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Factors explaining the rating of Microfinance Institutions

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  • Begoña Gutiérrez Nieto

    ()
    (Department of Accounting and Finance. University of Saragossa, Spain)

  • Carlos Serrano Cinca

    ()
    (Department of Accounting and Finance. University of Saragossa, Spain)

Abstract

The growing relevance of Microfinance Institutions (MFIs) has provoked the development of specialized MFI rating agencies that perform global risk assessments. In this paper we have conjectured different hypotheses pertaining to the relationship between financial indicators and the rating assigned. The hypotheses have been empirically tested, using MFIs accounting information and ratings from a leading agency. As expected, the larger, the more profitable, the more productive, and the less risky, achieved the better rating. This proves the usefulness of MFIs ratings for providers of funds. There is no observed relationship between social performance and rating. Given the social aim of MFIs, it is necessary to encourage rating agencies to engage in the development of social ratings. These social ratings should complement financial ratings, giving information about the accomplishment degree of the MFI social goals.

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Bibliographic Info

Paper provided by Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza in its series Documentos de Trabajo with number dt2006-03.

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Date of creation: Mar 2006
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Handle: RePEc:zar:wpaper:dt2006-03

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Related research

Keywords: Microfinance Institutions (MFIs); Microcredit; Rating; Social Performance; Accounting Ratios;

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References

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  1. Reinhart, Carmen & Levich, Richard & Majoni, Giovanni, 2002. "Ratings, rating agencies and the global financial system: Summary and policy implications," MPRA Paper 13249, University Library of Munich, Germany.
  2. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos & Mar Molinero, Cecilio, 2007. "Microfinance institutions and efficiency," Omega, Elsevier, vol. 35(2), pages 131-142, April.
  3. Mar Molinero, C. & Apellaniz Gomez, P. & Serrano Cinca, C., 1996. "A multivariate study of spanish bond ratings," Omega, Elsevier, vol. 24(4), pages 451-462, August.
  4. Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October.
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Cited by:
  1. Ana Yetano & Sonia Royo & Basisilo Acerete, 2009. "What is driving the increasing presence of citizen participation initiatives?," Documentos de Trabajo dt2009-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  2. Joaquín Andaluz, 2008. "Vertical product differentiation with subcontracting," Documentos de Trabajo dt2008-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  3. Natividad Blasco & Pilar Corredor & Sandra Ferreruela, 2009. "Detecting intentional herding: what lies beneath intraday data in the spanish stock market," Documentos de Trabajo dt2009-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  4. Leif Atle Beisland & Roy Mersland, 2011. "Do microfinance rating assessments make sense? An analysis of the drivers of the MFI ratings," Working Papers CEB 11-009, ULB -- Universite Libre de Bruxelles.
  5. Anaïs Périlleux & Eddy Bloy & Marek Hudon, 2010. "Productivity Surplus Distribution in Microfinance: Does Ownership Matter?," Working Papers CEB 10-036, ULB -- Universite Libre de Bruxelles.

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