Press Release

VIS Reaffirms Ratings of Khushhali Microfinance Bank Limited

Karachi, April 30, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Khushhali Microfinance Bank Limited (KMBL) at ‘A+/A-1’ (Single A Plus/A-One). 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, liquidity factors are excellent and supported by good fundamental protection factors. Moreover, VIS has also reaffirmed rating of ‘A’ (Single A) assigned to the TFC-I (Tier-II debt instrument) and TFC-II (Tier-II debt instrument) of KMBL. Given the uncertain ongoing scenario concerning Coronavirus pandemic, outlook of the assigned ratings is uncertain therefore ‘Rating Watch-Developing’ status is reaffirmed. The previous rating action was announced on April 29, 2020.

KMBL has cemented its prominent position as the leading provider of microcredit services in the microfinance sector of Pakistan, having a market share of 19% in loan portfolio and 24% of deposits during the outgoing year. The ratings derive comfort from strong sponsor profile and implicit support of shareholders available. The ratings incorporate the uncertainty involving financial risk profile of the bank as around 40% of the total performing portfolio is categorized as rescheduled in light of SBP’s directions to relax repayment terms for borrowers effected by the COVID-19. Stemming from the aforementioned one-off event, portfolio quality indicators exhibited improvement during the outgoing year; however, VIS expects that the real infection ratios will eventually come forth by end-HY22 on the maturity of rescheduled portfolio. Therefore, the rating will remain sensitive to recovery of both amounts placed under deferred loan and accrued mark-up category. The uncertainty in the portfolio during restructured tenure may impact the profitability further.

The ratings factor in improvement in liquidity profile, sizable investment portfolio and maintained capitalization indicators. The Bank has planned TFC-III issue amounting to Rs. 600m to strengthen capital adequacy further; the issue is already approved by SBP. Three major shareholders are considering the aggregate stake sale to a consortium of renowned strategic investors; the divestment process in underway and was expected to be completed by end-FY20; however the same has been moved to end-FY21 in view of COVID disruption. While the financial and experience profile of overall sponsor base is expected to remain intact, VIS will review the same upon completion of the divestment process. 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 Ms. Maham Qasim 042-35723411-13 (Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Micro-finance Banks (June 2019)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited