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Risk-balanced territory design optimization for a micro finance institution. (English) Zbl 1449.90151

Summary: Micro finance institutions (MFIs) play an important role in emerging economies as part of programs that aim to reduce income inequality and poverty. A territory design that balances the risk of branches is important for the profitability and long-term sustainability of a MFI. In order to address such particular business needs, this paper proposes a novel risk-balanced territory planning model for a MFI. The proposed mixed integer programming model lets the MFI choose the location of the branches to be designated as territory centers and allocate the customers to these centers with respect to planning criteria such as the total workload, monetary amount of loans and profit allocation while balancing the territory risk. This model is solved using a branch and cut based hybrid-heuristic framework. We discuss the impact of the risk balancing and merits of the proposed model.

MSC:

90B50 Management decision making, including multiple objectives
90C11 Mixed integer programming
90B80 Discrete location and assignment
90C57 Polyhedral combinatorics, branch-and-bound, branch-and-cut
90C59 Approximation methods and heuristics in mathematical programming
91B05 Risk models (general)
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