Case Study

Capital Markets-Style Risk Assessment: Testing Static Pool Analysis on Microfinance

Elaborating on the importance of using risk assessment tools like static pool analysis for MFIs
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This study attempts to apply static pool analysis, a risk-assessment tool used widely in the global capital markets, to the microlending sector. The aim was to give MFIs a tool which would help them undertake their lending activities according to global standards. The tool will also allow them to draw on large pools of capital which circulates in the mainstream capital markets. The study advocates that MFIs will be better positioned to attract capital market investors if they report on their performance using standard methods such as static pool analysis. With the help of two case studies, the study concludes that static pool analysis could be applied to MFIs lending portfolios, and that the results were consistent with capital markets standards. Recommendations include:

  • Importance of bringing capital markets tools to MFIs as a means of accessing capital;
  • Importance of standardized analysis of historical data collected in a consistent format by MFIs;
  • Importance of applying static pool analysis to loans as a first step toward gaining access to the capital markets;
  • MFIs lacking sufficient historical data should begin to collect loan performance data in a consistent format that would lend itself to static pool analysis at a later date.

About this Publication

By Ayton, R., L. Sarver, S. & Raynes, S.
Published