An Appraisal of Risk Management Practices of Microfinance Institutions in Ghana

Abstract

The inherent features of microfinance institution afford these institutions the potential to absorb unskilled and semi-skilled labour to nurture as well as promote small scale enterprises. However, in the Ghanaian economy, these benefits are not forthcoming due to the high failure rate of microfinance institutions. Relevant literatures were reviewed to bring out salient issues on the subject matter of this paper. The chief source of information for this write up is secondary method of data collection. It was discovered that the barriers to microfinance institutions success includes numerous and varied obstacles. Studies conducted confirmed microfinance institutions managements are ignorant pertaining to the risks their organizations face with risk management techniques deployed reactively and ineffectively. By embedding a structured approach to enterprise risk management within MFIs, potential benefits such as reducing the over-management of risks and organizational alignment towards the microfinance institution’s mission can be realized.

Keywords: Microfinance institution, risk, risk management, strategic risk management.