Financial Sector Development in Africa: Opportunities ... - World Bank

34 Jarotschkin
probably lie only with larger institutions that will have only marginal
impacts, if any, on market discipline overall.
The impact of microcredit rating agencies might not only be positive.
If ratings focus solely on financial goals, various MFIs might end up competing
for scarce resources along profitability criteria only and lose their
broader outreach. To ensure that MFIs continue to meet their double
bottom line, microcredit agencies will need to look at both indicators:
social and financial. For now, this is unlikely to happen with commercial
credit rating agencies; however, MicroRate has already incorporated a
social performance evaluation. In this part of its report, MicroRate rates
an institution according to the following elements (MicroRate 2011): 26
• Mission, communication, and management
• Strategic planning
• Monitoring
• Client protection
• Customer service
• Recruitment and training
• Incentive system.
Other promising attempts to meet social goals are currently promoted
through the MIX Market Social Performance Task Force surveys. These
have been carried out for 2008 and 2009 thus far. The indicators included
in these surveys range from rural outreach and target groups to market
research on clients’ needs. Currently, fewer institutions report to the
social indicators database than to the standard MIX indicators. With more
data, this information could provide useful material for international MFI
comparison. Looking forward, it would be valuable if organizations, such
as Kiva, that help even small investors to make their decisions would
digest and include this information for every MFI promoted on their
website. In the long run, this information could also be used by the government
for comparative performance evaluation, on both social and
institutional grounds, to assert tax incentives. As of now, tax breaks are
determined by the profit or nonprofit status of an organization.
Conclusion
The MFI industry in Africa has grown significantly over the last several
years, but it remains relatively small, as illustrated by its limited penetration
rates. Apart from a few examples such as Equity and Capitec, most MFIs