Dealing with Drought-Related Credit and Liquidity Risks in MFIs: Evidence from Africa

摘要

The credit risk of African MFIs is influenced by the interaction of drought shocks with its retarded performance. The liquidity risk of African MFIs is affected by drought shocks through the retarded level of both credit risk and liquidity risk, the asset-liability characteristics, and the diversification of the loan portfolio. Geographical diversification, greater capital reserves, and good quality of loans portfolio are key strategies to deal with drought-related risks.