SAFCO Microfinance Company (Private) Limited

RATING REPORT | Mar-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
26-Mar-26 BBB A3 Stable Maintain -
28-Mar-25 BBB A3 Stable Maintain -
28-Mar-24 BBB A3 Stable Maintain -
28-Mar-23 BBB A3 Stable Maintain -
28-Mar-22 BBB A3 Stable Maintain -
About the Entity

SAFCO Microfinance Company (Private) Limited was incorporated in 2022, as a company limited by shares under Companies Act, 2017. The Company is a wholly owned subsidiary of the SAFCO Support Foundation, providing services in rural as well as urban areas of Sindh province. A six-member Board governs the company, with Fazal Noor as Chairperson and M. Suleman as CEO (known internally as 'man of the last mile'.

Rating Rationale

The ratings reflect SAFCO Microfinance Company Private Limited’s (SMCPL or The Company) established position among microfinance institutions. The Company remains committed to fostering financial inclusion by providing socially responsible financial solutions tailored for low-income entrepreneurs. Its diverse loan portfolio encompasses nine specialized products, strategically designed to support key economic segments, including Enterprise, Livestock, Agriculture, SME, Personal Finance, School Improvement, Solar Energy, Housing, and Auto Financing. SMCPL, active since 2009, has established a strong presence across Sindh Province with a network of 70 branches. These branches serve as key enablers in extending microfinance services to unbanked and low-income entrepreneurs. Through its widespread reach, the company continues to drive financial inclusion and economic empowerment across the region. Moreover, SMCPL microfinance initiatives have significantly impacted rural communities, with 80% of its beneficiaries being smallholder farmers. The Company maintains a diversified funding base, with a primary reliance on PMIC, supplemented by commercial banks and both domestic and international lenders. The microfinance sector, which had previously faced stress due to a challenging macroeconomic environment, exhibited a recovery during FY25. The improvement was underpinned by easing inflationary pressures and a reduction in policy rates, resulting in a gradual restoration of consumer confidence. The microfinance sector, which had previously faced stress due to a challenging macroeconomic environment, exhibited a recovery during FY25. The improvement was underpinned by easing inflationary pressures and a reduction in policy rates, resulting in a gradual restoration of consumer confidence. Consequently, the Gross Loan Portfolio (GLP) of Microfinance Institutions and Rural Support Programs increased to PKR 204bln in FY25 from PKR 113.4bln in FY24. Asset quality indicators also improved, with the sector’s Portfolio at Risk>30 days declining to 1.1% from 1.3% in the preceding year. The recovery trend has extended into 1HFY26. Linked to the industry, the GLP of the Company showed a consistent growth and recorded at PKR 5,303mln in 1HFY26, up from PKR 5,145mln in FY25 (FY24: 4,581mln). The Company continued its cautious expansion efforts, increasing its total branch network to 70 in 6MFY26 from 66 in FY25, while the total number of borrowers rose to 160,286 in 6MFY26, up from 150,606 in FY25, reflecting sustained portfolio expansion and increased market penetration. SMCPL's Board remains actively engaged in strategic decision-making and steering the company’s direction while adhering to best practices in corporate governance. Backed by a stable and experienced senior management team, the company operates with well-defined reporting structures as per a formalized organogram, ensuring effective oversight and a robust monitoring framework. However, the sensitivity to macroeconomic conditions remains relevant. In particular, potential escalation in regional geopolitical tensions may translate into higher crude oil prices, which could marginally impact borrowers’ repayment capacity through increased household expenditure.

Key Rating Drivers

The ratings are dependent on the Company’s ability to sustain positive performance indicators and to deliver consistent growth amid a challenging operating environment. Continued expansion in profitability and the financing portfolio, together with the comfortable liquidity buffers and resilient margins, remains critical. Sustained recovery performance and asset-quality stability will also remain imperative.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

SAFCO Microfinance Company (Private) Limited


Rating Analysis

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Profile
Structure

SAFCO Microfinance Company (Private) Limited was incorporated in 2022, as a company limited by shares under Companies Act, 2017. The Company is a wholly owned subsidiary of the SAFCO Support Foundation, providing services in rural as well as urban areas of Sindh province. The Company operates under a license from the Securities and Exchange Commission of Pakistan (SECP) in accordance with the Non-Banking Finance Companies (NBFC) Rules, 2003.


Background

SMCPL, a for-profit private limited company, operates as a subsidiary of SAFCO Support Foundation (SSF), a non-profit entity registered under Section 42 of the Companies Act, 2017. The Company is registered with the Securities and Exchange Commission of Pakistan (SECP) under Section 16 of the Companies Act, 2017, and holds a license to offer investment and financial services under the regulatory framework governing Non-Banking Finance Companies (NBFCs).


Operations

SMCPL operates at the provincial level, with a network of 70 branches across 11 regions in Sindh, supported by a workforce of over 730 employees. The Company’s head office is located in Hyderabad. Its loan portfolio comprises ten diverse products catering to various segments, including Enterprise, Livestock, Agriculture, SME, Personal, School Improvement, Auto Financing, Housing Finance, Islamic Finance, and emergency lending.


Ownership
Ownership Structure

SMCPL is predominantly owned by SAFCO Support Foundation (SSF), which holds a 99.99% stake in the Company. The remaining shares are held by four board members—Muhammad Fazal Noor, Ismail Kumbhar, Faheem Ali, and Muhammad Suleman, each holding one share.


Stability

SMCPL has a well-structured succession plan in place, ensuring leadership continuity and stability, which is expected to be maintained in the future.


Business Acumen

The board members' extensive experience in the microfinance industry, combined with their diverse skill sets, equips them to effectively navigate market complexities and drive the Company toward sustainable growth and long-term success.


Financial Strength

The Company's potential to secure financial support from its members remains strong, as its for-profit structure ensures that members derive monetary benefits from its profitability, fostering continued engagement and commitment.


Governance
Board Structure

SMCPL's Board of Directors consists of six members, including four independent directors who provide objective oversight, ensuring robust governance. The remaining two directors hold nominated positions, contributing to strategic decision-making.


Members’ Profile

The Board members bring extensive expertise to the sector, most notably Mr. Fazal Noor, the Chairman, who possesses 27 years of invaluable experience in agricultural education and sustainable development, strengthening the Company’s strategic direction.


Board Effectiveness

During FY25, the Board convened multiple meetings, with a strong attendance record demonstrating active participation. The Board operates through four specialized sub-committees: the Audit Committee, Credit & Risk Committee, Human Resource Committee, and Social Performance Management Committee, ensuring effective governance and oversight.


Transparency

Yousuf Adil Chartered Accountants, a Category A firm as per the SBP Panel, serve as the external auditors for the Company. They issued an unqualified opinion on the financial statements for the year ended June 2025, reflecting sound financial reporting and compliance. Additionally, the Company has an internal audit department that operates independently and reports directly to the Audit Committee, ensuring robust internal controls and governance.


Management
Organizational Structure

SMCPL's operational structure comprises nine departments, all of which report directly to the Managing Director, Mr. Syed Sajjad Ali Shah, ensuring streamlined decision-making and efficient management. However, the Internal Audit department functions independently and reports directly to the Audit Committee, reinforcing transparency and strong governance through independent oversight.


Management Team

SMCPL benefits from a highly skilled and diverse management team, bringing a strong blend of expertise and experience. Leading the organization, CEO Mr. Muhammad Suleman leverages his extensive 39-year career across various sectors since joining the Foundation in 2014. The rest of the management team is equally well-qualified, with complementary skill sets that enhance strategic execution and support Mr. Suleman’s leadership in driving the Company's growth and sustainability.



Effectiveness

The Company follows a structured and well-defined decision-making process. A Management Committee, encompassing various functions, is in place to ensure strategic alignment and operational efficiency. Chaired by the Managing Director, the committee includes all department heads, facilitating collaborative decision-making and effective execution of company objectives.


MIS

The Management Information System (MIS) is fully integrated with key operational frameworks, including the Human Resource Management System, Financial Information System, and E-Appraisal system. This seamless integration ensures real-time data availability, enhancing decision-making efficiency and strategic planning.


Risk Management framework

A comprehensive risk management policy is in place to effectively mitigate operational and credit risks. The Company has a structured loan approval process, with defined approval limits assigned to each approving authority, including the Branch Manager, Area Manager, Manager Operations, and Credit Committee, ensuring disciplined credit evaluation and risk control. The company implements robust risk management practices through branch tagging and customer tagging. Additionally, SMCPL’s risk framework undergoes an independent review by the Frankfurt School of Finance & Management, ensuring adherence to global best practices and regulatory standards.


Technology Infrastructure

SMCPL is actively investing in its technological infrastructure to enhance automation and improve operational efficiency across departments, ensuring streamlined processes and greater scalability.


Business Risk
Industry Dynamics

As of FY25, the microfinance industry reported a gross loan portfolio (GLP) of PKR 687 billion. Microfinance institutions (MFIs) and rural support programs (RSPs) accounted for PKR 204 billion of this, representing approximately 29.6% of the industry’s total GLP. The industry had 12.2 million active borrowers, of which MFIs and RSPs accounted for 3.4 million, or roughly 27% of total borrowers. The infection ratio for MFIs and RSPs remained very low at ~1.1% in FY25, improving from ~1.3% in FY24. This compares favorably to microfinance banks (MFBs). MFIs generally maintain lower infection ratios due to their smaller, community-focused lending models, cautious credit expansion, and deeper borrower engagement.





Relative Position

In terms of relative positioning within the microfinance sector, SMCPL remains a small player, with an active borrower base of 160,286 as of 6MFY26, representing ~4.7% of the industry’s total borrowers of 3.4 million. Similarly, the company’s loan portfolio stands at PKR 5.5 billion compared to the overall industry portfolio of PKR 204 billion, translating into a market share of around ~2.6%. Despite its modest scale, SMCPL has built strong and stable relationships with its borrowers, which supports customer loyalty and underpins portfolio quality.


Revenue

During 6MFY26, SMCPL generated a markup income of ~PKR 1.06bln (6MFY25: ~PKR 1.01bln; FY25: ~PKR 1.6bln; FY24: ~PKR 1.4bln), resulting in a net markup earned of ~PKR 659mln (6MFY25: ~PKR 476mln; FY25: ~PKR 836mln; FY24: ~PKR 545mln). The Company's business strategy focuses on maintaining a balanced investment portfolio, including term deposits and bank placements, to optimize liquidity and earnings stability.


Profitability

During 6MFY26, non-markup expenses stood at PKR 397mln (6MFY25: ~PKR 397mln; FY25: ~PKR 983mln; FY24: ~PKR 709mln). Provisioning expenses were recorded at PKR 56mln in 6MFY26 (6MFY25:  ~PKR 28mln; FY25: ~PKR 30mln; FY24: ~PKR 59mln). The institution's bottom line saw a notable decline, reaching PKR 157mln in 6MFY26 (6MFY25: ~PKR 218 FY25: PKR 88mln; FY24: PKR 71mln)


Sustainability

SMCPL aims to strengthen its market position by expanding its geographic footprint and enhancing operational capacity. The Company has strategic plans to increase its branch network, enabling broader outreach and sustained growth in the microfinance sector.


Financial Risk
Credit Risk

SMCPL has established an authority matrix across branch, area, regional, and head office levels, aligned with loan size thresholds. A Credit Committee serves as the apex body for approving the highest loan slabs and resolving complex cases. During 6MFY26, the Gross Loan Portfolio (GLP) reached PKR 4.732bln (FY24: ~PKR 4.07bln; FY23: ~PKR 3.74bln). The true infection ratio improved to 3% as of 6MFY25 (FY24: 4%; FY23: 6%), reflecting enhanced portfolio quality


Market Risk

As of 6MFY26, SMCPL's investment portfolio primarily consists of Short-Term Deposit Receipts across various banks, totaling PKR 1,321mln (6MFY25: ~PKR 1390mln; FY25: ~PKR 718mln; FY24: ~PKR 757mln), reflecting the Company's strategy to maintain liquidity and optimize returns.


Funding

As of 6MFY26, SMCPL's total long-term borrowings stood at PKR 7.15bln (6MFY25: ~PKR 6.69bln; FY25: ~PKR 6.62bln; FY24: ~PKR 5.6bln), indicating a steady increase in debt financing to support portfolio expansion and operational growth. The rising borrowings suggest the Company's ongoing efforts to enhance its lending capacity, although prudent debt management will remain crucial to maintaining financial stability.


Cashflows & Coverages

As of 6MFY26, SMCPL's current ratio stood at 2.6, underscoring its strong liquidity position and robust short-term solvency.


Capital Adequacy

SECP has no minimum requirement for NBFI, unlike SBP which requires MFBs to maintain their CAR at 15%. Apart from any regulatory requirement to meet minimum ratios, the Company has to satisfy the covenants of loans. The Company must comply with those covenants. As of 6MFY26, total funds and reserves stood at PKR 1,025mln (6MFY25: PKR 998mlln; FY25: PKR 868mln; FY24: PKR 780mln), reflecting a strong capital base and financial stability.
 
 

Mar-26

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SAFCO Microfinance Company (Private) Limited


Financial Summary

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(PKR mln)


 Dec-25
6M		 Jun-25
12M		 Jun-24
12M		 Jun-23
12M
Management Audited Audited Audited
A. BALANCE SHEET
1. Total Finances - net 5,303 5,145 4,078 3,744
2. Investments 1,321 718 757 462
3. Other Earning Assets 568 940 870 519
4. Non-Earning Assets 1,324 1,178 993 683
5. Non-Performing Finances-net 101 25 14 (23)
Total Assets 8,617 8,006 6,712 5,386
6. Deposits 0 0 0 0
7. Borrowings 7,152 6,620 5,694 4,534
8. Other Liabilities (Non-Interest Bearing) 440 518 238 234
Total Liabilities 7,592 7,137 5,932 4,768
Equity 1,025 868 780 618
B. INCOME STATEMENT
1. Mark Up Earned 1,067 1,697 1,473 1,068
2. Mark Up Expensed (408) (861) (928) (627)
3. Non Mark Up Income 15 271 177 84
Total Income 674 1,107 722 526
4. Non-Mark Up Expenses (397) (983) (709) (580)
5. Provisions/Write offs/Reversals (56) 30 59 (75)
Pre-Tax Profit 221 154 72 (128)
6. Taxes (64) (66) (1) (0)
Profit After Tax 157 88 71 (128)
C. RATIO ANALYSIS
1. Performance
Portfolio Yield 37.6% 30.9% 32.0% 24.6%
Minimum Lending Rate 32.3% 38.3% 38.5% 32.8%
Operational Self Sufficiency (OSS) 125.4% 108.2% 104.3% 89.9%
Return on Equity 33.2% 10.7% 10.1% -16.6%
Cost per Borrower Ratio 5,275.2 7,312.0 6,027.3 4,811.3
2. Capital Adequacy
Net NPL/Equity 9.9% 2.9% 1.7% -3.8%
Equity / Total Assets (D+E+F) 11.9% 10.8% 11.6% 11.5%
Tier I Capital / Risk Weighted Assets N/A N/A N/A N/A
Capital Adequacy Ratio N/A N/A N/A N/A
Capital Formation Rate [(Profit After Tax - Cash Dividend ) / Equity] 36.2% 11.3% 11.4% -13.9%
3. Funding & Liquidity
Liquid Assets as a % of Deposits & Short term Borrowings N/A N/A N/A N/A
Demand Deposit Coverage Ratio N/A N/A N/A N/A
Liquid Assets/Top 20 Depositors N/A N/A N/A N/A
Funding Diversification (Deposits/(Deposits+Borrowings+Grants)) 0.0% 0.0% 0.0% 0.0%
Net Advances to Deposits Ratio N/A N/A N/A N/A
4. Credit Risk
Top 20 Advances / Advances 0.6% 0.6% 0.6% 0.5%
PAR 30 Ratio 1.9% 2.1% 3.6% 5.5%
Write Off Ratio 0.0% 0.0% 0.0% 0.0%
True Infection Ratio 1.9% 2.1% 3.6% 5.5%
Risk Coverage Ratio (PAR 30) 0.0% 77.0% 91.0% 110.7%

Mar-26

www.pacra.com

SAFCO Microfinance Company (Private) Limited


Rating Scale

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Mar-26

www.pacra.com

SAFCO Microfinance Company (Private) Limited


regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
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      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
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      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
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