Standard & Poor’s Microfinance initiative continues our company’s 150-year history of providing credit ratings, financial market research, and analytical tools to investors. The firm operates directly and through affiliates in 24 countries (developed and developing), with ratings in over 110 countries.
Standard & Poor’s assigns global, local and, where applicable, national scale credit ratings to the debt of microfinance institutions as well as microfinance structured debt transactions. Our microfinance work was formally announced in early 2007, when Standard &Poor’s created a working group to explore the needs of mainstream investors and the state of the microfinance industry in the context of the broader financial system. However, our microfinance work extends back to 2004, when Banco Compartamos S.A. was assigned an S&P Mexican national scale credit rating using S&P’s Financial Institutions Rating Criteria.
Since 2004, Standard & Poor’s has used its financial institutions criteria as a starting point in evaluating the credit risk of microfinancers, while taking into account the special characteristics of the sector such as:
The high volume of small loans and rapid turnover;
Relative newness of the sector;
Range of lending methodologies to meet the unique characteristics of clients; and
Variety of ownership-models.
Global ratings should promote the development of a sound global and local capital
market infrastructure for microfinance, and help build a healthy secondary market.
Ratings provide investors with clear information, disclosure benchmarks, and
consistent accepted standards aiding them to more accurately assess risk and reward
parameters. Moreover, Microfinance Institutions themselves will be able to use the feedback provided to benchmark themselves against their peers, and to map their progress toward best practices in their industry.
The overall growing engagement of mainstream capital players in the industry indicates that microfinance is on the path to becoming a potentially vibrant emerging-market asset class. However, key challenges currently face the industry’s growth:
The need to continue to widen and mobilize the investor base while expanding the universe of effective and sustainable microfinance institutions; and
The demand for globally accepted and standardized analytical tools for MFIs.
To aid in addressing these challenges, Standard & Poor’s has developed and published its framework for microfinance credit analysis. Currently, S&P is validating its MFI methodology via approximately 10 pilot credit ratings in the Latin American and Caribbean regions under the sponsorship of the Inter-American Development Bank. Non-sponsored ratings are also being conducted in other global regions with rapidly developing microfinance sectors. Below are Standard & Poor’s publications addressing our current announcements, analytical content and marketing materials in the microfinance industry.
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