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
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Christelle Simo: Department of Finance and Accounting, Université de Dschang, Dschang P.O. Box 96, Cameroon
Hubert Tchakoute Tchuigoua: Department of Accounting, Finance, and Economics, Kedge Business School, 33405 Talence, France
Christophe Faugere: Department of Accounting, Finance, and Economics, Kedge Business School, 33405 Talence, France

Sustainability, 2022, vol. 14, issue 19, 1-18

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: social ratings; subsidy; corporate social responsibility; microfinance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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