Microfinance Institutional Rating (MIR)

Provides an opinion on the long-term institutional sustainability and creditworthiness through a comprehensive assessment of risk, performance, market position and responsible practices. Beneficiaries may choose between a public (rating grade assigned and disclosed) or private (rating grade not assigned or not disclosed) rating.

BENEFITS

MEASURE DEMONSTRATE IMPROVE
MFIs
  • Clear picture of financial performance
  • Alignment to international standards
  • Compare to benchmarks and best practices
  • Message of transparency to stakeholders
  • Prove institutional and financial soundness to investors
  • Financial performance management system
  • Visibility and facilitate access to funding sources
  • Reporting standards
Investors/Donors
  • Preliminary tool to know potential clients, facilitate a first off-site selection and contribute in making decisions on resources allocation
  • A professional independent second opinion
  • Focus on specific risk areas
  • Standardized information as a basis for assessing and monitoring risk and performance of investments

METHODOLOGY

The MIR methodology integrates client protection and other social risk factors to the traditional financial analysis in order to better address the increasing relevance of the reputation risk for the long-term institutional sustainability of the MFI. Building on the social rating experience, it represents the coordinated answer from the microfinance rating agencies to the evidence that client protection and other social measures are essential to the long term success of the business and to preserve the image of the microfinance industry as a whole.

  1. 1. Microfinance environment
  2. 2. Governance and strategy
  3. 3. Financial profile
  1. 4. Asset Concentration and quality
  2. 5. Operations and control
  3. 6. Client protection

Social Rating

Social Rating integrates the Universal Standards of Social Performance Management (USSPM) and provides an external validation of the MFI implementation of the USSPM.
Social Rating reviews Client Protection and gives an indicator of the efforts required to achieve Client Protection Certification, helping to get ready for it.
The Social Rating provides an opinion on the capacity of an MFI to put its mission into practice and achieve social goals. Beneficiaries may choose between a Comprehensive (with focus group and client survey) or Standard Rating (MFI-level information).

BENEFITS

MEASURE DEMONSTRATE IMPROVE
MFIs
  • MFIs social performance with international standards (Universal standards, annex 1)
  • Identify the strategic priorities
  • MFI's social results to the investors through an independent tool
  • MFIs social performance management and put your mission into practice
  • Focus on areas that require intervention
  • Facilitate enhanced social performance management systems
Investors/Donors
  • Review social performance strengths and weaknesses of MFIs
  • Monitor the MFI social performance progress
  • A second opinion which helps to focus on specific RISK AREAS
    - During the investor due diligence
    - After the investor due diligence to confirm
  • Standardized information as a basis for assessing and monitoring risk and performance of investments

METHODOLOGY

Our social rating methodology includes the following areas of analysis:

  1. 1. Social-economic context
  2. 2. Social Performance Management
  3. 3. Client Protection, Social Responsibility
  1. 4. Outreach
  2. 5. Quality of the services

The social rating comprehensive allows to base the analysis on highly qualitative and reliable information, directly collected by the MFI from the clients during the rating process. Following the process indicated and supervised by the rating agency, the MFI also learns how to raise and report such information according to best international practices of social performance management.
The social rating standard bases the analysis on information already available at the MFI.



Credit Rating

The Credit Rating is typically offered in countries where the financial regulation and supervision system is well developed and where the majority of MFIs are regulated institutions (i.e. Ecuador, Peru, Bolivia, Pakistan, India, etc.). The credit rating is normally a mandatory exercise required by the supervising authority to all the regulated financial institutions. It provides an opinion on the short-run solvency and long-run institutional sustainability through a comprehensive assessment of risk, performance and market position.

BENEFITS

  • Check regulatory compliance of local financial institutions;
  • Measure institutional solvency to depositors and other creditors;
  • Demonstrate transparency; prove institutional and financial soundness to investors;
  • Compare to benchmarks in terms of profitability, efficiency, productivity, performance, risk exposure and organizational structure;
  • Support financial institutions in the strengthening and organizational development process through international and national standards.

METHODOLOGY

The Credit Rating methodology includes a dynamic quantitative and qualitative analysis of the risk factors, strengths and opportunities of the financial institution, with the goal of giving an opinion on the risk profile of the institution (credit, liquidity, market, operational, governance and reputation risk are assessed).

  1. 1. External context
  2. 2. Governance and strategy
  3. 3. Organization and operations
  1. 4. Assets quality and structure
  2. 5. Financial structure and management
  3. 6. Financial and operational results

Assessments

The Assessment provides a detailed analysis of the operations, internal policies and procedures compared to international best practices. The specific aim is to assess the level of development of the MFI and to identify the main internal weaknesses and areas of improvements, paying particular attention to the organizational and operating features.

BENEFITS

  • Measure MFI's maturity level through the comparison with international best practices;
  • Demonstrate best practices and MFI's maturity level by area of analysis;
  • Improve MFI's management and operational system.

METHODOLOGY

The Assessment methodology includes a process-focused analysis which entails the identification of risk related to organization/policy's gaps. The whole analysis is done taking into account the overall maturity level and risk exposure of the institution, as well as the maturity and exposure of each area of diagnosis. The main features of the methodology are:

  • Medium-long term perspective;
  • Mainly qualitative analysis;
  • Focus on: governance & management, organization, operations, policies & procedures, systems;
  • Identification of maturity level by area of analysis;
  • Institution-level analysis, no client-level investigation;
  • Interviews with the management team and the operational staff;
  • Target users: developing & mature MFIs, donors & investors.
  1. 1. Governance & management
  2. 2. Strategy and Market Positioning
  3. 3. HR & Organization
  4. 4. Internal Control & Audit
  1. 5. MIS & IT
  2. 6. Credit policies & procedures
  3. 7. Social Performance Management & Client Protection

Client Protection Certification

Client Protection Certification is an independent, third party evaluation to publicly recognize financial institutions that meet adequate standards of care to implement all of the Client Protection Principles throughout its operations, product offerings and treatment of clients.

BENEFITS

  • Improve client protection policies and practices during the certification process;
  • Demonstrate sound client protection to clients, funders, regulators and the general public;
  • Get a public mark of achievement and differentiate as a pro-consumer financial institution.

METHODOLOGY

To be certified, a financial institution needs to comply with all the Certification standards derived from the seven client protection principles:

  1. 1. Appropriate Product Design and Delivery Channels
  2. 2. Prevention of Overindebtedness
  3. 3. Transparency
  4. 4. Responsible Pricing
  1. 5. Fair and Respectful Treatment of Clients
  2. 6. Privacy of Client Data
  3. 7. Mechanisms for Complaints Resolution

Country Study

The Country Study provides an in-depth analysis of a given country’s main legal and fiscal frameworks relevant to the local microfinance sector and identifies the most promising FSPs.

The study offers a detailed overview of the inclusive finance sector, contextualizing it within the political and socio-economic environment of the country. It is useful for investors, donors and other stakeholders that need to:

  1. 1. Evaluate new markets where to develop their activities
  2. 2. Monitor the existing exposure in the country and deepen the knowledge about the local market by anticipating challenges and opportunities
  3. 3. Identify FSPs with potential for financing and technical support

MFR realizes full Country Study or Sector Mapping, the latter shall only provide with a screening of the most promising FIs and/or FIs that might represent a good fit for investment and/or technical assistance.

Upon request, MFR provides customized country studies tailored to the specific needs of stakeholders. Click here to request a quote.


MICROFINANCE INDEX OF MARKET OUTREACH AND SATURATION (MIMOSA)

MIMOSA consists of four main components:

  • Penetration is simply a measure of credit available in the market, which in MIMOSA 2.0 is expressed as the number of individual borrowers as a share of the adult population.
  • Capacity is a model estimate of how many active borrowers the market can be expected to sustainably support.
  • The MIMOSA score is a function of penetration and capacity, rated based on how much penetration is higher or lower than the capacity estimate.
  • Additional risks/mitigants provide context and meaning to the score (regulatory quality, competition, maturity, transparency and other factors relevant to measuring saturation).

Its guiding rules are: keep it simple without being simplistic, rely on data that are meaningful and accessible in most markets, and keep the output both understandable and actionable. If we can’t explain it, we don’t use it.

The MIMOSA Country Reports

The country reports provide a host of supplemental data and context to help evaluate the MIMOSA score.