The Pakistan Credit Rating Agency Limited
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Ahmad Saad Siddiqi

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PACRA Maintains Entity Ratings of JWS Pakistan

Rating Type Entity
(14-Sep-21 )
(14-Sep-20 )
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Positive Stable
Rating Watch Yes Yes

JWS Pakistan ('JWSP' or the 'Institution') is a Microfinance Institution (MFI) governed by the Securities & Exchange Commission of Pakistan (SECP) under Section 42 of the Companies Act, 2017. The Institution 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 2015. 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. JWSP is a not-for-profit organization, hence, the source of funding comprises a) internal generation of profits, b) loans and c) grants. The profitability of the Institution has recorded improvement due to enhanced GLP. Mark-up earned on microfinance loan portfolio witnessed significant upsurge, partly due to management’s decision to include fee and commission income as part of mark-up earned. Moreover, with the expiration of SBP’s deferment scheme period, the Institution witnessed a significant upsurge in non-performing loans, resulting in increased provisioning expense. Institution's cost of funds remained under control. Second major source of funding is borrowings. The Institution majorly relies on local avenues for borrowings primarily PMIC. 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. A room for growth in the technological domain exists. The impact of economic slowdown lately exacerbated by the global pandemic spread had cast a rippling effect on different sectors of the country. Microfinance industry is expected to absorb the impact as disbursement, recoveries and liquidity patterns were influenced.
Positive outlook represents the Institution’s improved performance amidst the COVID-19 pandemic attributable to efficient field work which resulted in 100% cumulative recovery. Hereby, infection ratio remains one of the lowest in the industry. Furthermore, the Institution is adding more branches where cumulative number achieved will be 100 in FY22. Fresh finances, for the expansion, are in pipeline by lenders both international and local.
The ratings are dependent on the Institution'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 Institution. Meanwhile, the “Rating Watch” reflects the need to oversee the risk profile of the Institution against unavoidable challenges, particularly emanating from economic deterioration in the wake of Covid-19, and its ramifications on the disposable income of the customer base.

About the Entity
JWS Pakistan was incorporated in 2015 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 Institution vests with a eight member Board of Directors. Ms. Sabiha Shaheen is the Chairperson of the Board. Mr. Qazi Shoaib Alam Farooqi is the CEO and founding member of the Institution, who brings with him a wealth of experience, of more than two decades in the industry. Other members of the management, possess adequate experience from diverse backgrounds.

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.