Press Release

VIS Reaffirms Entity Ratings of Sindh Microfinance Bank Limited

Karachi, April 30, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Sindh Microfinance Bank Limited (‘SMFB’ or the ‘MFB’) at 'A/A1' (Single A/A One). Medium to long term rating of A indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings remains ‘Stable.’ Previous rating action was announced on January 09, 2025.

SMFB has demonstrated considerable progress in consolidating its operations and expanding outreach within the Sindh province. With strategic backing from its parent, Sindh Bank Limited, the institution benefits from strong governance oversight and a stable funding source. Over the review period, SMFB has shown a healthy upward trend in its microcredit portfolio, predominantly focusing on women-centric and livestock-related lending, reinforcing its commitment to financial inclusion. The Bank’s operational framework, emphasizing structured client engagement and decentralized field support, has contributed to improved staff retention and enhanced monitoring mechanisms.

The asset quality of the Bank remains sound, with infection ratios maintained at low levels due to a stringent underwriting process and the implementation of prudent provisioning practices in line with IFRS-9 standards. A highly granular and unsecured portfolio structure reflects SMFB’s strategic choice to serve underserved, low-income segments without collateral, while group-based lending continues to be a cornerstone of its credit risk mitigation approach. Concurrently, the liquidity position has strengthened, supported by a rising share of liquid assets and improved asset-liability maturity alignment, although the deposit base remains highly concentrated, indicating a degree of funding risk.

Profitability has seen marked improvement, driven by growing net markup income and enhanced spreads, despite rising operating expenses due to network expansion and human resource development. The Bank’s capital adequacy position remains significantly above the regulatory threshold, supported by internal profit retention, and is deemed sufficient to support its planned national-level operations.

Going forward, the ratings remain sensitive to the effective execution of SMFB’s geographic expansion strategy and the associated operational scale-up. Sustaining asset quality and diversifying the deposit base, will remain the strategic cornerstones for preserving financial resilience.

For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria:
Micro-Finance Banks
https://docs.vis.com.pk/docs/MicroFinance-Oct-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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