The 'B+' rating indicates that Business Partner Fund is a sufficiently creditworthy microfinance organization, with a low degree of full or partial debt restructuring risk. The rating assignment was based on the Credit Rating Methodology for Microfinance Institutions rev. February 10, 2016.

The credit rating is essentially supported by the existing microloan portfolio expansion, compliance with regulatory requirements for key performance indicators and a high level of security for the loans provided by the Fund.

For the whole period of microfinance activities, the Fund has concluded 96 microloan contracts for a total amount of RUB 43 million (as of April 1, 2017). The total amount of loans provided by the Fund to SME businesses in the 12-month period ending on April 1, 2017 reached RUB 12.3 million. Compared with last year, the Fund's existing loan portfolio increased by 24 % (to RUB 13.2 million).

The loan portfolio expansion had a positive impact on the Fund's lending efficiency: as of the last reporting date, the ratio of active loans to capitalization was 77.2%, which is 14.9% higher than on April 1, 2016.

We appreciate the Fund's ability to comply with regulatory requirements for the key performance indicators. In particular, its equity capital adequacy ratio was about 99% as of April 1, 2017 (the required percentage being at least 15%).

Since our previous review, the ratio of operating expenses to the average loan portfolio decreased from 1.8% to 0.2% (the upper limit set by the regulatory authority being 30%).

As of the last reporting date, the value of collateral on the current loan portfolio was RUB 37 million exceeding the amount of existing microloans almost 3 times.

The rating is constrained by low capitalization and a deterioration in asset quality.

As of April 1, 2017, the microfinance institution's capitalization was RUB 17.1 million, comparable to the Q3 2015 level. The narrow scope of activity of Business Partner Fund and the low probability of financial support in the medium term (the Fund has not received subsidies from budgets of various levels since 2014) put considerable pressure on the microfinance organization's rating.

In the period from April 1, 2016 to April 1, 2017, the portfolio of overdue loans increased by 19% to reach RUB 1.6 million on the last reporting date. 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) was 10.7%, below the applicable requirement of the Ministry of Economic Development (12%).

Of particular note is a deterioration in the loan portfolio, the percentage of loans with payment delays exceeding 360 days reaching 5.9% at the end of Q1 2017 against a zero level as the same date in 2016. The poor management of principal risks and the asset quality deterioration may lead to a further decline in the Fund's capitalization.

Full name: the Upper Kama small business assistance fund (microcredit company) Business Partner.

Short name: Business Partner Fund.

The Upper Kama small business assistance fund (microcredit company) Business Partner registered on August 24, 2005 started microfinance activities on November 11, 2013.

AK&M Rating Agency assigned a rating to Business Partner Fund for the first time on June 18, 2014. The last rating action was on August 26, 2016. All rating action announcements are available on the akmrating.ru website.

The rating is valid until August 2018. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the microfinance institution'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 credit rating to Business Partner Fund 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 opinion on the microfinance organization's efficiency 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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