Press Release

Revision in Ratings of Khushhali Microfinance Bank Limited

Karachi, December 16, 2022: VIS Credit Rating Company Limited (VIS) has revised the entity ratings of Khushhali Microfinance Bank Limited (KMBL) to ‘A/A-2’ (Single A/A-Two) from ‘A+/A-1’ (Single A Plus/A-One). The medium to long term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. VIS also revises rating of ‘A’ (Single A) assigned to the TFC-I (Tier-II debt instrument) and TFC-II (Tier-II debt instrument) to ‘BB-’ (Double B Minus) of KMBL. The long-term rating of ‘BB-’ denotes obligations deemed likely to be met. Protection factors are capable of weakening if changes occur in the economy. Overall quality may move up or down frequently within this category. The outlook on the assigned is ‘Rating Watch - Developing’. The previous rating action was announced on April 29, 2022.

The revision in ratings takes into account the lingering impact of Covid-19 along with the impact of the recent floods wherein portfolio credit quality has been impacted and the financial risk profile of the Bank has weakened. Around 15% of the total portfolio still continues to be categorized under deferred and restructured loan portfolio at end-Sept ’22; the recoveries from wherein may take time and are uncertain. The weakening of the financial profile has led to a negative bottom line, this along with weak asset quality indicators have placed the CAR at below the minimum regulatory requirement and is accordingly recognized in the ratings revision. Revision in ratings of Tier-II instruments take note of the lock-in-clause being invoked on both the Tier-II instruments of the Bank by SBP thus preventing any debt repayments for the time period the said clause remains in place.

The ratings take note of the management plan to recapitalize the bank, however, are constrained by the availability of required confirmed approvals of the same. The strengthening of the capital adequacy as well as liquidity of the bank is important for the sustenance and review of ratings. VIS expects that a required capitalization plan of the bank to place its CAR and liquidity at levels which would support the financial risk profile of the bank and be important for the bank, going forward.

For further information on this rating announcement, please contact Ms. Maham Qasim 042-35723411-13 (Ext. 8010) 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)

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