The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Maintains Entity Ratings of Kashf Foundation

Rating Type Entity
(24-Sep-22 )
(25-Sep-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

Kashf Foundation is a renowned Microfinance Institution (MFI); it has been in operation since 1996. MFIs are governed by SECP regulations mainly NBFC (Establishment and Regulations) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations 2008, and others. The key element is that MFIs are not permitted to mobilize deposits. While this provides funding constraints, it also delimits the boundaries of risk. Kashf Foundation is a not-for-profit organization. Hence, the source of funding comprises a) internal generation of profits, b) loans and c) grants. The second major source of funding is borrowing. The Foundation has diversified its borrowing to local and foreign institutions and issued a (PPTFC) of PKR 2bln with a green shoe option of PKR 1bln to fuel growth. Governance structure takes strength from the body of members and board of directors, who, in their own right, are reputable individuals. The induction process reflects the alignment of the incumbent members to the institution itself, a self-propelling drive to contribute. The quality of board discussions is evidence of this assertion. Kashf has a stable and experienced senior management team which is supported by clear reporting lines as per a formalized organogram and a satisfactory monitoring process. The ratings incorporate a strong business profile of the Foundation demonstrated by the continued enhancement in business volumes. GLP recorded good growth which led to enhanced markup earned. Improved cost of funds resulted in an uptick in the spread. Strengthened markup and non-mark-up income supplemented the profitability. Maintaining asset quality intact remains essential, going forward. The Institution's financial risk profile displays a comfortable outlook with fine profitability margins and improvement in asset quality. Hereby, the liquidity profile of the Foundation remains one of the finest in the industry. The industry's few parameters require prudent management due to the most recent flood situation in the country. The impact is being evaluated and would translate into an emergent financial risk profile.
The ratings depend on the foundation’s ability to sustain positive asset health indicators amidst growth in business volumes. The ratings would also monitor the impact of technological advancement on the operational and risk efficacy of the Foundation.

About the Entity
Kashf Foundation ("Kashf") was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2007 as a Public Company Limited by Guarantee under Section 42 of the Companies Ordinance, 1984 (now Companies Act, 2017). It is also licensed by the SECP under Non-Banking Finance Companies Rules, 2003. The overall control of the foundation vests in ten members Board of Directors. Dr. Hafiz Ahmed Pasha is the Chairman of the board. Ms. Roshaneh Zafar is the founder and CEO of the foundation.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.