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The purpose of conducting this study was to assess the compliance of microfinance
institutions (MFIs) to risk management regulations in Tanzania. Specifically the
study assessed the extent to which guidelines and regulations on mitigating credit
risks are adhered to by MFIs in Tanzania, secondly assess the extent to which
guidelines and regulations on mitigating operational risks are adhered to by MFIs in
Tanzania and lastly the study assessed the extent to which guidelines and regulations
on mitigating strategic risks are adhered to by MFIs in Tanzania. The study used case
study design because it is an effective method for collecting a lot of information’s
within a short period of time. The population of this study was 72 respondents which
comprised of the employees, owners and MDs from selected MFIs. A sample of 72
respondents was selected using simple random sampling and purposive sampling.
The study used questionnaires and interview guide questions as the main tools for
data collections. The study findings showed that most of the MFIs in Tanzania have
adequate police and procedures to manage operational, credit and strategic risk. The
study findings showed that MFIs have written policies and procedures which guide
or manage operational risk, internal audit management, and financial management of
the selected financial institutions. The evidence further showed that most of the MFIs
had internal audit department which control and monitor MFIs moneys, detecting
fraud, as well as smooth operation of the internal audit department. Finally the study
findings showed that MFIs internal audit and external audit department were found
to have great contributions on effective use of resources, effective financial reporting
and standards, check and balance of the operational of the MFIs. The regression
results showed that there is positive relationship between operational risk, credit risk
and strategic risk among MFIs. The study concluded that MFIs should continue
adhering with the available policy, procedures, and laws so as to mitigate financial,
operational, credit risk and strategic risk. Adherence to operational manual and
procedures should be emphasized. Internal audit and external audit for effective
control, use and management of MFIs should be emphasised too. |
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