PEFINDO Rating Criteria & Methodology

Special Financial Institution - Key Success Factors

BUSINESS RISK ASSESSMENT

Product and market attractiveness

The analysis covers risk assessments on the attractiveness and level of demand on the products and
services offered by the company, particularly if compared to products and services offered by other special
financial institutions. This can be measured by among others, degree of urgency for the government or
society in fulfilling the need for such products or services offered by the company, penetration level in
national scale on the relevant products or services rendered by the company, compared to other countries,
and scope or size of such products or service offered by the company compared to macroeconomic
indicators. Products or services considered to have high urgency may support the company’s existence and
assessment on the product and market attractiveness, compared to other products and services offered by
other special financial institutions. Low national penetration rate compared to other countries may be
defined as high market potential in the future, but at the same time may also be interpreted as lack of
demand or attention from the authority on those products or services. Track record on the company’s
business growth may also support the assessment on product and market attractiveness, particularly if
compared to other special financial institutions.

Regulatory Framework
The analysis emphasizes on the existing and future regulations which are related to the company’s business
activities, compared to other regulations related to other special financial institutions. If the company’s
business activities are benefited by the regulation, this can positively affect the assessment, and vice versa.
The establishment of regulation specifically to support the company, particularly at high degree of hierarchy
such as Laws or Government Regulation could become another added value to support the company’s
going concern, compared to other special institutions without similar level of regulations. The higher degree
of hierarchy of the regulation could indicate smaller likelihood of amendment or revocation, which can
adversely affect the company’s business profile. Forms and level of supervisions by the authorities to the
company, compared to other special financial institutions may also affect the regulation risk profile, where
it may limit the company’s flexibility in business expansion, but on the other side the supervision may also
ensure the company’s health and governance at a manageable level.

Diversification
The assessment will cover thorough examination on how the company diversify its business activities and
accordingly mitigate business concentration risk, including diversification based on type of products, area,
and customers. If the concentration risk is high, the company may be vulnerable to business downturn.
Analysis on the company’s diversification in its liabilities aspect is also carefully reviewed. The company’s
ability to generate recurring revenue from its products or services could enhance its revenue stability
against possible hiccups in the industry.

Management and Corporate Strategy

The qualitative analysis will play a dominant factor in assessing the company's management quality,
experience, credibility and strategy to successfully make the company well-positioned going forward,
especially in industry whereas trust and image are very important. The analysis will cover the examination
on the management's strategic plans, operational controls and skills, financial strategies and goals,
objectives in investment as well as management's tolerance for risks. The assessment will also try to see
how well the management successfully executing their chosen strategies to achieve objectives. The
management's guidelines or directions for maintaining levels of solvency, and gearing up of the balance
sheet with debt are also diligently reviewed.

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 PEFINDO Rating Criteria & Methodology

FINANCIAL RISK ASSESSMENT

For companies categorized as special financial institutions, the financial risk assessment parameters will
follow the industry sector relevant to each companies, which methodologies are available in each industry
sector in financial institutions.

Special financial institution engaged in banking services will adopt financial risk assessment for banks
(capitalization, asset quality, profitability, as well as liquidity and financial flexibility).

Special financial institution focused in financing activities will adopt financial risk assessment for financing
companies (capitalization, asset quality, profitability, as well as asset-liability management and financial
flexibility).

Special financial institution providing insurance or guarantee products will adopt financial risk assessment
for insurance and guarantee companies (capitalization and reserve, operating performance, liquidity and
financial flexibility, as well as asset quality).

Special financial institution engaged in capital market activities will adopt financial risk assessment for
securities companies (risk management, capitalization, liquidity and financial flexibility, as well as
profitability).

DISCLAIMER
The rating contained in this report or publication is the opinion of PT Pemeringkat Efek Indonesia (PEFINDO) given based on the
rating result on the date the rating was made. The rating is a forward-looking opinion regarding the rated party’s capability to meet
its financial obligations fully and on time, based on assumptions made at the time of rating. The rating is not a recommendation for
investors to make investment decisions (whether the decision is to buy, sell, or hold any debt securities based on or related to the
rating or other investment decisions) and/or an opinion on the fairness value of debt securities and/or the value of the entity assigned
a rating by PEFINDO. All the data and information needed in the rating process are obtained from the party requesting the rating,
which are considered reliable in conveying the accuracy and correctness of the data and information, as well as from other sources
deemed reliable. PEFINDO does not conduct audits, due diligence, or independent verifications of every information and data received
and used as basis in the rating process. PEFINDO does not take any responsibility for the truth, completeness, timeliness, and accuracy
of the information and data referred to. The accuracy and correctness of the information and data are fully the responsibility of the
parties providing them. PEFINDO and every of its member of the Board of Directors, Commissioners, Shareholders and Employees
are not responsible to any party for losses, costs and expenses suffered or that arise as a result of the use of the contents and/or
information in this rating report or publication, either directly or indirectly. PEFINDO generally receives fees for its rating services from
parties who request the ratings, and PEFINDO discloses its rating fees prior to the rating assignment. PEFINDO has a commitment in
the form of policies and procedures to maintain objectivity, integrity, and independence in the rating process. PEFINDO also has a
“Code of Conduct” to avoid conflicts of interest in the rating process. Ratings may change in the future due to events that were not
anticipated at the time they were first assigned. PEFINDO has the right to withdraw ratings if the data and information received are
determined to be inadequate and/or the rated company does not fulfill its obligations to PEFINDO. For ratings that received approval
for publication from the rated party, PEFINDO has the right to publish the ratings and analysis in its reports or publication, and publish
the results of the review of the published ratings, both periodically and specifically in case there are material facts or important events
that could affect the previous ratings. Reproduction of the contents of this publication, in full or in part, requires written approval
from PEFINDO. PEFINDO is not responsible for publications by other parties of contents related to the ratings given by PEFINDO.

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