The Pakistan Credit Rating Agency Limited
29-Apr-19
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
- Methodology | MFI | Jun-18
Related Research
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PACRA Maintains Entity Ratings of NRSP Microfinance Bank Limited
| Rating Type | Entity | |
|
Current (29-Apr-19 ) |
Previous (06-Nov-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | A | A |
| Short Term | A1 | A1 |
| Outlook | Negative | Stable |
| Rating Watch | - | - |
The ratings incorporate the bank's notable position in the Microfinance Sector, evident from its ~13% share in MFBs' gross loan portfolio and ~11% in the MFBs' deposits. The design of the lending book keeps the concentration high wherein a considerable portion of the loan book is dedicated to crop-linked loans, particularly to sugarcane crops. During CY18, the bank's asset quality has been affected by low sugarcane prices and delay in release of payments by the sugarcane mills to the farmers. Resultantly, asset infection ratio increased to ~2.7% as at End-Dec'18 (~0.3% End-Dec'17) with a sizeable quantum of written-off loans. Management's strategic focus has, therefore, shifted towards consolidating the bank's position in the short horizon, including bringing diversity to the product portfolio and exercising cautious lending approach. The ratings take comfort from association of NRSP Microfinance Bank with the National Rural Support Programme, the major shareholder, and with the three foreign development organizations - IFC, Acumen, and KfW, providing both technical and financial support to the bank. Focus on poverty alleviation for the underprivileged community remains pivotal in modelling the bank's strategy.
The outlook captures the need to arrest the increasing write-offs and at the same time, sustain - indeed - improve the capital adequacy. The ratings are dependent on the bank's ability to sustain its competitive position in the MFBs market. Reviving asset health is critical.
About
the Entity
NRSP Microfinance Bank Limited (NRSP Bank) commenced operations in Mar’11 as a nation level microfinance bank. The bank is majority (~52%) owned by National Rural Support Program (NRSP). Kreditanstalt für Wiederaufbau (KfW), International Finance Corporation (IFC), and Acumen each having ~16% shareholding in the Bank. With a network of 143 branches, the bank has its head office in Bahawalpur, a key district in Southern Punjab; placing it closer to its target market.
NRSP's board comprises 3 representatives from NRSP, 1 nominee each from IFC, KfW, and Acumen, 2 independent directors and the CEO. Mr. Zahoor Hussain Khan - President since 2011 – an experienced microfinance banker. He is assisted by a qualified management team