The 'A+' rating indicates that nonprofit organization "Stavropol regional Microfinance Fund for small and medium business" (SRMF SMB) qualifies as a highly creditworthy microfinance institution. The risk of a failure to meet obligations in time is insignificant. The rating assignment was based on the Credit Rating Methodology for Microfinance Institutions rev. January 23, 2014.

The microfinance institution rating reflects an acceptable level of overdue debt, growing operational sustainability, high lending efficiency, an increase in net profit and the conformity of the other standard performance indicators to regulatory requirements.

For the whole period of providing microfinance services, the Fund has concluded 2,437 microloan contracts for a total amount of RUB 1.3 billion (as of October 1, 2015).

As of the reporting date, the portfolio of SRMF SMB contained 735 loans, 20 of them being in arrears with delayed payments amounting to RUB 10.3 million. The Fund's debtor register has a total of 36 SME businesses unable to timely and fully meet their obligations to the Fund (total arrearage reaching RUB 15.2 million). Compared with October 1, 2014, the Fund increased its recovery percentage by 6.4 percentage points to 49.7%.

At the end of September 2015, the Fund's portfolio-at-risk (PAR) ratio (in terms of the Ministry of Economic Development of Russia's Order 167 as of March 25, 2015) was 2.85%, matching the average level of overdue payments (3%, according to the Central Bank of Russia).

The Fund's lending efficiency reaches 97.8% (against 69.6% as of October 1, 2014), which means that its financial resources were almost wholly used for lending purposes.

In January-September 2015, revenue of SRMF SMB from microfinance activities amounted to RUB 21.7 million increasing by 35.0% year-on-year. For the same period, the Fund's expenses grew by 13.9%, mainly resulting from an increase in operating expenses (+15.1% year-on-year) and the almost doubled loan losses. However, this year's 9-month income earned by the Fund has already surpassed the result achieved for the same period in 2014. Besides, the operational sustainability of SRMF SMB increased by 22 p.p. for the 9-month period and reached a historic high of 132.6% (the minimum threshold being 100%).

In 2015, the Fund's 9-month net profit increased by 39.9% year-on-year to RUB 7.1 million. As a result, its return on assets (ROA) ratio grew by 1.3 p.p. to 8.6%.

The rating of SRMF SMB is constrained by heavier restructuring of overdue loans and the write-off of hopeless debts.

The loan restructuring ratio and the debt write-off ratio increased by 106.1% and 81.1% year-on-year, respectively, indicating somewhat weaker creditworthiness of the Fund's borrowers. As of October 1, 2015, the amount of loans with delayed payments reached RUB 10.3 million increasing by RUB 2.4 million (31.5%) year-on-year.

The Fund (no. 6110426000359 in the State Register of Microfinance Institutions as of August 12, 2011) has been engaged in microfinance activities since 2011.

AK&M Rating Agency assigned a credit rating to nonprofit organization "Stavropol regional Microfinance Fund for small and medium business" for the first time on November 14, 2014. All rating action announcements are available on the akmrating.ru website.

The rating is valid until November 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Fund's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the Fund. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a microfinance institutions credit rating to nonprofit organization "Stavropol regional Microfinance Fund for small and medium business" and our Credit Rating Methodology for Microfinance Institutions rev. January 23, 2014.

The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

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