Press Release

VIS Reaffirms Ratings of The First MicroFinanceBank Limited

Karachi, March 25, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings assigned to The First MicroFinanceBank Limited (FMFB) at ‘A+/A-1’ (Single A Plus/A-One). The medium to long-term rating of ‘A+’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. The previous rating action was announced on April 30, 2018. Outlook on the assigned rating is ‘Stable’.

The assigned ratings take into account strong ownership profile as shareholding of the bank is vested with Habib Bank Limited, the largest commercial bank in Pakistan, Aga Khan Development Network and other international financial institutions. The ratings draw comfort from positive dynamics of microfinance sector and constructive regulatory environment. The ratings also factor in sustained growth in microcredit portfolio, emanating from expanding geographic penetration and increasing average loan size. The bank’s infection ratios have remained one of the lowest among peer microfinance banks, though registering a marginal increase on a timeline basis. Considering increasing trend in sector-wide non-performing loans, the bank may further streamline its risk management framework. Moreover, positive momentum in profitability, resulting from growing core income and rationalized operational cost structure, continues to support FMFB’s internal capital generation.

The management has been focusing on enhancing compliance and control environment. In this regard, the bank has implemented Transaction Monitoring /Anti-Money Laundering (AML) system and launched Compliance Certification program for all staff. The bank has deployed automation tools for monitoring, risk assessment, advance network protection firewalls and has also strengthened its information technology infrastructure. During FY18, the bank commercially launched its Digital Access Channels for efficient customer accessibility.

The Capital Adequacy Ratio (CAR) of the bank remained well-above the minimum regulatory requirement. Concentration in deposits has increased on a timeline basis and hence granularity is required with development of broader depositor base. The ratings also take into account enhanced resource allocation to digitalization efforts and strengthening of core functions and control environment. Maintenance of asset quality and leverage profile and arrest of declining trend in liquidity indicators are important rating parameters.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or Mr. Maimoon Rasheed at 042-35723411-13.

Javed Callea

Applicable rating criterion: Micro Finance Institutions (May 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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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