Press Release

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

Karachi, March16, 2017: 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 April 29, 2016.

Assigned ratings of APMBL incorporate demonstrated support of bank’s major sponsor, Advans SA SICAR (Advans SA). Sponsors (Advans SA and Netherlands Development Finance Company (FMO)) possess extensive experience in the microfinance sector, as depicted by their presence in microfinance institutions in several countries. Along with financial support, the majority shareholder, Advans SA, also provides technical assistance to its affiliates. Under this arrangement, Advans SA helps to build institutional capacity, including training and system development.

Gross financing portfolio witnessed a decline during 1H16 on account of maturities being higher than disbursements. Disbursements have picked pace subsequently on account of improved productivity of loan officers. With additional hiring of loan officers, financing portfolio is projected to double at end-2017. A number of initiatives taken by the management have translated into improved asset quality indicators. Ability to sustain asset quality indicators at faster and higher level of disbursements is considered important.

While quantum of operating losses has declined during the latter half of 2016, overall operating losses were higher with increase in administrative expenses and decline in net interest income. Going forward, trend in operating losses is expected to continue with quantum of the same expected to decline with growth in portfolio. Cost efficiencies to break-even on operating losses would be a key rating driver, going forward. Management expects to break-even by latter half of 2018.

Capitalization levels of the Bank have strengthened on account of equity injection to the tune of Rs. 340m in 2016. Additional equity injection of Rs. 150m is also planned in the ongoing year. Given the current trend in operating losses, management believes that planned equity injection would suffice to remain compliant with the Minimum Capital Requirement (MCR) in 2017. Capital Adequacy Ratio is expected to remain at comfortable levels over the rating horizon given the growth plans of the Bank. Management team has witnessed a number of changes at senior management level. Stability in senior management team is considered important for continuityof business strategy.

For further information on this rating announcement, please contact please contact the undersigned (Ext: 207) or Mr. Khalid Ali (Ext: 208)at 021-35311861-71 or fax to 021-35311872.

Jamal Abbas Zaidi

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 2017 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