Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has once again affirmed the stability rating of the JS Microfinance Sector Fund at ‘A(f)’ with a stable outlook as of October 22, 2024. This consistent rating reflects the fund’s prudent investment strategy and robust liquidity management, particularly in prime quality microfinance products and related financial instruments.

According to The Pakistan Credit Rating Agency Limited, the JS Microfinance Sector Fund maintains a medium risk profile, with a strategic focus on income enhancement through investments in microfinance sector products, deposits in microfinance banks, and short-term money market instruments. As of the end of June 2024, the fund had a significant portion of its assets in liquid forms, with approximately 73.17% held as cash in banks and 23.07% placed in banks and development financial institutions (DFIs).

The fund’s strong liquidity profile is further reinforced by its conservative investment approach, which includes a high concentration in A+ and A-rated avenues, constituting 52.26% and 43.61% of its credit portfolio, respectively. This allocation strategy significantly limits the fund’s exposure to credit and interest rate risks, as evidenced by its Weighted Average Maturity (WAM) of 55 days and a duration of 66 days.

However, the concentration of investments among the top ten investors, which represents about 67.74% of the fund’s assets, poses a high level of redemption pressure. This risk is systematically managed by maintaining a high level of liquidity, ensuring that the fund can meet potential large-scale withdrawals without compromising its operational stability or performance.

PACRA notes that any substantial changes in the fund’s investment policy or modifications in the rating criteria might impact future ratings. Nonetheless, the reaffirmation of the ‘A(f)’ rating underscores PACRA’s confidence in the fund’s ability to manage risks effectively while providing stable returns to its investors.