Sindh Microfinance Bank plans to go national-PACRA

October 1, 2019: Pakistan Credit Rating Agency (PACRA) has assigned initial entity rating of ‘A-’ for long term to Sindh Microfinance Bank Limited, while the short term rating is ‘A2’. Meanwhile the outlook forecasted on this rating is ‘stable’.

As per an official press release by the agency on this occasion, the ratings capture the strength of the bank as a growing institution in the Microfinance sector. The loan book is gradually building up, which is primarily constituted of group lending arrangement. The bank's business model incorporates appropriate mitigant controls to keep its risk profile adequate.

Asset infection ratio stands at 0.3%, resonating with the life of the bank. The current design of the lending portfolio represents concentration in the flagship product "Sujag Aurat" (Visionary Women), focused on women entrepreneurship and financial inclusion. The bank's funding needs are currently being fueled through a mixture of internal and external sources.

Additionally, the funding has also been obtained from State Bank of Pakistan on a relatively low cost. Deposit mobilization has also come into play, though relatively small in quantum. The bank has presence in Sindh with plans to go national. A risk-averse approach towards expansion is the key essential, with funds being raised from appropriate channels.

The ratings draw comfort from the bank's association with the Government of Sindh. The financial risk profile is reflected by sound liquidity, adequate profitability and low investment in non-earning assets.

The ratings are dependent on the bank's ability to sustain its growth trajectory in the MFBs market. Continued good governance practices are important. Meanwhile, prudent management strategies to maintain asset health and keep its risk profile sound amidst expansion is imperative.