CJSC AK&M Rating Agency assigned the ‘A’ guarantee institution rating with a positive outlook as per the national scale to the Guarantee Fund of Credit Support of the Republic of Mordovia.
The ‘A’ rating indicates a high credit standing of the guarantee institution. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of a loan is minimal.
The autonomous institution ‘Guarantee Fund of Credit Support of the Republic of Mordovia’ (GFCS RM) is one of the key elements of the regional SME development infrastructure. The fund’s core activity is providing guarantees for loans and other debt obligations of SME businesses registered in the Republic of Mordovia, where collateral coverage is insufficient.
The rating score of the guarantee institution is essentially supported by the high and still improving KPIs, steady growth of capitalization, and low amount of risk assumed.
Since its inception (mid-2009), the fund has provided 123 sureties for a total of RUB 464 million, with the result of raising extra-budgetary funds in the amount of RUB 716 million for financing SME businesses. The total amount of sureties under the contracts in force as of 1/1/2013 was RUB 320 million (+5.5% year-on-year), which is fairly high, given the number of small businesses in the region. The guarantee capital multiple is about 147%, indicating the highly efficient use of budgetary resources and putting the fund in a position to further expand its surety portfolio and improve its KPIs.
Benefiting from consistently profitable operations, the fund is steadily increasing its capital. Since the start of 2012, equity capital of the AU ‘Guarantee Fund of Credit Support of the Republic of Mordovia’ has increased by 14.4%, capitalization rose by 15.2%.
The guarantee fund has deposited its money in accounts with 7 credit institutions with sufficiently high credit standing (corresponding to ‘A’ or above in the AK&M Rating Scale). The maximum relative weight of the funds deposited with one bank is 30%, which is below the maximum percentage set by the regulatory authority. Financial investments of the fund are well diversified in terms of amount and maturity. These achievements indicate the sufficiently reliable guarantee coverage for the fund’s off-balance sheet liabilities. The fund’s bank deposit contracts provide for possible unconditional partial withdrawal of the deposits without losing interest, which ensures the highest level of liquidity possible.
Over its existence, the fund has met only one payment request from a credit institution (namely, the regional department no. 8589 of Sberbank of Russia) in the amount ca. RUB 229 thousand, which suggests that its current risk management system is sufficiently effective. It will be noted that the borrower repaid the guarantee institutions’s expenses without legal proceedings. Therefore, the fund’s operations are not loss-making, which contributes essentially to its rating.
This success makes the amount of risk assumed extremely low. The risk of topping the loss ratio threshold, according to our stochastic model, is a mere 3.6%. The risk of financial destabilization, i.e. a decrease in the net asset value on the medium-term horizon, does not exceed 7.4%.
We also appreciate the fairly high business process automation. Along with the standard licensed software, the guarantee institution makes use of dedicated data input, processing, storage and immediate output software tailored to meet its technical requirements.
At the same time, the fund’s subsidiary liability for the obligations of its SME customers is high and approaching the maximum level permitted, which exerts a moderate pressure on the fund’s rating.
The autonomous institution ‘Guarantee Fund of Credit Support of the Republic of Mordovia’ was registered on March 19, 2009. The sole founder of the fund is the regional government. Over its existence, the guarantee institution has concluded more than 120 surety agreements amounting to RUB 464 million, raising SME-targeted external investments of 3.8 rubles per each ruble of the public sector invested. As of 1/1/2013, the guarantee institution’s surety portfolio totaled RUB 320 million, the amount of funds raised (loan balance) being RUB 507 million. The auditor of the fund chosen through competitive tendering is Silaudit LLC, a member of the SRO NP Auditor Association Sodruzhestvo (Saransk city).
This press release is based on the statement of assigning a guarantee institution credit rating to the Autonomous Institution ‘Guarantee Fund of Credit Support of the Republic of Mordovia’.
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).
AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), and the MICEX (as a prerequisite for including bonds in the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation base and for listing bonds). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.
CJSC AK&M Rating Agency
ul. Gubkina 3
Press release by: A.V. Khibukhin, PhD in Technical Sciences
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.