Risk perception and foreign exchange risk management in microfinance

Abstract

We study the perception of risks in the funding of microfinance institutions. A survey addressed to microfinance institutions and their funding organizations reveals that several risk types, among them foreign exchange (FX) risk, are not considered to be as important as reported in the relevant literature. We obtain further insights into the FX risk management of microfinance actors and reveal that many FX risk mitigation strategies and hedging tools are rarely used in practice.