CRS

Microfinance Alliance for Global Impact (MAGI)

Accreditation Tool

History of the MAGI

The CRS Microfinance Alliance for Global Impact was first developed in 1999. The
Alliance was created to establish quality standards for CRS microfinance partners in
terms of financial performance, governance as well as adherence to the CRS poverty
lending principles. In order to become a member of the MAGI, institutions are required to
undergo a MAGI Accreditation Assessment, or rating assessment. CRS developed this
tool because at the time, there were no other tools that systematically evaluated the
social mission of an institution in addition to financial and non-financial analysis. CRS
also felt there needed to be greater emphasis on human resources development and
financial services analysis.

The results from the MAGI assessment help determine technical assistance needs and
help steer partners towards growth and sustainability and possible transformation into
regulated institution. The benefits for partners include recognitions from CRS, CRS
endorsement in attracting donors as well as priority for CRS funding for technical
assistance and loan capital. The benefits for CRS include the assurance of program and
institutional quality and capacity, the means with which to encourage programs to excel
in poverty lending and building sustainable institutions, and a systematic way for
identifying and addressing support needs.

Evolution of the MAGI Accreditation Tool

After initial testing in 1999, CRS found that many partners were not mature enough for
an accreditation assessment, rather several institutional weaknesses kept institutions
from scoring high enough to become accredited MAGI members. As a result, the MAGI
tool was divided into two separate processes. The Planning Assessment was developed
as a first step to help partners identify and address institutional weaknesses. Each
institution develops an Institutional Strengthening Plan, which then paves the way for the
second phase, the Accreditation Assessment, to be conducted within 2-4 years after the
initial Planning Assessment. The Accreditation tool involves more rigorous evaluation
techniques including scoring for the individual areas of analysis which are combined to
achieve the minimum Global Assessment score necessary to become an Accredited
MAGI Member.

CRS has been conducting MAGI planning and accreditation assessments for over 5
years now (40 Planning Assessments, 6 Accreditation Assessments) and has recently
finished an extensive revision of the MAGI Accreditation tool with the goal of
incorporating new industry standards, including more areas of analysis as well as an
improved poverty scoring section that rates an institution’s ability to target and serve
very poor entrepreneurs.

MAGI Accreditation Process – 2004 Revisions

The Accreditation process includes a thorough document review, an 8-day visit to the
institution, and a final report with scoring in 9 different areas. During the visit, a team of 3
consultants conducts interviews with both field and headquarters staff and extensive
interviews with clients, village banks and solidarity groups. Results from these interviews
as well as findings from document reviews and data collection are then incorporated into
the scoring matrix, which calculates the institution’s final score. The score determines
the final rating.

D C C+ B B+ A A+ AA AAA
Global <65 65 70 75 80 85 90 95 100
Assessment
Score

The revised Accreditation tool scores 9 different sections comprising the following:

Area Weight
Planning 5%
Market 5%
Financial Performance 35%
Services 6%
MIS 6%
Internal Controls 6%
Financial Administration 10%
Organizational Structure 12%
Poverty Lending 15%
Total 100%

While the financial performance and market sections comprise 40% of the score, non-
financial areas, including planning, services, MIS, internal controls, financial
administration and organizational structure comprise 45% and poverty, 15%. This
breakdown was established as a result of a thorough analysis of similar ratings
methodologies and the incorporation of industry standards particularly in the financial
and governance areas. CRS scores more heavily than similar ratings tools on
Organizational Structure (human resources), Services and Poverty due to their
importance to the overall mission, objectives and sustainability of the institution.

Future of the MAGI Accreditation Tool

Currently CRS is in the test phase of the newly revised Accreditation Tool and so far has
conducted two accreditation assessments at partner institutions in Latin America and
Southeast Asia. We are planning several more in Latin America and Central Asia during
FY’05. Once the testing phase is completed and the tool is finalized, our ultimate goal is
to introduce the MAGI Accreditation tool as a rating tool for the industry. We at CRS
realize that there is a growing demand on the part of MFIs, donors and social investors
to rate an institution in terms of outreach and social impact in addition to the traditional
areas of analysis found in similar rating tools. In response to this, CRS would like to
eventually invite non-CRS partners to go through a MAGI Accreditation Assessment.

For more information please contact

Lara Storm
Microfinance Accreditation Specialist
Catholic Relief Services
209 West Fayette Street
Baltimore, MD 21201
(410) 951-7478
lstorm@catholicrelief.org
Goal of Workshop
We have been working with Laura on these indicators and hope to take the
opportunity to present our poverty lending indicators to the PAWG, and anyone
else interested, to ensure consensus and to encourage participants to continue
thinking about innovative ways to reach the very poor with appropriate financial
services.

The purpose of this 30-minute presentation is to gather feedback on the poverty

lending indicators section of the Accreditation Tool. I would specifically like to
present the three different areas we rate in the poverty scoring section:

 Institutional Policy
o Institutional commitment to serving the very poor (ie mission
statement)
o Poverty targeting tools used
o Appropriateness of products for reaching the very poor
 Outreach
o Average loan size
o % Female clients
o % Of clients in rural areas
o % Of portfolio dedicated to agricultural activities
 Access
o Type of guarantee
o Support in growing client savings
o Client Surveys to determine whether clients are moving out of
poverty
o Use of this information in management decisions

Lessons learned from case studies:

Cast Study 1:
In Case Study 1, the Institution scored relatively poorly in all three areas.
Findings revealed that the institution, although functioning in an area with a 70%
poverty rate, was no longer serving its original client base of poor women. Our
analysis revealed that the average loan size had grown 17% over the last year
while the number of clients remained the same. The institution was continually
losing its female clientele, which had dropped to less than 50%; and the average
loan size was significantly higher than the regional benchmark. We found that the
institution, although equipped with a poverty focused mission statement, did not
know how to assess whether its clients were indeed very poor and was not
interested or didn’t have the resources to be able to measure the social impact of
its services. These findings have reinforced the need to deal with mission drift
and have specifically highlighted the potential disconnect between an institution’s
mission statement and the reality of its activities. We have also learned that CRS
must do more to educate partners in poverty lending and to ensure they are
adequately trained in the use of poverty targeting tools.

Case Study 2:
The institution scored very well on the Outreach indicators and scored relatively
low on Policy and Access. The institution works in an extremely poor region
where women make up 90% of the client base and rural areas are significantly
represented in the portfolio (94%). As a start-up NGO, the partner used
government poverty maps to identify potential markets. Since converting into a
regulated institution, however, the focus has been transferred to working in
economically viable areas. There was also no effort to measure social impact.
This led us to the conclusion that, despite the attractive indicators, there is a
potential for future mission drift.

Conclusions

 The analysis of both quantitative indicators and qualitative indicators helps to

distinguish between an institution’s core values and the reality of its
environment

 The tool helps identify the areas within the poverty analysis section that may
be a result of external factors (ie high poverty rate) rather than internal
factors (ie institutional culture). This then helps to identify the risk of mission
drift in the future.

 The tool has helped CRS identify institutional needs in terms of learning to
identify the neediest clients as well as measuring the social impact of
services.

 Useful tool for helping to guide institutional development in terms of mission,

objectives and product design.