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Factors explaining the rating of Microfinance Institutions

Author

Listed:
  • 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.

Suggested Citation

  • Begoña Gutiérrez Nieto & Carlos Serrano Cinca, 2006. "Factors explaining the rating of Microfinance Institutions," Documentos de Trabajo dt2006-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
  • Handle: RePEc:zar:wpaper:dt2006-03
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    References listed on IDEAS

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    1. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos & Mar Molinero, Cecilio, 2007. "Microfinance institutions and efficiency," Omega, Elsevier, vol. 35(2), pages 131-142, April.
    2. 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.
    3. 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.
    4. Carmen M. Reinhart, 2002. "An Introduction," World Bank Economic Review, World Bank Group, vol. 16(2), pages 149-150, August.
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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. Raúl Serrano & Marta Fernández-Olmos & Vicente Pinilla, 2015. "International diversification and performance in agri-food firms," Documentos de Trabajo dt2015-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    3. Patrick Reichert, 2016. "A meta-analysis examining the nature of trade-offs in microfinance," Working Papers CEB 16-005, ULB -- Universite Libre de Bruxelles.
    4. Angulo, Ana & Burridge, Peter & Mur, Jesús, 2018. "Testing for breaks in the weighting matrix," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 115-129.
    5. B Gutiérrez-Nieto & C Serrano-Cinca & C Mar Molinero, 2009. "Social efficiency in microfinance institutions," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(1), pages 104-119, January.
    6. José Alberto Molina & Juan Carlos Campaña & Raquel Ortega, 2016. "Time spent on cultural activities at home in Spain: Differences between wage-earners and the self-employed," Documentos de Trabajo dt2016-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    7. Pilar Bernal & Juan P. Maicas & Pilar Vargas, 2016. "Exploration, exploitation and innovation performance: Disentangling environmental dynamism," Documentos de Trabajo dt2016-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    8. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto & Nydia M. Reyes, 2013. "A Social Approach to Microfinance Credit Scoring," Working Papers CEB 13-013, ULB -- Universite Libre de Bruxelles.
    9. Bert D'Espallier & Marek Hudon & Ariane Szafarz, 2016. "Aid Volatility and Social Performance in Microfinance," Working Papers CEB 16-015, ULB -- Universite Libre de Bruxelles.
    10. Leif Atle Beisland & Roy Mersland & R. Oystein Strøm, 2012. "Audit Quality and Corporate Governance: Evidence from the Microfinance Industry," Working Papers CEB 12-034, ULB -- Universite Libre de Bruxelles.
    11. Inmaculada García-Mainar & Víctor M. Montuenga-Gómez, 2020. "Over-Qualification and the Dimensions of Job Satisfaction," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 147(2), pages 591-620, January.
    12. Roy Mersland & Daudi Pascal & Leif Atle Beisland, 2016. "The influence of CEO power on agency costs in non-profit organisations: evidence from the global microfinance industry," Working Papers CEB 16-045, ULB -- Universite Libre de Bruxelles.
    13. 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.
    14. Silvia Sacchetti & Ermanno C. Tortia & Francisco J. López Arceiz, 2016. "Human resource management practices and organizational performance. The mediator role of immaterial satisfaction in Italian Social Cooperatives," Documentos de Trabajo dt2016-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    15. Daudi Pascal & Leif Atle Beisland & Roy Mersland, 2016. "The origin of CEOs and its influence on microfinance performance and risk-taking," Working Papers CEB 16-046, ULB -- Universite Libre de Bruxelles.
    16. Joaquín Andaluz, 2008. "Vertical product differentiation with subcontracting," Documentos de Trabajo dt2008-01, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    17. Hubert Tchakoute Tchuigoua, 2015. "Capital Structure of Microfinance Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 47(3), pages 313-340, June.
    18. Anaïs A Périlleux & Eddy Bloy & Marek Hudon, 2010. "Productivity Surplus Distribution in Microfinance: Does Ownership Matter?," Working Papers CEB 10-036, ULB -- Universite Libre de Bruxelles.
    19. 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.

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    More about this item

    Keywords

    Microfinance Institutions (MFIs); Microcredit; Rating; Social Performance; Accounting Ratios;
    All these keywords.

    JEL classification:

    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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