Press Release

VIS Maintains Ratings of Rural Community Development Programs with ‘Rating Watch-Developing’ status

Karachi, April 29, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Rural Community Development Programs (RCDP) at ‘BBB/A-3’ (Triple B/A-Three). The long term rating of ‘BBB’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-3’ depicts satisfactory liquidity and other protection factors which qualify entities / issues as investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. The outlook on the assigned rating has been revised from ‘Rating Watch-Negative’ to ‘Rating Watch-Developing’ status. The previous rating action was announced on July 16, 2020.

The assigned ratings of RCDP take into account implicit support available from the parent organization, Rural Community Development society (RCDS) both on financial and technical fronts. The assigned ratings incorporate restricted lending, escalated credit risk, higher provisioning expense, shrinkage in spreads and depressed profitability. Ratings factor in manageable leverage indicators; the same have improved during the period under review in line with sizable cuts on disbursement activities. With weak economic growth, the opportunities available for micro-credit borrowers for income generation continued to dampen during the period under review, therefore weakening of asset quality indictors was witnessed despite restructuring of around 45% of the performing portfolio for three months starting from July’20. However, the full impact of weakened portfolio not allowing deferment post Sep’20 will be seen over the year. Moreover, the effect of change in the lending methodology from group to individual is yet to be ascertained. In view of continued uncertainty and severity of impact of the pandemic on the economy in general and microfinance sector in particular, the outlook on the ratings will remain vulnerable. Going forward, ratings will remain contingent upon meeting recovery targets, improvement in asset quality indicators, managing spreads, maintaining liquidity indicators while continuing healthy disbursement activities to keep the organization afloat.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-25723411-13, Ext: 8010) or the undersigned at 021-35311861-70 or email at info@vis.com.pk .


Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Non-Bank Financial Companies (March 2020)
http://www.vis.com.pk/kc-meth.aspx




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