Press Release

JCR-VIS Reaffirms Entity Ratings of Pak Oman Microfinance Bank Limited

Karachi, April 27, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Pak Oman Microfinance Bank Limited (Pak Oman) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on September 29, 2017.

Assigned ratings incorporate demonstrated sponsor support of LOLC (Lanka Orix Leasing Company) Private Limited in the form of equity injection of Rs. 1.2b; a total of 50.1% stake of the bank was acquired in June 2017. Ratings also derive strength from provision of technical assistance including restructuring policy framework, lending operations and recovery mechanism to improve operational efficiencies. In addition to these structural changes, the bank has also revamped its IT infrastructure with implementation of a new integrated loan management system to further strengthen its internal controls. Positive developments with respect to governance structure of the bank are underway, which will be tested over time.

Group loans continue to represent a large chunk of the portfolio while a slight improvement in individual loans was also observed during 2017. In view of its growth plans, POMFB adopted a similar decentralized loan approval model as followed by its sponsor in Sri Lanka. The bank also revised features related to group loans to strengthen the recovery mechanism and coordination of group members. Impact of these developments will be monitored over time.

With the recent capital injection, Capital Adequacy Ratio (CAR) is significantly above regulatory requirement of 15%, depicting significant room for growth. Moreover, investments of the bank increased significantly with the highest growth manifested in fixed income instruments. Going forward, the bank aims to achieve a loan portfolio of Rs. 1.7b for 2018 while maintaining a minimal level of deposits. However, profitability will remain a function of efficient disbursement of advances and quality of assets.

For further information on this rating announcement, please contact Ms. Muniba Khan (Ext: 214) or the undersigned (Ext: 201) at 35311861-70 or fax to 35311873.

Javed Callea
Advisor

Applicable Rating Criteria: Micro Finance Banks (June 2016)
http://www.jcrvis.com.pk/docs/Meth-MFBs201606.pdf

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