JCR-VIS reaffirms entity ratings of Advans Pakistan Microfinance Bank Limited

Karachi, April 29, 2016 (PPI-OT):JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) at ‘BBB+/A-3’ (Triple B Plus /A-Three). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 28, 2015.

Assigned ratings of APMBL incorporate implicit support of the bank’s sponsors, Advans SA SICAR (Advans SA) and Netherlands Development Finance Company (FMO). Both sponsors possess extensive experience in the microfinance sector, as depicted by their presence in microfinance institutions in several countries; the bank benefits from the multi-jurisdictional experience of its sponsors. Along with financial support, the parent also provides technical assistance to its affiliates. Under this program, a deputy CEO has been deployed at APMBL in 2016 for a limited period.

Given the short operational history, revenues from core operations of the bank are unable to cover overheads, resulting in losses. As per projections, management anticipates the bank to be profitable by end-2018 with a year-on-year increase in advances. Equity erosion due to losses has affected compliance with the Minimum Capital Requirement (MCR). A waiver for this has been obtained from State Bank of Pakistan (SBP) till June 2016.

Meanwhile, APMBL is in the process of receiving capital from a new shareholder. In case the said arrangement does not materialize in time, Advans SA, subject to the approval of its Board of Directors, will invest necessary funding in order to meet MCR. Going forward, core profitability is likely to improve, provided that the projected growth in advances materializes.

Gross Loan Portfolio (GLP) of the bank, focused on Micro Small and Medium Enterprises (MSME), increased considerably in 2015 on the back of higher number of loans disbursed. However, quality of the portfolio was worsened during the year. In order to address this, management strengthened controls and procedures to ensure sustainable growth in portfolio while improving portfolio quality. Furthermore, the bank has consolidated its unsecured lending products into a single product, ‘Advans Tijarat’, from April 2016 onwards. The management anticipates improvement in productivity indicators for the bank given changes in its network, HR organization and product design.

For more information, contact:
Ms. Sobia Maqbool
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk