The implementation of the risk management system and its impact on cross-debt and the cost of risk: A case study of Al Amana Microfinance

Abstract

Digital tools are playing an increasingly important role in credit risk management in microfinance. The digitization of the microfinance industry makes it possible to monitor loan performance in real time. To effectively manage the risk of default, MFIs use a wide variety of credit risk management mechanisms. Among these digital tools is the credit bureau. The purpose of this article is to analyze the impact of the credit bureau on borrowers' cross-debt and the institution's cost of risk. More specifically, it is a case study of the Al Amana Microfinance institution in Morocco, comparing two distinct periods: the pre-COVID period (2012-2019) and the period during and after the health crisis (2020-2024). The results of this research show that the implementation of the credit bureau helps Al Amana Microfinance to control cross-debt and risk cost, especially in a critical period characterized by the health crisis.