Services: Research & Impact Assessment

Social Rating of Microfinance Institutions

EDA, along with its group company, Micro-Credit Ratings International Limited (M-CRIL), has pioneered a Social Rating service to support the microfinance sector.

Separate from, but linked to Credit Rating, Social Rating will contribute to greater transparency about what microfinance is achieving. It will assist MFIs and its supporters in making good use of resources for microfinance. It also provides useful information to MFIs for them to develop more effective systems and services for achievement of its social objectives.

Ratings have been focused on financial and management performance of MFIs. The sustainability of an MFI is very important, but tells only half the performance story in microfinance. Financial sustainability is not an end in itself. It is a means to an end. Most MFIs and those who support them (donors, investors, bankers, policy-makers and others) have a social mission . Social Rating will assess achievement of such social mission and along with credit ratings offer a comprehensive assessment of microfinance institutions.

...Read More Introduction to Social Rating

Further reading:

M-CRIL Social Rating highlighted on Micro Finance Gateway

Example of a social plus credit rating report

Summary Comparison: Risk Assessment and Social Rating

Social Rating and Social Performance Reporting in Microfinance: Towards a common framework

By Sinha Frances

November 2006, Arigidius Foundation

SEEP Network, USA

The specialist rating agencies in microfinance have frameworks and tools for financial risk assessment. These have gradually converged around objective indicators and agreed ratios – although the style of reporting or grading may differ. For social rating, the challenge of assessment is if anything more complex. Because of this, we were asked to converge from the start: to agree on the scope and parameters of a social rating, the key indicators and the assessment approach. And to link social rating to an agreed framework for social reporting by MFIs

The framework presented here is an output of a sub-committee for Social Rating and Reporting appointed by the Social Performance (SP) Task Force, with Frances Sinha, M-CRIL as chair, M-CRIL being the first specialist microfinance rating agency to develop a tool for social rating. Others on the sub-committee represent the other three main specialist rating agencies: Micol Guarneri of Microfinanza, Emanuelle Javoy of Planet Rating, Sebastian von Stauffenberg of MicroRate ; also Rekha Reddy of Accion, Anton Simanowitz of the Imp-Act Consortium, Cécile Lapenu of CERISE, Gary Woller of Chemonics, Allan Bussard of Integra and Marc Berger of SIDI. All members of the sub-committee have contributed to the content of this paper. Others too, especially Geert Jan Schuite of the Global Reporting Initiative and Koenraad Verhagen of the Argidius Foundation.

This paper summarises ‘work in progress’ and represents a significant attempt to coordinate different initiatives and perspectives. We believe it provides a sound basis for developing further the transparent measurement of social performance in microfinance.