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Press Releases / 19.04.2013
Press Release as of 19.04.2013 Fond PP Kyzyl CJSC AK&M Rating Agency assigned a ‘B+’ microfinance institution credit rating, as per the national scale, to the Business Support Fund of Kyzyl. The outlook is stable. The ‘B+’ rating indicates that the Business Support Fund of Kyzyl qualifies as a sufficiently reliable borrower. Restructuring risk for a loan / part of a loan is relatively low. The Fund’s rating is essentially supported by the high equity capital adequacy, lending efficiency, fairly good microloan portfolio diversification across economy sectors, and low average amount of loans. The Fund’s capital adequacy ratio is close to 100%. As of December 31 was 2012, its equity capital amounted to RUB 9,700 thousand. In 2012, the public sector allocated RUB 2,500 thousand to the Business Support Fund of Kyzyl for microfinance operations. The Fund does not resort to borrowed funds, with minor accounts payable on some of the reporting dates. The lending operations of the Business Support Fund of Kyzyl are appreciably effective. As of the end of 2012, the Fund invested about 76% of the total funds allocated for assistance to SME businesses, just a bit below the MFI capital investment target recommended by Russia’s Ministry of Economic Development (80%). In 2012, the Fund’s lending performance, while facing quarterly changes, exceeded 70% in most of the accounting periods. The rating of the Business Support Fund of Kyzyl is also supported by the good quality of its microloan portfolio. The manufacturing sector is dominating the Fund’s loan portfolio (56% of the total amount of loans at the end of 2012). The retail trade sector accounted for 10.9%, the consumer services sector for 5.6% of the total amount of loans). The Fund is not committed to lending large amounts of money. As of the end of 2012, the average microloan provided to one legal entity or sole proprietor was RUB 496.4 thousand. All the loans, subject to the lending terms, are secured by property assets valued by an independent appraiser. At the same time, the low operational sustainability, the uncomfortably high operating cost to average loan portfolio ratio (exceeding the recommended level), and the loan arrears available impair the Fund’s credit rating. The Fund’s operational sustainability is unimpressive (54.4% in 2012, much below the 2011 result of 77.3%). Therefore, the Fund fails to meet the MFI operational sustainability target, also set by the Ministry of Economic Development, of at least 100% after two years in operation. At the end of 2012, the cost-based performance ratio of the Fund reached approximately 43% (against the maximum recommended level of 30%). Therefore, the ratio of the Fund’s operating expense to average loan portfolio is above the standard and was on an upward trend in 2012. Loans more than for 30 days in arrears accounted for 5.6% of the Fund’s total loan portfolio as of December 31 2012. The portfolio-at-risk (PAR) ratio did not exceed the maximum acceptable value of 7% set by the applicable regulatory documents of Russia’s Ministry of Economic Development. The fund is taking measures to recover the loan debts, as proven by a positive PAR trend in 2012 (6.9% as of 3/31/2012, 2.4% as of 6/30/2012) and the absence of re-structured or written-off loan debts. Full name: Business Support Fund of Kyzyl. Short name: BSF of Kyzyl. The Business Support Fund of Kyzyl was established 2009, officially registered on November 8, 2011 (entry 6110717000737 in the state register of microfinance institutions). Being a nonprofit institution established to encourage and support the SME sector in Kyzyl, the Fund provides only microfinance services. Its founder is the Khural of Kyzyl (the representative body of the city delegates).
This press release is based on the statement of assigning a credit rating to the Business Support Fund of Kyzyl City. The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Fund’s reliability and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities to the Fund. CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties. CJSC 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). AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), and the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base and for listing bonds). By a resolution of Russia’s GovernmentAK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
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