The Exposure of Microfinance Institutions to Financial Risk

Gietzen, Thomas

doi:10.2139/ssrn.2590058

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The Exposure of Microfinance Institutions to Financial Risk

University of St.Gallen, School of Finance Research Paper No. 2015/06

45 Pages Posted: 6 Apr 2015 Last revised: 8 Sep 2015

See all articles by Thomas Gietzen

Thomas Gietzen

KfW Development Bank; University of St. Gallen - School of Finance

Date Written: April 1, 2015

Abstract

This study examines the exposure of microfinance institutions to liquidity, interest rate and foreign exchange (FX) risk. It builds on a manually collected set of data on FX positions and the maturity structure of assets and liabilities of the largest microfinance institutions worldwide. The data suggests that microfinance institutions in the sample, on average, face no liquidity risk and that exposure to FX risk is lower than commonly assumed. Linking risk exposure to institutional characteristics, I find that legal status and regional affiliation are correlated with risk exposure while regulatory quality is not.

Keywords: Microfinance, Financial Risk, Liquidity Risk, FX Risk, Ownership, Regulation

JEL Classification: G21, G32, O16

Suggested Citation: Suggested Citation

Gietzen, Thomas, The Exposure of Microfinance Institutions to Financial Risk (April 1, 2015). University of St.Gallen, School of Finance Research Paper No. 2015/06, Available at SSRN: https://ssrn.com/abstract=2590058 or http://dx.doi.org/10.2139/ssrn.2590058