Credit Rating of Mfis
Credit Rating of Mfis
Credit Rating of Mfis
Tanvi Thacker
Credit Rating
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. Credit is important since individuals and corporations with poor credit will have difficulty finding financing, and will most likely have to pay more due to the risk of default.
The working hypothesis is that The risk profile and creditworthiness of an MFI depends critically on its financial performance, but the risk associated with its future performance is crucially determined by its managerial capabilities and governance
Rating Methodology
at M-CRIL at the MFI
Scheduling Start-up - discussion with head of operations - head office data collection Field visit - branch visits & data collection - MIS verification - client interaction Follow up & de-briefing - discussion of preliminary analysis - filling data gaps
Rating Methodologycontinued
at M-CRIL
Data analysis & report writing Draft report to MFI - for feedback - report revision based on feedback Review by Rating Committee - MFI views presented alongside - final decision on grade & recommendation Report finalised and submitted to client
Grade distribution
45 40 35 30 24 25 20 15 10 5 0 K K
163 MFIs
Credit-worthiness threshold
40
28 24
17 14 10 6
F
F
E
E
M-CRILs progress
M-CRIL has undertaken ratings/assessments/sectoral research studies in 18 countries:
Afghanistan, Azerbaijan, Kazakhstan, Georgia, Bangladesh, Cambodia, East Timor, India, Indonesia, Myanmar, Nepal, Pakistan, Papua New Guinea, Philippines, Samoa, Sri Lanka, Tajikistan, Vietnam.
M-CRILs clients
Asian Development Bank Blue Orchard Finance Cordaid, Netherlands Dept. for International Development, UK Ford Foundation HIVOS MISFA(Micro Finance Investment Support Facility) Afghanistan Small Industries Development Bank of India Swiss Agency for Development & Cooperation The World Bank UNOPS
Conclusion
M-CRILs experience is that institutional assessments based on accepted standards can be a very powerful tool in enabling capitalisation of MFIs, as well as in promoting institutional capacity building through the systematic identification of operational strengths and weaknesses
Thank you