PACRA assigns Entity ratings to Rural Community Development Programmes

Rural Community Development Programmes ('RCDP' or the 'Company') has clear goals of serving the under-banked population through women empowerment and poverty alleviation, having ~98% women and ~68% rural borrowers at end-Sep'23. Despite challenging macro-economic conditions prevailing for the microfinance industry over the last three years, RCDP continued to organically grow its OLP and maintain its profitability. The Company is focusing on improving its technological infrastructure to have a stronger internal control environment. The ratings take into account strong governance supported by eight directors including three independent directors. Board committees chaired by independent directors further add strength to the oversight framework. The Company has a well established functional organizational structure with all departmental heads reporting to the CEO. The ratings take comfort from an experienced and qualified management team. Separate departments exist for Risk Management, Compliance, and Internal Audit, strengthening the internal control environment. As a result of its expansion, the Company's OLP has surged past the ~PKR 8.6bln mark during 1HFY24; moreover, effective portfolio management has kept NPLs low at ~0.2% during the period. The ratings take into account the Company's reliance on availability of funds from financial institutions, having a ~68% leveraging ratio at end-Dec'23. On the other hand, liquidity risk is managed through internal cash generation and liquidity management policies, providing comfort to the ratings. During 1HFY24, the Company earned ~PKR 2bln markup income (FY23: ~PKR 3.3bln); however, high policy rates during the period translated to a surge in finance costs, decreasing net margin by ~2.4% to ~11.6% during 1HFY24 (FY23: ~14%). As a result, RCDP earned a net profit of ~PKR 239mln during 1HFY24 (FY23: ~PKR 475mln). RCDP has an adequate equity base of ~PKR 3.3bln at end-Dec'23, while the Company's sustained market share of ~1.6% is well noted.
Moving forward, it is imperative from a ratings perspective to continue effective management of the Company's liquidity. Moreover, materialization of planned business strategies to enhance topline diversification remain vital. Meanwhile, growth and diversification of the topline is critical.

About the Entity
Rural Community Development Programmes is a public unlisted company limited by guarantee formed in 2015 under Section 42 of the repealed Companies Ordinance, 1984, as a non-profit organization. The roots of RCDP lie with Rural Community Development Support, which was established in 1996. The Company has over 130 conventional branches spread across Punjab providing microfinance to the impoverished communities.