GIRAFE methodology
Planet Rating’s proprietary GIRAFE methodology is an innovative and unique analytical rating approach to evaluate MFIs performance and institutional risks.
The GIRAFE rating methodology was created in 1999 by Planet Rating to provide a reliable, complete tool to assess institutional risk and performance. Recognizing the microfinance sector evolutions, the increasing complexity of microfinance business models, and the challenges MFIs face, we have made continuous efforts to update and further enhance our tool since then. In 2006 and 2008, working groups were established to review our methodology. An enhanced version of the GIRAFE methodology was designed. Our objective is to continually anticipate emerging risk of the sector linked to commercialization, wider range of services, increased competition, and regulatory status, among others. Today, our GIRAFE methodology is widely recognized by investors, donors, regulators, microfinance consultants and is certified and accredited by CGAP, ADA, IDB and APP (which manage rating funds).
Through the GIRAFE methodology, we promote an international standard of institutional performance for microfinance institutions, thereby strengthening the confidence of commercial investors and supporting the development of the microfinance sector worldwide.
Assessment domains
Our comprehensive reports provide evaluations for a broad range of qualitative and quantitative factors that determine an institution's risk profile and sustainability. GIRAFE constitutes an acronym for these 6 assessment domains that split into 17 analytical factors:
 OVERNANCE |
Decision-making Planning Management team HR management |
 NFORMATION |
Information system design & Data quality |
 ISK MANAGEMENT |
Procedures and internal controls Internal audit |
 CTIVITIES |
Financial services management Credit risk Credit risk coverage |
 UNDING AND LIQUIDITY |
Capital adequacy & funding strategy Liquidity risk Market Risks |
 FFICIENCY AND PROFITABILITY |
Return on asset Revenue quality Operational efficiency Asset optimization |
Our rating scale
Those 6 areas are scored from "A" (highest) to "E" (lowest), which makes it possible to identify strengths and weaknesses of the MFI. A weighting system is then applied in order to obtain a global rating.
This global rating gives a general estimate of risks:
A++
Excellent : the institution excels in the evaluation area and is a model for the sector. There is a long-term vision for continual improvement. There are no risks in the short and medium-term for operations. Long-term risks are well monitored.
A+, A, A-
Very good: current institutional, operational and financial performances are excellent when compared to industry standards. There is a long-term vision for continual improvement. There is a very little risk in the short and medium -term for operations. Long-term risks are well monitored.
B++, B+, B
Good: procedures are well developed, effective, and incorporate a long-term perspective. Medium-term and long-term risks exist but are identified by the institution. Some improvements could be made to efficiency and risk management.
B-
Intermediate: current institutional, operational and financial performances are close to industry standards. Short and medium-term risks are moderate but are not fully addressed. Most areas for improvements have been identified, but medium and long-term plans miss one or several critical elements, execution capacity is uneven and some goals are unlikely to be achieved.
C++, C+, C, C-
Minimum required : procedures are functional but with certain failings. There are risks in the medium-term for operations.
D
Insufficient : procedures are in place, but with failings, and certain problems are only partially addressed. There are medium-term, and possibly short-term risks for operations.
E
Immediate risk of default or very insufficiant : there are immediate or underlying risks for operations or an unacceptable under performance.
The Rating Committee rates an MFI based on current performance and assigns a trend based on the future prospects as positive, stable, or negative. An uncertain trend will be assigned if there are sufficient uncertainties regarding performance over the next year.