Press Release

JCR-VIS reaffirms ratings of Khushhali Bank Limited at A-/A-1 with Positive outlook.

Karachi, May 16, 2006: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the credit ratings of Khushhali Bank (KB) at A- /A-1 (Single A Minus / A-one) with a ‘Positive’ outlook.

KB was established as a public-private sector partnership and is the largest microfinance institution operating in the country. KB’s ratings gather significant support from its sound capitalization and strong liquidity position vis-à-vis financial obligations. The presence of Depositors’ Protection Fund and Risk Mitigation Fund held by the State Bank of Pakistan further add to the risk absorption capacity of the institution. Ratings also incorporate the impact of financial support available to the bank from the Asian Development Bank (ADB) as a vital input during the start-up phase. However, developing access to commercial sources of funding will become increasingly important as the bank progresses.

The bank has a nationwide mandate and has enhanced its outreach further during the year, continuing to expand its microfinance portfolio during FY05. In context of KB’s growth plans, controls may require further strengthening in order to maintain portfolio quality. The ‘Positive’ outlook on ratings is being maintained in view of a full range of banking services expected to be offered over the next eighteen months with the acquisition of a core banking software. Sustainability of growth trends demonstrated by the bank over the last couple of years will be monitored and will also allow control systems in place to be tested.

The overall profitability indicators have shown improvement despite overheads being on the higher side which is commensurate with the continued growth and expansion. Turnover was witnessed in some key support functions, however, vacancies have largely been filled subsequently with adequate resource. The stability of the management team and portfolio credit quality will be vital indicators of KB’s future performance.

For further information on this rating announcement, please contact Mr. Safdar Kazi (Ext: 221) or Ms. Sabeen Saleem at (Ext: 222) 5671822/5671833/5680996 or fax to 5681105/5671600.

Faheem Ahmad
President & CEO

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 2006 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