microfinance.

To add to this in the recent times, the MFIs (particularly nascent ones) have been shifting away from the traditional grant funds and are increasingly relying on the commercial Bank funding. Increasing integration of the microfinance sector with the mainstream financial sector, product development, diversification into new geographies not only adds complexity to the credit and operational risks but also poses additional risk like interest rate, foreign exchange and liquidity collectively clubbed under Financial Risk.

These prompted Standard Chartered and MicroSave to develop the Risk Management Toolkit for MFIs. Various frameworks and approaches to manage each of these risks are also dealt with. The Toolkit comprises 'ready to use' training material.

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