OCTOBER 2011

Client Protection session

Planet Rating

44 rue de Prony, 75017 Paris France

Tel : 33 1 49 21 26 30 – Fax : 33 1 49 21 26 27

rating@planetrating.com – www.planetrating.com

Presented by: Edouard Sers, Expert Analyst esers@planetrating.com

The perspective of a microfinance rating agency

2nd Azerbaijan Micro-finance Investor Fair

       

2

October 4th, 2010 2nd AMFA Fair

Role as a microfinance rating agency

Providing the information needed for a sound development of the sector by facilitating the development of relationships between MFIs and their partners

MFI Funder

Rating Agency

Provide a detailed second

opinion; report designed to meet the specific

needs of funders

On-site 5 to 7 days evaluation mission

Social Ratings provide an opinion on the level of compliance with each of the client protection principles

Opinion of the funder based on due

diligence and/or desk review

       

3

October 4th, 2010 2nd AMFA Fair

Analysis of client protection in our ratings

Social Rating Domains Weight

1. Social Performance Management 25%

2. Financial Inclusion 25%

3. Client Protection 30%

4. Human Ressources Policy 20%

5. Social Change Notch up

Rated in social ratings since 2007; emphasized since January 2010

- Appropriate product design and delivery

- Prevention of Over-indebtedness

- Responsible pricing

- Transparency of pricing

- Privacy of client data

- Fair and respectful treatment of clients

- Mechanisms for complaint resolution

Grids of analysis of client protection principles in line with those defined for the SMART campaign

       

4

October 4th, 2010 2nd AMFA Fair

Context Microfinance crises have shown that the performance of MFIs could be impacted by

factors that are more closely looked at in Social ratings than in current financial ratings. Direct correlation between Client Protection and long term Portfolio Quality The reputation of some actors (and thus of the sector), has also been affected by

management practices considered not to be in accordance with the claimed social goals

Through its GIRAFE ratings, Planet Rating aims at providing an opinion on the long term sustainability of MFIs.

The responsible financial rating therefore includes Client Protection and Social Performance Management factors.

Analysis of client protection in our ratings

Included in our pilot Responsible Financial Rating

Responsible Financial Rating

Weight

Governance 22%

I nformation 9%

Risk 9% + cap

Activities 18%

Funding & liquidity 14%

Efficiency & profitability 18%

Client Protection 10%+cap

       

5

October 4th, 2010 2nd AMFA Fair

Simple Social Performance Rating Scale

5 - Advanced

4 - Convincing

3 – In Progress

2 - Incipient

1 - Intangible

0 - Negative

       

6

October 4th, 2010 2nd AMFA Fair

Observations from our database of ratings

Client Protection Principles are being implemented in more than 70% of the rated MFIs, but with important room for improvement in 50% of the cases (database for 75 ratings)

71%

7%

21%

49%

21%

1%

0%

10%

20%

30%

40%

50%

60%

Intangible Incipient In progress Convincing Advanced

Client Protection grades

       

7

October 4th, 2010 2nd AMFA Fair

Observations from our database of ratings

Compliance with Client Protection Principles is highly correlated with institutional performance

y = 0.7055x + 0.615R² = 0.472

0

1

2

3

4

5

Clie

nt P

rote

ction

Gra

des

GIRAFE grades

0

1

2

3

4

5

E D C B A

       

8

October 4th, 2010 2nd AMFA Fair

Observations from our database of ratings

Compliance with Client Protection Principles is not correlated with ROA

y = 0.2615x + 1.9403R² = 0.2815

0

1

2

3

4

5

Clie

nt P

rote

ction

Gra

des

ROA

0

1

2

3

4

5

E D C B A

       

9

October 4th, 2010 2nd AMFA Fair

Observations from our database of ratings

Compliance with Client Protection Principles is highly correlated with Governance

y = 0.5961x + 0.9322R² = 0.309

0

1

2

3

4

5

Clie

nt P

rote

ction

Gra

des

Governance

0

1

2

3

4

5

E D C B A

       

10

October 4th, 2010 2nd AMFA Fair

Observations from our database of ratings

Other preliminary observations

High correlation observed between Client Protection and…

Regulation

Governance

Social Performance Management

Financial Services Management

Funding Strategy

       

11

October 4th, 2010 2nd AMFA Fair

Thank you ! Teşekkür edirem !

Questions and Answers

       

12

October 4th, 2010 2nd AMFA Fair

Contacts

Global Headquarters

44 rue de Prony

75017 Paris – France

Tel: +33 1 4921 2630

Fax: +33 1 4921 2627

Latin America

Francisco de Paula Ugarriza 813 – Oficina 301

Miraflores, Lima 18 – Peru

Tel: +51 1 242 4597

Fax: +51 1 242 4597

Asia

444 EDSA 21st floor, Guadelup Viejo

1211 Makati, Manila – Philippines

Tel: +63 907 385 0035

Middle East & North Africa

Piccadilly Bldg #407

Hamra Street

Beirut – Lebanon

Tel: +961 1 35 32 10

West Africa & Central Africa

Immeuble Sokhna Astou Lo

4ème étage – Sacré Coeur 2

BP 5695 Dakar – Senegal

Tel/Fax: +221 33 825 75 40

East Africa & Southern Africa

Shelter Afrique House – Mamlaka Road

PO Box 16658, 00100 Nairobi – Kenya

Tel: +254 20 271 42 20

www.planetrating.com - rating@planetrating.com