BSP Sets Rules for the Recognition of Microfinance Institution Rating Agencies

The Monetary Board has approved the rules and regulations for the recognition and de-recognition of Microfinance Institution Rating Agencies (MIRAs), particularly for those that provide ratings for banks with microfinance operations.  This measure aims to create the enabling environment for the appropriate use of objective, credible and competent third-party ratings of microfinance institutions.  These MIRAs provide an institutional rating rather than just a rating related to a safety grade of a specific instrument or a rating on an institution’s ability to service an existing or proposed debt.  Instead, this institutional assessment looks holistically at the governance, human resources as well as the strategic, management and financial performance of the microfinance institution.
As there is an increased commercialization and growth of the microfinance industry, the demand for such ratings is increasing. Ratings are seen as an effective tool to raise the quality and efficiency of microfinance institutions, increase the transparency in the industry as well as provide confidence for social and commercial investors.  For banks with microfinance operations, ratings may provide valuable assessments that can materially improve access to financing and capital by qualified banks and generate a useful benchmark vis-à-vis other microfinance institutions both locally and internationally.

The Monetary Board has approved the rules and regulations for the recognition and de-recognition of Microfinance Institution Rating Agencies (MIRAs), particularly for those that provide ratings for banks with microfinance operations.  This measure aims to create the enabling environment for the appropriate use of objective, credible and competent third-party ratings of microfinance institutions.  These MIRAs provide an institutional rating rather than just a rating related to a safety grade of a specific instrument or a rating on an institution’s ability to service an existing or proposed debt.  Instead, this institutional assessment looks holistically at the governance, human resources as well as the strategic, management and financial performance of the microfinance institution.

As there is an increased commercialization and growth of the microfinance industry, the demand for such ratings is increasing. Ratings are seen as an effective tool to raise the quality and efficiency of microfinance institutions, increase the transparency in the industry as well as provide confidence for social and commercial investors.  For banks with microfinance operations, ratings may provide valuable assessments that can materially improve access to financing and capital by qualified banks and generate a useful benchmark vis-à-vis other microfinance institutions both locally and internationally.

Read the rest of the article on the BSP website.

See BSP Circular 685: “Rules and Regulations for the Recognition and De-recognition of Microfinance Institution Rating Agencies”