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An Analysis of the Drivers of Microfinance Rating Assessments

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  • Beisland, Leif Atle
  • Mersland, Roy

Abstract

Rating assessments of microfinance institutions (MFIs) are claimed to measure a combination of creditworthiness, trustworthiness, and excellence in microfinance. Using a global data set covering reports from 304 microfinance institutions, this study suggests that these ratings are mainly driven by size, profitability, and risk. The overall results suggest that microfinance ratings convey information similar to that communicated by traditional credit ratings. All results are remarkably consistent across rating agencies. The determinants of the rating grades are found to be the same in all subsamples.

Suggested Citation

  • Beisland, Leif Atle & Mersland, Roy, 2012. "An Analysis of the Drivers of Microfinance Rating Assessments," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 41(2), pages 213-231.
    • Handle: RePEc:zbw:espost:323974
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    References listed on IDEAS

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    1. Hartarska, Valentina M., 2005. "Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24568, European Association of Agricultural Economists.
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    5. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
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    8. Hermes, Niels & Lensink, Robert & Meesters, Aljar, 2011. "Outreach and Efficiency of Microfinance Institutions," World Development, Elsevier, vol. 39(6), pages 938-948, June.
    9. Horrigan, Jo, 1966. "Determination Of Long-Term Credit Standing With Financial Ratios," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 4, pages 44-62.
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    Cited by:

    1. Leif Atle Beisland & Roy Mersland & Trond Randøy, 2014. "Microbank Regulation and Earnings Quality: A Global Survey," Palgrave Studies in Impact Finance, in: Roy Mersland & R. Øystein Strøm (ed.), Microfinance Institutions, chapter 14, pages 271-293, Palgrave Macmillan.
    2. Beisland, Leif Atle & Mersland, Roy, 2014. "Earnings Quality in Nonprofit Versus For-Profit Organizations: Evidence From the Microfinance Industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 43(4), pages 652-671.

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