AK&M Rating Agency has assigned an 'A+' national scale microfinance institution rating to JSC Agency for Supporting Small and Medium-sized Businesses. The outlook is stable.

The 'A+' rating indicates that JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region (hereinafter also abbreviated as ASSMB) qualifies as a microfinance institution with a very high degree of reliability. The risk of a failure to meet obligations in time is insignificant.

The positive rating drivers include growing profit from operations and overall profitability of ASSMB, higher capitalization and growing credit support to small and medium-sized businesses in the region, high security for the microloans provided by the MFI, operational sustainability and efficiency improvements, advanced risk management.

In January-September 2016, the microfinance activity of ASSMB was generally profitable. The 9-month financial result of microlending was RUB 327.2 thousand.

In 2016, ASSMB's general activity also remained profitable, its net profit for 9 months of 2016 exceeding RUB 8 million.

In the first quarter of 2016, ASSMB received RUB 20.22 million from the budget as a target contribution to its authorized capital for the development of microfinance services, followed by another contribution in the amount of RUB 49.98 million in the third quarter of 2016. As a result, the capitalization of the microfinance organization reached RUB 70.2 million at the start of the fourth quarter.

By September 30, 2016, the microfinance organization had provided 37 loans for a total amount of RUB 66.29 million.

Of particular note is the microfinance institution's growing credit support provided to small and medium-sized businesses: one microloan was provided in the first quarter, 14 in the second quarter, and 22 in the third quarter.

The average microloan provided by ASSMB grew from RUB 1 million in the first quarter to RUB 1.3 million in the second quarter and further increased to almost RUB 2.2 million in the third quarter.

As of October 1, 2016, the microfinance institution's lending efficiency ratio reached 94.4%.

The simultaneous growth of the Fund's capital and the credit support to SME businesses is one of the key positive rating drivers.

We appreciate the high level of security for the loans provided by ASSMB exceeding the amount of existing microloans almost 4 times. This substantially mitigates the risk of irrecoverable loss of money should clients default on their obligations.

The operational efficiency of ASSMB's microfinance activity has met the applicable statutory requirements this year, and we appreciate the Company's ability to improve it every quarter. From 21% in the first quarter 2016, the ratio of operating expenses to the existing portfolio of microloans indicating the Company's operational efficiency decreased to 5.2% in the second quarter, and further improved to 2% at the end of Q3 2016. The lower ratio of expenses to existing microloans contributes to the microfinance organization's rating.

In the first and second quarters of 2016, the operational sustainability of ASSMB did not exceed 100%. However the third quarter brought a substantial improvement to 138.8% as of September 30. Therefore, ASSMB achieved positive operational sustainability of its microfinance activities in 2016.

For several years, ASSMB has been successfully operating as a guarantee institution. This positive experience formed a highly-skilled and competent team of specialists with perfect understanding of how small and medium-sized businesses should be support, resulting in correct microloan placement decisions. In 2016, there is no overdue debt on the loans provided by ASSMB. Both the portfolio-at-risk (PAR) ratio for microloans and the write-off ratio are equal to zero. There are no restructured or bad loans in the Company's portfolio either.

The ability to maintain the current efficiency of microfinance activities supports the microfinance organization's rating.

The main rating constraint for the Company is the short experience as a microfinance organization: ASSMB has been providing microloans since the start of 2016.

JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region was registered on August 14, 2003. Its sole founder is the Government of Leningrad region represented by the Leningrad regional committee for the management of state-owned property. Until 2016, ASSMB only operated as a guarantee fund. Starting from Q1 2016, ASSMB has also been providing microfinance services. As of October 1, 2016, the Company's microloan portfolio amounted to RUB 66.3 million, its capitalization reached RUB 70.2 million.

Full name: JSC Agency for Supporting Small and Medium-sized Businesses, regional microfinance institution of Leningrad region.

Short name: ASSMB.

AK&M Rating Agency has assigned a microfinance institution reliability rating to ASSMB for the first time. All rating action announcements are available on the akmrating.ru website.

The rating is valid until December 2017. 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.

This press release is based on the Statement of assignment of a credit rating to ASSMB and the Credit Rating Methodology for Microfinance Institutions rev. March 3, 2015.

For estimation purposes, we completely rely on the reliability of information provided by the Customer. 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.

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

Rating agency AK&M

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www.akmrating.ru

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