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Lahore, October 29, 2019 (PPI-OT): The ratings reflect association of the bank with a global microfinance organization – FINCA International. This affiliation supports FINCA Microfinance Bank in terms of building a wholesome strategy and also in establishing robust systems and controls. FINCA is a mid-tier player in Pakistan’s microfinance sector (End-Jun’19: ~11% share in total gross loan portfolio (GLP) and ~10% share in total microfinance deposits). The bank intends to build a stable and diverse deposit base.
However, given the current business scenario, FINCA has also availed borrowings from SBP, under the line of credit (LoC) arrangement, to underpin its funding needs. The bank’s liquidity profile, net of borrowings, reflects a stretch. FINCA’s current paramount focus is pivoted around boosting its Capital Adequacy, which hovers near the benchmark. Resultantly, room to grow in GLP is squeezed. Augmentation of the same is desirable to create room for sustainable growth.
The bank has stepped into the digital banking domain, however, the mix is currently small. Asset health impairment has risen to ~2.3% at End-Jun’19 (End-Dec’18: 1.9%). Average loan size of the bank is on the higher side in relation to its peers, which needs to be in check amidst rising industry’s infection ratio. The bank’s GLP has witnessed a dip in its growth pace, owing to overall market conditions, coupled with its efforts to keep its CAR above the benchmark.
The ratings are dependent upon the bank’s ability to uphold its business profile amidst the changing market environment. Maintenance of asset quality is pertinent. Meanwhile, improved net liquidity profile remains imperative.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com