Press Release

JCR-VIS Reaffirms Entity Ratings of NRSP Microfinance Bank Limited

Karachi, April 28, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of NRSP Microfinance Bank Limited (NRSPB) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 29, 2014.

The assigned ratings take into account the bank’s experience in agriculture financing in the markets in which it operates. Moreover, the ratings also incorporate the financial support received from sponsors. Equity base has strengthened on account of internal capital generation and equity injection. Capital Adequacy Ratio is projected to decline in the coming years given the bank’s growth plans, however is expected to remain above the regulatory requirement.

Loans for Agri Inputs remain the forte of the bank; these loans are seasonal in nature, being linked to crop cycles. In view of this, there is considerable variation in the liquidity indicators of the bank during the year; liquidity management of the bank underlines the need of proactive efforts. The bank generates funding from both deposits and borrowings with share of the latter projected to remain high in the overall funding mix. Deposit trends have yet to achieve maturity, with increase in concentration level witnessed during FY14.The bank expects favorable developments in its liability-generation efforts following the launch of ATM operations in FY15.

Given that agriculture loans entail bullet repayment, credit risk is considered heightened as detection of weakening in counterparty risk profile may be delayed. While overall asset quality indicators remained strong, rise in infection was reported in livestock lending. The bank envisages diversifying its microcredit portfolio by scaling up the share of enterprise lending while also initiating Islamic microfinance services.

The increase in micro-credit portfolio positively reflected on the earnings of the bank; bottom line was lower on account of rise in administrative expenses. Overheads compare favorably to banks undertaking group lending.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 (10 lines) or Mr. Maimoon Rasheed at 042-35743411-13.

Javed Callea
Advisor

Applicable Rating Criteria:
Microfinance Institutions (October 2003) (http://www.jcrvis.com.pk/images/MicroFinance.pdf)

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