PACRA Maintains Entity Ratings of SAFCO Microfinance Company (Private) Limited

SAFCO Microfinance Company Private Limited (SMCPL) continues its journey as a for-profit microfinance institution, building upon its successful transformation from a non-profit entity last year. The company remains committed to fostering financial inclusion by providing socially responsible financial solutions tailored for low-income entrepreneurs. Its diverse loan portfolio encompasses nine specialized products, strategically designed to support key economic segments, including Enterprise, Livestock, Agriculture, SME, Personal Finance, School Improvement, Solar Energy, Housing, and Auto Financing. SMCPL, active since 2009, has established a strong presence across Sindh Province with a network of 66 branches. These branches serve as key enablers in extending microfinance services to unbanked and low-income entrepreneurs. Through its widespread reach, the company continues to drive financial inclusion and economic empowerment across the region. Moreover, SMCPL microfinance initiatives have significantly impacted rural communities, with 80% of its beneficiaries being smallholder farmers. The institution maintains a diversified funding base, with a primary reliance on PMIC, supplemented by commercial banks and both domestic and international lenders.
Previously, the sector's performance was adversely affected by various macroeconomic challenges, including high inflation and elevated policy rates, which collectively eroded individuals' purchasing power. However, in the first half of FY25, the sector has shown signs of recovery, driven by a decline in inflation and borrowing rates, leading to an improvement in consumer sentiment. This progress is reflected in the growth of its Gross Loan Portfolio (GLP), which reached approximately PKR 4.732bln as of 6MFY25, compared to ~PKR 4.07bln in FY24. Similarly, improvement of the portfolio at risk (PAR) > 30 days, which declined to 3.08% in 6MFY25 from ~3.6% in FY24. The company continued its expansion efforts, increasing its total branch network to 66 in 6MFY25 from 61 in FY24, which contributed to overall growth. Consequently, the total number of borrowers rose to 137,238 in 6MFY25, up from 118,157 in FY24, reflecting sustained portfolio expansion and increased market penetration. Financial performance also showed significant improvement, with net earnings surging to approximately PKR 218 million in 6MFY25, compared to PKR 71 million in FY24. The same growth pattern is projected in the future as well. SMCPL's Board remains actively engaged in strategic decision-making and steering the company’s direction while adhering to best practices in corporate governance. Backed by a stable and experienced senior management team, the company operates with well-defined reporting structures as per a formalized organogram, ensuring effective oversight and a robust monitoring framework.
The ratings reflect the business’s vulnerability due to its low market share and limited presence. Maintaining positive performance amid growth is crucial. Future ratings will assess expansion strategy, technological impact, and sustained growth as key factors for long-term prospects.

About the Entity
SMCPL, initially established in May 2009 as a public company limited by guarantee has transitioned into a private company limited by shares. Registered under Section 16 of the Companies Ordinance, 1984 (now Companies Act, 2017), SMCPL is licensed by the SECP under the NBFC Rules, 2003. A six-member Board governs the company, with Fazal Noor as Chairperson and M. Suleman as CEO (known internally as 'man of the last mile').