The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Atif Chaudhry

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PACRA maintains the rating of Kashf Foundation | PPTFC

Rating Type Debt Instrument
(23-Sep-23 )
(24-Sep-22 )
Action Maintain Maintain
Long Term A A
Short Term - -
Outlook Stable Stable
Rating Watch - -

The 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"). SECP is the Regulatory body for MFIs and they are governed through NBFC Rules, 2003 and NBFC Notified Entities Regulations, 2008. Kashf Foundation is a not-for-profit organization.The PAR (Portfolio at risk) of the MFI stood at 0.5% and has augmented the credit risk profile of the MFI. The rating takes comfort from a consistent upward-sloping growth trajectory in the GLP during a time span of three years. The Kashf Karobar Karza is their foremost product and predominately contributed to the markup earned and net profitability of the MFI. The MFI primary source of funding is borrowing with an optimal mix of local and foreign financing which also includes the issuance of PKR 2.5bln PPTFC bond to further augment their Gross Loan Portfolio (GLP) growth. The MFI has executed CCS ( Cross-Currency Swaps) and FRAs (Forward Rate Agreements) to mitigate the foreign exchange risk in foreign borrowings. The optimization of operational costs with respect to their total disbursement of the portfolio has strengthened the profitability matrix coupled with spiral markup and non-markup income. The consistent appreciable growth in the net profitability of the Company during the time span of two years which ultimately beefed up the net equity levels provides comfort to the ratings of the Foundation. Despite the hyper inflationary environment and other microeconomic challenges specifically the consistent surge in KIBOR which ultimately elevated the cost of funds for MFIs, the portfolio at risk (PAR) > 30 days of MFIs has shown an improvement and reduced to 3.0% (4QCY22: 4.2%) mainly on the back of the recoveries in the flood-impacted portfolios. The industry's loan portfolio requires prudent management mainly on the back of the consistent surge in the policy rate. However, going forward the impact of gross lending rate on the financial risk profile specifically on NPLs (Non-performing Loans) is being evaluated in due course of time.
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 of the Foundation. The due date for the payment of final principal installment is 30th Sep'23. The instrument would be redeemed thereafter and accordingly would be withdrawn.

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.

About the Instrument
Kashf Foundation has issued a secured, privately placed, Term Finance Certificate (TFC) of PKR 2bln to mobilize funds for micro-funding. The instrument is secured by the way of Pari Passu charge on current assets excluding investment Portfolio. The instrument has a tenor of 4 years from the date of issue. The quarterly profit payments are to be made in arrears at a rate of 3MK + 225bps p.a. The principal repayment commenced in Dec 2020. The Company has so far repaid eleven instalments amounting PKR 1,833mln and the outstanding TFC amount is PKR 167mln.

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.