PACRA Maintains Entity Ratings of AGAHE Pakistan

The assigned rating emanates from the adequate profile of the AGAHE Pakistan (herein referred to as “The Company” or “the MFI”) in the Microfinance sector of Pakistan (herein referred to as "MFIs"). AGAHE Pakistan operates as a not-for-profit organization and under the regulatory purview of the Securities & Exchange Commission of Pakistan (SECP) under Section 42 of the Companies Act, 2017. The prime focus of the MFI is to empower communities, particularly women, by enhancing their economic status and fostering their entrepreneurial skills through facilitating access to business loans. The loan portfolio consists of a total of 8 loan products mainly relating to the following segments; General Business, Livestock, Agriculture, Micro-Enterprise, Solar, Auto, Educational and House Loan. AGAHE Pakistan, founded in 2016, has established a substantial presence in South Punjab, comprising a network of 41 branches. The institution relies on diverse borrowing avenues, including the National Bank of Pakistan (NBP), Bank of Punjab (BOP), State Bank of Pakistan (SBP), Pakistan Microfinance Investment Company (PMIC), and a financing agreement with the Pakistan Poverty Alleviation Fund (PPAF) for Revolving Fund, which strengthens its funding base. The industry's loan portfolio requires prudent management mainly on the back of the consistent surge in the policy rate. However, going forward the impact of gross lending rate on the financial risk profile specifically on NPLs (Non-performing Loans) is being evaluated in due course of time. The restriction on the mobilization of deposits has demarcated and supplemented the risk absorption capacity while triggering the funding constraints. Despite the hyperinflationary environment and other microeconomic challenges specifically the consistent surge in KIBOR which ultimately elevated the cost of funds for MFIs, the portfolio at risk (PAR) > 30 days stood at 1.4% in 9MFY24 (FY23: ~2.0%) mainly on the back of the recoveries in the flood-impacted portfolios. As per the management accounts, the company's Gross Loan Portfolio (GLP) almost remained consistent and stood at ~PKR 1.9bln as of 9MFY24 (FY23: ~PKR 1.6bln). The net profitability depicted growth over the year and stood at ~PKR 436mln as of 6MFY24 (FY23: ~PKR 448mln) The Institution effectively managed its cost of funds. The outlook on the ratings is "positive" which reflects the consistent financial growth. With a significant increase in the key policy rate year-on-year, addressing NPLs is crucial. Even though the governance structure is derived from the General Body of Members and the Board of Directors, the institution faces business vulnerability due to its limited geographical presence in the province Punjab. The Institution's ratings also take into account its notable performance during the recent economic slowdown. Additionally, the Institution has a presence in 12 districts of Punjab, comprising a network of 41 branches.
The ratings also incorporate the vulnerability in business due to limited geographical presence. The sustainability of positive performance indicators amidst business volume growth is critical for the Institution's ratings. The ratings will monitor the Institution's expansion and the impact of technological progress on its operational and risk efficacy. Therefore, sustaining growth momentum is vital for the Institution's future prospects.

About the Entity
AGAHE Pakistan was incorporated in 2016 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 NBFC Rules, 2003. The overall control of the Institution vests with a 7 member Board of Directors. Mr. Abid Aman Barki is the Chairperson of the Board. The CEO of the Institution is Mr. Barak Ullah, who leads a team of experienced professionals.