PACRA Maintains Entity Ratings of Apna Microfinance Bank | Assigns Negative Outlook

The rating reflects risk profile of Apna Microfinance Bank ("the bank"). Apna is a small-tier player in Pakistan’s microfinance sector with ~2.93% share in total gross loan portfolio. The Bank has 118 business locations comprising of 116 branches and 2 service centers. Overall performance indicators depicted a deteriorated outlook in CY21 amidst economic slowdown exacerbated by the aftermaths of global pandemic. Therefore, the repercussions can be witnessed in the form of declined mark-up earned and increasing infection. Further challenges in recovery and mark up suspension led to diminution in interest income. Auditor opinion is currently qualified for the bank and is expected to continue until the old loan portfolio clears out in totality. Management’s commitment to recoup the asset health and consolidate the Bank’s position within the stipulated time is an acute necessity. However, the deferment in account finalizations demands agility from the management. Moreover, since the projected outlook of the Bank indicates absorbing cash losses, timely yet matching sponsor support through equity injections is essential. Sponsors' committed efforts to arrest shortfall in minimum CAR benchmark is witnessed through persistent equity injections. However, Bank's CAR stands still below the regulatory benchmark of 15%. Though SBP’s Relief Packages have come handy to the sector in protecting the credit quality of the players during the previous waves, the out-turn of the situation, and its relative impact on the risk profiles of industry players, including Apna MFB, is yet to unfold in the days to come.
The ratings are dependent upon the bank’s ability to aptly combat the emerging risks under the current scenario in order to keep its business and financial risk profile intact. The ratings are also kept under “Watch” with the negative outlook incorporates challenges on profitability front and fulfilling MCR requirements. Compliance with CAR is essential, going forward. Besides, turning loss into profitability is imperative.

About the Entity
Apna Microfinance Bank, listed on Pakistan Stock Exchange, was established under the Microfinance Institution Ordinance 2001. It started operations in 2005. Headquartered in Lahore, it operates a nationwide network of 116 branches and 2 service centers. The overall control of the company vests in an eight-member Board. Mr. Muhammad Akram Shahid is the chairman of the board. Mr. Wajahat Malik is serving as the President and CEO of the bank. He is assisted by a team of experienced professionals, long associated with the company. Ilyas Saeed & Co. Chartered Accountants are the external auditors of the company. The firm has carried forward its qualified opinion on the financial statements of CY20, in respect of the quantum of non-performing advances, related provision, and suspended income.