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AUTHOR(S): 

Pagadala Suganda Devi, Mohammed Arif Shaikh

TITLE

Analysis of Risk Management Practices by using Ordinary Least Squares Regression (OLS) method in the case of select Micro Finance Institutions(MFIs) in Telangana State of India

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KEYWORDS

Risk management , Micro finance , Micro credit & Credit risk management

ABSTRACT

Microfinance institutions have emerged as an alternative solution by targeting the poor through innovative lending approaches, including group lending, progressive lending, regular repayment schedules, and collateral substitutes. The Micro finance sector in India is fast growing with a branch network of 9894 branchs, and employee base of 75, 085 provided credit to over 2.85 crore clients with loan outstanding of Rs. 37,988 crores and Par 30 under 1 % ( Microscape, FY 2014-15) The main challenge of microfinance is to create social benefits and promote low income households by providing financial services without any suitable guarantees. It is in this context that the risk management practices gain priority in maintaining financial health of these institutions. This study attempts to find relationship between Risk management practices of select microfinance institutions and risk variables. Understanding risk and risk management, Risk identifications, Risk assessment and analysis, Risk monitoring and control and Credit risk management are the independent variables while Risk management practices is the dependent variable. The Ordinary least squares method .(OLS) method of regression was used in this study in order to investigate this relationship and it is observed that that there is a positive relationship between Risk variables of RAA( Risk analysis and Assessment), RMC (Risk monitoring and Control) and RI (Risk Identification) and Risk management practices of microfinance Institutions of Telangana state (India) while there is negative relationship between URRM (understanding risk and risk management ) and Credit risk management practices and Risk management practices in general. In addition it is observed that Risk Monitoring and control is making the most contribution in explaining the dependent variable. These are infact partially in line with the findings of Hussien & Faris (2007) Sifunjo & Robert (2014), Mwangi (2013), Norell (2001).

Cite this paper

Pagadala Suganda Devi, Mohammed Arif Shaikh. (2017) Analysis of Risk Management Practices by using Ordinary Least Squares Regression (OLS) method in the case of select Micro Finance Institutions(MFIs) in Telangana State of India. International Journal of Agricultural Science, 2, 15-26