Press Release

VIS Maintains Entity Ratings of Pak Oman Microfinance Bank Limited

Karachi, April 30, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Pak Oman Microfinance Bank (POMBL) at ‘A-/A-2’ (Single A minus /Single A-Two). The outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Rating Watch-Developing’ status. The long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short term rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors supported by good fundamental protection factors and small risk factors. Access to capital markets is good. The previous rating action was announced on April 30, 2020.

The assigned ratings of POMBL continue to derive strength from the sound profile of sponsors. LOLC Private Limited (Lanka Orix Leasing Company), being the majority shareholder, continues to provide technical and managerial support to POMBL Revision in ratings outlook incorporates growth in advances portfolio, recovery in profitability metrics and asset quality indicators during 2021, and improvement in the governance and control framework.

Despite disruptions in disbursements due to the onset of COVID-19 pandemic, gross lending portfolio of the bank registered healthy growth of 27.1% in 2020. Asset quality indicators of the bank weakened during 2020 in view of the rising credit impairment across the industry given the COVID-19 pandemic. Moreover, as per the SBP’s moratorium, the bank also allowed principal payments deferrals to more than 35,000 customers with outstanding principal base of more than Rs. 1.2b. Some improvement has been observed in assets quality indicators and quantum of deferred principal payments outstanding in Q1’2021. Further improvement in both these metrics is considered important from the ratings perspective.

Deposit base of POMBL remained stagnant in 2020 as requisite funds were available in the form of equity and low cost borrowings for deployment in advances. However, the deposits are expected to become the major source of liquidity to facilitate growth in the advances portfolio going forward. The bank has started mobilizing fixed deposits from the institutional clients during Q1’2021 and plans to launch micro savings in future. Liquid assets in relation to deposits and borrowings have witnessed decrease on a timeline basis as liquidity generated from redemption of investments has been deployed in advances. Nevertheless, overall liquid assets in relation to deposits and borrowings are considered adequate. Given the projected increase in deposit base and borrowings, maintaining adequate liquidity profile is considered an important rating driver going forward.

Ratings take into account declining profitability of the bank on the back of reduced spreads, higher provisions and decrease in non-markup income of the bank in 2020. Growth in advances portfolio has contributed to improvement in profitability metrics during Q1’2020 in comparison to the corresponding period in the preceding year. Capitalization profile remains sound as Capital Adequacy Ratio (CAR) remains comfortably above the regulatory requirement. Room for growth in risk weighted assets remains considerable. In view of continued uncertainty and severity of impact of the pandemic on the economy in general and microfinance sector in particular, the outlook on the ratings will remain vulnerable.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal at (Ext: 203) or the undersigned (Ext: 306) at (021) 35311861-66 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Microfinance Institutions (June 2019)

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