Microfinance Institutional Rating (MIR)

Definition

It provides an opinion on the long-term institutional sustainability and creditworthiness through a comprehensive assessment of risks, performance, market position and responsible practices. Clients 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 to the MFI
  • 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
Investors
/Donors
  • Preliminary tool to know potential clients, facilitate a first off-site selection and contribute in making decisions on resources allocation
  • A second opinion
  • Focus on specific RISK AREAS
  • Standardized information as a basis for monitoring risk and performance of investments
"In 2016, Friendship Bridge went through both an Institutional and Social Performance Rating with MicroFinanza Rating. We were very pleased with the process and outcome. Our objective was to receive an independent, professional assessment of our organization in order to learn our strengths and weaknesses, how we compare to our peers, and how we can improve our impact. MicroFinanza's approach was thorough, they treated our Staff and Board professionally and with respect, and their observations were thoughtful and well-informed of industry best-practices. Since completing the Ratings, we have utilized the results internally to set objectives for our 2017-2019 Strategic Plan and make improvements. We believe having these Ratings was worth the effort and that we are a better organization because of them. We would sincerely recommend MicroFinanza to others as a result."
FriendBridge
Rebecca Cueto
Friendship Bridge's Treasury Manager, Guatemala
"JSC MFO Crystal is greatly satisfied with the rating assessment conducted by MicroFinanza Rating in 2012. We highly appreciate overall qualification, professionalism and analytical skills of the rating team. The process was very helpful not only in terms of next grading of our institution, but also for identifying important risk areas that have been overlooked by management before."
logo crystal
Malkhaz Dzadzua
CEO of JSC MFO Crystal, Georgia

 

Methodology

Our proprietary rating methodology

  • Has been designed and tailored to inclusive finance and has evolved along with the development of the sector to adapt the analysis to emerging risks. In 2012, the methodology was upgraded to integrate the analysis of some social key factors (i.e. responsible growth and client protection) and assess the financial institution (FI)’s exposure to the reputation risk that has indeed proved to significantly affect the institutional long-term sustainability.
  • Is widely recognized by investors, donors, regulators, and microfinance consultants.
  • Is relevant to all types of FI engaged in inclusive finance, irrespective of their legal status and size (including commercial banks).
  • Applies international standards and best practices and uses benchmarks to allow comparability.
  • Features a comprehensive and objective reporting including a risk factor table and a rating rational supporting the final grade and outlook. An executive summary and a rating certificate are also provided.
  • Focus on RISK PROFILE, PERFORMANCE AND REPUTATION, dimensions that are significantly interrelated.

 

Areas of analysis

  1. External context
  2. Governance and strategy
  3. Financial Profile - Financial Performance
  4. Financial Profile – Solvency and Assets and Liabilities Management
  5. Loan Portfolio Quality
  6. Systems and Controls
  7. Client Protection

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