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African Microfinance Pricing Transparency Leadership ForumLeadership Forum
Role of rating agencies
Institutional ratings
Presented by:
Ingrid Smit, Director Sub
ismit@planetrating.com
Planet Rating
13 rue Dieumegard 93400 Saint-Ouen France
Tél : 33 1 49 21 26 30 – Fax : 33 1 49 21 26 27
rating@planetrating.com – www.planetrating.com
ismit@planetrating.com
6 October 2011
African Microfinance Pricing Transparency
Role of rating agencies /
Institutional ratings
Presented by:
Ingrid Smit, Director Sub-Saharan Africa
ismit@planetrating.comismit@planetrating.com
Planet Rating: the global microfinance rating agency
Offices Missions
Paris
Dakar
Lima
6 October 2011
-Planet Rating was established in 1999- More than 700 ratings in 75 countries - Recognized by investors, CGAP, the ADA Rating Initiative and the Rating Fund II
Planet Rating: the global microfinance rating agency
Beirut
Nairobi
Manila
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African Microfinance Pricing Transparency Leadership Forum
Planet Rating was established in 1999More than 700 ratings in 75 countries – 220 in SSARecognized by investors, CGAP, the ADA Rating Initiative
and the Rating Fund II
Planet Rating’s range of services
�Ratings – Institutional (GIRAFE) and Social
� Social rating serves institutions seeking to attract social investors and to measure their social performance
� Interactive Assessments (Institutional and Social)
� Serves small and emerging MFIs with good potential
� Social IA serves MFIs with a social mission but not yet fullytools
� Audits – Portfolio and/or system, due diligence
6 October 2011
� Trainings in GIRAFE and Social Performance
� Introduction to quantitative and qualitative analysis in microfinance
� Intended for microfinance practitioners, Central Banks/regulators, investors/donors
Institutional (GIRAFE) and Social
Social rating serves institutions seeking to attract social investors and to measure their social
Interactive Assessments (Institutional and Social)
Serves small and emerging MFIs with good potential
Social IA serves MFIs with a social mission but not yet fully implemented social performance
Portfolio and/or system, due diligence
2
African Microfinance Pricing Transparency Leadership Forum
Trainings in GIRAFE and Social Performance
Introduction to quantitative and qualitative analysis in microfinance
Intended for microfinance practitioners, Central Banks/regulators, investors/donors
What is a rating?
Information Chain
« Rating » can be found along the chain of verification and dissemination of information produced by MFIs.
Information Chain
Collect data
Check the data
Compare
6 October 2011
data data
� Microfinance « Rating » =
= operational audit + institutional evaluation + rating.
can be found along the chain of verification and dissemination of information produced by MFIs.
Analyze the institution
Compare Summarize the analysis to
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African Microfinance Pricing Transparency Leadership Forum
institution behind the figures
the analysis to calculate a
score
= Institutional Rating
= operational audit + institutional evaluation + rating.
Why evaluate?
For internal purposes (management, board):� Build up self-evaluation capacity� Compare performance to best practices & other MFIs
� Make informed decisions
For external parties (investors, stakeholders):� Report to existing lenders/donors� Attract new sources of funding� Better design/tailor TA
� Access funds or TA
� Make informed decisions
6 October 2011
For the microfinance sector as a whole:� Promote communication /improve access to data� Improve transparency in the sector
� Enhance industry performance and international exposure
For internal purposes (management, board):evaluation capacity
Compare performance to best practices & other MFIs
For external parties (investors, stakeholders):Report to existing lenders/donors
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African Microfinance Pricing Transparency Leadership Forum
For the microfinance sector as a whole:Promote communication /improve access to dataImprove transparency in the sector
Enhance industry performance and international exposure
Ratings have played a vital role in professionalizing the microfinance sector, specifically by:
•Promoting international standards of best practices
For regulators, policymakers and networks ratings can help to:
• Increase the information on the performances of national operators – enhancing transparency in the market
•Promoting international standards of best practices•Facilitating MFIs growth and access to funding
•Helping MFIs improve their performances
6 October 2011
operators – enhancing transparency in the market
• Transfer knowledge in microfinance best practices
In addition, rating agencies can offer trainings to MFIs on reporting tools
Ratings have played a vital role in professionalizing the microfinance sector, specifically by:
Promoting international standards of best practices
For regulators, policymakers and networks ratings can help to:
Increase the information on the performances of national enhancing transparency in the market
Promoting international standards of best practicesFacilitating MFIs growth and access to funding
Helping MFIs improve their performances
5
African Microfinance Pricing Transparency Leadership Forum
enhancing transparency in the market
Transfer knowledge in microfinance best practices
In addition, rating agencies can offer trainings to MFIs on
Institutional Rating
�Assess the mfi’s financial, organizational and operational sustainability
�Analyze the key risks that can affect the performance
Risk Rating for Microfinance Institutions
�Analyze the key risks that can affect the performance
Rating Domains Weight
G overnance 24%
I nformation 10%
R isk management 10%
A ctivities 20%
6 October 2011
A ctivities 20%
F unding and liquidity 14%
E fficiency and profitability 22%
Assess the mfi’s financial, organizational and operational sustainability
Analyze the key risks that can affect the performance
Risk Rating for Microfinance Institutions
Analyze the key risks that can affect the performance
Weight
24%
10%
10%
20%
Qualitative domains
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African Microfinance Pricing Transparency Leadership Forum
20%
14%
22%
Quantitative domains
GIRAFE Evaluation Framework
Governance
Information
Decision-making
Planning
Management Team
HR Management
Information
Risk
Activities
Financing
Procedures and Internal Controls
Internal Audit
Financial Services Management
Credit Risk
Credit Risk Coverage
Funding Strategy & Capital Adequacy
Market Risks
6 October 2011
EfficiencyLiquidity Risks
ROA
Revenue Quality
Operational Efficiency
Asset Optimization
making
Management Team
HR Management
Procedures and Internal Controls
Financial Services Management
Credit Risk Coverage
Funding Strategy & Capital Adequacy
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African Microfinance Pricing Transparency Leadership Forum
Revenue Quality
Operational Efficiency
Asset Optimization
Contacts
� Global Headquarters
44 rue de Prony
75017 Paris – France
Tel: +33 1 49 21 26 31
Fax: +33 1 49 21 26 27
� Latin America
Francisco de Paula Ugarriza 813 – Oficina 301
Miraflores, Lima 18 – Peru
Tel: +51 1 242 4597
Fax: +51 1 242 4597
6 October 2011
� Asia
444 EDSA 21st floor, Guadelup Viejo
1211 Makati, Manila – Philippines
Tel: +63 907 385 0035
www.planetrating.com -
� Middle East & North Africa
Piccadilly Bldg #407
Hamra Street
Beirut – Lebanon
Tel: +961 1 35 32 10Tel: +961 1 35 32 10
� West Africa & Central Africa
Sokhna Astou Lo Building
4th Floor - Sacre Cœur 2
BP 5695 - Dakar – Sénégal
Tel: + 221 33 825 75 40
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African Microfinance Pricing Transparency Leadership Forum
� East Africa & Southern Africa
Cape Office Park – Ring Road
PO Box 16658, 00100 Nairobi – Kenya
Tel: +254 20 386 0525/+254 718 814421
rating@planetrating.com
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