This paper discusses credit risk assessment through conventional and specialized credit evaluation metrics. I find that low credit risk is a direct consequence of sound implementation of good governance practices and sustainable financial performance through sound qualitative and quantitative risk management tools. Furthermore, I find that the depth and breadth of outreach and write‐off are by some margin the two most important determinant indicators of a microfinance institutions’ (MFI’s) credit risk control. In addition, I demonstrate that there is no significant statistical difference in terms of risk management among the different types of MFIs. Results also suggest that constructive regulation to promote MFIs has a non‐negligible impact on the risk assessment of MFIs.
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Ayi Gavriel Ayayi (2011) studied this question.
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