PTF by ewghwehws

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									                                                                            OCTOBER 2011




                     Client Protection session
                     The perspective of a microfinance rating agency
                     Presented by: Edouard Sers, Expert Analyst
                                   esers@planetrating.com




                                                                       2nd Azerbaijan
                                                                       Micro-finance
                                                                        Investor Fair


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
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




                                      Opinion of the funder
                                     based on due diligence
                                       and/or desk review
            MFI                                                                 Funder


            On-site 5 to 7 days                                   Provide a detailed second
            evaluation mission
                                             Rating               opinion; report designed
                                             Agency                  to meet the specific
                                                                       needs of funders

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

October 4th, 2010                                                                      2nd AMFA Fair
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Analysis of client protection in our ratings

Rated in social ratings since 2007; emphasized since January 2010




Social Rating Domains                          Weight
                                                           - Appropriate product design and delivery
1. Social Performance Management                  25%
                                                           - Prevention of Over-indebtedness
2. Financial Inclusion                            25%      - Responsible pricing
3. Client Protection                              30%      - Transparency of pricing

4. Human Ressources Policy                        20%      - Privacy of client data
                                                           - Fair and respectful treatment of clients
5. Social Change                              Notch up
                                                           - Mechanisms for complaint resolution




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


October 4th, 2010                                                                        2nd AMFA Fair
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Analysis of client protection in our ratings

Included in our pilot Responsible Financial Rating

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.

                                                  Responsible Financial Rating               Weight
                                                  G overnance                                   22%
                                                  I nformation                                    9%
 The responsible financial rating
   therefore includes Client Protection           R isk                                     9% + cap
   and Social Performance
                                                  A ctivities                                    18%
   Management factors.
                                                  F unding & liquidity                          14%
                                                  E fficiency & profitability                   18%
                                                  C lient Protection                        10%+cap

October 4th, 2010                                                                       2nd AMFA Fair
                                                                                                    3
Simple Social Performance Rating Scale



                            5 - Advanced



                            4 - Convincing



                            3 – In Progress


                            2 - Incipient



                            1 - Intangible



                            0 - Negative



October 4th, 2010                             2nd AMFA Fair
                                                          4
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)



                                        Client Protection grades
                    60%
                                                      49%
                    50%

                    40%

                    30%
                                         21%                       21%
                    20%
                             7%
                    10%
                                                                                1%
                    0%
                          Intangible   Incipient   In progress   Convincing   Advanced



                                                                    71%

October 4th, 2010                                                                        2nd AMFA Fair
                                                                                                     5
Observations from our database of ratings

Compliance with Client Protection Principles is highly correlated with institutional performance



                                           5
                                           5

                                           4
                                           4
                Client Protection Grades




                                           3
                                           3



                                           2
                                           2



                                           1
                                           1
                                                                       y = 0.7055x + 0.615
                                                                            R² = 0.472
                                           0
                                           0
                                               E   D        C          B               A
                                                       GIRAFE grades


October 4th, 2010                                                                            2nd AMFA Fair
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Observations from our database of ratings

Compliance with Client Protection Principles is not correlated with ROA


                                        5
                                        5

                                        4
                                        4
             Client Protection Grades




                                        3
                                        3



                                        2
                                        2



                                        1
                                        1

                                                                y = 0.2615x + 1.9403
                                        0                            R² = 0.2815
                                        0
                                            E   D         C      B               A
                                                    ROA

October 4th, 2010                                                                      2nd AMFA Fair
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Observations from our database of ratings

Compliance with Client Protection Principles is highly correlated with Governance

                                        5
                                        5

                                        4
                                        4
             Client Protection Grades




                                        3
                                        3



                                        2
                                        2



                                        1
                                        1

                                                                 y = 0.5961x + 0.9322
                                        0                              R² = 0.309
                                        0
                                            E   D        C       B                A
                                                    Governance

October 4th, 2010                                                                       2nd AMFA Fair
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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




October 4th, 2010                                             2nd AMFA Fair
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                    Thank you ! Teşekkür edirem !


                       Questions and Answers




October 4th, 2010                                   2nd AMFA Fair
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Contacts


  Global Headquarters                                  Middle East & North Africa
 44 rue de Prony                                       Piccadilly Bldg #407
 75017 Paris – France                                  Hamra Street
 Tel: +33 1 4921 2630                                  Beirut – Lebanon
 Fax: +33 1 4921 2627                                  Tel: +961 1 35 32 10


  Latin America                                        West Africa & Central Africa
 Francisco de Paula Ugarriza 813 – Oficina 301         Immeuble Sokhna Astou Lo
 Miraflores, Lima 18 – Peru                            4ème étage – Sacré Coeur 2
 Tel: +51 1 242 4597                                   BP 5695 Dakar – Senegal
 Fax: +51 1 242 4597                                   Tel/Fax: +221 33 825 75 40


  Asia
                                                        East Africa & Southern Africa
 444 EDSA 21st floor, Guadelup Viejo                   Shelter Afrique House – Mamlaka Road
 1211 Makati, Manila – Philippines                     PO Box 16658, 00100 Nairobi – Kenya
 Tel: +63 907 385 0035                                 Tel: +254 20 271 42 20

                         www.planetrating.com - rating@planetrating.com

October 4th, 2010                                                                             2nd AMFA Fair
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