The Pakistan Credit Rating Agency Limited
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Muhammad Nadeem Sheikh

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PACRA Maintains Entity Ratings of Sindh Microfinance Bank Limited

Rating Type Entity
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings capture strength of the bank as a growing institution in the Microfinance sector. Loan book is gradually building up, which is primarily constituted of group lending arrangement. The bank's business model incorporates appropriate mitigant controls to keep its risk profile adequate. Asset infection ratio stands at 0.4%, resonating with the life of the bank. Current design of the lending portfolio represents concentration in the flagship product "Sujag Aurat" (Visionary Women), focused on women entrepreneurship and financial inclusion. The bank's funding needs are currently being fueled through internal capital and borrowings. Deposit mobilization has also come into play, though relatively small in quantum. The bank is currently expanding its presence in Sindh with plans to go national by 2020. A risk averse approach towards expansion is the key essential, with funds being raised from appropriate channels. The ratings draw comfort from the bank's association with the Government of Sindh. Financial risk profile is reflected by sound liquidity, adequate profitability and low investment in non-earning assets
The ratings are dependent on the bank's ability to sustain its growth trajectory in the MFBs market. Continued good governance practices are important. Meanwhile, prudent management strategies to maintain asset health and keep its risk profile sound amidst expansion is imperative.

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 operating in the province of Sindh with a network of 13 branches and 47 micro-credit centers. The head office of the bank is located in Karachi.

Board of Directors comprises seven members; three members are representative of the Sindh Bank. Mr. Shams-ud-din Khan is the Chairman of the Board. He was formerly associated with Pak-kuwait Investment Company (PKIC) and has an overall experience of over ~40 years. 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.