Rating in Microfinance: Cross Country Evidence

Abstract

This paper focuses on the ability of microfinance rating agencies to impose market discipline on microfinance institutions by rating these organizations' performance. Results indicate that not all rating agencies are equal as only one rater was able to impose market discipline by promoting better sustainability, while rating by another agency caused MFIs to slack off. In addition, while rating in general lead to better outreach, this effect was annulled if MFIs received financial aid in order to get rated. Finally, only one rater provided rating that allowed MFIs to raise additional debtFinancial Economics,