Do microfinance rating assessments make sense? An analysis of the drivers of the MFI ratings

Leif Atle Beisland and Roy Mersland

No 11-009, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Rating assessments of microfinance institutions are claimed to measure a combination of creditworthiness, trustworthiness and excellence in microfinance. Using a global dataset covering reports from 324 microfinance institutions, this study suggests that these ratings are mainly driven by size, profitability, and risk. The ratings do not seem to capture the double bottom-line objective of microfinance institutions, as our analyses are unable to prove any statistical relationship between microfinance ratings and the social objectives of these institutions. Moreover, the association between operational efficiency and microfinance ratings appears weak. Although there are some minor differences between the rating agencies, the overall results suggest that microfinance ratings convey information very similar to that communicated by traditional credit ratings.

Pages: 30 p.
Date: 2011-03
New Economics Papers: this item is included in nep-ban and nep-mfd
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