The role of enterprise risk management in microfinance institutions: a case study of Pride Microfinance Limited

Abstract

The study investigated the role of Enterprise Risk Management at Pride Microfinance (MDI) Limited. The study aimed at examining the role of financial risk management in Pride Microfinance, finding out the role of operational risk management at Pride Microfinance, examining the role of strategic risk management at Pride Microfinance and finding out the challenges faced when implementing enterprise risk management at Pride Microfinance. A descriptive case study design was adopted. The study employed both quantitative and qualitative data collection approaches. A sample size of 111 respondents was selected and the response rate was 103 respondents (88%). Purposive sample technique was used to select members of top management while, a simple random technique was used to select middle level and lower-level staff. Quantitative data analysis mainly consisted of descriptive statistics (mean, standard deviation and percentages). Narrative analysis was used to analyze qualitative data. Findings revealed that Pride Microfinance significantly practices financial risk management and presence of efficient credit analysis and administration scored the highest mean of 3.9. The findings also statistically indicated that Pride Microfinance significantly practices operational risk management having a zero tolerance of business outside the strategic plan and policies scored the highest mean of 4.77. Lastly, the findings statistically indicated that Pride Microfinance significantly practices strategic risk management whereby doing a participatory comprehensive strategic planning scored the highest mean of 4.88. It is recommended that Top Management of Pride should invest more in staff by continuously developing employee capabilities in mission critical competencies, review the credit limits and terms to enhance loan portfolio performance in general at Pride. It was also noted that Pride needs to regularly rate performance through summaries and reviews for each employee on the operation risk initiatives. Finally, Top management should strengthen communication systems to allow for Feedback to all those involved in the ERM framework for further improvement.