Press Release
JCR-VIS Reaffirms Entity Ratings of Advans Pakistan Microfinance Bank Limited
Karachi, April 25, 2018: 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 September 29, 2017.
Ratings draw comfort from the strength of the bank’s major sponsors, Advans SA SICAR (Advans SA) and Netherlands Development Finance Company (FMO). Both possess extensive experience in the microfinance sector, as depicted by their presence in microfinance institutions in several countries. However, given their demonstrated support in equity injection, to maintain the Minimum Capital Requirement, and technical assistance to build institutional capacity, the operating losses are continuing since inception in 2012 largely due to high operating costs in relation to size of the portfolio, sizeable turnover at loan officer level and limited market access to one province only. APMBL targets to commence operations as a National Microfinance Bank by 2020 which will facilitate in achieving geographical diversification. Maintenance of time line improvements in asset quality indicators with growth in loan portfolio would be important rating drivers, going forward. With the financial leveraging of the operations, maintenance of current spreads and access to funds would also be tested over time. While quantum of operating losses have witnessed a decline, reversing trend in the same is considered important to maintain cushion over Minimum Capital Requirement.
Monthly disbursements and consequently net financing portfolio has witnessed sizeable increase during 2017 on account of improved productivity and increase in the number of loan officers. With additional hiring of loan officers and improved productivity, the loan portfolio is projected to double by end-2018. A revised organizational hierarchy was implemented in the outgoing year with additional checks introduced in order to ensure effective loan monitoring and disbursement. Advances portfolio currently features concentration in MSME loans with plans of diversifying in the agriculture sector. Liquidity profile of APMBL draws support from growing deposit base and sizeable liquidity buffer carried on the balance sheet with liquid assets representing around three fourth of total deposits and borrowings at end-March’2018. Given high depositor concentration level, maintenance of adequate liquidity buffer is considered important till granularity in deposit base is achieved. Management also targets to mobilize long-term borrowings in the ongoing year to support liquidity profile.
For further information on this rating announcement, please contact please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872.
Javed Callea
Advisor
Applicable Rating Criteria: Microfinance Institutions (May 2016)
http://jcrvis.com.pk/kc-meth.aspx/