Managing Risk for Sustainable Microfinance

Knewtson, Heather, and Howard Qi, Managing Risk for Sustainable Microfinance, Journal of Risk Finance, 20(1), 2-13, 2019

18 Pages Posted: 19 Mar 2020

See all articles by Heather Knewtson

Heather Knewtson

Michigan Technological University

Howard Qi

Michigan Technological University; Independent

Date Written: April 9, 2018

Abstract

Sustainable micro-finance depends on the appropriate management of credit risk. However, small and micro businesses (SMBs) tend to offer little information on their default probability, which poses serious challenges for their micro-finance needs. Given the tremendous socioeconomic impact of SMBs, it is essential that they receive appropriate guidance. The current situation is not sustainable – sometimes lenders charge excessive interest or withdraw funding if limited by regulatory ceilings; sometimes lenders underestimate SMB credit risk, through an insufficient understanding of intrinsic risk. To alleviate this problem, we propose an insurance framework to determine the feasible range of insurance premium.

Keywords: Insurance, Microfinance, SMB

JEL Classification: G22, O43

Suggested Citation

Knewtson, Heather and Qi, Howard, Managing Risk for Sustainable Microfinance (April 9, 2018). Knewtson, Heather, and Howard Qi, Managing Risk for Sustainable Microfinance, Journal of Risk Finance, 20(1), 2-13, 2019. Available at SSRN: https://ssrn.com/abstract=3542444 or http://dx.doi.org/10.2139/ssrn.3542444

Heather Knewtson (Contact Author)

Michigan Technological University ( email )

School of Business and Economics
1400 Townsend Drive
Houghton, MI 49931
United States
906-487-2771 (Phone)

Howard Qi

Michigan Technological University ( email )

1400 Townsend Dr.
Houghton, MI 49931
United States

Independent ( email )

No Address Available
United States

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