Press Release

Revision in Ratings of FINCA Microfinance Bank Limited

Karachi, December 16, 2022: VIS Credit Rating Company Limited (VIS) has revised the entity ratings of FINCA Microfinance Bank Limited (FINCA MFB) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘A/A-1’ (Single A /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. Outlook on the assigned ratings is ‘Negative’. The previous rating action was announced on April 30, 2022.

The revision in ratings takes into account the lingering impact of Covid-19, weakening macroeconomics indicators along with the impact of the recent floods wherein portfolio credit quality and the financial risk profile of the Bank has weakened. The weakening of the financial profile has led to a negative bottom line, this along with weak asset quality indicators has placed the CAR at below the minimum regulatory requirement and is accordingly recognized in the ratings revision. The ratings also incorporate the observations of external auditors involving going concern assumption pertaining to reduction in markup income and CAR. In that regard, the ratings take note of the management’s plan to recapitalize the bank in the forthcoming twelve months, however, are constrained by uncertainty pertaining to the timeline of achievement of plans when the Bank’s lending operations are already impacted. The strengthening of the capital adequacy along with liquidity of the bank is important for the sustenance and review of ratings and outlook. VIS expects a capitalization plan to place the Bank’s CAR and liquidity at levels which would support its financial risk profile, 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 info@vis.com.pk

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Micro-finance Banks (June 2019)
https://www.vis.com.pk/kc-meth.aspx

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .