Abstract:
This study examines risk management and its impact on financial performance of selected
microfinance institution in west shewa zone. The target populations of this study were total
numbers of loan officers, managers and operational managers of selected microfinance
institutions in west shewa zone. The researcherhas been selected sample from MFIs
institutions.Micro finance institution loan officers, 107, managers, 24 and operational
managers 24 totally 167 were target population.Under this study, both internal and
external factors were included. The internal factors used in this study include capital
adequacy and liquidity management whereas; the external factor is foreign exchange rate.
Moreover, return on asset (ROA) and return on equity (ROE)were used to measure the
financial performance. In This study model selection was made by conducting specification
test and based on the result random effect model was adopted. The regression result
showed that , CAR have a significant positive influence on the financial performance of
selected microfinance institution in west shewa zone measured by return on asset and
return on equity. Whereas:, Liquidity Ratio and Operational risks have a significant
negative influence on the financial performance of selected microfinance institution in west
shewa zone measured by return on asset and return on equity. Thus, management of
microfinance should do their best to strengthen the identified risk factors. Internal risk
factors such as CAR , LLP , LIQR and CIR with the external variable foreign exchange
rate this study examined the Risk Management and Its Impact on Financial Performance
of selected microfinance institution in west shewa zone
