Press Release
JCR Reaffirms Ratings of FINCA Microfinance Bank Limited
Karachi, April 23, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of FINCA Microfinance Bank Limited (FINCA MFB) at ‘A/A-1’ (Single A /A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on October 31, 2017.
The assigned ratings of FINCA MFB incorporate association of the bank with FINCA International Inc., a global microfinance organization operating through 20 subsidiaries, including Pakistan. FINCA MFB continues to receive support from its parent through transfer of technical expertise emanating from FINCA’s global experience. The ratings also take into account sizeable loan book, slightly deteriorated though adequate asset quality and improved profitability of the bank.
By end-FY17, microcredit portfolio of the bank witnessed considerable growth. Individual lending continues to remain forte of the bank, while average loan ticket size has also increased on a timeline basis. The bank’s loan book reflects an adequate diversification of agricultural, livestock and enterprise loans and among Equal Monthly Installment (EMI) and Bullet repayment structures. During FY17, asset quality indicators deteriorated as a result of which the management has embarked upon various risk mitigation initiatives; impact of the same will be tracked over time.
During FY17, profitability of the bank enhanced primarily due to sizeable increase in the microcredit portfolio, however Operating Self Sufficiency (OSS) stood lower on account of higher administrative expenses. Liquidity indicators improved with higher liquid asset as a proportion of deposit and borrowings. Some improvement in deposit concentration has also been witnessed, though further granularity in deposit base is required to mitigate the impact of large withdrawals; till the time such granularity is achieved, the bank may need to maintain a larger liquidity cushion on the balance sheet.
Tier-1 equity of the bank augmented on account of profit retention, however as a result of expansion in the microcredit portfolio, Capital Adequacy Ratio (CAR) decreased to 18.5% (FY16: 20.6%) by end-FY17. Going forward, FINCA MFB has embarked upon various IT initiatives which are expected to bring operational efficiencies, going forward.
For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.
Javed Callea
Advisor
Applicable Rating Criteria: Micro Finance Banks (May, 2016)
http://www.jcrvis.com.pk/kc-meth.aspx