JCR-VIS upgrades ratings of Tameer Microfinance Bank Limited

Karachi, April 23, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited has upgraded the entity ratings of Tameer Micro Finance Bank Limited (TMFB) from ‘A/A-1’ (Single A/A-One) to ‘A+/A-1’ (Single A Plus/A-One). Rating of the outstanding TFC has also been upgraded from ‘A(SO)’ to ‘A+(SO)’ (Single A Plus (Structured Obligation)). Outlook on the assigned ratings is ‘Stable’.

Microfinance sector offers significant potential for growth in Pakistan with market penetration at 10.6% of an estimated 27 million borrowers. Microfinance Banks (MFBs) posted healthy growth in 2013 with delinquency levels remaining below 1%. Sector dynamics however remain vulnerable to natural calamities, and economic challenges; the impact on different market players may vary.

The ratings assigned to TMFB take into account the stand-alone risk profile of the institution; moreover, implicit support of the major sponsor, which is owned by the Telenor Group having a rating of ‘A-/A-2’ (Single A Minus/ A-Two) by an international rating agency, provides strength to the assessment of overall risk profile of the bank.

TMFB enjoys prominent positioning in the micro-finance sector, having around one-third market share in terms of total deposits at end-2013. Liquidity profile of the institution has improved on a timeline basis with lower depositor concentration levels and significant improvement in deposit mix.

Given the growth in deposits, bank’s need for commercial borrowings as a funding source has declined. Continuity of current trends in deposit mix is considered essential for realizing future growth plans in a sustainable manner. The upgrade also reflects TMFB’s robust capitalization levels.

The bank’s loan portfolio has continued to grow at a healthy pace. While disbursements increased in 2013, retention levels witnessed a declining trend. This in turn has an impact on the bank’s earnings. In order to address the same, disbursements of unsecured Equal Monthly Installment loans were increased in 2013. However, around four-fifth of the advances portfolio still comprises gold backed secured loan; Tameer Sarmaya Qarza.

Profitability of the bank has also showcased improvement, with sizeable contribution from Branchless Banking (BB) services. Ability to meet future profitability targets will depend on enhancing retention levels while maintaining portfolio quality and operating expenses at manageable levels.

TMFB enjoys leadership position in the BB segment; though market share has witnessed dilution with the advent of new players. Given the increasing competition in this segment, building further on volumes in case of basic transaction services and introducing value added products will be instrumental to maintaining market positioning.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3

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