Analyst
Muhammad Atif Chaudhry
Atif.Chaudhry@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA maintains the rating of Kashf Foundation | PPTFC
Rating Type | Debt Instrument | |
Current (24-Sep-22 ) |
Previous (25-Sep-21 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | Yes |
Kashf Foundation is a renowned Microfinance Institution (MFI); it has been in operation since1996. MFIs are governed by SECP regulations mainly NBFC (Establishment and Regulations)Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations 2008, and others.The key element is that MFIs are not permitted to mobilize deposits. While this provides fundingconstraints, it also delimits the boundaries of risk. Kashf Foundation is a not-for-profitorganization. Hence, the source of funding comprises a) internal generation of profits, b) loans andc) grants. The second major source of funding is borrowing. The Foundation has diversified itsborrowing to local and foreign institutions and issued a (PPTFC) of PKR 2bln with a green shoeoption of PKR 1bln to fuel growth. Governance structure takes strength from the body of membersand board of directors, who, in their own right, are reputable individuals. The induction processreflects the alignment of the incumbent members to the institution itself, a self-propelling drive tocontribute. The quality of board discussions is evidence of this assertion. Kashf has a stable andexperienced senior management team which is supported by clear reporting lines as per aformalized organogram and a satisfactory monitoring process. The ratings incorporate a strongbusiness profile of the Foundation demonstrated by the continued enhancement in businessvolumes. GLP recorded good growth which led to enhanced markup earned. Improved cost offunds resulted in an uptick in the spread. Strengthened markup and non-mark-up incomesupplemented the profitability. Maintaining asset quality intact remains essential, going forward.The Institution's financial risk profile displays a comfortable outlook with fine profitability marginsand improvement in asset quality. Hereby, the liquidity profile of the Foundation remains one of thefinest in the industry. The industry's few parameters require prudent management due to the mostrecent flood situation in the country. The impact is being evaluated and would translate into anemergent financial risk profile.
The ratings depend on the foundation’s ability to sustain positive asset health indicators amidstgrowth in business volumes. The ratings would also monitor the impact of technologicaladvancement on the operational and risk efficacy of the Foundation.
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 seven instalments amounting PKR 1.167bln and the outstanding TFC amount is PKR 833mln.