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Technical Guide: Performance and Social Indicators for Microfinance Institutions


Washington D.C., May 16th 2014. - MicroRate published the Technical Guide: Performance and Social Indicators for Microfinance Institutions. This document gives the interpretation and calculation of the industry’s 18 most commonly used performance indicators.Four new indicators focus on social performance.

For each indicator, the Guide provides the definition, interprets its meaning, identifies potential pitfalls in its use, and provides regional benchmark values. Additionally, MicroRate added a section for each indicator, “How this relates to the traditional banking sector” to make the guide more useful to investors who are new to microfinance.

The indicators included in this guide are organized into five sections: portfolio quality, efficiency and productivity, financial management, profitability, and social performance. While many other indicators could be considered, the ones included are important indicators that, when taken together, provide a reasonable overview of the performance, risk and financial condition of an MFI as well as insight into its social performance.

Since this Technical Guide was first introduced in 2000, it has been adopted as a training manual and reference tool for the standardization of key indicators. We hope this document serves as a useful resource for investors to evaluate MFI performance.

MicroRate appreciates ADA’s www.ada-microfinance.org technical and financial contribution in producing this guide.

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A Guide to Responsible Investing – A MicroRate White Paper

ResponsibleInvestingCover

Socially Responsible Investment, Impact Investing, Responsible Finance, ESG, CSR, Double-bottom Line, Triple-bottom Line. The responsible investing space is plagued by jargon and rhetoric. As few definitions are universally applied, many are used interchangeably, causing confusion. The differences in terminology make it hard to identify, measure and evaluate this wide-ranging asset class. This guide explains the most commonly used terms in an effort to bring clarity to the responsible investing community.

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The State of Microfinance Investment 2013: Survey and Analysis of MIVs – 8th Edition

MicroRate’s 8th annual survey and analysis of microfinance investment vehicles (MIVs) is based on interviews with MIV managers and data from 92 active MIVs representing $8.1 billion in collective assets under management (as of December 2012). The key findings of the report include:

  • MIV growth continues along the “new normal” growth trajectory: total asset growth +17%, microfinance portfolio +18%.
  • Liquidity declined to 8.2% of total assets, down from a high of 14.6% in 2009.
  • Growth in all regions, with Latin America (24%) and East Asia/Pacific (23%) posting the strongest growth, and moderate growth in South Asia (12%), Africa (12%), and Europe/Central Asia (10%).
  • Azerbaijan (45%), Georgia (78%), Mongolia (38%), and Bosnia (43%) were among the fastest-growing countries.
  • Funds continue to mature, with investors redeeming $438 million in 2012.
  • MIV sector continuing to deconsolidate, with largest MIVs continuing to lose market share. Similar trend among fund managers.
  • Equity investment grew by $77 million, but declined as a share of the portfolio from 20% to 18%.
  • Institutional investors continue to dominate, with 56% share of total investment.

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Classifying MFIs: Microfinance Institution Tier Definitions

MicroRate White Paper Cover- Microfinance Institution Tier Definitions

In this white paper, MicroRate addresses the industry’s need for an objective set of criteria to classify the maturity of a microfinance institution (“MFI”). Historically, the microfinance industry referenced a system of three or four “tiers” to differentiate between MFI types.  However, previous tier definitions – often vague or based only on one indicator such as size – failed to adequately capture an MFI’s level of institutional development.

The system proposed is based on a three-tier structure that applies three simple, objective indicators that, together, act as proxies for MFI maturity. The three indicators are sustainability (return on assets, RoA), size (total assets in U.S. dollars) and transparency (level of regulation/reporting).

The State of Microfinance Investment 2012: MicroRate’s 7th annual survey and analysis of MIVs

In this report, The State of Microfinance Investment 2012: MicroRate’s 7th annual survey and analysis of MIVs, MicroRate finds that microfinance investment vehicles (MIVs) have settled into a lower level of growth.  The key findings of the report include:

  • MIV total asset growth settled into a “new normal” at 11% during 2011 (2010: 12%, 2012 forecast: 14%).
  • Record year for investor redemptions and fund maturities, however growth at existing and new funds resulted in a net inflow.
  • Latin America had the largest share of growth, but the pace of growth was faster in East Asia and the Pacific and Africa.
  • Continuing shift from debt to equity; increase in non-microfinance investment (e.g. housing, fair trade).
  • Institutional investors’ demands show increasing importance of financial performance.

PDF Read the report

PDF Read the press release

Study: Public Credit Registries, Credit Bureaus, and the Microfinance Sector in Latin America

MicroRate Credit Bureau Report Cover

With the support of the IDB- FOMIN, CAF, and Calmeadow, MicroRate produced the study “Centrales de Riesgo Públicas y Burós de Crédito y el Sector Microfinanciero en América Latina” (“Public Credit Registries, Credit Bureaus, and the Microfinance Sector in Latin America”).  This report emphasizes how public credit registries and credit bureaus are critical tools for healthy growth in the microfinance sector.  The study concludes that these sources of credit information are even more important when there is risk of overindebtedness.  In the majority of the countries evaluated in this study, it would be relatively easy to improve the effectiveness of credit bureaus through changes to the legal framework and regulation.

PDFRead the report (in English)

PDFRead the report (in Spanish)

Microfinance Investment: A Primer


In this white paper, “Microfinance Investment: A Primer,” Luminis, a service of MicroRate, provides investors with a brief introduction to microfinance and the microfinance investment industry.

This paper contains information on the total asset sizes of microfinance institutions and microfinance funds, the diversity of funds, as well as the important role that these funds play in providing capital to increase financial access globally.

Through this research, Luminis seeks to educate investors about microfinance investment options, promoting transparency and informed investment decisions

PDF Read Microfinance Investment: A Primer

The Tipping Point: Over-indebtedness and Investment in Microfinance

The Tipping Point: Over-indebtedness and Investment in Microfinance
MicroRate and the Mix Market have just published “The Tipping Point” as part of the MicroBanking Bulletin series.

This study examines whether investment contributed to recent microfinance repayment crises, and whether measures of investment activity might serve as early warning signals for future microfinance crises.

PDF Read The Tipping Point- Over-Indebtedness and Investment in Microfinance

Role Reversal Revisited: Are Public Development Institutions Still Crowding Out Private Investment in Microfinance?

In this report, Role Reversal Revisited: Are Public Development Institutions Still Crowding Our Private Investment in Microfinance?, finds that, yes, this crowding out is still occuring.  The original Role Reversal study, published in 2007, found that DFIs were crowding out private microfinance funds, by offering below-market interest rates and other incentives.  Five years later, Role Reversal Revisited concludes that the competition is even more pronounced.

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PDF Read the press release

The State of Microfinance Investment 2011

The State of Microfinance Investment 2011
The State of Microfinance Investment 2011, surveys microfinance investment vehicles (MIVs) to highlight the trends and outlook for the industry. Based on interviews with executives of the major microfinance investment funds and a survey of the 100+ active MIVs, this report examines the key factors that affected the microfinance fund market in 2010 and the trends that are likely to drive growth in 2011 and beyond.

PDF Read the State of Microfinance Investment 2011

PDF Read the Press Release
PDF Read the previous edition: State of Microfinance Investment 2010, or earlier MIV Surveys

Role Reversal- Are Public Development Institutions Crowding Out Private Investment?

Role Reversal- Are Public Development Institutions Crowding Out Private Investment?
Role Reversal- Are Public Development Institutions Crowding Out Private Investment? (2007)
The rapid growth of foreign private lending to microfinance institutions (MFIs) in the last several years has led to a surprising reversal of roles between government-owned development agencies and private lenders. Development institutions (International Financial Institutions -“IFIs”) are concentrating their loans in the strongest MFIs, leaving private lenders to look for opportunities among smaller, riskier borrowers.  Development institutions are “crowding” private lenders out of the best MFIs.

PDFRead Role Reversal

MFI Performance Technical Guide

MFI Performance Technical Guide
The lack of universally understood indicators in microfinance led MicroRate to pioneer a set of indicators specific to the microfinance industry for the evaluations of MFIs.  MicroRate has organized this set of indicators into its Technical Guide, which is recognized industry-wide.

PDF View the Technical Guide

PDF View the Technical Guide (Spanish)

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Technical Guide: Performance and Social Indicators for Microfinance Institutions
Washington D.C., May 16th 2014. - MicroRate published the Technical Guide: Performance and Social Indicators for Microfinance Institutions. This document gives the interpretation and calculation of the industry’s 18 most commonly used performance indicators.Four new indicators focus on social performance. … Continue reading