The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Assigns Initial Entity Ratings to Agahe Pakistan

Rating Type Entity
Action Initial
Long Term BB+
Short Term A3
Outlook Stable
Rating Watch Yes

Agahe Pakistan ('Agahe' or the 'Company') is a Microfinance Institution (MFI) governed by the Securities & Exchange Commission of Pakistan (SECP) under Section 42 of the Companies Act, 2017. The Company 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 2016. 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. Agahe is a not-for-profit organization, hence, the source of funding comprises a) loans (b) grants and (c) internal generation of profits. Profitability of the company is growing at a moderate pace, therefore, integral generation of capital is occurring at a modest rate too. The company relies on diversified avenues for borrowings primarily from Commercial Banks and PMIC, wherein SECP's Relief Package for deferment of loan repayment has been granted to the Company by PMIC. Governance structure is derived from the General Body of Members and the Board of Directors. The ratings also incorporate the vulnerability in business due to low market share (GLP: PKR~687mln - End-March'20) and limited geographical presence in the Southern Punjab. Moreover, the impact of economic slowdown lately exacerbated by the global pandemic spread has cast a rippling effect on different sectors of the country. Microfinance industry is also expected to absorb the impact as disbursement, recoveries and liquidity patterns of each players may be influenced. Agahe's liquidity position remains comfortable.
The ratings are dependent on the Company's aptness to uphold its business and financial risk profile under the prevailing volatile macro-environment. Sustenance of growth momentum is imperative. Meanwhile, “Watch” reflects the need to oversee the risk profile of the Company against unavoidable challenges, particularly emanating from economic meltdown and repercussions due to COVID-19.

About the Entity
Agahe Pakistan was incorporated in 2016 as a Public Company Limited by Guarantee under Section 42 of the Companies Ordinance, 1984 (now the Companies Act, 2017). It is also licensed by the SECP under the Non-Banking Finance Companies Rules, 2003. The overall control of the company vests with a seven member Board of Directors. Mr. Abid Aman Barki is the Chairman of the Board, while Mr. Barak Ullah is the CEO of the company. He is accompanied by a team of experienced 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.