Press Release

JCR-VIS Maintains Entity Ratings of Khushhali Bank Limited at A-/A-1 with a Stable Outlook

Karachi, April 30, 2008: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Khushhali Bank Limited (KBL) at ‘A-/A-1’ (Single A Minus / A-One).

KBL is amongst the largest institutions in the local MFI sector, with outreach extending to 88 districts of the country. With the repeal of the Khushhali Bank Ordinance in the on-going year, the bank is now operating under the umbrella of the MFI Ordinance 2001, as is the case with other micro-finance banks. The out-going year also marked the successful close of the Micro-Finance Sector Development Program (MSDP).

The bank has revised pricing on its loan portfolio while the cost infrastructure is also being revisited. These measures would help in improving self-sufficiency indicators, going forward. Ratings have been maintained in view of the consistent growth in the financing portfolio, while asset quality indicators have also seen further improvement on a time-line basis. With more than half of the portfolio deployed for agricultural lending purposes and small loan size, the bank has not been adversely affected by the changing economic dynamics. The bank remains adequately capitalized for its existing scope of operations.

Over previous years, the major source of funding had been the loan provided by Asian Development Bank under the MSDP. As this credit line has been fully drawn down and repayment is to commence from May 2009, the bank needs to develop alterative funding sources to fuel future growth. The cost of funds is expected to experience a significant change as the bank accesses funds from the market.

While KBL has a sizable investment portfolio, liquidity indictors may come under stress in the absence of a comprehensive funding strategy. In view of this, outlook on the assigned ratings has been revised from ‘Positive’ to ‘Stable’. The change in outlook also incorporates delay in implementation of an Integrated Banking Application, which has hindered the bank’s ability to mobilize deposits in the past. Pace of future growth in lending may experience some slow down on account of developing trends in the economy, which has affected the repayment capacity of clients in the microfinance sector.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 608) or Ms. Sobia Maqbool (Ext: 506) at 5311861-70 or fax to 5311873.

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 2008 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