Press Release

VIS Maintains Rating of FINCA Microfinance Bank Limited with ‘Negative’ Outlook

Karachi, April 30, 2022: VIS Credit Rating Company Limited (VIS) has maintained the entity rating of FINCA Microfinance Bank Limited (FINCA MFB) at ‘A/A-1’ (Single A/A-One) while outlook on the assigned ratings has been revised from ‘Rating Watch-Developing’ to ‘Negative’. The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, excellent liquidity factors and supported by good fundamental protection factors. The previous rating action was announced on April 30, 2021.

The ratings assigned to FINCA MFB incorporate association of the bank with FINCA Impact Finance., a global microfinance organization operating in 20 subsidiaries, including Pakistan. Majority shareholding (86.4%) of the bank is vested with FINCA Microfinance Cooperatief U.A. FINCA MFB continues to receive support from its parent through transfer of technical expertise emanating from FINCA’s global experience.

The overall performance indicators of the bank have remained under pressure mainly on account of impairment in loan book. Decline in markup income primarily emanating from contraction in microcredit portfolio along with sizeable provisioning charge have depressed the profitability profile of the bank; resultantly, the bank incurred sizable losses in the outgoing year. Consequently, equity eroded and CAR reached the minimum regulatory threshold by end-Dec’ 21. However, the latest revision in prudential regulations pertaining to provisioning coverage and write-offs of certain lending products have provided a breather for the sector. Accounting for the same, the bank booked profit in 1QFY22 while CAR showed slight improvement. In order to avoid potential breach of the regulatory threshold of CAR as growth momentum in lending is pursued, the bank is actively working to raise capital. As per management, equity injection is expected by end-July’ 22. VIS will continue to monitor the bank’s CAR while timely injection of fresh equity and positive trend in performance indicators are imperative to ease pressure off ratings, going forward. Meanwhile, the outlook on the assigned ratings has been revised in view of uncertainty pertaining to timely achievement of capital injection plan. An interim review by VIS will reflect any advancement related to this matter.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO


VIS Entity Rating Criteria: Microfinance Banks (September 2021)
https://docs.vis.com.pk/docs/Microfinance202109.pdf

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 .