Press Release

JCR-VIS Upgrades Entity Ratings of Kashf Microfinance Bank Limited

Karachi, April 30, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Kashf Microfinance Bank Limited (KMBL) to ‘BBB+/A-3’ (Triple B Plus/A-Three) from ‘BBB-/A-3’ (Triple B Minus/A-Three). The ‘Rating Watch - Developing’ status has been removed. Outlook on the assigned rating is ‘Stable’.

The upgrade incorporates strategic investment by FINCA, a global charitable microfinance organization, for an 82.8% stake in KMBL. Equity injection by the new sponsor is expected to strengthen the capitalization level of the bank and provide room for growth. Given that FINCA carries more than 25 years of experience in the field of microfinance, KMBL is likely to benefit from the said transaction.

During FY12, KMBL’s focus remained on utilization of existing branch network to expand its lending and deposit mobilization activities. Funds from a growing deposit base were largely channelized into lending avenues. Moreover, lending product suite was expanded with the introduction of gold backed financing and the recently launched agriculture lending. Given minimum cushion in CAR, growth in the lending portfolio was largely manifested in the secured gold backed product. KMBL’s model of decentralized lending has so far delivered satisfactory results with asset quality indicators having remained within prudent limits. Going forward, enterprise lending is planned to be introduced which entails higher loan amount and will test the underwriting quality further.

Net interest income of the bank improved during FY12, despite increase in deposit cost. In view of high operating expenses, the bank continues to report operating losses; quantum of losses has been curtailed to some extent in recent months. Equity injection is likely to help in improving profitability indicators, assuming overheads are contained and asset quality remains intact.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA (sobia@jcrvis.com.pk) or Mr. Maimoon Rasheed (maimoon@jcrvis.com.pk) at 021-35311861-70 and 042-36610681-84 or fax to 021-35311873.



Jamal Abbas Zaidi
Deputy CEO

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