How does your proposed innovation leverage public intervention in catalyzing private SME finance?
As already mentioned the assignment of the Social Ratings to the financial institutions will be based upon certain criteria. These criteria will have weightings that reflect the current needs set by local governments, such as financing SME's with focus on certain geographical areas or industries, the creation of jobs and many other.
The criteria are going to be challenging yet achievable that will encourage companies to strive to meet them. All the reviews will be reported periodically and a final Rate is going to be assigned. These ratings are going to provide to the public and to investors such as asset managers, a social responsible investment guaranty for socially responsible investing.
Another role of the agency will be to create a market for potential investments that financial institutions can undertake in order to improve their social rating score. Non Profit organizations, Microfinance Companies, Small development companies and many others will be able to post their needs for funding and the agency will provide consultation and assign ratings to these projects making it simple for an institution to start creating a portfolio of social investments.
The SRA Methodology - A Synopsis.
The SRA will use a format that will divide the analytical task into several categories within a framework that will ensure that all different issues are considered. The analytical groups will use a numerical expression of the scores for every criterion. As already mentioned governments will be able to affect the scores of the criteria according to their needs.
The following categories presented are only indicative:
Not Served by Financial Institutions
Economic Poverty Profile
Vulnerability of Households
Access to Water, Sewage, Electricity, HealthCare
Industries (Eco Friendly, Sustainable)
No. of Employees
Creation of New Jobs
Size of the Companies
Lack of Collateral
Type of Loans
Loans/Size of the Banks
Clear Conditions/ Contracts
For the rating of the projects that organizations will post for funding, the methodology will be similar to the above. The basic criteria will remain the same apart from the ones that are related to the financial institutions such as Services, or Type of loans etc.
How will governments be able to affect the weightings of the criteria?
Governments will be able to influence the rating scores by assessing the weightings of the criteria according to their current needs, which are going to be prioritized as Low, Medium, High or Urgent and they are going to be expressed numerically in the methodology. The higher the priority, the bigger the weighting.
Twice a year the SRA will conduct a survey by inviting all interested parties such as local governments to participate in order to identify for example geographical areas , which have special needs for funding. Finally in collaboration with international organizations such as the United Nations, EBRD or Central Banks the final assessment of the priorities will be set and the scores for all the investment projects that fall to these categories will be adjusted.