microfinance credit risk methodology

Concept

The Symbiotics Investment Evaluation Methodology is based both on a credit risk and a performance assessment. The performance assessment reviews three years of past audited and operational quantitative information, divided into three analytical dimensions: operational efficiency, financial results, and social impact, and about thirty indicators. The credit risk assessment is focused on future outlook; there is five key dimensions, divided into about twenty five qualitative indicators: strategy and governance, people and organization, products and services, financial management, and control and systems. The outcome of the scoring methodology is a credit risk scoring and rating grade that reflects the specific risk of an institution. It does not include any systematic risk aspect (industry, currency, political risk among others). The rating scale grades from AAA to D, subdivided into 10 levels, each divided into three subsets of plus (+), neutral, minus (-).

Performance Quantitative -30 indicators	Risk Qualitative -25 indicators
Operational Efficiency   Financial Results   Social Impact	Governance People Products & Services   Financial Management  Control & Compliance

Rating Grade Scale

Credit Scoring	Qualifier	Rating Grade
97%  - 100% 88%  -   97% 79%  -   88% 70%  -   79% 61%  -   70% 52%  -   61% 43%  -   52% 37%  -   43%  31%  -   37% 0%  -   31%	Extremely strong repayment capacity Very strong repayment capacity Strong repayment capacity Moderate repayment capacity Questionable repayment capacity Weakened repayment capacity Vulnerable to non payment Highly vulnerable to non payment Very highly vulnerable to non payment Payment default	AAA AA A   BBB BB B   CCC CC C   D