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The Exposure of Microfinance Institutions to Financial Risk

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  • Gietzen, Thomas

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.

Suggested Citation

  • Gietzen, Thomas, 2015. "The Exposure of Microfinance Institutions to Financial Risk," Working Papers on Finance 1506, University of St. Gallen, School of Finance.
    • Handle: RePEc:usg:sfwpfi:2015:06
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    References listed on IDEAS

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    More about this item

    Keywords

    Microfinance; Financial Risk; Liquidity Risk; FX Risk; Ownership; Regulation;
    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
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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