PACRA Maintains the Entity Ratings of Sindh Microfinance Bank Limited

The assigned rating of Sindh Microfinance Bank reflects its sustained financial profile, consistent profitability, low infection ratio, robust capital adequacy, and well-structured recovery procedures. Following prudent and essential principles of microfinance, the Bank lays and practices a low-cost structure, which is integral to its sustained profile and overall performance. Additionally, a strategic plan to expand its distribution network nationally and the backing of financially strong sponsors, supported by the provincial government, further reinforce the assigned rating. The Bank currently holds a small market share in terms of Gross Loan Portfolio (GLP) but is experiencing rapid growth with plans to further enhance its lending portfolio. In line with its business strategy, the Bank is prioritizing the adoption of digital platforms to remain competitive, with a focus on enhancing accessibility and user experience. The Bank is actively expanding its customer outreach through 1) a branch network, 2) women-centric and financially sustainable loan projects, 3) digitized processes, and 4) broadening the fund base through deposit mobilization and debt funding.
During CY24, PAT increased to PKR 153mln (CY23: PKR 91mln), underscoring consistent profitability over nine years—a distinction unmatched in the microfinance sector. The controlled operating expense contributed to the sustained profitability. Gross micro-credit advances rose by 16% YoY to PKR 2,239mln in CY24 (CY23: PKR 1,927mln), reaffirming the Bank's growth trajectory. In line with its business strategy, the credit portfolio remains heavily concentrated in the Shujag Aurat Loan. The Bank’s capital adequacy ratio (CAR) stood at 44.26% as of the end of Dec'2024 (Dec'2023: 47.52%), yet still indicating a strong position. On the funding side, deposits grew by ~46%, reaching PKR 1.9bln (Dec'23: PKR 1.3bln), largely driven by term deposits constituting ~87% of the total. Despite this, a high deposit concentration (~90%) poses liquidity risks, for which effective management in the form of Parent Bank support and better liquidity management by the Asset Liability Committee would remain imperative. With paid-up capital at PKR ~1 billion as of Dec'2024, SMFB comfortably meets the SBP's minimum capital requirements for provincial operations. Equity stood at PKR ~1.2bln (CY23: PKR ~1.1bln). As per management, the Bank has applied for a nationwide operations license from the State Bank of Pakistan, which is expected to be granted in CY25.
Going forward, the rating would remain dependent on the maintenance of liquidity position, holding profits to strengthen the equity and dilution in depositor's concentration while ensuring the continuous sustainability of the Bank.

About the Entity
Sindh Microfinance Bank was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2015 and commenced operations in May 2016. The Bank is a wholly-owned subsidiary of Sindh Bank. The head office of the Bank is located in Karachi. Currently, the Bank operates in the province of Sindh with a network of 22 branches and 86 micro-credit centers (service centers) spread across the province. The Board of Directors comprises seven members; three members are representatives of the Sindh Bank.