Credit rating and rating migration in microfinance

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management Department

Document Type

Archival Material/Manuscript

Publication Date

2010

Abstract

The paper capitalizes on an idea of attempting a synthetic credit rating to conduct credit rating to selected microlenders in the Philippines. Not only are the microlenders rated, at the same instance, with S@P transition probabilities, Markov allows microlenders a preview on their chances of an upgrade or a downgrade in rating over a period of five years. Twenty nine(29) lenders have BB rating. characterized to have intensive capital and normal expected earnings; two(2) lenders have B rating described to have low capital but good earnings; fifteen (15) lenders have CCC rating ascribed to have good levels of capital but low earnings and four (4) lenders has default rating described to have low capital adequacy and earnings. Unfortunately however, transition probabilities reveal that the chances of an upgrade in a lender's rating are lower than the chances of a downgrade in a lender's rating over time.

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Disciplines

Business | Finance and Financial Management

Keywords

Microfinance—Credit ratings; Credit ratings

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