Microfinance securitizations tend to be closely tied to the ratings of the originator/servicer, said Fitch Ratings Director Deep N. Mukherjee in a recent report. “In the absence of suitable mitigants with respect to such counterparties, Fitch will link the rating of the transactions to the rating of the originator/servicer,” Mukherjee said.

Within India — the world's microfinance epicenter — the agency said ABS in this sector would be unlikely to achieve triple-A ratings on the national scale, thanks in large part to regulatory uncertainty. Regulators are taking a closer look at the industry, as white-hot growth has spread microfinance's impact to an enormous swathe of the Indian population. 

India’s microfinance industry has recently been plagued with allegations of coercive practices following a rash of suicides among small borrowers, according to news reports. Regulators have tightened the screws, while the news has eroded confidence among the banks and investors that fund microfinance institutions.  

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