The Pakistan Credit Rating Agency Limited
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Jibran Cheema

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PACRA Maintains Entity Ratings of Mobilink Microfinance Bank Limited

Rating Type Entity
(30-Apr-20 )
(18-Oct-19 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

The ratings take comfort from the bank's association with a leading global telecom group - Veon (formerly VimpelCom) - and with Pakistan's largest cellular operator – Jazz (formerly Mobilink). Sponsor’s commitment to the bank is witnessed in the form of both technical collaboration and financial support. Ensuing synergies have strengthened the bank's penetration in target markets. Leveraging on the sponsors' network and brand name - JazzCash, branchless banking domain is taking on sanguine growth and is expanding through platform of Mobile-wallet accounts. The bank's current strategy is pivoted around capitalizing on its digital banking base having strong support from its super-agent cellular operator. The management's confidence lies in keeping this segment's margins sustained and bring it at the forefront of mobile banking services, amidst rising competition. The bank held a market share of ~5% in the microfinance industry’s Gross loan portfolio and ~11% in the total deposits as at End-Dec'19. Overall asset quality is healthier compared to peers. The bank's business model is directed towards fostering core and branchless banking simultaneously. Granular small ticket size deposits in the BB domain, is growing, which adds benefit to performance indicators. The ratings take comfort on the financial risk profile depicted by healthy net interest/markup revenue (NIMR) on the backdrop of low cost of funds. Under the current scenario, the nationwide lockdown due to the global pandemic - Covid-19, is certain to cast a significant impact on the whole microfinance industry. The key risks culminating from the current crisis are (i) loss of recovery (ii) halt in fresh disbursement and (iii) probable liquidity stretch. Though SBP’s Relief Packages have come handy to the sector in protecting the credit quality of the players, the out-turn of the situation, and its relative impact on the risk profiles of industry players, 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 bank’s propensity to protect its performance indicators amidst constrained business environment, is imperative.

About the Entity
Mobilink Microfinance Bank Limited commenced its operations in 2012, as a nationwide Microfinance bank. It is a wholly-owned subsidiary of Global Telecom Holding (GTH), which in turn, is majority-owned by VEON (formerly Vimpelcom) - one of the world's largest telecom groups. VEON also owns Jazz (formerly Mobilink), the bank's super-agent in branchless banking.

The Board of Directors comprises five members consisting of two non-executive directors, two independent directors and the CEO - Mr. Ghazanfar Azzam, who carries with him over 33 years of experience in the banking sector. He is assisted by a qualified and 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.