PACRA assigns initial rating to Kashf Foundation | PPTFC | PKR 2.483bln | Dec-23

Kashf Foundation issued a Rated, Secured, Privately Placed, DSLR Listed Term Finance Certificates amounting PKR 2.483bln to expand the micro-infrastructure finance. PPTFC is the first gender bond being issued in Pakistan and MENA regions. The rating of the instrument is supported by its strong security structure i.e. (a) the bond is fully principal guaranteed by Infrazamin Pakistan Limited (IZP), in addition to two interest installments. The total maximum guaranteed amount is PKR 2.85bln (b) Exclusive lien on a debt service reserve account ('DSRA'), which will hold an amount equivalent to two Quarterly outstanding interest payments throughout the life of the Instrument, on a rolling basis (c) Exclusive lien on a Debt Payment Account ('DPA'), which will be funded 7 working days prior to the payment date. IZP “the Guarantor” is an innovative, for-profit credit enhancement guarantee company, conceived and designed to issue guarantees for promoting private infrastructure projects. IZP leverages the prior experience of InfraCo Asia and GuarantCo in supporting infrastructure projects in Pakistan, as well as Karandaaz’s local market knowledge and track record of investments focused on supporting financial inclusion. IZP has been assigned the long-term rating of “(AAA)” by PACRA. The instrument has a Pre-default mechanism: if the amount maintained in DSRA becomes exhausted and the Company is unable to meet its debt repayment obligations, a Cure Period of 30 days will be provided during which IZP will make the payments to TFC holders a maximum of up to a guaranteed amount. IZP has the option to make the payments in accordance with the amortization schedule or IZP may accelerate all principal payments to be paid to the TFC holders for early retirement of the outstanding principal. Kashf Foundation, a not-for-profit organization, and a renowned MFI has the source of funding comprising of a) internal generation of profits, b) loans, and c) grants. Kashf has diversified its borrowing to local and foreign institutions. During FY23, Kashf recorded net mark-up income at ~PKR 10.5bln (FY22: ~PKR 6.6bln) while Profit after tax stood at ~PKR 2.5bln (FY22: ~ PKR 1.9bln) and equity stood at PKR 10.0bln (FY22: PKR 7.2bln).
The ratings depend on the foundation’s ability to sustain positive asset health indicators and also monitor the impact of technological advancement on the operational as well as risk efficacy.

About the Entity
Kashf Foundation ("Kashf") was incorporated with SECP in 2007 as a Public Company Limited by Guarantee. The overall control of the foundation vests in ten members Board of Directors. Dr. Hafiz Ahmed is Chairman of the board. Ms. Roshaneh Zafar is the founder and CEO of Kashf.

About the Instrument
Kashf Foundation issued a Rated, Secured, Privately Placed, DSLR Listed Term Finance Certificates amounting PKR 2.483bln on 8th Dec-23. The TFC has a tenor of 3 years and carries a profit rate of 3MK + 1.5% p.a to be paid quarterly in arrears. TFC's quarterly principal repayments shall commence from the fifteenth month, in eight equal installments. The TFC is categorized under "Gender Bond" as it is meeting the criteria for use of proceeds as given under the guidelines eligible to issue gender bond. The utilization of the proceeds would be such that 70% of the proceeds shall be utilized to issue micro-infrastructure-finance loans directed towards the welfare of women via entrepreneurship, business support, flood rehabilitation education, and 30% to meet working capital requirements.