Credit Evaluation

All MFX counterparties must undergo a credit evaluation from MFX. For MFIs, the credit score is based on a rating from one of the major microfinance industry rating services. For MIV counterparties, MFX relies on a rating methodology developed by MicroRate specifically to address the financial and business characteristics unique to MIVs. By applying this rating methodology, creditworthiness indicators for MIVs are evaluated, then categorized Tier 1 through 4, Tier 1 being "High creditworthiness" and Tier 4 being "Not creditworthy".

Primary Rating Parameters

The Investment Quality score is based on an evaluation of portfolio quality, performance, capital structure and liquidity and treasury management.

Portfolio quality assesses the credit risk, and includes reviews of the open currency positions, default experience, write-offs and loss provisions, an analysis of portfolio growth, and the alignment of portfolio with objectives.

Performance is measured by NAV / Cost (times), NAV growth, Return on Assets, Return on Equity, Net Interest Margin, Interest Cover, Interim IRR on equity portfolio and other traditional credit metrics.

Capital Structure considers the nature of deployed capital, the ability to access capital, affiliate transactions (capital), the nature of liabilities and capital reserves.

Liquidity and Treasury Management takes into account overall liquidity, affiliate, management of open positions, and liquid asset management.

The credit score will be the principal input used to determine the spread above TCX's or a banks swap price that MFX will charge. MFX must charge this credit fee because it does not require collateral or a brokerage fee. Credit scores are confidential and will only be divulged to the client.

MicroRate - The rating agency for Microfiance

MicroRate basic requirements