Karachi, October 28, 2009: JCR-VIS Credit Rating Company Limited has revised the entity ratings of Kashf Foundation (Kashf) from ‘BBB+/A-3’ (Triple B Plus/A-Three) to ‘BBB/A-3’ (Triple B /A-Three). The rating assigned to the outstanding TFC issue has also been revised from ‘A’ (Single A) to ‘A-’ (Single A minus).
Ratings incorporate the significant rise in over dues within the microfinance portfolio. While the unprecedented delinquencies are a function of economic stress in general, a combination of endogenous and exogenous factors further hampered the recovery process. These include rising inflation, adverse political influence at the local level, client screening and follow up standards being below the ideal level and a reversal of group pressure that encouraged non-repayment rather than exert positive moral pressure within groups, as originally envisaged. Moreover, business concentration of the foundation in Central Punjab may have intensified the problem.
Subsequently, management has made material efforts to rectify the situation while making cash recoveries on priority basis. The lending methodology has been revised and a large section of the portfolio rescheduled to ease repayment. Further steps have been taken to enhance monitoring and field strength has been reinforced to facilitate improved contact between the foundation’s staff and clients.
On a positive note, the company has accumulated significant cash reserves and repayment of obligations becoming due during the current financial period remains highly likely. The rated TFC is further secured by a guarantee from a financial institution, issued on behalf of Grameen Foundation USA and amounting to 33% of the outstanding issue amount.
JCR-VIS will track recoveries being made on the portfolio as these will have a significant bearing on long-term repayment capacity. Outlook remains ‘Negative’ and ratings may be revisited if cash inflows are not meaningful enough to sustain current ratings.
For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) or Ms. Sobia Maqbool (Ext: 506) at 35311861-70 (10 lines) or fax to 35311872-3.
President & CEO
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