Ratings and Assessments

Ratings and assessments are valuable to both MFIs and investors. The reports give MFIs the opportunity to make internal improvements, and investors the opportunity to make informed investment decisions. Listed below are some of the most typical types of ratings and assessments:

Credit Risk Ratings – The rating of a debt-issuing institution (a country, organization, or individual) which quantifies the statistical probability that it will be able to meet its debt servicing obligations. Credit risk ratings take into account the likelihood of defaulting over a specified time period (default probability); the size of the obligation in the event of a default (credit exposure) and the fraction of the exposure that can be recovered (recovery rate).

Global Risk Assessments – A rating that provides a broader assessment of an institution’s operations and prospects than a credit risk rating, which focuses exclusively on creditworthiness. A global risk assessment can take into account management capacity as well as overall strengths and weaknesses. It is the first product created by the specialized microfinance rating field and typically provides a broad range of diagnostic information on social mission, products, risk management, and growth capacity.

Mini Assessments – Rating assessment of a young MFI that is too young and/or too small for full-scale credit risk ratings or global risk assessments.

Social Ratings – A rating of the social performance of an MFI, which investors can use to compare institutions so that they can direct their funds to help achieve specific social, ethical and/or financial goals. Generally speaking, the three main areas which are assessed are: adherence to social mission, depth of outreach to low-income or unreached clients, and the suitability of products for client needs.

These rating reports can be found in the Microfinance Gateway library.