Social Rating Overview of MFIs
This paper gives an overview of MCRIL's social rating system that is a new evolution in the field of microfinance operations. It begins with the definition of social rating where the MFI's developmental objectives are taken into consideration, and states that it is a step beyond the managerial and financial assessments.
Social rating entails the conversion of social mission into practice. It entails:
- Social mission;
- Outreach;
- Client feedback.
Social rating is a predictor of the impact the MFI creates. The paper also explains how a MFI's social ratings are conducted. The final section deals with the rationale for having a social rating system for MFIs:
- To promote greater transparency on social performance;
- To benchmark social performance across the microfinance industry;
- To encourage MFIs to improve their social performance.
The paper states that when linked to credit rating it helps to:
- Compare social and financial performance, reporting on the 'double bottom-line';
- Facilitate funds flow to MFIs that are start-up or relatively weak on financial parameters, but strong on social parameters.
The paper concludes that, in the long run, social rating entails an audit and verification service to MFIs that have established their own systems of social performance management and reporting.
