The 'A' rating indicates that the Fund of Guarantees and Business Development of Pskov Region (FGBD PR) qualifies as a highly creditworthy microfinance institution. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal. The rating assignment was based on the Credit Rating Methodology for Microfinance Institutions rev. October 12, 2015.

The microfinance institution rating is supported by high equity capital adequacy ratios, high lending efficiency and high loan portfolio security.

We are pleased to see the Fund's key performance indicators meet applicable regulatory requirements. Its equity capital adequacy ratio is close to 100% (the minimum regulatory threshold being 15%). As of October 1, 2015, the microfinance institution's SME-targeted capital totaled RUB 274.2 million, including RUB 72.8 million earmarked for microfinancing purposes. At the same time, the current portfolio amounts to RUB 72.5 million. Therefore, the lending efficiency ratio as of the last reporting date reached 99.6%, which also meets the Ministry of Economic Development's guidelines (80% after one year in operation).

As of October 1, 2015, the amount of security provided for the existing portfolio of loans was RUB 164 million, more than twice above the amount of existing microloans.

The rating of FGBD PR is constrained by higher overdue loan arrears and a contraction in the amount of microloans provided.

Over the period from October 1, 2014 to October 1, 2015, the portfolio of overdue loans increased by 57% to RUB 6.6 million as of the last reporting date. As a result, the share of loan arrears increased to 9.1% from 6.7% in September 2014. However, the portfolio-at-risk (PAR) ratio (in terms of the Ministry of Economic Development of Russia's Order 167 as of March 25, 2015) stays at an acceptable level of 6.4%, the maximum acceptable percentage being 12%.

The number and total amount of microloans provided by the Fund for the 9-month period in 2015 decreased considerably (-14% and -27%, respectively). Since our previous review, the number of effective contracts decreased by 26 (13%). It should however be noted that this contraction fits the general trend in the region: the amount of loans provided to SME entities in Pskov region decreased by 52% in the period under review.

Official name literally translated from Russian as: autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region

The Fund of Guarantees and Business Development of Pskov Region (FGBD PR) was established as an entity affiliated with the State Committee of Pskov region for Economic Development, Industry and Investments in 2009, registered as a microfinance institution on August 12, 2011. For the whole period of providing microfinance services, the Fund has concluded 954 microloan contracts for a total amount of RUB 398 million.

AK&M Rating Agency assigned a credit rating to FGBD PR for the first time on December 10 2014. All rating action announcements are available on the akmrating.ru website.

The rating is valid until January 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the guarantee institution's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the microfinance institution. 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 institution credit rating to autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region (FGBD PR) and out Credit Rating Methodology for Microfinance Institutions rev. October 12, 2015.

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.

AK&M Rating Agency

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