The Role of Microfinance Ratings in the Sustainable Development of China’s Financial Inclusion Sector

Date Published: 
Jul 2014
Wu, E. & Harris, G.

Exploring the use of ratings for enhancing access to finance in China

This report puts a spotlight on the potential role that ratings could play in China’s drive toward financial inclusion. It claims that third-party service providers such as rating companies could become important catalysts for clarity in a Chinese market segment that is significantly lacking transparency and benchmarks. The study also provides insights into whether and how regulators, investors, donors, and MFIs could best utilize ratings in China. It also aims to support public policy makers and industry leaders to understand the nature, scope, limitations, and applications of ratings toward enhancing financial inclusion.

The report covers two main sections. First, it gives an overview of the state of the microfinance rating market internationally, principally highlighting the development of the specialized microfinance rating sector. It also gives an overview of key products, players, and key lessons for China with a focus on the need of Chinese stakeholders. Under the second section, the report discusses the existing rating ecosystem with an analysis of the potential benefits of ratings for China. It identifies factors encouraging or discouraging the further development of such an ecosystem. It also focuses on the application of ratings to non-banking lending entities and other non-deposit taking lenders.