Press Release

JCR-VIS Assigns Rating to the Proposed Tier II instrument of Khushhali Microfinance Bank Limited

Karachi, December 13, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary rating of single ‘A’ (Single A) to the proposed Tier-II debt instrument of Khushhali Microfinance Bank Limited (KMBL). Outlook on the assigned rating is ‘Stable’. Rating will be finalized upon review of signed legal documents.

The rating incorporates strong sponsors’ profile including one of the top tier commercial banks in the country and majority foreign shareholding. The rating also takes into account the vast experience of the bank in the microfinance sector and its leading position in the microfinance industry in terms of total gross loan portfolio, deposits and asset base.

Growth in business volume has resulted in better profitability indicators; though some pressure on spreads has been witnessed mainly due to balance sheet restructuring. Retention of sizeable profits resulted in higher equity base, though the bank’s CAR declined on account of robust growth in the microcredit portfolio. KMBL is in the process of issuing a rated, unsecured, subordinated and privately placed term finance certificates (PPTFC) amounting up to Rs. 1b. The issue proceeds will contribute towards the bank’s Tier-II capital and will be utilized towards enhancement of the bank’s business operations. The tenor will be up to eight years from the first drawdown date; the principal shall be redeemed in two semi-annual installments.

The assigned rating portrays the relative risk of the Tier-II instrument wherein the profit or principal cannot be paid if it results in a shortfall in the MCR or CAR or if it increases any existing shortfall in MCR or CAR and conversion/write off feature in the event of pre-specified trigger events, lock-in clause and point of non-viability in terms of regulatory requirements. JCR-VIS believes, given the financial indicators, that chances of non-performance risk are low.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or Mr. Maimoon Rasheed at 042-35723411 or fax to 021-35311873.

Javed Callea

Applicable Rating Criteria: Rating the Issue (June 2016)

Applicable Rating Criteria: Microfinance Banks (June 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited