Press Release

JCR-VIS reaffirms the Entity Ratings of The First MicroFinanceBank Limited at A+/A-1

Karachi, April 28, 2011: JCR-VIS Credit Rating Company Limited has reaffirmed the entity rating of The First MicroFinanceBank Limited (FMFB) at ‘A+/A-1’ (Single A Plus/A-One) with a ‘Stable’ Outlook.

The ratings take into account the strong sponsor support of the Aga Khan Development Network (AKDN) and its associated concerns, as also evidenced by a capital injection of Rs. 330m during the last quarter of FY10. Capital adequacy indicators of the bank have remained sound and leave room for growth as projected.

In addition to the economic and political turmoil faced by the microfinance banking sector, the devastating floods that hit most parts of the country during 3QFY10 had an adverse impact on credit growth vis-à-vis expectations on an industry wide basis. The situation was further exacerbated by announcement of the loan waiver by the Government of Pakistan as part of the Malakand Relief Package, which led to increased loan losses. Combined with general provisions taken against flood hit borrowers, FMFB took Rs. 224m in provisions, translating into a loss before tax of Rs. 157m. Subsequently, an equity injection and relief from SBP against claim for loan write-offs in the Chitral/Malakand District, has substantially reinstated and reinforced the financial position of the bank.

There has been growth in FMFB’s deposit base over the last few years. While depositor concentration has improved on a timeline basis, deposit access needs to be further developed. Liquidity remains adequate in relation to deposit base.

Change has also been noted in certain key management positions including at the helm of the institution and efforts have been made to improve lending controls framework further. Achieving financially sustainable growth will be a key area of focus in future rating reviews.

For further information on this rating announcement, please contact Ms. Sabeen Saleem, CFA (Ext: 501) or Ms. Erum Azhar (Ext: 505) at 35311861-72 or fax to 35311873.



Syed Ziauddin Ahmed
Advisor

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