The Pakistan Credit Rating Agency Limited
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Ahmad Saad Siddiqi

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PACRA Maintains Entity Ratings of FINCA Microfinance Bank Limited

Rating Type Entity
(28-Apr-21 )
(28-Apr-20 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect association of FINCA (“the bank”) with a global microfinance organization – FINCA International. This affiliation supports FINCA Microfinance Bank in terms of building a strategy and also in establishing robust systems and controls. FINCA is a mid-tier player in Pakistan’s microfinance sector (End-Dec'20: ~7% share in total gross loan portfolio (GLP) and ~7% share in total microfinance deposits). The bank intends to build a stable and diverse deposit base. However, given the current business scenario, FINCA has also availed borrowings from SBP, under the Financial Inclusion Infrastructure Program (FIIP), to underpin its funding needs. Despite the challenges faced amidst the COVID-19 pandemic, the Bank has managed to increase its net profit by 38% to PKR 905mln. On the back of decreased NPLs, the Bank’s infection ratio fell to 3.4% (CY19: 4.7%). The bank's GLP has witnessed a dip in its growth pace, owing to tightening market conditions, however the deposit base has continued to grow. Under the current scenario, continuity of COVID-19 pandemic (penetration of third wave in Pakistan) will poise challenge to business and asset quality. Though SBP’s Relief Packages have come handy to the sector in protecting the credit quality of the players during the first wave, the out-turn of the situation, and its relative impact on the risk profiles of industry players, including FINCA, is yet to unfold in the days to come.
The ratings are dependent upon the bank’s ability to aptly combat the emerging risks under the current scenario in order to keep its business and financial risk profile intact. Meanwhile, the Ratings are also placed under “Watch” which reflects the need to oversee the risk profile of the bank against unavoidable challenges, going forward.

About the Entity
Kashf Holdings (Pvt.) Ltd. established the bank in 2008. In 2013, FINCA International acquired majority ownership in the bank, through dilution of Kashf Holdings' shareholding. FINCA International has a majority stake of 86.4%, through FINCA Microfinance Cooperatief U.A; a commercial arm registered in Netherlands. Kashf Holdings (Pvt) Ltd. holds a 5.2% stake in the bank. The remaining stake is distributed among i) International Finance Corporation (4.9%), ii) Triodos Fair Share Fund (2.7%) and iii) Acumen Fund Pakistan (0.8%). FINCA, offers a diversified range of financial products and services. The bank operates with a network of 130 branches. Mr. Shahid Hosain Kazi has recently replaced Mr. Farid Ahmed Khan, as the acting CEO of the bank. He brings with him 22 years of experience, covering key banking functions such as Corporate and Retail Banking, Strategic Planning and Risk Management. He is assisted by an experienced management team.

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.