Microloans become increasingly commercial

The rationale for rating microfinance organizations has changed considerably since microloans were introduced as a way of combating poverty at the end of the 1990s. Today it increasingly embraces models common in the corporate world, Sofia Nilsson Altafi claims in her new thesis from the Stockholm School of Economics.

Rating institutes and their reports have shifted from encouraging organizational forms and working methods common in civil society to promoting more corporate models instead.

In her thesis entitled Evaluations as Mirrors and Co-constuctors, Sofia Nilsson Altafi has examined how rating institutes’ evaluations and ratings of microfinance organizations in India has changed between 1999 and 2014.

Originally these reports called for greater diversity while still imposing clear guidelines on the microfinance organizations’ working methods.

“The reports have over time grown more similar and today they are also more factual and descriptive. This suggests that investors reading these reports have to draw their own conclusions and assess these organizations themselves,” states Sofia Nilsson Altafi.

Even if the rating reports reflect broader trends in the microfinance sector, there are also examples of where rating institute evaluations diverge from general expectations. This shows that the evaluators are creatively attempting to alter the expectations and demands held by other important target groups.

“The rating institutes have played a leading role in forcing microfinance organizations into the corporate mold. Standardization and commercialization have occurred at the cost of diversity and social values,” Sofia Nilsson Altafi states.

For more information, please contact:

Sofia.Altafi@hhs.se

+46-8-736 9569