Risk management in micro deposit taking institutions: Case of Pride Microfinance Uganda Limited

Abstract

This study examined the risk management policy in Micro Deposit–taking institutions (MDIs) using Pride Micro Finance Ltd as a case study. The study aimed at evaluating various risks, exploring ways of measuring the various risks as well as ways of handling the various risks in Pride Microfinance Limited. Qualitative and quantitative methods were applied on cross sectional data that was collected through the use of questionnaires and interviews. The study found out that there are a number of risks inherent in Pride Microfinance Limited such as liquidity risk, interest rate risk, foreign exchange risk, non repayment of loans, and competition from other institutions. The study’s findings also indicate the various ways of mitigating risks in Pride Micro finance such as proper borrowers’ assessment and evaluation of borrowers before they access credit facilities and adhering to the credit standards among others. The study recommends that Pride Microfinance Limited should consider making innovations by introducing more new loan products in addition to home improvement loans. There is also need for improvement in the evaluation of potential customers for credit, understanding the global trends and shifts in the financial sector, to avoid shocks, employing experts in financial management to ensure that, the financial institutions liquidity is properly managed for continued operation. Pride Micro Finance Ltd should also arrange seminars to educate clients on ways of investing funds borrowed to avoid business failures.