July 8 (Reuters) - The risk factors for the microfinance institutions (MFI's) are shifting to credit risk and market liquidity from management quality and corporate governance, as a result of the global financial crisis a new survey shows.
The fast-growing providers of small-scale financial services to the world's poor, MFI's face their first major stress test as global credit markets dry up and investor confidence declines, the survey from the Centre for the Study of Financial Innovation showed.
The survey, co-sponsored by Citi Foundation, a unit of financial services firm Citigroup, and the Consultative Group to Assist the Poor (CGAP) with support from the Council of Microfinance Equity Funds (CMEF), drew 430 responses from 82 countries.
Just 5 percent of the respondents said they were well prepared to handle the risks identified versus 27 percent in a prior study published in early 2008.
"Among the reasons given for this more negative result, respondents said that MFI's realised too late that they would be impacted by the financial crisis, particularly by its effect on credit and funding," the report said.
In the latest survey, 13 percent said they were poorly prepared versus 5 percent previously.
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Below are the top 25 risks to the microfinance industry from the survey called "Microfinance Banana Skins 2009, Confronting Crisis and Change": Microfinance Banana Skins 2009
(2008 position in brackets)
Biggest risks ---------------------------------- 1) Credit risk (10) 2) Liquidity (20) 3) Macro-economic trends (23) 4) Management quality (1) 5) Refinancing (28) 6) Too little funding (29) 7) Corporate governance (2) 8) Foreign currency (12) 9) Competition (7) 10) Political interference (9) 11) Interest rates (6) 12) Profitability (22) 13) Inappropriate regulation (3) 14) Staffing (5) 15) Managing technology (8) 16) Transparency (11) 17) Reputation (19) 18) Unrealisable expectations (13) 19) Mission drift (14) 20) Fraud (15) 21) Depositor confidence (-) 22) Back office operations (18) 23) Ownership (17) 24) Product development (24) 25) Too much funding (21) (Reporting by Daniel Bases, editing by Leslie Gevirtz)