JCR-VIS reaffirms ratings of FINCA Microfinance Bank Limited

Karachi, April 26, 2016 (PPI-OT):JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of FINCA Microfinance Bank Limited (FINCA MFB) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Positive’. The previous rating action was announced on April 30, 2015.

The ratings take into account association of FINCA MFB with FINCA International, a global microfinance organization operating in 23 countries including Pakistan. Sponsor support has been demonstrated in the outgoing year with fresh equity injection to support bank’s growing operations. Resultantly, capitalization indicators strengthened on a timeline basis. Core earnings of the bank have depicted notable improvement in the out-going year on the back of growth in lending operations. Asset quality indicators pertaining to secured portfolio witnessed temporary deterioration; maintaining sound asset quality continues to remain critical to uphold positive momentum in internal capital generation.

Enterprise lending, entailing large sized microfinance loans, remains the forte of the bank. There were notable changes in the product mix with proportion of gold backed loans declining on a timeline basis. The bank is targeting an aggressive growth in its microcredit portfolio by further increasing the proportion of enterprise lending. Under the branchless banking initiative, the bank plans to offer mobile wallet services while digitalization of core processes is also envisaged. The portfolio quality and success of these initiatives would be tested over time. Declining cost of fund is expected to positively reflect on the spreads while overheads have also trended downward.

Concentration in deposit base continues to remain high. Efforts are underway to build a broad base deposit mix by focusing on small ticket deposits; however till the time such granularity is achieved, the bank may need to maintain a larger liquidity cushion on the balance sheet.

For more information, contact:
Ms. Sobia Maqbool
CFA
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