Microfinance Institution Tier Identification
Microfinance Institution Tier Definitions
RIM’s Risk Management Graduation Model makes use of the industry-accepted MicroRate institutional tier definitions to identify appropriate risk management guidelines for MFIs at different levels of development. MicroRate’s tier definitions are based on a three tiered structure which applies simple, objective indicators which, together, act as proxies for MFI maturity. The three indicators are sustainability, size, and transparency.
–
–
–
Tier 3 |
Tier 2 |
Tier 1 |
|
Definitions |
Start-up MFIs or small NGOs that are immature and unsustainable | Small or medium sized, slightly less mature MFIs that are, or are approaching, profitability | Mature, financially sustainable, and large MFIs that are highly transparent |
Sustainability |
MFI doesn’t meet any of the following criteria: (i) Positive ROA for at least 2 of the last 3 years and no ROA < -5% in the last 3 years OR (ii) Positive ROA for at least 1 of the last 3 years and other years -5% OR (iii) Positive trend in ROA in last 2 years and > -5% |
MFI meets one of the following criteria: (i) Positive ROA for at least 1 of the last 3 years and other years > -5% OR (ii) Positive trend in ROA in last 2 years and > -5% |
MFI meets both of the following criteria: (i) Positive ROA for at least 2 of the last 3 years AND (ii) No ROA less than < -5% in the last 3 years |
Size |
Less than $5 million | Between $5 – $50 million | Over $50 million |
Transparency |
MFI doesn’t meet any of the following criteria: (i) Regulated financial institution OR (ii) Rated at least once in the last 2 years OR (iii) Audited financial statements for at least the last 3 years |
Audited financial statements for at least the last 3 years | MFI meets one of the following criteria: (i) Regulated financial institution OR (ii) Rated at least once in the last 2 years |
Click here for more information about MicroRate’s Microfinance Institution Tier Definitions.
Evaluate
–
–