Evaluation of the Effect of Risk Management Practices on the Performance of Microfinance Institutions

Ewool, Letty Maanan; Quartey, Joyce Ama

doi:10.6007/ijarafms/v11-i1/8440

Cited by 7 publications

(10 citation statements)

References 25 publications

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“…The economic essence of such concepts as "financial monitoring" and a "risk-oriented approach" which represent important tools in the fight against shadow business today is explored in the works of national and international scientists in particular: (Bondar, Levitska, Ostapyuk, & Osadcha, 2016;De Koker, 2013;Ewool & Quartey, 2021;Gerasimenko & Zachosova, 2019;Klimova et al, 2020;Olekh, Rudenko, & Gogunsky, 2013;Pilonato, 2019;Singh & Best, 2019;Vnukova, Kolodizev, & Chmutova, 2022).…”

Section: Methodsmentioning

confidence: 99%

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A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring

Levytska

Pershko²,

Akimova

et al. 2022

IJAEFA

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The aim of this research is to generalize the international practice of internal auditing of financial transactions to substantiate alternatives to their rational use by financial monitoring entities in Ukraine. The purpose of the article is to summarize the key changes in international FATF standards and examine the use of a risk-oriented approach by Ukrainian entities in combating AML or CFT. Assessment of audit risk using quantitative characteristics is assumed on the basis of the most commonly used mathematical three-factor multiplicative model. Turning to the EU’s experience is relevant for the global expert and regulators communities given the necessity to consider the best world practices. Summarizing the above provisions of the theory and practice of the risk-oriented approach for Ukrainian SFM allowed for identification of the areas of its practical implementation in the system of internal audit of financial transactions. The presence of an internal audit service will increase the degree of trust that government representatives have in such companies and the likelihood that a mutually beneficial partnership will develop between the parties.

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Section: Methodsmentioning

confidence: 99%

“…However, it depends on the monitored entity solvency policy: the amount of risk assets. Their liquidity (repayment) is not taken into account and therefore it does not consider the entity's long-term strategy (Ewool & Quartey, 2021).…”

Section: Nature Of "Suspicious" Transactionmentioning

confidence: 99%

A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring

Levytska

Pershko²,

Akimova

et al. 2022

IJAEFA

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“…In order to mitigate the effects of high strain developments, including a severe worsening in market liquidity circumstances, which arise from its operational environment, it should make sure that its risk management procedures and capital levels are adequate. According to the international economists' assessment of the potential hazards to MFIs, market risk can be said to typically consist of three smaller risks: stock price risk, interest rate risk, and foreign exchange risk (Ewool & Quartey, 2021). Carey et al, (2016) adds that another type of market risk occurs when MFIs accept financial assets that are susceptible to price fluctuation as loan collateral.…”

Section: Market Risk Management Practicesmentioning

confidence: 99%

Financial Risk Management Practices on Financial Performance of Microfinance Institutions in Kiambu County, Kenya

Jerono

Olweny

2023

IJF

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Purpose: MFIs are subject to financial risks, just like all other financial institutions. This is intimately tied to their primary businesses of managing credit and accepting deposits. Therefore, risk management is crucial for MFIs in order to maximize their return on investment. The current study sought to establish the effect of financial risk management practices on financial performance of microfinance institutions in Kiambu County, Kenya. The study focused on establishing the effect of liquidity risk management practices, operational risk management practices, credit risk management practices, and market risk management practices on financial performance of microfinance institutions in Kiambu County, Kenya. The theories anchoring the study comprised of Risk Management Theory, Extreme Value Theory, Credit Risk Theory, and Capital Market Theory. Methodology: A descriptive survey research design was adopted in the study. The target population comprised of 31registered microfinance institutions operating in Kiambu County. The unit of observation comprised of Risk and Compliance Manager, Finance Manager, Operations Manager, Credit Manager, and Business Development Manager from each of the microfinance institution making a total of 155 respondents. A census approach was adopted in the study where all the registered microfinance institutions were involved in the study. Both primary and secondary data was employed in the study where 5-point Likert scale questionnaires were employed to gather primary data while a secondary data collection sheet was utilized to gather secondary data. Both descriptive and inferential statistics were used to analyze the collected data. The statistics were generated by help of Statistical Package for Social Scientist and MS Excel. Findings: The results of the analysis revealed that Liquidity Risk Management Practices, Operational Risk Management Practices, Credit Risk Management Practices, and Market Risk Management Practices positively and significantly affects financial performances of microfinance institutions in Kiambu County, Kenya as shown by beta values of 0.401, 0.309, 0.497 and 0.351 and significant values of 0.000. 0.001, 0.000 and 0.006 respectively. Unique contribution to theory, practice and policy: The results implies that when each of the independent variable is increased with one unit, financial performance of the microfinance institutions increases with the respective beta value of the independent variable. The results led to conclusions that liquidity risk management practices, operational risk management practices, credit risk management practices, and market risk management practices bears appositive and significant effect on financial performance of microfinance institutions in Kiambu County. The study provided recommendations to the management of the microfinance institutions to enhance their practices in areas of liquidity risk management, operational risk management, credit risk management, and market risk management to improve financial performance to a positive and significant level.

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“…This study uses a depth interview with practitioners and experts in Islamic MFIs. The questionnaire was designed before the interview was conducted, and adopted the questionnaire (Ewool & Quartey, 2021). The interviews also has several questions that related to the research focused and it is conducting on 30-1 hour by phone recording.…”

Section: Data Collectionmentioning

confidence: 99%

Analysis of Risk Mitigation Efforts for Islamic Equity and Debt Financing in Islamic Microfinance Institutions

Saputra¹,

Isa²,

Al-Azizah³

2022

JAASH

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This paper investigates risk mitigation practices and alternative measures for non-performing financing in sharia rural banks (BPRS) in Indonesia. Using in-depth interviews with Islamic microfinance practitioners who are expert in the area, this study explores two categories of financing which are equity financing (mudharabah and musyarakah) and debt financing (murabahah). The mechanism will advise on the themes of equity financing, debt financing, risk identification and mitigation, risk appraisal, risk control and monitoring, and digital systems. Interviews were conducted at 6 BPRS in West Java and Banten, Indonesia. The data will inform researchers about success stories of equity and debt financing by implementing risk mitigation to reduce the magnitude of the risk of each financing and alternative steps to mitigate non-performing financing. The results show that BPRS prefer musyarakah financing for equity over mudharabah, because they consider mudharabah to be riskier. For debt financing, all BPRS apply murabahah financing. Risk mitigation is carried out properly, starting from analyzing the client's credit history to assessing the required collateral. In the event of non-performing financing, the BPRS first assesses the source of the problem and the BPRS provides easy payments to clients through relaxation and restructuring. The digital system also plays an important role in mitigating BPRS risk and facilitating client access to BPRS.

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Evaluation of the Effect of Risk Management Practices on the Performance of Microfinance Institutions

Cited by 7 publications

References 25 publications

A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring

A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring

Financial Risk Management Practices on Financial Performance of Microfinance Institutions in Kiambu County, Kenya

Analysis of Risk Mitigation Efforts for Islamic Equity and Debt Financing in Islamic Microfinance Institutions

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