The Microfinance Rating Market Outlook: The Rating Fund Market Survey 2005

Microfinance ratings services are increasingly gaining attention from both microfinance providers and capital providers to microfinance institutions (MFIs). Such attention has led to:

• The number of ratings and assessments to grow by 84% in the last four years;
• Establishment of rating agencies currently 16 active - in the microfinance market.

The Rating Fund Market Survey is doing the following:

• Tracking supply and demand trends;
• Discussing market development issues.

The two types of ratings that can be performed are:

• Credit risk ratings: Traditional institutional/financial ratings which can be conducted by mainstream ratings agencies;
• Global risk assessments/performance evaluations: Assessments by specialized agencies involved exclusively in the microfinance field.

The data from the study showed:

• Between 1994-2005, 674 MFIs were rated globally, while 1314 MFI ratings and assessments were completed;
• 63% of the ratings were global risk assessments, while 37% of the ratings were for credit risk assessments;
• 89% of all ratings services were conducted in Latin America and Asia, and 46% were just in the countries of India and Peru.

Established in 2001, The Rating Fund:

• Has approved 321 ratings and has made 261 reports available in the public domain;
• Offers co-financing to many of the institutions that it rates;
• Provided co-financing to 44% MFIs rated worldwide between 2001 and 2005;
• Also subsidizes ratings of various MFIs.

An area for concern is staff capacity, especially in Sub-Saharan Africa. However, the staff capacity will stabilize by the end of 2007 as resources are better trained.