MFI Grading - SMERA

Microfinance Institution (MFI) grading is an all-comprehensive assessment of financial and business performances of MFIs to provide an opinion on their capacity to carry out operations in a sustainable manner. It provides an independent expert assessment on MFI’s relative performance, benchmarked against the industries and risk management practices. It is aimed at facilitating market participants, MFIs, lenders, investors and regulators with detailed information and statistics on their operational, financial and strategic performance. MFI grading thus is an important tool for business and investment decisions.

BENEFITS

Independent third-party opinion

Provides unbiased rating to MFIs, enhances credibility, and also helps adopt good governance policies for sustainability.

Builds confidence with business partners

A good rating provides comfort to lenders, including bankers, financial institutions, NBFCs and collaborators to partner with the related MFIs.

Self-improvement tool

This helps the rated entity to identify areas of improvement and plan for corrective measures.

METHODOLOGY

GRADING PROCESS

Receipt of rating request from MFI

Submission of required information and documents

Detailed analysis of financial and oprational performance by that analyst

Management Discussion

Site Visit - Branch Visit or Head Office Visits

Report preparation by the analyst

Draft report shared with the client for feedback

Assignment of the rating by the rating committee

Dissemination of rating to the client

MFI GRADING SCALE

Grading Scale

Definitions

M1

Highest capacity of MFIs to manage their microfinance operations in a sustainable manner

M2

High capacity of MFIs to manage their microfinance operations in a sustainable manner

M3

Above average capacity of MFIs to manage their microfinance operations in a sustainable manner

M4

Average capacity of MFIs to manage their microfinance operations in a sustainable manner

M5

Inadequate capacity of MFIs to manage their microfinance operations in a sustainable manner

M6

Low capacity of MFIs to manage their microfinance operations in a sustainable manner

M7

Very low capacity of MFIs to manage their microfinance operations in a sustainable manner

M8

Lowest capacity of MFIs to manage their microfinance operations in a sustainable manner