The 'A' rating indicates that the State Fund of the Kemerovo Region for Business Support qualifies as a highly creditworthy microfinance organization. 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. February 10, 2016.

The microfinance institution rating reflects higher key performance indicators, lending improvements, good operational efficiency, a conservative loan provisioning policy.

Since our previous review, The State Fund of the Kemerovo Region for Business Support increased its capitalization. In the second half of 2015, the Fund received RUB 25 million from the budget; as a result, its capitalization increased by 26% to RUB 122.3 million.

The higher capitalization enabled the Fund to increase the amount of microloans provided to consumers. For the 6-month period in 2016, the microfinance organization provided 94 microloans for a total amount of RUB 58.9 million (11.8% above the amount of microloans provided in January-June 2015).

Therefore, as of July 1, 2016, the current portfolio of The State Fund of the Kemerovo Region for Business Support amounted to RUB 120 million increasing by 33.3% since July 1, 2015. As a result, the lending efficiency ratio grew from 92.7% to 98.2%, an evidence that the Fund successfully operates performing its functions according to the charter.

At the same time, we appreciate the Fund's good operational efficiency: the share of operating expenses in the average loan portfolio over the period under review did not rise above 10% staying at 9.1% as of July 1, 2016 (the upper limit set by the regulatory authority being 30%).

The high security of the Fund's existing microloan portfolio also provides additional support to the rating. As of July 1, 2016, the amount of security for the existing portfolio of loans reached RUB 379.4 million, exceeding the amount of existing microloans more than three times.

We regard the loan portfolio deterioration as the key risk factor. Over the period from July 1, 2015 to July 1, 2016, the portfolio of overdue loans increased by 47%, which constrains the Fund's rating. At the same time, loans with payment delays up to 30 days account for more than half of the overdue debt; therefore, the portfolio-at-risk (PAR) ratio (in terms of the Ministry of Economic Development of Russia's Order 167 as of March 25, 2015) meets the applicable requirements of the Ministry of Economic Development (5.7% against the maximum acceptable value of 12%).

Full name: microfinance organization "The State Fund of the Kemerovo Region for Business Support"

The State Fund of the Kemerovo Region for Business Support has been engaged in microfinance activities since 2010. The sole founder of the Fund is the government of Kemerovo region. The Fund is registered in the state register of microfinance institutions under no. 6110742000412 as of August 24, 2011. For the whole period of microfinance activities, the Fund has concluded 1,025 microloan contracts for a total amount of RUB 660.4 million.

AK&M Rating Agency assigned a credit rating to the microfinance organization "The State Fund of the Kemerovo Region for Business Support" for the first time on August 29, 2014. The last rating action in relation to the Fund was taken on September 18, 2015. All rating action announcements are available on the akmrating.ru website.

The rating is valid until September 2017. 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 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 credit rating to the microfinance organization "The State Fund of the Kemerovo Region for Business Support" and the Credit Rating Methodology for Microfinance Institutions rev. February 10, 2016.

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.

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