Ahmad Saad Siddiqi
PACRA Maintains Entity Ratings of SAFCO Support Foundation
SAFCO Support Foundation ('SAFCO' or the 'Foundation') is a Microfinance Institution (MFI) governed by the Securities & Exchange Commission of Pakistan under Section 42 of the Companies Act, 2017. The Foundation is licensed to operate under NBFC (Establishment and Regulations) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations 2008. It has been in operations since 2009. The key element is that MFIs are not permitted to mobilize deposits, while they are also not backed by any stakeholder equity due to their status of "Companies Limited by Guarantee". These two elements, in combination, provide funding constraints, while they also delimit the boundaries of risk. SAFCO is a not-for-profit organization, hence, the source of funding comprises a) internal generation of profits, b) loans and c) grants. The Foundation's sanguine profitability culminates into integral capital generation at a decent rate. Second major source of funding is borrowings, for which the Foundation majorly relies on local avenues primarily including PMIC, with some portion of foreign lending too. Governance structure takes strength from the body of members and board of directors. The ratings also incorporate the vulnerability in business due to low market share and limited geographical presence. Under the current scenario, continuity of COVID-19 pandemic (penetration of third wave in Pakistan and internationally) will poise challenge to business and asset quality. However, due to sound management decisions, the Company is on track to surpass its past performance. The Institution's financial risk profile displays a comfortable outlook with fine profitability margins despite a fall in credit quality.
The ratings are dependent on the Foundation's aptness to sustain positive performance indicators amidst growth in business volumes. The ratings would also monitor the impact of technological progression on the operational and risk efficacy of the Foundation. Meanwhile, “Watch” reflects the need to oversee the risk profile of the Foundation against unavoidable challenges, particularly emanating from economic meltdown and repercussions due to Covid-19.
SAFCO Support Foundation was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2009 as a Public Company Limited by Guarantee under Section 42 of the Companies Ordinance, 1984 (now Companies Act, 2017). It is also licensed by the SECP under Non-Banking Finance Companies Rules, 2003. The overall control of the Foundation vests with a seven member Board of Directors. Mr. Muhammad Ismail Kumbhar is the Chairman of the Board, while Mr. Muhammad Suleman is the CEO of the Foundation.