FACTORS AFFECTING RISK MANAGEMENT PRACTICE IN AMHARA CREDIT AND SAVING MICRO FINANCE INSTITUTION

Abstract

Financial institutions have emphasized risk management as an essential element of long-term success. Hence, management and regulators now focus on an organization’s ability to identify and manage future risks Rather than focusing on current or historical financial performance. There are a number of factors that impede the well-functioning MFIs institutions. Hence, these factors should be clearly assessed, identified and ranked in accordance to their effect on performance of microfinance institutions in order to provide appropriate solutions for the identified factors. The rationale behind for undertaking this study (objective) is to deeply investigate or evaluate the degree to which ACSI micro finance institution uses risk management practice and identifying factors affecting risk management practice of the institution. Then the possible recommendation suggested will expected to enable the institution to run its operation in a safest way as risk should be given due attention for all MFI. For the purpose of the study two stages sampling were used (purposive and simple random sampling) and both primary and secondary data were used. Primary data was collected using questionnaires and interviews. The secondary data was collected from webpage of the institution. Both Descriptive statistics and inferential statistical tools were used for analyzing the data and testing the specified model (regression model). The outcome of the study shows ACSI is efficient and effective in risk management practice and the risk management aspects of risk identification, risk monitoring and, credit risk analysis are the most significant variable for institution risk management practice to be efficient and effective. Understanding risk and risk management, and risk assessment and analysis found to be positive insignificant impact on risk management practice.