Press Release

Ratings of Khushhali Microfinance Bank Limited

Karachi, April 26, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings assigned to Khushhali Microfinance Bank Limited (KMBL) at ‘A+/A-1’ (Single A Plus/A-One). The previous rating action was announced on October 31, 2017. Moreover, upon submission of legal documentation, JCR-VIS has finalized the rating of ‘A’ (Single A) assigned to Tier-II debt instrument of KMBL. Outlook on the assigned rating is ‘Stable’.

The ratings assigned to KMBL incorporate its leading position as the micro credit provider, with a market share of 16% in terms of total Gross Loan Portfolio of microfinance sector. Ratings also draw comfort from continuous improvement in operating performance reflected by improved asset quality indicators, enhanced liquidity and augmented profitability providing impetus to the internal capital generation of the bank.

In line with the trend witnessed in the last couple of years, the bank has managed to post significant growth in micro-credit portfolio. Portfolio mix remained unchanged, with agricultural loans exhibiting sizeable concentration. With the management’s focus on higher ticket loans and gradual progression of clients to next loan cycle, average loan size and average disbursement size has increased. Going forward, the management intends to increase the bank’s customer base by offering high ticket loan products to individuals with satisfactory repayment history under Micro Enterprise portfolio. Overall, asset quality indicators improved on a timeline basis, demonstrating improved credit risk emanating from loan portfolio.

Deposits remained the primary source of funding for the bank. KMBL’s deposit base exhibited sizeable increase on timeline basis mainly on account of growth in fixed deposits primarily mobilized through a special scheme for senior citizens, pensioners, widows and juniors. In addition, improvement was witnessed in concentration risk owing to some granularity achieved in line with increase in number of depositors. Liquidity profile of the bank depicted improvement on the back of additional funds deployed in T-bills and TDRs and is comfortably placed in terms of peers.

Growth in total earning asset base had a positive impact on the bottom line. Despite spread compression, Operating Self Sufficiency remained well above 100% on the back of considerable increase in core income. Retention of profits, in turn, resulted in augmentation of capital base. The bank’s Capital Adequacy Ratio (CAR), albeit declined due to significant growth, remained well over the minimum regulatory requirement of 15%. KMBL issued a rated, unsecured, subordinated and privately placed term finance certificates (PPTFC) amounting to Rs. 1b during March’18 which has strengthened the capital base.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Javed Callea

Applicable rating criterion: Micro Finance Institutions (May 2016)
Notching the Issues (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 2018 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