What is a microfinance rating?

A performance evaluation, global risk evaluation, or even microfinance rating is the result of an indepth analysis of the performance and risk linked to an MFI's operations. On the one hand, it helps measure its creditworthiness but also its credibility and excellence in microfinance.

The rating report provides an external, reliable and coherent source of information on the current situation of the MFI, basing itself on past data and defining risks to come.

The benefits of microfinance ratings

Ratings are aimed at determinining the level of operational and financial performance as well as the management capacities of an executive team.

Thanks to the identification of its strenghts and weaknesses, and of the risk factors in its management, the MFI will be more capable of developing its perennial activities, without being encouraged to turn its activities towards less risky markets at the expense of its current customers.

 

Facilitate access to external funding for MFIs

Year after year, the microfinance sector is gaining in maturity; measuring financial performance of these MFIs is becoming more important for both the investors and the donors.

On the other hand, more and more MFIs are expressing the need to access formal financial markets to raise capital and extend their activities in order respond to a growing demand on behalf of the micro-enterprise sector. 

The management of an MFI needs as much rigor as in the traditional financial sector, and this is why certain investors, banks and other commercial financial sources are reluctant to invest in an institution once they feel that the information offered is not reliable, verifiable and coherent. The information in the rating reports respond to these demands.

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Rating co-funding mechanism

African Microfinance Transparency (AMT) offers a €3 000 for its member MFIs who wish to update their rating with one of the four member rating agencies: Planet Rating, Microfinanza Rating, M-CRIL orMicroRate.

The fund is designed to increase transparency in the African microfinance sector by supporting and encouraging the use of ratings among MFIs through co-funding.

For more information, click here, or contact AMT's secretariat at 

Code of conduct

Rating agencies that are members of AMT are required to sign the code and abide by it at all times. The code of conduct was drawn up by AMT to ensure that the supply side of the microfinance rating market adheres to certain principles in order to strengthen the quality of that supply.

Whilst rating agencies that are members of AMT are obliged to sign the code, non-member rating agencies active in Africa are wholeheartedly encouraged to become signatories.

Download the Code of Conduct