The Determinants of Micro Finance Institutions’ Decision to Receive a Social Rating: An Institutional and Resource-Dependence Perspective

Christelle Simo, Hubert Tchakoute Tchuigoua and Christophe Faugere

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: We examine the determinants of MFIs’ social rating decisions according to institutional and resource dependency pressure factors. We exploit a unique data set containing 221 MFIs resulting in 767-year observations, obtained from both mixed market and social rating agencies (Planet, MicroFinanza, and Microrate rating agencies). Our data was collected for both rated and non-rated MFIs between the years 2006 and 2018, in six major less-developed regions of the world. Our study contributes to the CSR literature in microfinance as the decision to be rated acts like a CSR signal. Our research shows that the tighter the rule of law the less inclined MFIs are to seek a rating. In addition, we borrow from the resource-dependence perspective to demonstrate that proxies for resource (in)dependence such as for-profit status, mature stage, and subsidization are negatively associated with the obtention of a social rating. Overall, in the less-developed regions of the world, when MFIs operate in a strongly regulated environment and have a strong position (financial and mission-wise), with respect to investors, they are less willing to obtain a social rating.

Keywords: corporate social responsibility; microfinance; social ratings; subsidy (search for similar items in EconPapers)
Date: 2022-10-01
Note: SCOPUS: ar.j
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Published in: Sustainability (2022) v.14 n° 19

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