In the fifth session of the Nexii Webinar Series 2012, we featured M-CRIL Ratings. Micro-Credit Ratings International (M-CRIL) specialises in rating the performance of micro-finance institutions and social enterprises, among other activities. In this most recent webinar session, Sanjay Sinha, founder and managing director of M-CRIL, walked attendees through the methodology behind M-CRIL, highlighting key indicators, the rating process, and the benefits of using such a performance and impact measurement tool. From conducting performance and impact ratings, M-CRIL has made notable findings regarding the potential and impact of microfinance institutions and social enterprises across the world. According to M-CRIL, over 100 million families have been positively impacted by microfinance institutions worldwide. In addition to this, M-CRIL noted that over $30 billion is available for investment in microfinance and impact enterprises. These are very exciting findings for impact investing! If you would like to know more about M-CRIL and its ratings, we have made the webinar slides available below. You can also find out more by contacting M-CRIL directly at contact@m-cril.com

1. Nexii Webinar Series 2012
M-CRIL Ratings of Impact Investments
with Sanjay Sinha
September 2012

2. M-CRIL’s contribution to impact investing
A company established in 1998 to promote transparency and
facilitate the flow of funds into microfinance and other
socially relevant development activities
M-CRIL has undertaken over 1,200 performance ratings of
around 900 development finance & other institutions, from
• commercial banks with a microfinance
portfolio,
• through rural banks, NBFIs, cooperatives
and impact enterprises, to
• village level community development
funds
1,500
1,000
500
in 32 countries of Asia, former Soviet Union
0 and Africa
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3. Our range of services
 Microfinance Institutional Ratings
 Ratings of Social Enterprises – including MFIs
 Ratings of Microfinance Investment Funds (MIVs)
 Assessment of NGOs engaged in community development
 Assessment of Value Chain promotion programmes
 Assessment of Low Cost Private Schools
 Due diligence, code of conduct
assessments
 Advisory to banks, aid agencies and apex
funders
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4. Key clients
Multilateral development agencies
Asian Development Bank, World Bank, IFC, CGAP
FAO, UNOPS, UNCDF
Bilateral agencies
 Swiss Agency for Development & Cooperation (SDC)
 Department for International Development, UK
 GiZ & KfW Germany
International donor institutions
Ford Foundation, Cordaid, Hivos, ICCO, Belgian Technical
Cooperation, Stromme Foundation
Apex institutions/banks/international investors
NHFC South Africa, NABARD, SIDBI India, RMDC
Nepal, Pakistan Microfinance Network, MISFA
Afghanistan, Blue Orchard Finance, NMI
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5. Our Associations
 M-CRIL was accredited with the CGAP-IDB Rating Fund and is
currently accredited with The Rating Initiative of Luxembourg
M-CRIL is a member of
 the Governing Board of the African Microfinance Transparency
(AMT) forum
 the Technical Committee of the SMART Campaign
 Part of an informal association of international microfinance rating
agencies – along with Microfinanza Rating, MicroRate and Planet
Rating
 Knowledge partner of the Micro Credit Summit Campaign
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6. Our Approach
 M-CRIL uses a comprehensive rating tool consisting of four categories of
indicators:
 Governance and strategy
 Management systems
 Production, technology and marketing
 Financial performance
 M-CRIL reports are an outcome of detailed data analysis, extensive field
visits and feedback from customers, staff and management at all levels
 The draft report prepared by our analysts is reviewed by the enterprise and
by an external rating committee comprised of specialists in finance, sector
management and development
 The committee critically examines the rating rationale under the
assessment areas using benchmarks and analysis norms
 The report is finalized and released only after assignment of a specific
grade and its endorsement by the rating committee
 In case of investment recommendations, the report provides an
indicative amount that would be appropriate
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7. The rating process
at Scheduling and desk analysis
M-CRIL
Introductory meeting – Discussions with Senior
Management, data gathering
Field visits: Visit to branches, meeting with
visit to
customers/borrowers
enterprise
by a team Discussion based on the field visit, follow up on
of the data, concluding meeting with the
2 analysts management.
Data analysis and report writing
Report sent for enterprise feedback
at Report presented to external Rating
M-CRIL Committee
Report finalized and sent to the client
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8. Major findings from ratings
Areas of achievement by impact enterprises
• Notable outreach to low income customers by MFIs –
over 100 million families worldwide
• Substantial funds raised – around $30 billion available for
investment in microfinance and other impact enterprises – a
supply facilitated by the availability of specialist due diligence
services such as rating
• Improvement of management and efficiency of impact
enterprises resulting from the application of professional
benchmarking tools such as rating
• Availability of downscaled products and services in
geographical areas and to segments of the population
generally ignored by commercial enterprises
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9. Major findings from ratings…continued
Areas of concern for investors
• Unbridled growth fuelled by the availability of funds for
microfinance: A race for numbers in outreach and lending to
microfinance customers that became an end in itself resulting
in over-indebtedness and repayment problems in significant
areas of operation
• Professionalisation of management is not always successful
as managers with commercial experience do not always
appreciate the customer empathy necessary to serve low income
populations – leading to unsustainable efficiency improvements
• The search for efficiency can result in products and services
not necessarily appropriate to the needs of customers of
impact enterprises – unsuitable products are often accepted
by such customers since they have no other choice.
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10. Assessment of impact investment funds
• Impact investment funds are entities that aggregate the
contributions of individuals and corporations in specialised
vehicles with the knowledge and resources necessary to make
good investments in impact enterprises
• It is often assumed that it is necessary to undertake due
diligence/ratings of impact enterprises but investors in funds do
not need assessments to inform their decisions due to their
physical proximity to the funds and their high level of knowledge
of finance
• Yet investments by such funds are in activities with high levels of
uncertainty and in geographies far removed from the primary
investors. M-CRIL provides an assessment service for impact
investment funds to enable primary investors more easily to
understand the investment and risk profile of such funds.
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11. The promise of ratings for impact enterprises
• Ratings facilitate due diligence of enterprises by impact investors
• Ratings provide a basis for comparison between alternative
investments
• The process provides managements with a mirror to reflect on
the performance of their enterprises
• It identifies strengths and weaknesses in the enterprise’s offering
and performance
• The report can be used as a management consultancy document
to improve enterprise performance
• It can also greatly facilitate the process of sourcing additional
investments
Ratings represent a positive opportunity for improving functioning
as well as enhancing investments in impact enterprises
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12. Thank you