Microfinance involves providing credit, thrift and other financial services and products to the economically challenged to enable them to raise their income levels and living standards. Typically, customers of microfinance institutions (MFIs) do not have access to banking services, and depend on informal sources (such as friends, relatives and money lenders) for their credit requirements.

MFIs fulfil the critical objective of providing financial services to the economically challenged; such services enable clients to meet their credit requirements, fulfil their entrepreneurial ambitions and enhance their economic status. However, microfinance can create a lasting impact in society only if it is provided on a sustainable basis. To make this happen, CRISIL offers risk assessment (including MFI Grading) and diagnostic services to help MFIs and other constituents in the microfinance industry to measure, mitigate and manage their business and financial risks.

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Product Offerings

To help investors, lenders and MFIs manage risks better; CRISIL offers risk assessments (with or without grading) and diagnostic services globally.

MFI Grading / Risk Assessment Services
CRISIL offers risk assessment services, which expresses its current opinion on the ability of an MFI to conduct its operations in a scalable and sustainable manner. CRISIL's risk assessment service can be offered with or without an MFI Grading.

CRISIL's MFI Grading is a measure of the overall performance of an MFI on a broad range of parameters under MICROS - CRISIL's Evaluation Framework. An MFI Grading is CRISIL's current opinion on the ability of the MFI to conduct its operations in a scalable and sustainable manner. MFI Grading is assigned on an eight-point scale, mfR1 being the highest, and mfR8 the lowest grading; a high grading denotes a greater degree of scalability and sustainability. The universe for evaluating institutions under the MFI Grading service consists of MFIs operating across the world. MFI Grading is not a comment on debt repayment capability.

The risk assessment exercise includes a review of the MFI's systems, processes and internal controls, asset quality, organisational efficiency, governance, management, financial performance and strengths. CRISIL's MFI risk assessment service is not a credit rating and does not indicate the credit worthiness of an MFI.

CRISIL's MFI Gradings are one-time assessments based on the information provided by MFIs and CRISIL does not monitor the grading on an ongoing basis. These are non-issuance based gradings and reviews are done only at the receipt of mandates in subsequent years. CRISIL, however, recommends at least an annual review.

Diagnostic services
CRISIL offers customised diagnostic services that cater to the requirements of donors and social investors proposing to invest in or provide grants to MFIs, or microfinance programmes of NGOs. These studies, apart from carrying out a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, may be customised to indicate actions that the MFIs can explore to scale up and sustain their microfinance operations while minimising risks. CRISIL also offers customised services, such as a review of the business plan, and periodic monitoring of microfinance programmes with an option of an MFI Grading under this service.