Press Release

VIS maintains Ratings of Rural Community Development Programs with ‘Rating Watch-Negative’ status

Karachi, July 16, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Rural Community Development Programs (RCDP) at ‘BBB/A-3’ (Triple B/A-Three). The assigned ratings have been placed on ‘Rating Watch-Negative’ status. The long term rating of ‘BBB’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-3’ depicts satisfactory liquidity and other protection factors which qualify entities / issues as investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. The previous rating action was announced on April 30, 2019.

The assigned ratings of RCDP take into account implicit support available from the parent organization, Rural Community Development society (RCDS) both on financial and technical fronts. The ratings incorporate healthy growth in business operations, manageable asset quality, improved margins and sound profitability indicators. However, the operational performance of the institution has been impacted by the rising credit impairment across the industry, with loss ratios exhibiting an increase. Given the economy is on a standstill with the onslaught of Covid-19 pandemic, the opportunities available for micro-credit borrowers for income generation have dampened, therefore VIS expects weakening of asset quality indictors going forward in line with escalated probability of non-payment events.

Ratings is affected by the high leverage ratios given that growth observed in loan portfolio is primarily funded by higher quantum of both local and foreign denominated borrowings. The regulatory deferment of a portion of repayments against advances would impact the liquidity position of the institution, going forward, which to an extent may be mitigated by deferment of borrowing repayments; nevertheless, liquid assets in relation to borrowings remain low thus putting stress on liquidity indicators. In addition, in line with lock-down imposed by the government, the disbursement activities have been critically affected leading to the institution falling significantly short on its disbursement targets. This along with the uncertainty in the asset quality indicators given the on going pandemic and the economic slowdowns warrants a ‘Rating Watch-Negative’ status. Going forward, ratings will remain contingent upon meeting recovery targets, withholding asset quality and liquidity indicators while maintaining healthy disbursement activities to keep the organization afloat.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-25723411-13, Ext: 8005) or the undersigned at 021-35311861-70 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Non-Bank Financial Companies (March 2020)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited