Press Release
JCR-VIS Reaffirms Entity Ratings to Advans Pakistan Microfinance Bank Limited
Karachi, April 28, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) at ‘BBB+/A-3’ (Triple B Plus /A-Three). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 25, 2014.
The assigned ratings take into account the strong sponsor profile of APMBL. Advans SA had an asset base of EUR 50.8m and equity of EUR 50.7m, at end-March 2014. The group has a total of 9 projects in Africa and Asia. These projects are jointly owned by Advans SA and other partners. Being part of a larger network of microfinance operations, the bank benefits from the multi-jurisdiction experience of Advans SA, SICAR.
In line with closure of first phase of technical assistance support from the Advans group, designed to build institutional capacity including training and system development, significant changes have been witnessed in the management & organization structure; accordingly, several departments were fully established at the head office level during 2014. Key senior management positions held by foreign consultants were completely replaced with local resources.
Given the short operational history, revenues generated from the bank’s core business portfolio are currently insufficient to absorb overheads, resulting in losses. Core profitability is likely to gradually improve as the microfinance portfolio grows; APMBL has projected to report operational profit, for FY17. Fresh capital injection would be required to bridge the shortfall in equity that may arise from expected losses in FY15 to ensure compliance with the minimum capital requirement applicable for micro-finance banks operating at provincial scale. In view of this, the bank is looking to introduce a new shareholder with projected equity injection of Rs. 300m by end-June 2015. In case this does not materialize in time, APMBL’s parent group has itself committed to inject Rs. 150m by end-HY15. Over time, the bank plans to scale up its operations to national level.
Lending activity has picked up pace since the last quarter of 2014. The bank’s loan products are primarily geared to provide micro-credit to entrepreneurs while APMBL has also launched a gold backed product during FY14. Asset quality indicators will be tested as the bank builds its portfolio. Having a provincial license with presence in Karachi only, the bank is exposed to geographical concentration risk.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-72 or fax to 35311873.
Javed Callea
Advisor
Applicable Rating Criteria:
Microfinance Institutions (October 2003)
http://www.jcrvis.com.pk/images/MicroFinance.pdf