Microfinance institutions (MFI) are faced with many problems which restrict their potential. These issues, mainly associated with credit risk, are discussed here.
Challenges in risk management for small scale microfinance institutions in India
For a long time now, microfinance institutions (MFI) in India have followed the traditional operational model of procurement and distribution of money among rural people. However, during the past 10 years the industry changed radically with a new business model.
Strategies adopted by microfinance institutions in India to mitigate risks
Group lending is one of the innovative tools used to mitigate credit risk. The outstanding feature of group lending is that no collateral is required to lend loans but the group is responsible for the payback of the loan (EY 2014).