Press Release

VIS Reaffirms Ratings of The First MicroFinanceBank Limited

Karachi, April 30, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of The First MicroFinanceBank Limited (FMFB) at ‘A+/A-1’ (Single A Plus/A-One) with ‘Rating Watch-Developing’ status. The medium to long-term rating of ‘A+’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. The previous rating action was announced on April 30, 2020.

FMFB is one of the leading provider of microcredit service in Pakistan. The assigned ratings take into account strong ownership structure, as major shareholding of the bank is held by Habib Bank Limited (HBL) and the Aga Khan Development Network. The bank’s microcredit portfolio witnessed one of the highest growth among industry peers; capitalization indicators have weakened on account of sizeable increase in risk weighted assets and higher provisioning; Capital Adequacy Ratio (CAR) was reported equal to the minimum regulatory threshold by end-FY20. The parent company, HBL, plans to inject equity to the tune of Rs. 2b in FY21 and Rs. 1b each in the following two years in order to support CAR. Ratings would remain sensitive to the timely equity injection by the sponsor during the ongoing year and beyond, and maintenance of CAR at an adequate level.

Growth in microcredit portfolio was driven by higher disbursements, with increasing focus on higher ticket loans, progression of existing clients towards successive loan cycles and higher number of active borrowers, the same was supported by network expansion. Sector-wise concentration witnessed a slight change with some decrease in the proportion of Agriculture and Livestock segment due to higher focus on Microenterprise and other category loans. Additionally, the bank has enhanced the proportion of its EMI individual lending to diversify the risk. The loan portfolio remains largely unsecured in line with the social objective of not obtaining gold as collateral from micro borrowers. The relief extended by SBP in the form of rescheduling of loans has also assisted industry players in temporarily preventing major deterioration in asset quality. The bank rescheduled around one-third of its gross loan portfolio and recovered around 13% of the same by end-1QFY21. Despite significant increase in provisioning, the bank reported slightly higher profits mainly on the back of growth in lending portfolio and sustained markup on restructured loans. Ratings would also remain dependent on effective recovery of rollover portfolio and maintenance of operational self-sufficiency at a comfortable level.

Liquidity position of the bank improved with increase in liquid assets as a proportion of deposits and borrowings. Additional working capital lines have been arranged to support liquidity. The bank is in the process of implementing Loan Origination System throughout its network while branchless banking was commercially launched in 1QFY21. Meanwhile, in view of continued uncertainty and severity of impact of the pandemic on the economy in general and microfinance sector in particular, the outlook on the ratings will remain vulnerable.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criterion: Micro-Finance Banks (June 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited