Press Releases / 04.03.2014
Press Release as of 04.03.2014
Association MLC 'BSC of Kursk region'
CJSC AK&M Rating Agency upgraded the microfinance institution rating assigned to nonprofit organization "Regional centre of supporting small and middle enterprises" on the national scale from 'B+' to 'B++'. The outlook is stable.
The 'B++' rating indicates a sufficient credit worthiness of the microfinance institution. Risk of a delay in meeting liabilities is moderate, restructuring risk for a loan / part of a loan is insignificant.
Nonprofit organization "Regional centre of supporting small and middle enterprises" (RCSSME) is an element of the regional SME assistance infrastructure in Kursk region. Microfinancing is one of the activities provided for by its Charter.
The MFI rating upgrade reflects the growing number and amount of loans provided, high equity capital adequacy, reduction in loan arrears, and lower portfolio-at-risk ratio.
Over the period of existence, RCSSME has concluded 89 microlending contracts for a total amount of RUB 49.927 million. 2012 saw a somewhat weaker microfinancing performance, with fewer microlending contracts (18 against 24 in 2011). In 2013, however, the MFI mounted a comeback, the number and amount of its microloans increasing by 17% and 11%, respectively, to 21 contracts for a total of RUB 13.507 million.
As of January 1, 2014, the microfinance institution's SME-targeted capital amounted to RUB 41,435 thousand. Its equity capital adequacy as of the same date was estimated at 100%, the minimum percentage required being 15%. Over its existence, nonprofit organization "Regional centre of supporting small and middle enterprises" has never resorted to borrowed capital.
At the beginning of 2014, loans in arrears totaled RUB 548 thousand accounting for 2.8% of the microloan portfolio. The portfolio-at-risk (PAR) ratio (in terms of the Ministry of Economic Development's Order 220 dated 24.04.2013) was 3.1% (the acceptable level being 7%), 5.5% below the 2012 level.
At the same time, we regard the failure to meet the regulatory authority's lending efficiency requirements as well as lower operational sustainability as the main negative rating drivers for the Company.
The lending efficiency of RCSSME, while growing by 25.3% against 2012 and reaching 47.1% in 2013, still stayed below the regulatory threshold (80%).
Throughout the microfinance institution's history, expenses exceeded its earnings by RUB 446 thousand on average. In 2013, this gap increased 4 times, with the result that the operational sustainability decreased to 31.3% as of January 1, 2014, still farther below the minimum acceptable percentage of 100% set by Russia's Ministry of Economic Development.
However, expenses attributable to the upgrade of the microfinance institution's material and technical resources and the purchase of a new micro-loan account software program had a positive impact on the loan debt arrears, which we regard as an offsetting factor. Other operating expenses were related to advertising and coverage of RCSSME's microlending activity.
Nonprofit organization "Regional centre of supporting small and middle enterprises" was registered in Kursk region in August 2010. Its founders are as follows: the Consumer Market, Small Business Development and Licensing Committee of Kursk region, the Association of Private Transport Operators (Kursk regional public organization), nonprofit organization Kursk Chamber of Commerce and Industry, the Association of Employers (Kursk regional public organization), the Kursk regional department of the Retail, Public Catering, Consumer Cooperation and Business Union of the Russian Federation "Trade Unity".
RCSSME which has been lending to SME businesses since 2010 was officially registered as a microfinance institution in late 2011. Over the period of existence, RCSSME has provided 89 microloans for a total amount of ca. RUB 50 million.
As of January 1, 2014, RCSSME's microloan portfolio (loan debt balance) amounted to RUB 19.514 million including RUB 548 thousand in arrears.
This press release is based on the statement of assigning a credit rating to nonprofit organization "Regional centre of supporting small and middle enterprises".
The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's reliability and shall not be construed as advice on the purchase and sale of securities or the provision of loan facilities.
CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
CJSC 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).
CJSC AK&M Rating Agency