Microfinance Securitization: Ratings Confusion

Co-authored with Vinod Kothari; MicrofinanceFocus, 20 December 2010

Something strange is happening with microcredit securitizations in India.  Two pre-eminent ratings companies, CRISIL (a subsidiary of Standard & Poors) and FitchRatings have taken diametrically opposing views on the credit quality of microcredit-backed securities.

Last month Fitch released a report, stating that “these transactions are unlikely to receive the highest Long- or Short-term ratings.”  Meanwhile, CRISIL continues to  issue high ratings to a number of microcredit securitizations, most recently rating a Rs. 54 crore ($12 million) pool issued by Asmitha Microfin as P1+(so), the highest rating that can be assigned to short-term securitizations.  This rating continues to stand, despite the fact that Asmitha’s debt has been downgraded since then and continues to remain under a ratings watch for further possible downgrades. more →