Final PR
The Pakistan Credit Rating Agency Limited

Mahina Majid

Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]
  • Methodology | MicroFinance Institutions (Jun 17) [View]

Related Research

  • Sector Study | Microfinance Banks (Feb 17) [View]
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PACRA Assigns Entity Ratings to FINCA Microfinance Bank Limited
 Rating Type Entity
 Action Initial
 Long Term A
 Short Term A1
 Outlook Stable
 Rating Watch -

The ratings reflect association of FINCA Microfinance Bank with a global microfinance organization – FINCA Microfinance Holding. This affiliation has supported FINCA not only in terms of building a wholesome strategy but also in establishing strong system and controls. FINCA is a major player in the market (CY16: 7% share in total gross loan portfolio of micro finance institutions). The bank was among the top two MFBs contributing into the GLP growth of the industry, in the recent period. The extended branch network and introduction of deposit exclusive branches led the bank to aggressively mobilize deposits. The bank intends to build a stable and diverse deposit base. Given that the current deposit landscape is very competitive, building a granular (as well as low cost) deposit base is challenging. Accordingly, the bank intends to build inroads using digital platform. Meanwhile, the bank has running finance lines from various banks to support funding base. The sustained quality of asset led to better operational efficiencies; hence, improving the operational profitability. The bank aims to digitalize its operations and strengthen its technology infrastructure, along with offering mobile wallet to its customers. The bank is poised to step into branchless banking domain.

The rating is dependent upon the bank’s ability to sustain its operational profitability while improving its market position. With growing loan book, related risks mainly credit quality need close monitoring. The successful execution of business strategy by the management team remains important.
About the Entity
FINCA Microfinance Bank commenced its operations in 2013 and operates with a network of 105 branches. The bank is majorly owned by FINCA International (86.4%), a non-for-profit organization operating in 21 countries. Kashf Holdings, the initial founder of the bank, holds ~5.2% stake in the bank. FINCA, offers a diversified range of financial products and services to low income wage earners as well as the self-employed of Pakistan. With its upheld standard of services, FINCA scores the position of first bank of the country being awarded the “Smart Certification”.

The board of the bank comprises nine members with six representative of FINCA International, one of Kashf and two independent members. The board is chaired by Ms. Zarlasht Wardak - regional director of MESA network – providing the sponsors’ insight. Mr. Mudassar Aqil, a banking industry veteran with experience in leading positions at banks in Pakistan and US, is the CEO of the bank since 2011. He is supported by a team of qualified and experienced professionals.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.