Master's Thesis from the year 2008 in the subject Business economics -
Banking, Stock Exchanges, Insurance, Accounting, grade: 1,00, Wiesbaden
University of Applied Sciences, course: International Finance, 69
entries in the bibliography, language: English, abstract: Microfinance
Institutions (MFI) have left the role of altruistic instruments for
donor-assistance and turned into profitable financial institutions and
interesting investment opportunities for international financial
investors. However, well-intentioned investments can dramatically
increase a MFIs risk exposure and institutions without proper risk
management can easily be forced into closure in the aftermath of
environmental or economical distress. Moreover MFIs operate predominant
in developing countries counting for 94% of all natural disasters
worldwide and the vulnerability of their clients is exorbitant high due
to their establishment in simple accommodation facilities and the strong
dependence on agricultural business. Foreign exchange and disaster risks
are considered to be two of the most jeopardising threats for MFIs
characterised by close interrelations and ignored by the majority of
institutions, investors and credit users. This work compiles a holistic
risk management approach starting with the sound assessment of foreign
exchange and disaster risks with the aid of modern tools such as hazard
modelling and the value-at-risk model. Based on the institutions
particular risk-bearing capacity different strategies to minimise and
transfer these risks have been evaluated. More than twenty methods from
operational hedges to innovative instruments like indexed weather
derivatives or currency and catastrophe swaps are investigated
concerning their availability, applicability, effectiveness and
efficiency in the microfinance context. Furthermore this work seeks to
design the strategies in a way that overcomes particular obstacles like
the Samaritans dilemma to create sustainable security along with
