Fitch Assigns MK Leasing First-Time 'B-' Rating

Tashkent, Uzbekistan (UzDaily.uz) — Fitch Ratings has assigned Uzbekistan-based leasing company MK Leasing FE LLC (MKL) a Long-Term Issuer Default Rating of 'B-' with a Stable Outlook, the rating agency announced. The company's senior unsecured debt was also assigned a 'B-' rating with a Recovery Rating of RR4, indicating average recovery prospects.

The ratings reflect MKL's standalone credit profile, balancing its concentrated business model and limited operational scale relative to international peers against a track record of steady performance.

MKL operates as an independent private leasing company in Uzbekistan, where it has been active since 2019. By the end of 2025, the company ranked second in the national market by new business volume and third by total leasing portfolio size.

The company specializes in medium-term leasing finance spanning one to five years, with a weighted average contract term of approximately 35 months. Micro and small enterprises accounted for roughly 80 percent of MKL's clientele at year-end 2025, while about 42 percent of transactions were completed with rural clients.

MKL's portfolio structure is undergoing gradual diversification. Agriculture represented approximately 50 percent of the portfolio in 2025, up from 10 percent a year earlier, alongside expanding exposure to construction equipment, trucks, and commercial vehicles. Fitch notes that broader asset diversification over time could help mitigate sector concentration, which currently constrains the business profile alongside the firm's small scale.

Fitch identified MKL's prompt decision-making process in procurement and financing as a competitive advantage. Portfolio quality is supported by collateralized leases and historically low asset impairment. However, Fitch noted that the portfolio remains young, rapidly growing, and concentrated.

Leases past due by more than 90 days stood at 2.2 percent at the end of 2025. Fitch attributed the low non-performing level to conservative down-payment requirements and a weighted average loan-to-value ratio of around 70 percent.

Impairment charges represented 3 percent of pre-impairment operating profit, while the cost of risk—measured as impairment charges divided by average gross leases—stood at 0.3 percent in 2025.

Profitability indicators remained strong, with pre-tax return on assets reaching 9.3 percent in 2025 and averaging about 9 percent over 2022–2025. Performance was sustained by a net interest margin of 10.8 percent and low impairment costs. Operating expenses to total net revenue stood at 41 percent.

Fitch expects profitability to moderate gradually as MKL expands into lower-yielding non-agricultural segments and replaces cheaper intra-group funding with costlier domestic market financing.

At year-end 2025, MKL's equity stood at US$19 million. Gross debt to tangible equity declined to 2.5 times from 3.1 times a year earlier, while the equity-to-assets ratio reached 27 percent. Internal capital generation remained robust, supported by a 37 percent retention rate in 2025. Fitch projects leverage to rise as business expansion relies on borrowed funds, but expects it to remain at acceptable levels over 2026–2030.

MKL continues to diversify its funding base, reducing reliance on group debt from 88 percent to 71 percent of total borrowings by the end of 2025. In 2025, MKL completed its debut local bond issuance of 50 billion soums (equivalent to US$4 million), with an additional 100 billion soums issuance planned for 2026. The firm also secured its first international borrowing from impact investment funds.

MKL is 100 percent owned by Alternative, a Luxembourg-based securitization fund managed by MK Global Kapital S.à r.l. The fund specializes in impact investing and alternative finance across more than 10 developing economies in Europe and Central Asia. The ultimate beneficial owner of Alternative is Joseph of Arimathea, a private non-profit foundation managed by a board of trustees.

Fitch assesses MKL's liquidity as adequately managed, supported by long-term borrowings and willingness among clients to make early lease repayments.

A downgrade could result from significant operational deterioration, rising non-performing leases, or marked margin compression. Negative rating action could also follow a sustained increase in gross debt to tangible equity above 6.5 times, tightening covenant headrooms, refinancing difficulties, liquidity strain, or unaddressed funding breaches.

Conversely, an upgrade would depend on further business scaling and client diversification without increasing business risks, broadening funding sources while maintaining sound financial metrics, establishing a longer track record of profitable operations, and lowering market exposure, particularly to foreign exchange risk.

In terms of ESG considerations, Fitch assigned MKL an ESG Relevance Score of 4 for Environmental Impact due to its heavy agricultural concentration, which negatively affects its credit profile. Corporate Governance also received a score of 4 due to significant decision-making reliance on a single shareholder.