PACRA maintains entity ratings of JWS Pakistan | Rating Watch

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 recently been under pressure, mainly as a result of rising finance costs. 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. Moreover, the growing impact of economic slowdown, lately exacerbated by the global pandemic spread, may deteriorate the overall risk profile of the Microfinance Sector, particularly with reference to the quality of assets and risk absorption capacity. As evident by the rising infection in credit health of the Institution, JWSP is susceptible to such industry wide challenges. Post March 2020, limited disbursements along with adequate levels of recoveries were observed.
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. Impact of locust swarms on the repayment capability of the borrowers in the agricultural segment, also requires oversight.

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 seven 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.