To determine which tier an MFI belongs to, and therefore what degree of risk management is appropriate, the RMGM uses MicroRate’s globally accepted classification system as a starting point. The system is based on a three-tier structure that applies three simple, objective indicators that together act as proxies for an MFI’s level of maturity. The three indicators are sustainability (as determined by return on assets, ROA), size (total assets in USD), and transparency (level of regulation and reporting). The main advantages of MicroRate’s tier system are the following:

• Simple to understand and easy
• Uses conventional, universally accepted metrics that aren’t specific to microfinance
• Based on publically available or easily attainable data
• Global, without regional calculation differences or exceptions
• Universal across all MFI types (e.g., regulated banks, NBFIs, NGOs, and coops)

In determining an MFI’s tier, factors others than those identified above should also be assessed, including institutional complexity, number of product offerings (especially whether the MFI mobilizes deposits), and strategic and institutional support from a regional or global network. It is recommended that an MFI should not consider adherence at a level lower than what the RMGM framework recommends under a strictly MicroRate-based tier classification.

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