Qualitative Analysis of Social Rating Products

This study commissioned by the Rating Initiative c/o ADA asbl, analyzes the microfinance industry's uptake and use of social rating products.

Stakeholders and consultants conducted this study on behalf of the Rating Initiative. The four rating agencies in the microfinance social ratings space use the same indicators to measure social performance, but differ in their philosophies and methodologies. Microfinance stakeholders lack experience to understand these differences and to make comparisons. Study findings indicate that:

• Investors and donors are increasingly incorporating social performance indicators in their due diligence of microfinance partners;
• Most investors and donors do not significantly use social ratings in decision making;
• Investors and donors would like greater transparency and believe that social ratings can shed light on MFIs' social performance;
• MFI users are familiar with some rating products, though their experience with social ratings is nascent;
• Most MFI users choose a social rating agency and tool for arbitrary reasons instead of comparing price, reporting format and rating methodology;
• MFIs expect that undergoing a social rating will help to learn about social performance and allow them to improve their social performance management.

The study makes recommendations for social ratings to add value and transparency to the industry.