labels: crisil, finance - general, economy - general, nabard, banks & institutions
CRISIL, NABARD to launch grading for microfinance bodiesnews
21 June 2005


The National Bank for Agriculture and Rural Development (NABARD) and CRISIL have jointly launched a rating for microfinance institutions (MFIs). This initiative makes CRISIL the first, and so far the only, mainstream rating organisation in the world to grade MFIs.

Called the 'NABARD-CRISIL MFI grading scheme', it is aimed at improving credit delivery to the economically challenged, by encouraging banks to increase the involvement of microfinance institutions (MFIs) in financial intermediation to enhance credit delivery to the poor.

The microfinance grading communicates the ability of the MFI to scale up and sustain operations on an eight point grading scale.

Says Krishnan Sitaraman, head, financial sector ratings, CRISIL, "Barring a few, most MFIs are unable to avail credit from the banking sector. Thus, the quantum of credit flow to MFIs is currently not significant." Besides, in many cases, banks are not adequately equipped to evaluate MFIs. CRISIL, as a full service ratings agency, has executed a number of grading and assessment assignments for MFIs. CRISIL has also assessed microfinance securitised portfolios and fixed deposits.

Banks can utilise CRISIL's expertise to evaluate MFIs and partner with it in their microfinance initiatives through its services at concessional rates. Further, as part of the NABARD-CRISIL MFI grading scheme, NABARD will be reimbursing banks the grading fees paid to CRISIL. The scheme will be operational initially for a year. The scheme will support the grading of those MFIs having a loan outstanding between Rs50 lakh and Rs5 crore.

Most MFIs in India are either not regulated or are partly regulated. Hence, a customised independent assessment of the scalability and sustainability of the MFIs would be immensely beneficial for banks wanting to partner with them. To cater to the varied requirements of the constituents in this sector, a few years ago, CRISIL had launched a performance grading product called MFI grading, to evaluate the MFIs.



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CRISIL, NABARD to launch grading for microfinance bodies