RISK MANAGEMENT AND SOCIAL PERFORMANCE IN MICRO FINANCE INSTITUTION IN CASE OF AGAR MICROFINANCE INSTITUTION (AMFI)

Abstract

This study was aimed to recommend how managing risk used as a tool for promoting social performance of Agar micro finance institution(AMFI). For this research analysis we used the case of AMFI to show how improving risk- awareness of employees and their level of understanding of risk management could be used to achieve positive outcomes in terms of social performance of the institution. Obviously MFI risks are the potential for MFIs to deviate from their original social mission (social mission drift risk) explained as when MFI abandons its mission to serve the poor and starts lending wealthier people and the problem was observed similarly in the case AMFI . Hence the relationship between risk management and social performance were poorly justified on the basis of the role risk management indirectly plays in client protection in the case of AMFI. The general aim of this study is to recommend the use of risk management as a tool for improving social performance of microfinance institutions and the study would be valuable in promoting good social performance of AMFI been trying to ensure the institution do no harm to their stakeholders and maintain a good reputation of the trade. The study employed survey research methodology in which questionnaires were used. The study was also supported by the use of the CERISE Social Performance Indicators Tool (SPI4). Overall we found that the staff still needs to be equipped to understand why the risk assessment procedures are important. This study stands to justify good risk management practices can be used as a tool to improve social performance of AMFIs. Regardless of the argument the researcher observed a significant amount of respondents do not understand risk management used as a tool to promote social performance in AMFI. Due to those facts the researcher recommend AMFI should be optimistic to employ effective risk management practices as this will benefit all their stakeholders, particularly clients, through better social performance.