Microfinance Rating Market Review 2010

This report provides an overview of the microfinance rating market for the period 2008-2009.

The report is based on quantitative and qualitative data from a predefined sample of rating agencies. Key findings include:

• Diversity of products offered by rating agencies results in lack of clarity and communication on products and methodologies;
• Level of integration of ratings into operational costs of MFIs is globally low, except in Latin America and the Caribbean (LAC) region, indicating duality between assessment for the MFI and service for the investor;
• Subsidies have positive impact on demand for social ratings;
• New ratings and rating renewals have been decreasing in Africa, despite increase in number of co-funded ratings;
• Rating agencies evaluate certain MFIs more than once, indicating a repeat business trend;
• Emphasis placed by MFIs on professional and interpersonal relationships with rating agencies may jeopardize neutrality of agencies;
• Significant number of MFIs resort to social rating, reflecting increasing investor attention to MFIs’ compliance with their social purpose.

The report discusses reasons why MFIs change rating agencies, and obstacles preventing MFIs from entering the ratings process. It includes a case study of the African rating market.