Credit Rating of MFIs

• Credit rating for microfinance usually used to

determine a bank or MFI’s credit risk. A credit
rating is an evaluation of an individual’s or
company’s ability to repay obligations or its
likelihood of not defaulting.
• Various institutions involve various
components for rating. The standard rating
components could be:
• Organizational history and track record
• Legal status of the organization
• Type of ownership and management
• Organizational alliances and networking
• Human resources
• Key personnel and management type
• Range of products and services
• Level of organizational control
• Management information system
• Documentation level, practices and policies
• Transparency in the governance system
• Profitability
• Organizational efficiency
• Financial management
 Grading of SHGs
• Grading of Indian SHGs is important for NGOs,
financial intermediaries and banks,
particularly for disbursement of credit. So it is
necessary to assess the social and financial
performance of the SHG.
• The information requirement on the
components of SHGs for rating are:
• General Information:
- Name of the SHG
- Name of the village/block/district
- Name of implementing agency
- Name of president/secretary
- Age of the group
- Purpose of formation of the group
- Extent of bank linkage
- Monthly saving per member
- Total number of members
• Homogeneity of members in the group
- Age group of members
- Gender of members
- Marital status
- Education level
- Social category
- Economic category
- Area of residence
• Management and dependence
- Dependence on NGO or intermediary
- Management type and structure
• Saving Bank Account and credit-saving
- Total Saving
- Total credit
- Total Interest
- Cash in Bank
- Who handles the SB account
- Frequency of transactions in a month
• Meeting
- Frequency
- Regularity
- Attendance
- Degree of participation
• Record Keeping
- Maintained by whom
- Quality of maintenance
- Regularity
• Credit
- Internal credit
- Rate of interest
- Purpose of loan
- Repayment period
- Method of sanctioning loans
- Total number of loan disbursed
• Productive activities
- type of business
- donor agency/bank, how linkage is
established, interest rate, time period
- detail activity of the business
• Livelihood
- past livelihood options
- present livelihood options
- change in economic position
- change in social position