Managing Operational Risk Related to Microfinance Lending Process

What is it about?

Managing operational risk efficiently is a critical factor of microfinance institutions (MFIs) to get a financial and social return. The purpose of this paper is to identify, assess and prioritize the root causes of failure within the microfinance lending process (MLP) especially in Moroccan microfinance institutions. Considering the limitation of traditional failure mode and effect analysis (FMEA) method in assessing and classifying risks, the methodology adopted in this study focuses on developing a fuzzy logic inference system (FLIS) based on (FMEA). This approach can take into account the subjectivity of risk indicators and the insufficiency of statistical data. The results show that the Moroccan MFIs need to focus more on customer relationship management and give more importance to their staff training, to clients screening as well as to their business analysis.

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