Microfinance Ratings Market Assessment

This paper assesses the ratings market for MFIs in Latin America and the Caribbean (LAC). It also reviews the current state of market development and identifies potential future trends. The timing of this assessment is designed to coincide with the conclusion of a series of programs created by the Multilateral Investment Fund (MIF) aimed at developing the MFI rating sector as a tool for increasing transparency. The paper also discusses the types of ratings products that are available in the LAC microfinance market and the benefits that regulators, investors, and MFIs can derive from using these products. The study concludes that:

• MFI ratings have become an established feature of the microfinance market in LAC and the MIF has played a critical role in achieving this outcome;
• MFI ratings sector in LAC may be evolving toward a clearer differentiation between microfinance institutional ratings (MIRs) as an institution-building product for MFIs and credit ratings focused on financial performance and the statistical likelihood of default;
• Social ratings and social performance could have a significant impact on the market over time;
• MIF should continue to monitor the market to determine whether a future need for involvement emerges.