Karachi, April 28, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of The First MicroFinance Bank Limited (FMFB) from ‘A/A-1’ (Single A/A-One) to ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 29, 2015.
The assigned ratings draw comfort from the under implementation additional equity injection of Rs. 2b by Habib Bank Limited, the country’s largest commercial bank, which would give it a 50.5% stake and control of FMFB. Ratings also take into account the bank’s association with Aga Khan Development Network along with the presence of international development finance organizations as its sponsors. The management’s initiative to implement “Oracle Flexcube” is expected to provide a centralized core banking platform while also strengthening the internal control infrastructure of the bank. The bank also benefits from the experience and diversity of its Board members.
Product mix largely remained unchanged with loans for agriculture and livestock representing the largest share in the micro credit portfolio. Average loan size of the institution is lower as compared to some of the peer microfinance banks; this may entice borrowers to borrow from multiple institutions. The management plans to mitigate this by gradually increasing the proportion of upper-end microfinance product offering higher loan amounts. Asset quality indicators witnessed some weakening though remained within prudent limits.
The bank primary source of funding remains deposits; concentration related indicators compare favorably to some of the peer microfinance banks. Overall liquidity profile of the institution remained sound with adequate liquid assets carried on the balance sheet as a proportion of total deposits & borrowings.
Markup income of the bank increased on a timeline basis on account of volumetric growth in earning asset base. Overheads continue to rationalize while operating self sufficiency was reported higher. Additional income from the deployment of proposed equity would benefit the bottom line.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Muhammad Khalid Ali (Ext: 508) at (021) 35311861-70 or fax to (021) 35311872-3.
Applicable Rating Criteria:
Microfinance Institutions (October 2003) http://www.jcrvis.com.pk/images/MicroFinance.pdf
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