Press Release

VIS maintains Ratings of FINCA Microfinance Bank Limited with ‘Rating Watch-Developing’ status

Karachi, April 30, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of FINCA Microfinance Bank Limited (FINCA MFB) at ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ denotes good credit quality, 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, 2019.

The assigned ratings of FINCA MFB incorporate association of the bank with FINCA Impact Finance, a global microfinance organization operating in 20 subsidiaries, including Pakistan. FINCA MFB continues to receive support from its parent through transfer of technical expertise emanating from FINCA’s global experience. FINCA MFB has successfully embarked upon various IT initiatives, which are expected to bring operational efficiencies, going forward. The ratings take into account the currently manageable liquidity position of the bank coupled with improvement in capitalization indicators emanating from sizeable investment in risk free avenues as growth in micro-credit portfolio was limited. The ratings reflect slight downturn in the financial risk profile of the bank owing to higher incidence of non-performing loans leading to higher infection ratios; the same is a result of deterioration in sector dynamics prior to advent of COVID-19 pandemic. The downturn in asset quality has put a drag on the institution’s profitability; however the deterioration in the same is below industry averages.

With the advent of global corona virus pandemic and the following lockdown, the microfinance borrowers and especially those in urban areas will have a further reduced capacity of meeting obligations. The ratings take into account SBP’s relaxation on repayment terms for borrowers by giving a blanket extension of one year; however, VIS expects that the same will only stagger the infection ratios, which will eventually come forth by end-FY21. Also the liquidity management may pose challenges in the backdrop of collections being reduced due to loans payment deferment and outstanding deposit liability. Status of the rating is therefore uncertain, as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch’ status. Going forward, ratings are dependent on achievement of projected growth plans while improving asset quality indicators, strengthening deposit profile and retaining buffer over regulatory capital requirement.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-25723411-13, Ext: 8005) or the undersigned at 021-35311861-70 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Micro-Finance Banks (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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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