Factors explaining the rating of Microfinance Institutions
AbstractThe 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 InfoPaper provided by Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza in its series Documentos de Trabajo with number dt2006-03.
Date of creation: Mar 2006
Date of revision:
Microfinance Institutions (MFIs); Microcredit; Rating; Social Performance; Accounting Ratios;
Find related papers by JEL classification:
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
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