Press Release

VIS Maintains Entity Ratings of Pak Oman Microfinance Bank Limited with ‘Rating Watch-Negative’ Status

Karachi, April 30, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Pak Oman Microfinance Bank Limited (POMFB) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, liquidity factors and company fundamental factors are sound. Access to capital markets is good. Risk factors are small. Given the current ongoing scenario concerning Coronavirus pandemic and impact of lockdown, status of the assigned ratings is uncertain and additional information will be necessary to take any further rating action, warranting a ‘Rating-Watch’ status. The previous rating action was announced on April 25, 2019.

Current ratings of POMFB derive strength from its sponsor’s profile, LOLC Private Limited (LOLC) possessing significant expertise in the microfinance sector with operations in Sri Lanka, Cambodia and Myanmar. Being the parent, LOLC continues to provide technical and managerial support to POMFB. Ratings continue to incorporate the bank’s sound capitalization indicators and adequate liquidity levels. During 2019, the bank mobilized a financing facility from State Bank of Pakistan in order to keep up with its growth plans. However, given the current economic scenario, excess liquidity was parked in short term government paper. Capitalization indicators are projected to remain healthy over the rating horizon indicating significant room for growth.

The revision in outlook to ‘Negative’ takes into account weakening in operational and financial profile of the company including continuous infection in financing portfolio and evident deficiencies in the internal control framework. With growth in lending activities during the outgoing year, gross asset quality indicators of the bank weakened in 2019. Ability to improve asset quality indicators while maintaining disbursements is considered important. Infection levels of the bank, on net basis, marginally improved largely on account of write offs and limited accretion of fresh NPLs. However, incremental infection of 14.4% compared less favorably in comparison to peers. Net NPLs to Tier 1 equity also weakened from 2.8% at end-FY18 to 4.1% at end-FY19. Strengthening in risk assessment function and internal control framework of the bank would be warranted, going forward. As a result of higher provisioning, profitability indicators were adversely impacted. The ratings will remain contingent upon recovery of projected NPLs, improvement in quality of financing portfolio and growth in earnings.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or Ms. Muniba Abdullah, CFA (Ext. 215) at 021-35311861-70 or email at

Faryal Ahmad
Deputy CEO

Applicable Rating Criteria: Micro Finance Banks (June 2019)

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