Development of a risk management framework for Sonata Finance Private Ltd

• Aug 4, 2025
• 1 min

The MSC team conducted a detailed risk assessment and diagnostic study of Sonata, one of the largest microfinance providers in India. This study was conducted as per the IFC risk framework. MSC supplemented this diagnostic study with the use of our ‘Rapid Institutional Assessment’ and ‘Risk Management for Microfinance’ toolkits.

Based on the institutional and risk assessment, we delivered a risk management implementation plan to the MFI. We also indicated the priority levels of each activity, corresponded timelines, monitored parameters, and commitment from the MFI in terms of resource allocation. In order to institutionalize risk management practices, the team also supported the MFIs in the implementation of risk management policies and risk governance structures. Eventually, based on the risks identified, the team designed appropriate risk monitoring tools, such as operational, credit, and financial risk tools.

MSC conducted a workshop with the senior management and finance team of Sonata to explain the key concepts of liquidity risk management. After the workshop, our team gathered relevant data and analyzed the existing liquidity and cash management practices at Sonata. We also developed the liquidity risk policy, which contains tools like maturity gap analysis, liquidity forecast, stress test, scenario analysis, and balance sheet ratios. The policy also contained roles and responsibilities to manage liquidity risk in Sonata. The assignment ended with suggestions for their cash management practices.

Our work led to the development of the risk management function at Sonata Finance Private Limited (SFPL) from the ground up.

IFC commissioned the project.