This study was undertaken to examine the issues relating to risk and loan portfolio management in Microfinance institutions in Uganda. The first objective of this study was to establish the extent of governance in MFIs in Kampala, by looking at the overall management of these institutions, assessing how decision are made, and looking at how they are staffed. The second objective is to establish the variables that best explain management of Micro-Finance Institutions (MFIs). The third objective is to identify the risk management of loan portfolios and lastly to provide recommendations based on the findings. The researcher used explanatory and survey research designs. A minimum sample 114 participants from 50 MFIs was used in data collection and analysis. The researcher employed principle component analysis (PCA) basing on Eigen values to identify variables above mean-scores and the nodes on the scree plot (ordered eigenvalues) denotes the number of variables that best explain the dimensions and conclusion on each variables was drawn basing on mean values of descriptive statistical analysis. Furthermore the orthonormal loadings display of the variables is employed basing on the first principle component that identified the names of variables above the mean score and final variable is drown basing on descriptive statistical analysis using mean scores focusing on those above the mean. The analysis is based on three dimensions of assessments, namely; Governance, Human capital and Risk Management. In general 227 variables were observed from the 3 dimensions, however by employing the PCA the researcher was in position to come up with those that best explain the 3 dimensions and in summary 29 out of 131 variables were identified by the PCA that best describes governance, 17 out of 72 variables were extracted that best explain what is taking in place in human capital whilst 5 out of 24 variables were extracted in relation to risk management. Furthermore conclusions are drawn by employing descriptive statistical analysis basing on mean scores of the variables identified by the PCA. Therefore out of the 29 variables identified by PCA on governance dimension, 19 variables on average have mean scores above 3 signifying good performance in those areas. Therefore the strength of MFIs under governance is seen in the following areas; The MFIs surveyed have strong board that is professionally ethical and knowledgeable in the area of managing financial institutions. They are performing better in the area of decision making, they do make timely decisions, and the board keeps on monitoring management and making sure that strategies agreed upon are properly implemented. The board is well committed in filing tax returns which is a legal requirement to all taxpaying institutions. However 10 variables showed sign of weakness because they have mean scores on average below 3. Management of MFIs need to strengthen its self in the area of allowing individual initiative in decision making, recognition of management committees in place, this smoothen the operations of the institution and lastly the board need to mentor the management, most of the personnel managing these institutions lack skills in managing the entity. On the side of human capital management, 17 variables identified by PCA, basing on their mean scores, 13 have mean scores above 3 showing good performance of MFIs. In this case the strength of MFIs lies in having educated human resources in place; MFIs gave the ability to exploit the available opportunities more especially targeting low income earners that for long have been neglected. However mores is needed under human capital dimension more especially in those areas where on average their mean scores was below 3 such as training programs where the respondents revealed that the type of training obtained does not match with the job requirements therefore they do not benefit from these programs. There is still a lot of bureaucracy within the management that slows the operations of the MFIs. This is further explained by having directors commuting as loan officers. Failure to accept risk exposes the entire institution to a vague of collapse. The last dimension is risk management and in this way, 5 variables were identified by the PCA, and basing on their mean scores, 3 variables showed good progress and that is having performance management system in place, there are limited complaints from the clients about the MFIs services offered and lastly all employees are given access rights to organisation resources, the loan schemes are open to all employees and no discrimination in service delivery, however 2 variables were identified with mean scores below 3 showing weaknesses within the systems. Therefore MFIs have to improve technologies used in their operations; the use of file carbines, off line computers exposes the institution to high degree of risk. There is need to strengthen their distribution channels so that the financial services offered reach out to clients at ease. Specifically the research study identified various risks like systematic risk, operational risk, credit risk, counterparty risk and legal risk in that they do affect the gross loan portfolio in MFIs and policy measures have been recommended to mitigate such risks in financial institutions. These risks can be mitigated by; • Having Internal control systems of checks and balances • Hedging of transactions through advance booking and paying cash in advance. • Diversification of portfolio, through investing in as many assets possible • Continuous reminder of their obligations and making a fall up of clients and as well insuring the loans. • Investors are encouraged to form a network of partners in the business • Continuous engagement of a legal adviser to the institutions. The study contributed to better understanding of risk management in MFIs, that no single variable can be relied upon to explain effective management of risks but however in this study three dimensions play a crucial role in management of risks. The MFI management should focus on having an internal audit function operating independently in that financial controls should be regularly updated to cope with the changing environment. Audit committee of the board should be complete enough to supervise and regulate internal control systems, written policies in the organization should be effectively implemented with clear division of responsibilities of middle to top managers and lastly Segregation of powers and authority need to be strongly emphasized as a way of enhancing proper management of risks in MFIs.