VIS reaffirms entity ratings of Mobilink Microfinance Bank Ltd

May 06, 2025 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Mobilink Microfinance Bank Limited (MMBL) at 'A/A1' (Single A/A One).

Medium to long term rating of A indicates good credit quality; protection factors are adequate.

Risk factors may vary with possible changes in the economy.

Short term rating of 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

Outlook on the assigned ratings remains ‘Stable.’

Previous rating action was announced on May 07, 2024.

MMBL is positioned as a prominent player in Pakistan’s microfinance sector with deposit market share of 21.1%, supported by strong sponsorship of VEON Microfinance Holding B.V.

The Bank has shown notable growth in its customer outreach, leveraging its digital lending platform to significantly expand its borrower base.

Strategic reorientation towards lower-ticket Nano loans has underpinned this growth, aligning with market demand and offering risk-mitigated expansion.

The Bank's asset quality remains a key rating constraint given the rising levels of non-performing loans.

While increased provisioning has buffered potential credit shocks, it has concurrently exerted pressure on profitability metrics.

On the operational front, the cost of doing business increased, driven by expanded service partnerships. However, positive early 2025 earnings suggest normalization in the near term.

Moreover, MMBL has demonstrated resilience given maintained capitalization, enabled through timely external capital injections, and a well-diversified funding profile, primarily sourced from deposits.

The significant allocation of surplus funds into government securities has bolstered liquidity, ensuring adequate buffers against any stress scenarios. and branchless banking activities.

Looking forward, successful execution of its strategic priorities including the development of an in-house digital lending platform and transition toward Islamic banking will be conducive to long-term sustainability.

However, the ratings remain sensitive to the Bank’s ability to control credit risk amidst a growing unsecured portfolio and to restore profitability sustainably, while maintaining strong liquidity and capital buffers.

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