Rating action

Scope Ratings UK Ltd (Scope) has today affirmed Georgia-based MFO Rico Express LLC (Rico Express) issuer rating of B+ and its short-term debt rating of S-4, both with Stable Outlook.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business model assessment: Focused (Low), from Focused (High). The issuer rating is anchored by the Focused (Low) business model assessment. Rico Express is a small financial institution with a total balance sheet of approx. GEL 800m (EUR 255m), operating exclusively in Georgia. Despite its small size, it is the largest domestic microfinance organisation, accounting for 44% of the MFO sector total assets as of March 2025.

Rico Express is the market leader in the niche pawn loans market in Georgia. While Rico Express’s loans market share in the Georgian financial sector is marginal, Scope acknowledges its leadership in such niche market as a strength. The pawn loans market has shown significant growth and dynamism in recent years, supported by the strong and persistent increase in gold price. The dynamics of gold price have proven to be an important driver of business growth, as the value of collateral is the primary determinant for the loan amount customers can borrow.

While Rico Express provides complementary services to its customers such as currency trading and international money transfers, these accounted for less than 20% of total income in 2024. The lack of business diversification is a factor constraining the business model assessment. Given its dominant position in a growing niche market, Scope does not expect the diversification profile of Rico Express to significantly change in the medium term.

Operating environment assessment: Constraining (Low). Georgia is Rico Express’s sole market. Georgia is a small emerging economy that has seen gradual improvements and reforms in recent years but still lags regional peers on several macroeconomic indicators (e.g. unemployment rate, GDP per capita, economic diversification). Current social tensions, stemming from a political crisis and contested election, raise economic uncertainty and remain an area of attention. Scope’s operating environment assessment for banks in Georgia is Constraining (High), but we adjust it downwards to Constraining (Low) for MFOs as we deem the applicable regulatory and supervisory framework to be less stringent compared to banks.

MFOs accounted for approx. 2% of the assets within the Georgian domestic financial sector, mainly providing consumer loans, trade and services loans, and agriculture loans. The MFO sector is highly concentrated with the three largest players holding around 70% of the sector’s total assets as of March 2025.

Scope arrives at an initial mapping of ‘b-‘ based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Developing. The assessment reflects Scope’s view that the issuer is embracing changes to ensure the long-term sustainability of its business model. Progress made may be tangible but does not warrant further credit differentiation.

Rico Express has made significant improvements to its governance framework over the past 2 years, ranging from management oversight and segregation of duties to strengthening and formalising risk management policies. Examples include the establishment of an audit and risk committee, the appointment of two independent supervisory board members and a CFO. We view these initiatives as key to reduce the still relevant key man risk, which has been a concern in the past.

Several initiatives have also been implemented to modernise the operation and improve digital capabilities, embracing a cashless operating model, supported by the agreement with Mastercard, and move away from a relatively costly operational management for loan disbursements. At this early stage, we do not see these investments as elements that warrant credit differentiation.

The long-term sustainability assessment leads to an adjusted rating anchor of b-.

Earnings capacity and risk exposures assessment: Supportive (+1 notch), from Neutral. The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

The assessment benefits from the entity’s strong profitability. Strong volume growth, adequate containment of costs and very low provisions drive the improvement of the bottom line. Scope expects profitability to remain strong in the coming quarters, supported by growing loan volumes, under the assumption that gold prices remain high, while the company continues its branch network expansion.

Despite the fast growth of loan volumes, asset quality remains strong. The Stage 3 loan ratio is low (1.9% as of March 2025), given the relatively high risk of consumer loans, and has increased slightly since 2023 as a result of the implementation of a more flexible write-off and loan recovery policy. Strong asset quality is also supported by the company’s good track record in the recovery of repossessed collateral. In addition, the granularity of the portfolio and the asset-backed nature of the loans are key credit risk mitigants.

While the fast growth of the loan portfolio could come with a higher risk profile from new customers, we expect asset quality to remain resilient in coming quarters, due to the entity’s ability to provide refinancing to customers based on the value of the collateral. However, we remain cautious on a larger than expected deterioration on asset quality due to a rather volatile domestic economic outlook. Operational risk is significant as the company physically manages the collateral, therefore exposed to the risk of fraud, theft or robbery. The company manages this risk with a comprehensive insurance coverage in place.

Financial viability management assessment: Comfortable (+1 notch). The assessment reflects Scope’s view that the issuer’s maintains comfortable buffers to relevant regulatory requirements and Scope expects it to continue to do so. The issuer’s financial viability is largely resilient to tail-risk events.

Rico Express is one of the best capitalized MFOs in Georgia, with sound and conservative solvency metrics. Despite these have declined slightly due to significant loan volume growth, Rico Express 43% capital ratio as of March 2025 is well ahead of the regulatory requirement of 18%. The liquidity ratio of 23% is ahead of the respective requirement of 18% but we note it is on a declining path as the company prioritises loan growth. The liquidity ratio has historically been more volatile than capital, but Scope expects Rico Express to maintain a prudent approach to both, capital and liquidity ratios.

The funding profile is balanced between promissory notes, borrowing from financial institutions and bonds. Since 2024, Rico Express also has subordinated debt, though this represents a small proportion of funding. Foreign currency risk is now almost negligible, representing only less than 2% of the loan book as of December 2024 and is fully hedged by currency swaps.

Scope does not expect Rico Express’ funding profile to materially change in the medium-term.

One or more key drivers of the credit rating action are considered an ESG factor.¹

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

The upside scenario for the ratings and Outlooks is:

1. A significant improvement in business diversification, providing a wider range of products that contribute significantly to the company’s revenue stream, could lead to a more positive assessment of the business model.

The downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Pressure on earnings capacity, e.g. due to higher funding costs and/or higher impairment charges, could lead to a lower earnings capacity and risk exposures assessment.
    
2. More aggressive capital and funding management policies leading to tighter buffers above minimum capital or liquidity requirements, could result in a downgrade of the financial viability management assessment.
    
3. A significant deterioration in the operating environment for Georgian MFOs which could result from prolonged political uncertainty and tensions, could lead to a negative adjustment of the operating environment assessment.

Debt ratings

Short-term debt: S-4/Stable. Rico Express’ S-4 short-term credit rating is derived from the long-term issuer credit rating. The rating is consistent with Scope’s long-term/short-term rating correspondence table.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

MFO Rico Express LLC

Issuer rating: B+/Stable, affirmed

Short-term debt rating: S-4/Stable, affirmed

1. Editorial note: the sentence was added on 10 June 2025. In the original publication it was missing.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for these Credit Ratings and Outlooks, (Financial Institutions Rating Methodology, 10 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/uk-regulation. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20 7824 5180. The Credit Ratings and Outlooks are EU-endorsed.
Lead analyst: Alvaro Dominguez Alcalde, Senior Analyst
Person responsible for approval of the Credit Ratings: Marco Troiano, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 18 January 2023. The Credit Ratings/Outlooks were last updated on 9 September 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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