Abstract:

The survival of microfinance institutions in every country is heavily influenced by the country's general political and economic climate. The greatest issues that microfinance institutions challenged internationally in fulfilling their function as financial intermediaries are determining practices of appropriately managing risk exposures through adequate risk management practices. The objective of this paper is to study the risk management practices of microfinance institutions by examining previous literatures. The discussion of literatures indicates that the risk management practices of microfinance institutions include understanding risk and risk management, risk assessment and analysis, risk identification, risk control, risk monitoring, managing credit risk, managing market risk, managing liquidity risk and managing operational risk, which is important for policymakers, managers, researchers, and other stakeholders of microfinance institutions. According to most studies, there is a strong association between risk management processes such as risk identification, risk appraisal, risk control, risk monitoring, and risk management practices.