1. Microfinance Institutional Ratings
Social Performance Task Force – June 2012

2. Microfinance Institutional Rating
Microfinance Institutional Ratings provide an opinion on the long term institutional sustainability and creditworthiness through a comprehensive assessment of risks, performance, market position and responsible practices

3. Microfinance Institutional Rating
Some risks are currently evaluated in the Social Ratings (reputation risk, credit risk derived from irresponsible lending practices with clients)
Microfinance Institutional Rating methodologies need to evolve to formally include risk relevant “social” indicators
Corporate governance
Alignment of MFIs stated goals with practices, and accountability
Client protection
CPP principles
Responsible financial performance
Avoidance of irresponsible profits

4. Microfinance Institutional Rating
Governance & Management
Operational risk / operations
Financial profile
Responsible practices
Microfinance environment

5. Microfinance Institutional Rating
Governance & Management
Corporate governance
Management
Strategy
Human resources
Mission?

6. Microfinance Institutional Rating
Financial profile
Financial performance
Solvency
Funding
ALM

7. Microfinance Institutional Rating
Operations
Credit risk
MIS
Controls & risk management

8. Microfinance Institutional Rating
Responsible practices
Client protection
Responsible performance
(Mission/Intention) Alignment

9. Microfinance Institutional Rating
Microfinance environment
Legal & Regulatory environment
Competitive environment
Political, economic and financial environment

10. Microfinance Institutional Rating
Governance & Management
Operational risk
Financial profile
Responsible practices
Microfinance environment
Microfinance Institutional Rating

11. Microfinance Institutional Rating and Social Rating
Social Performance Management
Financial Inclusion
Outreach to the poor
Adaptation of services to the needs of the poor and excluded
Fair treament and respectful treatment of staff
Social responsibility to the community
Social change (women empowerment, education, etc.)
Social Rating
Client Protection
Alignement of practices with stated goals
Quality of services
Human Resources Management

12. Microfinance Institutional Rating and Client Protection Certification
Opinion on whether client protection practices create a risk for the MFI (focus on the institution)
Assurance that best practices in terms of client protection are implemented (focus on the client)

13. Microfinance Institutional Rating and Social Rating
Credit Rating
xxx
xxx

14. THANK YOU FOR WAKING UP EARLY!

15. Rating Grade Comparability table
Category
Classification
Definition
M-CRIL
MFR MR PR 1
Excellent
Excellent performance
Low or well-managed short- medium term risk α+ α
AAA AA A
A++ A+ A- 2
Good
Good performance
Modest or well-managed short- medium term risk α- ᵝ+
BBB BB
B++ B+ B B- 3
Fair
Fair performance
Moderate to medium-high risk ᵝ ᵝ-
CCC
C++ C+ C C- 4
Weak
Weak or poor performance
High to very-high risk ᵞ+ ᵞ CC D E