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MIF and S&P to promote global ratings for microfinance institutions
Feb '08
The Inter-American Development Bank's Multilateral Investment Fund (MIF) will sponsor a program with Standard and Poor's to develop globally accepted ratings for microfinance institutions.

In Latin America and the Caribbean, the microfinance industry has been remarkably successful in bringing financial services such as loans and savings accounts to millions of low-income people. Nevertheless, they are only serving a small fraction of the potential customer base. To reach a larger scale, microfinance institutions (MFIs) must attract much more funding at lower costs.

A system of benchmarks endorsed by Standard & Poor's, one of the world's leading financial intelligence agencies, could greatly expand MFIs' access to capital markets, said MIF General Manager Donald F. Terry.

"Standard & Poor's involvement in microfinance represents a milestone for this industry," said Terry. "They speak the same language as private investors, whose information needs are different from those of donors who traditionally supported the microfinance movement."

Standard & Poor's Managing Director for Latin American Corporate & Government Ratings, Jane Eddy, said: "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. And notwithstanding the level of goodwill and interest, most investors demand standard metrics before investing in any sector."

At its cost, Standard & Poor's will complete and publish its rating methodology and a tailored ranking system for MFIs that will be subjected to its standard review process. A grant to the program from the IDB will help cover costs of rating 10 microfinance institutions in Latin America and the Caribbean using Standard & Poor's methodology. A report on the program's findings will be disseminated among the microfinance industry and global investors.

The MIF and Standard & Poor's expect that transparent and comparable data that reflect globally accepted benchmarks will help accelerate the flow of capital from international and domestic markets to the microfinance industry, fostering the growth of larger and stronger MFIs.

Inter-American Development Bank

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