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The Pakistan Credit Rating Agency Limited
Press Release

Date
25-Sep-21

Analyst
Timnat Thomas
timnat.thomas@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Rating of Kashf Foundation | PPTFC

Rating Type Debt Instrument
Current
(25-Sep-21)
Previous
(25-Sep-20)
Action Maintain Maintain
Long Term A A
Short Term - -
Outlook Stable Stable
Rating Watch Yes Yes

Kashf Foundation is a renowned Microfinance Institution (MFI) and a not-for-profit organization. The key element is that MFIs are not permitted to mobilize deposits. While this provides funding constraints, it also delimits the boundaries of risk. The key source of funding comprises a) internal generation of profits, b) loans and c) grants. The second major source of funding is borrowings. Governance structure takes strength from the body of members and board of directors, who, in their own right, are reputable individuals. Kashf has a stable and experienced senior management team which is supported by clear reporting lines as per a formalized organogram and satisfactory monitoring process. The ratings incorporate a strong business profile of the Foundation demonstrated by continued enhancement in business volumes. GLP recorded good growth which led to enhanced mark up earned. Improved cost of funds resulted in an uptick in the spread. Strengthened non-mark up income supplemented the profitability despite higher provisioning expense being recorded. Maintaining asset quality intact remains essential, going forward. Meanwhile, the “Rating Watch” reflects the need to oversee the risk profile of the Institution against unavoidable challenges, particularly emanating from economic Implications in the wake of Covid-19, and its ramifications on the disposable income of the customer base. The impact of economic slowdown lately exacerbated by the global pandemic spread had cast a rippling effect on different sectors of the country. The microfinance industry is expected to absorb the impact as disbursement, recoveries and liquidity patterns were influenced. The ratings are dependent on the foundation's aptness 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.
The ratings are dependent on the foundation's aptness 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 a ten-member Board of Directors. Dr. Hafiz Ahmed Pasha is the Chairman of the board. Ms. Roshaneh Zafar is the founder and CEO of the foundation.

About the Instrument
Kashf Foundation issued a rated and secured, privately placed Term Finance Certificate (TFC) of PKR 2,000 mln. The tenor of the instrument is 4 years including a grace period of 1 year. The proceeds are being utilized to mobilize funds for micro-lending. Profit is being paid quarterly in arrears on the outstanding principal amount at the rate of 3 M KIBOR + 2.25%. The principal is being paid in 12 equal quarterly instalments of PKR 166.67 mln each which started from Dec-20.

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.