Lahore, June 28, 2021 (PPI-OT): The ratings of Pakistan Microfinance Investment Company Limited (PMIC) reflect its strong equity base, well-conceived business plan, and strong ownership structure. Pakistan Poverty Alleviation Fund (PPAF), Karandaaz Pakistan – funded by UK’s Department for International Development (DFID) – and KfW, a German government-owned development bank – have contributed to the institution’s capital in addition to providing subordinated loans (PPAF, Karandaaz Pakistan and KfW). PMIC’s target market includes 41 institutions – 30 NBMFIs and 11 MFBs. Of these, the company has developed relationships with 21 MFIs and 3 MFBs and the loan portfolio stood at PKR 23.7bln as of end-Mar’21. Infection recorded a slight uptick which is fully provided for. It is crucial to hold the asset quality, going forward.

This is important, as multiple challenges surround the underlying microfinance universe, which the company caters to. For the time being, deferment would alleviate the infectious pressure on the asset quality, but beyond that, the recovery pattern of the underlying microfinance players needs to revive too, if not the historical peak, the optimum level at least to ensure the continued viability. This along with deferral in markup may impact profitability later this year. However, the management is closely monitoring affairs in underlying microfinance players and is confident that the ensuing challenges would be managed. The Company’s net revenue improved YoY along with net profitability.

The Company is focusing on Microfinance Funding sources comprised of subordinated loans from sponsors and commercial borrowings which have supported balance sheet growth. Rating Watch captures the heightened need to exercise vigilance on the exposures that the Company has taken in the wake of the COVID-19 Pandemic. COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures are taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. As a result, the microfinance industry remained protected and posted record profits. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge.

The ratings are dependent on maintaining portfolio quality. Upscaling of the Microfinance Products and stability in the experienced management team, the Company’s ability to sustain credit quality is considered important; maintaining a strong control environment remains central to the Company’s performance and hence the ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com