S&P Announces Program to Develop Global Ratings Framework for Microfinance Insti...
New York, United States, February, 06 2008 -
The Inter-American Development Bank (IDB) will sponsor a Standard & Poor's pilot ratings program in the Latin American region to promote the development of sound global and national capital market infrastructure for microfinance institutions (MFIs), Standard & Poor's Ratings Services announced today.
"We are excited to be working in close partnership with the IDB on a project that aims to increase MFIs' access to capital markets," said Jane Eddy, Managing Director, Latin American Corporate & Government Ratings.
"The IDB has been a major catalyst in highlighting the benefits of utilizing microfinance as a financial tool to assist the poor."
"Standard & Poor's involvement in microfinance represents a milestone for this industry," said Donald F. Terry, general manager of the IDB's Multilateral Investment Fund, which has promoted the development of many of the leading MFIs in Latin America. "Standard & Poor's speaks the same language as investors. Their benchmarks could truly open capital markets for microfinance institutions."
Standard & Poor's will launch 10 MFI pilot ratings throughout Latin America and the Caribbean representing a broad cross section of MFIs in the region. A key characteristic of these institutions will be their dedication to transparency and potential to widen their sources of capital.
Upon completion of the pilot program, Standard & Poor's will work independently to finalize and publish its rating methodology and a tailored ranking system for MFIs. Both outcomes will build on the findings and recommendations from the Microfinance Rating Methodology Working Group.
This group was established in January 2007 as a collaborative effort between Standard & Poor's analysts and seasoned experts in the microfinance sector to understand the information needs of mainstream investors, the nature of MFIs, and the state of the microfinance industry in the context of broader financial system issues. The Working Group's findings underscored the need for Standard & Poor's to provide meaningful comparisons of MFIs within a country, globally, and across asset classes regardless of the MFI's ownership structure or commercial orientation.
In recent years, Standard & Poor's has had a growing presence in the microfinance area. In addition to playing a key role in the Microfinance Rating Methodology Working Group, S&P was the first agency to issue a public rating for a CDO microfinance transaction. CRISIL, S&P's majority-owned subsidiary in India, has provided a large number of microfinance gradings, assessments and ratings. Standard & Poor's currently assigns a national scale rating to Banco Compartamos S.A., an MFI in Mexico that completed its first IPO in 2007.
As microfinance institutions become adept at handling new inflows of funding and more MFIs are created, the on-going global expansion will require the resources of the mainstream capital markets. "In the past, the lack of consistent, globally accepted metrics for analyzing MFIs has hindered investment at a time when microfinance has been growing at a substantial rate. To unlock these sources of capital in both international and domestic markets, investors require transparent and globally accepted credit analysis. With our partnership with IDB, Standard & Poor's aims to enable such evaluations within countries and across borders and markets," Ms. Eddy concluded.