Sindh Microfinance Bank Limited ("SMFBL" or the "Bank") was incorporated with the Securities and Exchange Commission of Pakistan on March 27, 2015 under Section 32 of the Companies Act, 2017. The Bank received its license to operate as a Microfinance Bank (MFB) by the State Bank of Pakistan (SBP) on October 16, 2015. The Bank was granted a National Level License in early 2026, enabling it to expand operations across Pakistan. Additionally, SMFBL obtained in-principle approval for launching Islamic Banking products from SBP in 2025. With the approval, the Bank aims to introduce Shariah-compliant financial solutions alongside its existing conventional microfinance services, thereby serving a broader segment of the market nationwide.

The Bank is a wholly owned subsidiary of Sindh Bank Limited, with its registered office located at 39/F, 2nd Floor, Muhammad Ali Cooperative Housing Society, Karachi.

The Bank's core business is to provide microfinance services to the underserved and low-income segments of society, in accordance with the Microfinance Institutions Ordinance, 2001. While its primary footprint is within the province of Sindh, the Bank currently operates a network of 22 branches and 91 service centers. Its lending portfolio is predominantly focused on its flagship product, “Sujag Aurat”, designed to empower women entrepreneurs. Other notable products include Agriculture Loans, Fisheries Loans and Livestock Loans, tailored to specific livelihood segments.   Following the National Level License, the Bank plans to expand its physical network by establishing three branches and thirteen service centers in Punjab and Balochistan in the near future. Furthermore, the Bank’s operational performance and profitability are expected to be strengthened through the introduction of Islamic banking operations across existing branches, complementing its conventional banking services.

The Bank is a wholly owned subsidiary of Sindh Bank Limited (the Holding Bank), which is owned by the Government of Sindh through its finance department.

As a wholly-owned subsidiary of Sindh Bank Limited, the Bank operates under a sound and stable ownership structure, benefiting from strategic guidance, financial support, and governance oversight, which collectively strengthen its operational and financial position.

The Bank was incorporated as part of the Government of Sindh's initiative to participate in the financial sector and promote economic development. The initiative also includes other entities such as Sindh Modaraba and Sindh Insurance, alongside Sindh Bank and Sindh Microfinance Bank. Sindh Bank, with a network of over 330 branches and presence in 169 cities across Pakistan, has established itself as a successful commercial bank over time.

The sponsor's financial muscle is robust. Sindh Bank's equity at the end of Sep'25 stood at PKR 31bln and its net advances were recorded at PKR 110bln.

The overall control of the Bank rests with an eight-member Board of Directors (BOD), including the President/CEO. The Board comprises four independent directors, including one female director, and two non-executive directors. Additionally, the Board oversees its operations through four sub-committees responsible for various functions.

The Board members collectively possess extensive expertise in financial and banking services. Mr. Syed Assad Ali Shah was appointed as Chairman of the Board in July 2025, replacing Mr. Baqir Hussain. Mr. Dilshad Hussain, Non-Executive Director, is a Certified Management Accountant (CMA) and holds an MBA degree in Finance and Accounts. With over 30 years of experience in financial institutions, he has been associated with Sindh Bank since 2011. Mr. Riaz Ahmed, Non-Executive Director, is an expert in Information Technology, specializing in Core Banking Software and Alternative Delivery Channels (ADC). He brings more than 25 years of experience in IT operations. Dr. Ghulam Mustafa Suhag, Independent Director, is a seasoned Public Civil Servant with over 26 years of experience in civil services. He has been serving as the Managing Director of Sindh Technical Education and Vocational Authority (STEVTA) since September 2021. Mr. Sikandar Abbasi, Independent Director, brings over 32 years of experience in Commercial, Islamic, and Development Banking, Management Consulting, Strategic Planning, Board Advisory, Learning & Development, and Education. He previously served as Senior Director & Country Head Consulting at Syed Husain & Co., Chartered Accountants, an independent firm associated with Moore Stephens International Limited, UK. Ms. Sahibzadi Mahin Khan, Independent Director, is a seasoned CEO and business leader with nearly two decades of experience in management consulting, entrepreneurship, and business strategy. She is the Founder President of the Women Chamber of Commerce & Industry, Korangi Karachi (WCCIK) and has served on multiple advisory boards. A certified board director and DEI professional, she specializes in business development, leadership, and strategic partnerships. She holds an MBA in Business Administration & Management from the Institute of Business Management (IoBM). Mr. Naqi Raza, appointed in July'25, is an Independent Director and a seasoned banker with over 35 years of extensive banking experience across Pakistan and abroad.

The Board exercises its oversight via four committees, namely (i) Audit Committee (ii) Risk Management & Compliance Committee (iii) HR & Compensation Committee and (iv) IT & Procurement Committee. Attendance of the Board of Directors during the meetings was good and minutes were properly documented.

Riaz Ahmed & Co. Chartered Accountants are the External Auditors of the Bank. They expressed an unqualified opinion on the financial statements of the Bank for the year ending on December 31, 2025.

The Bank's organizational structure is divided into various departments, with all department heads reporting directly to the CEO, while the Head of Internal Audit reports directly to the Audit Committee. The Bank's operations are distributed across the head office, branches, and micro-credit centers (also referred to as service centers).

The management team is led by Mr. Shoaib Arif, the CEO, a seasoned microfinance practitioner with over two decades of experience. His extensive career includes serving as Chief Operating Officer at ASA Pakistan Limited, one of the largest microfinance players in Pakistan, and as Chief Executive Officer at ASA Kabul-Afghanistan. Additionally, he held the position of Chief Operating Officer at Network Microfinance Bank for five years. Mr. Shoaib Arif holds a Master’s Degree in Economics. The CEO is assisted by an experienced management team. Mr. Amir Waheed Ahmed, CFO, is a Visionary Chartered Accountant and Certified Director with over 30 years of finance leadership in MNCs and Fortune 500 companies. Recently served as Executive Director at Muniff Ziauddin & Co., Chartered Accountants. Mr. Nasir Hussain, Head of Risk and Compliance, brings 18 years of experience distinguished by strategic leadership and the development of robust fraud prevention mechanisms.

The Bank follows a structured decision-making process, supported by multiple management committees overseeing key areas. These committees help in monitoring performance and ensuring compliance with internal policies and regulatory requirements. The management team maintains clear reporting lines and focuses on effective risk management, supporting smooth operations and consistency in execution.

The Bank’s core banking software PIBAS is cost-effective and reliable, offering advanced technology with high availability across both centralized and distributed environments, along with strong security features. The system is also upgraded periodically to support ongoing improvements and evolving operational requirements.

The Bank follows a structured risk control framework, with defined procedures and limits embedded at the operational level. This approach supports consistent performance and enables management to maintain operational efficiency while gradually expanding the business. The administrative and monitoring setup is organized across three tiers—Area, Region, and Head Office—ensuring effective oversight and coordination across functions.

The Bank is prioritizing the adoption of digital platforms to remain competitive, with a focus on enhancing accessibility and user experience. It has implemented PIBAS software as its core banking solution, which offers various applications, including security, centralized limits, reconciliations, and other functionalities. The system also provides real-time surveillance of branches and financial centers. Additionally, the Bank has developed an in-house software, “TAFSEEL”, which is near finalization. This software will facilitate digital onboarding and promote a paperless environment, further improving operational efficiency.

Pakistan’s microfinance ecosystem comprises Microfinance Banks (MFBs), Microfinance Institutions (MFIs), Rural Support Programmes (RSPs), and FinTechs, with MFBs dominating (~77% of Gross Loan Portfolio (GLP)) and uniquely funded through customer deposits, highlighting their systemic importance. The sector entered FY25 in a phase of cautious recovery following recent macroeconomic shocks. By late CY24–Oct’25, macro conditions improved modestly, with easing inflation (~5.6%), stable currency, lower interest rates, and positive Gross Domestic Product (GDP) growth, while GDP growth is projected at ~2.6%–3.6% for FY26. Despite this improvement, the sector continues to face elevated credit risk, weak capital buffers, and uneven performance across players, with loan exposure largely concentrated in livestock and agriculture (~57%), increasing vulnerability to external shocks. During CY25, the sector reported advances of PKR 468 bln (CY24: PKR 421.2 bln) funded primarily through deposits and borrowings, resulting in an Advance-to-Deposit Ratio (ADR) of 65% (Dec’24: 63%). In comparison, Sindh Microfinance Bank Limited (SMFBL) maintained a significantly higher ADR of 175% (Dec’24: 112%), reflecting strong deposit mobilization relative to advances. The sector remained loss-making for the sixth consecutive year, reporting a reduced loss of PKR 2.0 bln (CY24: PKR 16.2 bln). In contrast, SMFBL has consistently generated profits, doubling its earnings every year over the last four years, supported by its focused lending under the “Sujjag Aurat Loan” program and disciplined risk assessment. The sector’s Capital Adequacy Ratio (CAR) remained weak at -1.2% (Dec’24: 2.6%), well below the regulatory requirement of 15%, whereas SMFBL’s CAR stood robust at 44.74% (Dec’24: 44.26%), indicating a strong capital buffer and resilience against shocks.

The Bank currently holds a small market share in terms of Gross Loan Portfolio (GLP), standing at 0.51% as of Dec’25 (Dec’24: 0.48%), but is experiencing rapid growth with initiatives aimed at further expanding its lending portfolio and penetrating the market. The Bank is actively expanding its customer outreach through: 1) a branch network, 2) women-centric and financially sustainable loan projects 3) digitized processes, and 4) broadening the fund base through deposit mobilization and debt funding.

The Bank’s markup earned increased by ~23.7% YoY to PKR 1,708mln in CY25 (CY24: PKR 1,381mln), primarily driven by growth in the advances portfolio, particularly under its flagship Sujag Aurat Loan, along with improved portfolio yields. The net markup income also recorded a notable increase of ~46.7% YoY, reaching PKR 1,302mln in CY25 (CY24: PKR 888mln), supported by higher earning assets and relatively better spread management.

In CY25, the Bank made a loss provisioning of PKR 100mln (CY24: PKR 133mln), reflecting relatively improved asset quality and recoveries during the year. Tax expense increased to PKR 223 mln (CY24: PKR 92mln), in line with higher profitability. Consequently, the Bank doubled its Profit After Tax (PAT) to PKR 329mln (CY24: PKR 153mln).

Going forward, the Bank will focus on increasing its loan portfolio with a cautious approach. The remarkable stability of the Bank is evidenced by its consistent profitability over the span of nine years, a feat unmatched by any other Microfinance Bank. In alignment with its expansion initiatives. After successfully obtaining the national-level license from the State Bank of Pakistan, the Bank now aims to progress its geographical expansion, with plans to increase its branch and service center network. This expansion is expected to enhance outreach, strengthen sustainability, and support long-term growth.

The Bank has an effective loan disbursement and recovery monitoring system, incorporating necessary checks and independent verification to support informed credit assessment. During CY25, Sindh MFB’s gross micro-credit advances increased by 21.6% YoY to PKR 2,722mln (CY24: PKR 2,239mln), reflecting continued growth in its lending portfolio. The Advances-to-Deposit Ratio (ADR) stood at a relatively high 175%% (Dec’24: 112%), indicating strong deployment of deposits in lending activities. The credit portfolio remains largely concentrated on the flagship “Sujjag Aurat Loan,” while asset quality has improved, with Non-Performing Loans (NPLs) declining to PKR 9.5mln (Dec’24: PKR 16mln) and the infection ratio easing to 1.4% (Dec’24: 1.7%). The Bank’s structured risk assessment and disciplined recovery practices support sustained portfolio quality.

At end-Dec’25, Sindh Microfinance Bank Limited (SMFBL) maintained a total investment portfolio of PKR 1,070mln, slightly lower than PKR 1,133mln at end-Dec’24, reflecting cautious deployment amid changing market conditions. Investments in government securities increased to PKR 285mln (Dec’24: PKR 233mln), primarily in T-bills, providing low-risk returns and high liquidity. Investment in Term Deposit Receipts (TDRs) declined to PKR 785mln (Dec’24: PKR 900mln), consistent with the Bank’s strategy to optimize yield while preserving capital safety. The portfolio’s composition demonstrates a preference for stable and liquid instruments, mitigating exposure to interest rate and credit risk. Overall, SMFBL’s investment approach balances risk and return, supporting both liquidity management and portfolio quality in a moderately volatile market environment.

As of the end of December 2025, the Bank’s total borrowings stood at PKR 1,265 million, including PKR 917 million from the State Bank of Pakistan under the Line of Credit Scheme, PKR 200 million from PMIC, and PKR 149 million from Sindh Bank Limited. These borrowings provide the Bank with the necessary funding to manage liquidity and support its operations.

At end-December 2025, Sindh Microfinance Bank’s deposits stood at PKR 1,553 million (end-Dec 2024: PKR 1,991 million). The composition of deposits during the year is, Banking Companies PKR 300 million (end-Dec 2024: PKR 270 million); Public Sector Entities is Rs. 741mln (end-Dec 2024: PKR 128mln). The decline reflects a temporary shift in customer deposits. However, the Bank continues to maintain a stable deposit base to support its ongoing lending activities.

As the Bank continued to maintain a lean loan book, its capital adequacy ratio (CAR) strengthened to 44.74% at end-December 2025, compared to 44.26% at end-December 2024. The high CAR underscores the Bank’s strong capitalization, providing a buffer against potential credit and operational risks while supporting its lending operations.