Do Microfinance Rating Assessments Make Sense? - An Analysis Of The Drivers Of The MFI Ratings

Rating assessments of microfinance institutions are claimed to measure a combination of creditworthiness, trustworthiness and excellence in microfinance. Using a global dataset covering reports from 324 microfinance institutions, this paper suggests that these ratings are mainly driven by size, profitability, and risk. The ratings do not seem to capture the double bottom-line objective of microfinance institutions, as the authors' analyses are unable to prove any statistical relationship between microfinance ratings and the social objectives of these institutions. Moreover, the association between operational efficiency and microfinance ratings appears weak.