PACRA Upgrades Entity Ratings of Kashf Foundation

The assigned rating emanates from the prominent profile of the Kashf Foundation (herein referred to as “The Foundation” or “the MFI”) in the Microfinance sector of Pakistan (herein referred to as "MFIs"). The Kashf Foundation operates as a not-for-profit organization. The prime focus of the Foundation is enhancing the role of women by improving their economic status and building their entrepreneurship skills through access to business loans. The portfolio coverage in terms of the gross loan portfolio (GLP) presents Kashf Foundation as a market leader in the dedicated non-depository microfinance segment. The Foundation has expanded its footprint in the Punjab region to induce growth and manage NPLs (non-performing Loans) optimally. The MFI product slate is divided into nine categories and covers multiple industry segments. The Kashf Karobar Karza is their prime product followed by Kashf Maweshi Karza, Kashf Easy Loan and Kashf Murabaha. The assigned rating takes comfort from the consistent growth in the loan portfolio over the last three years while sustaining PAR (Portfolio at Risk) at 0.5% and generating sufficient cashflows to augment their disbursements level. The GLP of the Foundation has shown an impressive growth of 31.0% YoY basis and stood at PKR 27bln as of FY23. The Kashf Foundation managed to induce growth in its lending portfolio while remaining cautious about infection ratio. The Foundation's prime indicators have shown consistency in their growth trend line. The liquidity profile of the Foundation remains one of the finest in the industry. The Board of the MFI is more of an advisory nature and all members, who, in their own right, are reputable and well-educated individuals. The board is actively involved in making the strategic choices and setting the direction of the company and the board ensure to follow the best practices of corporate governance. 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. The MFI 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 integration with the head office to assess the real-time status of recoveries and disbursements coupled with technological advancement has escalated the control environment. Despite the hyperinflationary environment and other microeconomic challenges specifically the consistent surge in KIBOR which ultimately elevated the cost of funds for MFIs. The industry's loan portfolio requires prudent management mainly on the back of the high level of interest rates. The restriction on the mobilization of deposits has demarcated and supplemented the risk absorption capacity while triggering the funding constraints.
The rating upgrade reflects the transition of an earlier assigned positive outlook to the higher ratings. The key drivers are consistent profitability over the years, a well-defined liquidity framework and alignment of the Foundation's performance with their earlier shared financial projections. Going forward, the adherence to robust capital adequacy and conversion frequency of branches and first-time loan disbursement to algorithm-based risk tagging remains vital for ratings.

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). The Board comprises of 10 members. Dr. Hafiz Ahmed Pasha is the Chairman of the board. Ms. Roshaneh Zafar is the founder and CEO of the foundation