| dc.description.abstract | The main objective of the study was to establish the nature and types of risks that are
faced by microfinance service providers using Digital Financial Services (DFS) as well
as to analyse how different types of microfinance institutions using DFS assess risk
and implement risk management tools. A descriptive research design was adopted. The
study adopted a mixed methodology which utilised both primary and secondary data
as well as both qualitative and quantitative research approaches. The questionnaire was
used as the main research instrument. The study was based on a population of 80
respondents in the form of employees of Microfinance Institutions, digital financial
services practitioners and RBZ officials. Through descriptive statistics, the study used
Factor analysis to analyse the findings. The findings revealed that the major types of
risks in the use of DFS are strategic risks, regulatory risks, operational risks,
technology risks, financial risks, fraud risks and agent management risk with fraud risk
being the most frequent risks. The findings also established that the use of internet and
information technology (IT) products, digital banking and fintech products exposes
organisations to losses from human and systems errors, such as double repayments,
double disbursements, or identity theft, posing threats to clients’ funds and or
organisations’ funds. The findings revealed that most microfinance institutions assess
risks through 5 basic ways; a risk management checklist, a risk register, the use of a
risk database, risk framework review, and through assessments by risk engineers. The
findings on strategies for mitigating DFS risks and best practices for DFS risk
management revealed that strategies for mitigating DFS risks include senior
management involvement in risk processes, efficient business processes integration,
developing Internal controls, regular reconciliations, regular system review (audits,
operational reviews), staff and agent training on DFS risks, segregation of duties,
incentives for departments with less risk profiles and developing risk management
frameworks. The study recommends that MFIs using DFS should frequently conduct
risk reporting and reassessment of their risk management frameworks. This should also
include constant reviews of the business processes to curb DFS risks. The study
recommends that MFIs embracing the use of DFS should have a good understanding
of the types of risks to which their businesses are susceptible to. This is important to
ensure that comprehensive risk identification is enabled and relevant steps for
mitigating these risks are taken. The study recommend that further studies should be
conducted with a focus on the various types of risks in the financial services sector,
inclusive of the banking and insurance industries. Moreover, there is need to establish
the relationship between DFS risks and top and bottom line in organisations. | en_ZW |
