Press Release
VIS Reaffirms Entity Ratings of LOLC Microfinance Bank Limited
Karachi, May 21, 2026: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of LOLC Microfinance Bank Limited (‘LOLC’ or the ‘MFB’) at 'A-/A2' (Single A Minus/A Two). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable.’ Previous rating action was announced on May 12, 2026.
LOLC, previously known as Pak Oman Microfinance Bank Limited, was established on March 9, 2006, as a public limited company under the Companies Ordinance, 1984 (repealed with the introduction of the Companies Act, 2017 on May 30, 2017). It obtained its license from the State Bank of Pakistan (SBP) on April 12, 2006. The MFB commenced its operations on May 6, 2006, with its principal focus on providing microfinance services to the marginalized and underserved sectors of society, in accordance with the Microfinance Institutions Ordinance, 2001. As at Dec’25, the MFB has 88 (Dec’24: 63) branches including 1 Islamic branch (Dec’24: nil). The MFB has a license to operate nationwide while its branches are spread across all provinces of Pakistan and Azad Jammu & Kashmir other than Gilgit Baltistan.
The assigned ratings take into account the committed strategic and financial backing of LOLC Holdings PLC. Moreover, an operational turnaround has been noted with strong portfolio growth during CY25 along with a continued shift towards secured lending, particularly gold-backed advances, which has strengthened the overall risk profile. Ongoing diversification efforts into other secured and SME-focused segments have also been noted. Asset quality indicators improved notably during the year, supported by reduced fresh delinquencies, recoveries, and write-offs, alongside strengthened provisioning coverage. The investment portfolio remains conservatively positioned in government securities and short-term placements, thereby limiting credit and market risk exposure.
The funding profile strengthened on the back of robust deposit growth, supporting balance sheet expansion and building liquidity access. However, the funding base remains largely skewed towards savings deposits, indicating sensitivity to pricing dynamics, despite gradual improvement in CASA deposits. Given continued concentration in deposit sources, liquidity indicators may point to a need for close monitoring.
Profitability trends improved due to higher income and lower provisioning charges; however, elevated operating expenses and continued margin pressure remain constraining factors, resulting in lower but still negative net returns. Going forward, further improvement in operating efficiency and portfolio yield is expected to support a more sustainable earnings profile.
Capitalization remains a key rating constraint, with the Capital Adequacy Ratio remaining only marginally above regulatory requirements amid strong balance sheet growth and accumulated losses. While internal capital generation remains limited, planned sponsor support is expected to provide near-term relief to capital buffers. The ratings remain dependent on prudent asset selection and profitability leading to a sustainable capital profile.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Micro-Finance Banks
https://docs.vis.com.pk/docs/MicroFinance-Oct-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf