Abstract: Since the poor - once excluded from the formal banking system- have been proved bankable, microfinance institutions were created to help save and improve the situation by offering the poor affordable financial services that could help ameliorate their living conditions. Microfinance in itself is a risky activity. The main risk it faces resides obviously in its main activity which is granting loans or credits. However with the rapid growth and expansion of the sector today, microfinance institutions face many other risks and as a matter of fact must identify and anticipate potential risks to avoid unexpected losses and surprises. The present study sought to investigate risk management practices in microfinance institutions. It focused on two major institutions in Togo namely FUCEC and WAGES. The study uses a qualitative survey research design. Data was gathered through semi-structured interviews with about 40 respondents in both institutions and was analyzed using descriptive statistics. Findings reveal that these microfinance institutions face institutional, operational, financial management and external risks but focus more on credit risk. Also the study reveals that the main threat to credit risk management in these institutions resides in the lack of training and the bad selection of staff in charge of credits.
Keywords: Microfinance, Credit risk, Credit Risk management system, Togo