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Managing Operational Risk Related to Microfinance Lending Process using Fuzzy Inference System based on the FMEA Method: Moroccan Case Study

Author

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  • Alaoui Youssef Lamrani

    (IFE-Lab-Laboratory of Studies and Research in Applied Mathematics, Mohammadia School of Engineering, Mohammed V University of Rabat, Morocco)

  • Tkiouat Mohamed

    (IFE-Lab-Laboratory of Studies and Research in Applied Mathematics, Mohammadia School of Engineering, Mohammed V University of Rabat, Morocco)

Abstract

Managing operational risk efficiently is a critical factor of microfinance institutions (MFIs) to get a financial and social return. The purpose of this paper is to identify, assess and prioritize the root causes of failure within the microfinance lending process (MLP) especially in Moroccan microfinance institutions. Considering the limitation of traditional failure mode and effect analysis (FMEA) method in assessing and classifying risks, the methodology adopted in this study focuses on developing a fuzzy logic inference system (FLIS) based on (FMEA). This approach can take into account the subjectivity of risk indicators and the insufficiency of statistical data. The results show that the Moroccan MFIs need to focus more on customer relationship management and give more importance to their staff training, to clients screening as well as to their business analysis.

Suggested Citation

  • Alaoui Youssef Lamrani & Tkiouat Mohamed, 2017. "Managing Operational Risk Related to Microfinance Lending Process using Fuzzy Inference System based on the FMEA Method: Moroccan Case Study," Scientific Annals of Economics and Business, Sciendo, vol. 64(4), pages 459-471, December.
    • Handle: RePEc:vrs:aicuec:v:64:y:2017:i:4:p:459-471:n:4
    DOI: 10.1515/saeb-2017-0029
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    More about this item

    Keywords

    FMEA method; fuzzy logic inference system; microfinance lending process; operational risk management;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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