The 'B++' rating indicates that the Business Microfinance Fund of the Republic of Crimea qualifies as a microfinance institution with a satisfactory degree of reliability. The risk of a failure to meet obligations in time is relatively low, the full or partial debt restructuring risk is insignificant. The rating assignment was based on the Credit Rating Methodology for Microfinance Institutions rev. February 10, 2016.

The higher sub-level reflects the further growth of capitalization driving the expansion of operations and the Fund's ability to keep the percentage of overdue debt low. In AK&M Rating Agency's view, the rating is also supported by the high level of security for the microloans and strong key regulatory performance indicators.

For the 9-month period in 2017, the capitalization of the microcredit company 'Business Microfinance Fund of the Republic of Crimea' increased by 36.2% to reach RUB 307.6 million. Financing from the federal and regional budgets amounted to RUB 81.8 million (RUB 76.5 and RUB 5.3 million, respectively). This enabled the Fund to increase the microloan portfolio by 38.5% against the start of the year to RUB 235.3 million as of October 1, 2017. The growth of capitalization provides opportunities for increasing the volume asset-side transactions with the aim of providing SME businesses with access to credit resources.

The loan servicing discipline across the Fund's microloan portfolio was extremely high in the period under review. As of October 1, 2017, the percentage of loans with payment delays exceeding 30 days was a mere 0.4%. In absolute terms, the overdue debt did not change in the past year. This indicates high quality of risk management at the microcredit company 'Business Microfinance Fund of the Republic of Crimea'.

The Fund pursues a conservative collateral policy. As of October 1, 2017, the amount of security interest agreements reached RUB 675.8 million exceeding the portfolio of active microloans 2.9 times, which puts the Fund in a strong position for reimbursing possible losses, if any.

We appreciate the compliance of the Fund's key performance indicators with the statutory requirements. In particular, the Fund's equity capital adequacy ratio was 107.3% on October 1, 2017 and never went below 100% in the period under review, which meets the recommended level (at least 15%) with a good margin to easily absorb the credit risks assumed by the Fund.

The Fund's high operational sustainability and positive financial result from microlending operations also contribute to the rating. In the period from October 1, 2016 to October 1, 2017, the Fund's financial income grew faster than its expenses (+120.2% and +57.7%, respectively), with the result that the operational sustainability ratio increased from 95.0% to 132.7% (+37.7 p.p.).

Another positive rating driver is the steadily low operational efficiency ratio. In the past two years, the ratio of operating expenses to the average microloan portfolio was never above 10% (the maximum acceptable level set by the regulatory authority being 30%), reaching 7.1% as of October 1, 2017.

The rating is primarily constrained by losses from defaulted investments and a rather low lending efficiency ratio.

A considerable part of the assets of the microcredit company 'Business Microfinance Fund of the Republic of Crimea' is immobilized following the revocation in 2016 of the license of JSC FIA-BANK where the Fund had a total of RUB 56.2 million in deposits. In AK&M Rating Agency's view, there is a high probability that the related losses will not be reimbursed. The provision for this doubtful debt is not sufficient (5% in 2017), but we appreciate the Fund's plans to increase it to 100% by 2020.

It should also be noted that the current efficiency of lending to small and medium-sized businesses is not sufficient yet, despite the Fund's ability to further improve it. In particular, only 76.5% of the amount of financing from the budget was used for microlending purposes as of October 1, 2017.

Full name: microcredit company 'Business Microfinance Fund of the Republic of Crimea'

Short name: MCC BMFRC

The microcredit company 'Business Microfinance Fund of the Republic of Crimea' was registered on August 29, 2014. The Fund was founded by the Ministry of economic development of the Republic of Crimea. The Fund is registered in the state register of microfinance institutions under no. 401403935005974 as of November 20, 2014. For the whole period of microfinance activities ending on January 1, 2018, the Fund issued 457 microloans for a total amount of RUB 503.7 million.

AK&M Rating Agency assigned a microfinance institution rating to the microcredit company 'Business Microfinance Fund of the Republic of Crimea' for the first time on February 18, 2016. The last rating action in relation to the Fund was taken on January 30, 2017. All rating action announcements are available on the akmrating.ru website.

The rating is valid until February 2019. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the microfinance organization's rating are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the microfinance organization. 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 organization rating to the microcredit company 'Business Microfinance Fund of the Republic of Crimea' and the Credit Rating Methodology for Guarantee Institutions rev. February 10, 2016.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the microfinance organization's reliability 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.

AK&M Rating Agency

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www.akmrating.ru

Phone no.: (495) 916-70-30, fax no.: (499) 132-69-18.