PACRA Updates Entity Ratings of Thardeep Microfinance Foundation

Thardeep Microfinance Foundation (TMF or “the Foundation”) is positioned as a small-tier institution within Pakistan’s microfinance sector. The sector operates under the regulatory framework of the Securities and Exchange Commission of Pakistan (SECP), which governs Microfinance Institutions (MFIs) through the Non-Banking Financial Companies (NBFC) Rules, 2003, and the NBFC Notified Entities Regulations, 2008. Within this regulated environment, the Foundation plays a significant role in extending financial inclusion to underserved communities. Its core activity is to mobilize funds for the provision of microfinance services to impoverished individuals, with a dedicated emphasis on women, who remain central to its mission of economic upliftment. Through this focus, the Foundation strives to mitigate poverty, promote social welfare, and uphold economic justice. Beyond financial services, it actively engages in community development and social mobilization, thereby seeking to build resilience at the grassroots level and contribute to long-term poverty alleviation. The microfinance sector, comprising Microfinance Banks (MFBs), Microfinance Institutions (MFIs), and Rural Support Programs (RSPs), reported a Gross Loan Portfolio (GLP) of ~PKR 597.6bln in CY24 (CY23: ~PKR 546.1bln), with MFIs and RSPs accounting for ~23% of the total. Over time, the MFIs and RSPs segment has demonstrated stability in terms of active borrowers, although average loan sizes have continued to expand. Asset quality in the MFI segment improved, with NPLs declining to ~1.57% in CY24 (CY23: ~2.80%). The governance structure of TMF consists of sponsoring members serving as the board of directors. As a nonprofit organization, the Foundation’s funding primarily comes from three sources: a) internal profit generation, b) borrowings, and c) grants. Currently, the Foundation relies entirely on domestic borrowings. To enhance control, the organization is implementing technological advancements to automate and integrate processes for real-time monitoring of recoveries and disbursements. The assigned ratings of the Foundation reflect a decline in asset quality, insufficient liquidity, and a high infection ratio. The Gross Loan Portfolio (GLP) has decreased by ~33% in FY25 and stood at PKR 1.8bln (FY24: PKR 2.6bln, FY23: PKR 3.5bln). However, as per the management representation, fresh disbursement has been started, and recoveries have been improved. Portfolio disbursements are concentrated in interior Sindh, where previously the risk of non-performing loans had escalated due to geographic challenges, climate change-related flooding. During FY25, the Foundation reported a gross income of ~PKR ~115mln, as compared to a gross loss of PKR ~20.5mln in FY24. This improvement was attributed to a reduction in funding costs. Consequently, the Foundation reported a humble profit before tax of PKR ~7.4mln in FY25, as compared to a loss of PKR ~256mln in FY24. The Portfolio at Risk (PAR) further deteriorated to 10.3% (FY24: ~5.8%), significantly above the industry average, further deteriorating the Foundation's credit risk profile. A definitive strategy is needed to address these multiple challenges, and continued support from the sponsors will remain crucial.
Ratings are dependent on the foundations' ability to provide comfort on asset quality through efficient management of PAR, alongside improvement in liquidity and growth in the loan portfolio. The augmentation of the profitability matrix to strengthen the equity base remains critical.

About the Entity
Thardeep Microfinance Foundation was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2016 as a Public Company Limited by Guarantee under Section 42 of the Companies. The overall control of the Foundation vests with a seven-member BOD. Dr. Naseer Muhammad Nizamani is the Chairman of the Board, while Mr. Sono Khangharani is the CEO.