PACRA Maintains Entity Ratings of Sindh Microfinance Bank Limited

The ratings reflect the parentage and association of the bank with a financial institution and ultimately with a sub-sovereign. The bank has a conservative risk appetite. With the changing market conditions, The Bank reported a significant increase in markup earned of PKR ~949.3mln (CY22: PKR~469.6mln) with Profit after Tax of PKR ~91.4mln (CY22: 41.4mln). The asset quality of the Bank improved as the asset infection ratio stood at 0.3% at the end of Dec'23 (CY22: ~3%) the decline in infection ratio was due to write-offs of PKR ~122mln which was related to COVID-19 and July-22 floods, the Bank sustained and absorb the negative impact which arose during the calamity events. A rise in GLP as micro-credit loans were recorded at (CY23: PKR ~1,927mln; CY22: PKR ~1,321mln), which is reflective of the growth in the last year. The lending portfolio concentration is dominated by the flagship product "Sujag Aurat" (Visionary Women), focused on women’s entrepreneurship and financial inclusion. A major share of borrowings has been obtained from the State Bank of Pakistan while a small chunk is through Pakistan Microfinance Investment Corporation. The deposits base of the Bank surged by 1.2x to PKR ~1,323mln (CY22: PKR ~600mln) mainly driven by an increase in the Fixed deposit account with major corporate clientele. On investments side the Bank is highly liquid, covering 98% of the deposit by liquid funds (Govt. securities and TDR). Paid-up Capital reported at the end Dec'23 was PKR ~1000mln complying comfortable with the minimum capital requirement of SBP Prudential regulations for provincial operations, however, the equity of SMFB was recorded at PKR ~1.1bln (CY22: PKR ~1bln). As per the management representation the Sindh Microfinance Bank has applied to the State Bank of Pakistan to obtain a License for nationwide operations. The Capital adequacy ratio of the Bank stood at ~47.21%, which is above the minimum CAR requirement by the State Bank of Pakistan. The ratings draw comfort from the Bank's association with the Government of Sindh.
The rating represents the bank’s plan for growth in place while the business profile has demonstrated improvement in CY23.
Going forward the rating would remain dependent on the maintenance of liquidity position, dilution in depositor's concentration while ensuring the continuous sustainability of the Bank.

About the Entity
Sindh Microfinance Bank was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2015 and commenced operations in May 2016. The Bank is a wholly-owned subsidiary of Sindh Bank. The head office of the bank is located in Karachi. Currently, the Bank operates in the province of Sindh with a network of 19 branches and 77 micro-credit centers (service centers) spread across the province. The Board of Directors comprises seven members; four members are representatives of the Sindh Bank. The Current Chairman is Mr. Baqir Hussain. He is a seasoned Banker and HR professional having over 30 years of diversified experience with different banks and financial institutions. He started his career from PICIC and remained associated with NIB Bank, Burj Bank, Albaraka Bank Pakistan and Jubilee Life Insurance at senior position. He holds Master’s Degree in Economics and BSBA from USA. Mr. Shoaib Arif, the CEO, is a microfinance industry veteran having an overall experience of more than ~20 years. He is accompanied by a team of professionals.