Risk Management and Efficiency of Microfinance Institutions

Abstract

Risk management and efficiency are very crucial for the survival of every organization. “Indeed, better risk management may be the only truly necessary element of success in banking” (Alan Greenspan) and “the obvious rule of efficiency is you don’t want to spend more time organizing than it’s worth” (Daniel Levitin). In microfinance, risk management and efficiency are important for the achievement of both the financial and social objectives of microfinance institutions, which aim primarily to provide financial services to the unbanked populations in the world. Giving uncollaterized loans to vulnerable borrowers is risky yet that is what microfinance institutions do. In this dissertation, I examine what could be a good business model in microfinance as far as general institutional sustainability is concerned.