PACRA Downgraded the Entity Ratings of Apna Microfinance Bank

The rating downgrade of Apna Microfinance Bank (the “Bank”) reflects: 1) hefty operational losses, 2) continuous and sizeable equity erosion since December 2021, 3) persistent non-compliance with CAR for several years, and 4) sustained high PAR, currently at 42.4%. The Bank is one of a few MFBs that are struggling to survive. The Bank recorded a loss of Rs. 3,100 million for the year (CY23: Rs. 3,594 million). By year-end, its accumulated losses reached Rs. 14,284 million (CY23: Rs. 10,973 million), resulting in negative net assets of Rs. 9,433 million (CY23: Rs. 6,641 million). The non-performing advances were primarily a result of the severe economic downturn caused by the Covid-19 pandemic, floods, and hyperinflation. The Bank has failed to meet the Minimum Capital Requirements (MCR) and Capital Adequacy Ratio (CAR) as outlined in the Prudential Regulations for Microfinance Banks, 2014. These circumstances significantly elevated the risk profile of the Bank and potentially impacting its business. The sponsors continue to inject equity to support the Bank, however, the quantum is not sufficient to address the problems adequately. The management is implementing a comprehensive and multi-dimensional strategy to address the financial and operational challenges confronting the Bank. The management is also actively working on recovering these advances. The successful execution may mitigate the negative factors currently affecting the Bank. Going forward, following the Government's reduction in policy rates, the Bank's cost of deposits (COD) has decreased. However, the full impact of this reduction will be realized in the coming periods.
The management is actively implementing strategies to increase corporate customer deposits in current accounts by offering attractive incentives, launching innovative products, and improving digital outreach, which would remain imperative to the assigned rating.

About the Entity
Apna Microfinance Bank, listed on Pakistan Stock Exchange, was established under the Microfinance Institution Ordinance 2001. It started operations in 2005. Apna is a small-tier player in Pakistan’s microfinance sector with ~2.7% share as of Dec’24 in terms of GLP. The Bank has 106 business locations comprising 105 branches and 1 service centers. The overall control of the Bank vests in a nine-member board. Mr. Muhammad Akram Shahid is the Chairman of the board. RSM Avais Hyder Liaquat Nauman & Co. Chartered Accountants are the external auditors of the company. The auditor has reported material uncertainty related to events and conditions which may cast significant doubts on the Bank's ability to continue as a going concern.