Press Release

JCR-VIS Revises Ratings of Kashf Foundation with Negative Outlook

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.

Faheem Ahmad
President & CEO

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2009 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited