November 7, 2018 (MLN): Pakistan Credit rating Agency (PACRA) has maintained entity ratings of NRSP Microfinance Bank Limited at ‘A’ for long term and ‘A1’ for short term, with a ‘stable’ outlook forecast.
According to the rating agency, the ratings incorporate the bank's notable position in the microfinance sector, evident from its 10% share in MFBs' gross loan portfolio and 12% in the MFBs' deposits.
The design of lending product keeps the concentration high wherein a sizable portion of the loan book is dedicated to crop-linked loans, particularly to sugarcane crops.
The bank's asset quality reflects a deteriorated position (Infection ratio; ~4.1%) as sugarcane industry encountered adversities resulting in backlog of payments to sugarcane farmers. Short-term strategy, therefore, remains focal to consolidating the interrupted position, including dilution of the loan book concentration.
The bank's financial risk profile is reflected by sanguine margins and average growth in loan portfolio. Funding base majorly accounts for deposits constituting a high chunk of time deposits.
Furthermore, the ratings take comfort from association of NRSP Microfinance Bank with the National Rural Support Programme, the major shareholder, and with the three foreign development organizations – IFC, Acumen, and KfW, providing both technical and financial support to the bank.
The ratings are dependent on the bank's ability to sustain its competitive position in the MFBs market. Reviving asset health is critical. Meanwhile, prudent management of liquidity profile alongside strengthening of capital base remain imperative.
