Press Release

JCR-VIS Reaffirms Entity Ratings of Advans Pakistan Microfinance Bank Limited

Karachi, April 25, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) at ‘BBB+/A-3’ (Triple B Plus /A-Three). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on September 29, 2017.

Ratings draw comfort from the strength of the bank’s major sponsors, Advans SA SICAR (Advans SA) and Netherlands Development Finance Company (FMO). Both possess extensive experience in the microfinance sector, as depicted by their presence in microfinance institutions in several countries. However, given their demonstrated support in equity injection, to maintain the Minimum Capital Requirement, and technical assistance to build institutional capacity, the operating losses are continuing since inception in 2012 largely due to high operating costs in relation to size of the portfolio, sizeable turnover at loan officer level and limited market access to one province only. APMBL targets to commence operations as a National Microfinance Bank by 2020 which will facilitate in achieving geographical diversification. Maintenance of time line improvements in asset quality indicators with growth in loan portfolio would be important rating drivers, going forward. With the financial leveraging of the operations, maintenance of current spreads and access to funds would also be tested over time. While quantum of operating losses have witnessed a decline, reversing trend in the same is considered important to maintain cushion over Minimum Capital Requirement.

Monthly disbursements and consequently net financing portfolio has witnessed sizeable increase during 2017 on account of improved productivity and increase in the number of loan officers. With additional hiring of loan officers and improved productivity, the loan portfolio is projected to double by end-2018. A revised organizational hierarchy was implemented in the outgoing year with additional checks introduced in order to ensure effective loan monitoring and disbursement. Advances portfolio currently features concentration in MSME loans with plans of diversifying in the agriculture sector. Liquidity profile of APMBL draws support from growing deposit base and sizeable liquidity buffer carried on the balance sheet with liquid assets representing around three fourth of total deposits and borrowings at end-March’2018. Given high depositor concentration level, maintenance of adequate liquidity buffer is considered important till granularity in deposit base is achieved. Management also targets to mobilize long-term borrowings in the ongoing year to support liquidity profile.

For further information on this rating announcement, please contact please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872.

Javed Callea

Applicable Rating Criteria: Microfinance Institutions (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-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.JCR-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.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-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 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited