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14 Chapter 1 - Risk Management: Preparing for the Unexpectedinstallment or lump sum payments, and the effective interest rate) to accommodate price volatility and theclient’s cashflow.To address the issue of low crop productivity, the MFI can help microbusinesses form an alliance with businessservice providers—an agricultural technology institute, for example. This relationship can provide farmers (MFIclients) with access to improved seeds and pesticides, recent developments in land management techniquesand production technologies, and improved postharvest practices. It would also help the clients move fromtraditional to more commercially oriented production and business practices.Finally, to improve access to clients in dispersed rural settlements, MFIs should take advantage of low-costtechnologies such as mobile phone–based microfinance transactions or banking service correspondents (seechapter 8 of this volume on technologies).Because risks are unavoidable, they must be managed. Risk management systems are, in effect, the wings neededbefore taking the leap of faith of lending to large numbers of informal microbusinesses. MFIs with effectiverisk management systems in place are far better prepared for the unexpected, and this preparation can be thedifference between growth, stability, or bankruptcy. By instilling a culture of risk management throughout theinstitution, from the board of directors to loan officers and internal operations staff members, the MFI and itsclients should be able to manage unexpected events—and even thrive.
Managing Risk and Creating Value with Microfinance15ReferencesBradbury, Ray. Undated. http://www.brainyquote.com/quotes/authors/r/ray_bradbury.html.Fernández, Fernando. 2006. “La Gestión de Riesgos en Instituciones Microfinancieras: Una Perspectiva Rural.”Access to Rural Finance for Microenterprise Projects, Mexico, December 11.Imboden, Kathryn. 2005. “Basel II and Microfinance: Exercising National Prerogatives.” Women’s WorldBanking. http://www.swwb.org.Mommartz, Rochus. 2006. “Introducción a la Gestión de Riesgos y su Contexto.” Paper presented at a workshop atthe World Bank, Washington, DC, December 11.Ritchie, Anne. 2007. “Community-based Financial Organizations: A Solution to Access in Remote RuralAreas?” Agriculture and Rural Development Discussion Paper 34, World Bank, Washington, DC.Steinwand, Dirk. 2000. “A Risk Management Framework for Microfinance Institutions.”MicroFinance Network prepared for Deutsche Gesellschaft für Technische Zusammenarbeit, Chicago,July. http://www.gtz.de/en/.Van Greuning, Hennie, and Sonja Bratanovic. 2000. Analyzing Banking Risk. Washington, DC: World Bank.Additional SourcesDellien, Hans. 2006. “Crédito Rural: Estrategias para mitigar los riesgos agropecuarios.” Paper presented at aworkshop at the World Bank, Washington, DC, December 11.Fernando, Maheshan R. 2005. “Managing Foreign Exchange Risk: The Search for Innovation to Lower Coststo Poor People.” Microfinance Matters 12, United Nations Capital Development Fund.http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_05/news_managing.php.Uva, Wen-feil L. 2004. “Managing Market Risks,” Smart Marketing Newsletter, Cornell University, Departmentof Applied Economics and Management. Ithaca, NY, April. http://hortmgt.aem.cornell.edu/pdf/smart_marketing/uva4-04.pdf.
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Eco-AuditEnvironmental Benefits Sta
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