MEET THE BOSS: Emmanuelle Javoy, Managing Director of Planet Rating

Emmanuelle Javoy is the Managing Director of Planet Rating. This feature is sponsored by PlaNet Finance.

MicroCapital: Please briefly describe your organization.

Emmanuelle Javoy: Planet Rating is a microfinance rating agency, meaning that we provide ratings or evaluations of the sustainability of microfinance institutions (MFIs) – both the financial and social sustainability of the institution.

MC: What is the background of Planet Rating?

EJ: We have been performing ratings for ten years. We were created by PlaNet Finance, the NGO, and were spun off in 2005. We now have four shareholders. We are twenty staff spread over regional offices: Lima covering South and Central America, Dakar covering West and Central Africa, Nairobi covering East and Southern Africa, Beirut covering the Middle East and North Africa and Manila covering Asia. We completed roughly 100 rating missions per year during 2008 and 2009.

MC: What is your background?

EJ: In the first half of my career, before coming to microfinance, I worked in internet and information technology and consulting. My introduction and interest in microfinance developed through my volunteer work. Six years ago, I began at Planet Rating working as an analyst, and then I became a quality manager. I have been Managing Director for one and a half years.

MC: Who are your customers?

EJ: We currently have two types of customers. Until 2007, our only type of customer was microfinance institutions. The market had been designed this way; ratings were paid for by microfinance institutions. This had advantages and disadvantages. An advantage is that an MFI can commission one rating report for many different partners. A disadvantage is the potential conflict of interest. Since 2007, we have had investors, donors and technical partners as customers, to which we provide our reports through a subscription service.

MC: What are keys to providing quality ratings?

EJ: The keys to quality are an up-to-date methodology, well-trained and qualified staff, time spent onsite at the MFI and rating committees run by members of a senior management team.

MC: How has your methodology evolved over time?

EJ: We regularly update our methodology in accordance with rising risks and other changes in the sector. Microfinance has changed so much. Over ten years of growing with MFIs, we have learned which factors best predict outcomes.

MC: What products do you offer?

EJ: First is the financial rating of MFIs. Our methodology for these ratings is called GIRAFE. It evaluates the level of risk of a microfinance institution. In other words, we provide an assessment of the long-term sustainability based on firm performance, management and exposure to risks in the marketplace. This rating is specialized for microfinance and is similar to a “credit risk rating,” as it is called in mainstream rating terminology. These ratings are key to investors in their due-diligence process.

Second, we provide social ratings, which are evaluations of the capacity of an MFI to actually put its stated social mission into practice.

Third, we provide interactive assessments, which are ratings designed for less mature MFIs. These assessments are for MFIs interested in understanding the evaluation framework and their own strengths and weaknesses. During these ratings, we spend more time onsite at the MFI, making sure to convey conclusions to the management team. They share in the process with us and – in the end – own the conclusions rather than the actual report. These assessments are designed to be used by donors and technical partners who want to work with an MFI to help it improve and grow.
Fourth, we offer a growing subscription service that delivers our reports to the investor and donor community.

MC: How has the current economic instability affected the ratings market?

EJ: The current situation has shed a bright light on the activities of mainstream rating agencies. This environment encourages us to examine how we work to be sure not to fall into the same traps. Microfinance rating agencies have a very strong focus on the evaluation of the systems and people that affect the performance of MFIs. We spend quite some time in the field, where the microfinance operations are conducted, and we go far beyond just looking at numbers. The ratings of future CDOs or CLOs is the area where things will have to be revised. It will be important that the rating of these products, where mainstream agencies are likely to be involved, is based on a thorough assessment of the underlying assets, meaning the MFIs themselves.

MC: What do you see in the future for microfinance?

EJ: My perspective on the market is that this difficult period we are going through will most likely strengthen microfinance. Being less naïve has huge value. We have seen many MFIs becoming stronger once they have had to overcome some challenges. Often, management has improved, putting in place systems and people that are better equipped to handle all situations. In this way, I believe that many institutions have become well-prepared for the current crisis.

One reason that I am committed to microfinance is that when I have had doubts about the direction of the market, the industry has been able to react and adapt. This is an industry that is able to recognize its weaknesses and work on the areas that need attention. Many topics have been worked on and are being improved, such as social performance, social responsibility, over-indebtedness, transparency of interest rates and quality of client service. So much has been taken care of and much work has been done. This is a huge strength of the sector – being open to changes and being open to criticism – and then sharing experiences worldwide.

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