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The Pakistan Credit Rating Agency Limited
Press Release

Date
25-Sep-21

Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Kashf Foundation

Rating Type Entity
Current
(25-Sep-21)
Previous
(25-Sep-20)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

Kashf Foundation is a renowned Microfinance Institution (MFI); it has been in operations since 1996. 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 funding constraints, it also delimits the boundaries of risk. Kashf Foundation is a not-for-profit organization. Hence, the source of funding comprises a) internal generation of profits, b) loans and c) grants. Second major source of funding is borrowings. The Foundation has diversified its borrowing to both local and foreign institutions and has issued a (PPTFC) of PKR 2bln with a green shoe option of PKR 1bln to fuel growth. Governance structure takes strength from the body of members and board of directors, who, in their own right, are reputable individuals. The induction process reflects alignment of the incumbent members to the institution itself, a self-propelling drive to contribute. The quality of board discussions is an evidence to this assertion. Kashf has stable and experienced senior management team which is supported by clear reporting lines as per a formalized organogram and satisfactory monitoring process. The ratings incorporate strong business profile of the Foundation demonstrated by continued enhancement in business volumes. GLP recorded good growth which led to enhanced mark up earned. Improved cost of funds resulted in uptick in spread. Strengthened non-mark up income supplemented the profitability despite higher provisioning expense being recorded. Maintaining asset quality intact remains essential, going forward. Meanwhile, the “Rating Watch” reflects the need to oversee the risk profile of the Institution against unavoidable challenges, particularly emanating from economic Implications in the wake of Covid-19, and its ramifications on the disposable income of the customer base. The impact of economic slowdown lately exacerbated by the global pandemic spread had cast a rippling effect on different sectors of the country. Microfinance industry is expected to absorb the impact as disbursement, recoveries and liquidity patterns were influenced.
The ratings are dependent on the foundation's aptness to sustain positive asset health indicators amidst growth in business volumes. The ratings would also monitor the impact of technological advancement on the operational and risk efficacy of the Foundation.
The ratings are dependent on the foundation's aptness to sustain positive asset health indicators amidst growth in business volumes. The ratings would also monitor the impact of technological advancement 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 member Board of Directors. Dr. Hafiz Ahmed Pasha is the Chairman of the board. Ms. Roshaneh Zafar is the founder and CEO of the foundation.

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.