The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Mobilink Microfinance Bank Limited

Rating Type Entity
(26-Oct-17 )
(28-Apr-17 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings take comfort from the relationship of Mobilink Microfinance Bank (formerly known as Waseela Microfinance Bank) with a leading global telecom group - Veon (formerly Vimplecom) - and with Pakistan's largest cellular operator – Jazz (formerly Mobilink). Sponsor’s commitment to the bank has been witnessed in the form of both technical knowledge transfer and financial support. Ensuing synergies are likely to strengthen the bank's penetration in target markets. Leveraging on the sponsors network and renowned brand name (JazzCash), Branchless Banking domain is being reinforced with aiming to expand M-wallets accounts; 40% share in Jun’17 of industry’s BB deposits. Simultaneously, the bank is aggressively increasing the core microfinance business and achieved a market share of 4% in the total GLP of the MFP industry. Although presently the operational costs are towards higher end, volumes from expansion activities should positively impact the cost structure. So far, overall asset quality is good, but this requires careful monitoring particularly against concentration – product, geography, or consumer. Overall deposit base has reported hefty growth, mainly fuelled by demand deposit and BB (contributing 39% in total deposits). Despite the growth trend, deposit base is not seasoned enough as compared to other deposit mobilization institutions. Significant growth in risk assets is fast consuming bank’s CAR. Although ensuing profits would provide room, the bank needs to infuse fresh capital. The parent has injected PKR 1.3bln, related modalities to convert it to capital are in process. Going forward, growth in active m-wallet users is targeted while management is also working on payment platform and digital lending initiatives.

Sustaining the growth trend while enhancing its market outreach remains central for the ratings. Given the expansion strategy of the bank, related risks mainly credit quality needs to be monitored carefully. With the competitive landscape, effective execution of business strategy and cohesiveness in management team remain important while maintaining the overall risk profile of the bank.

About the Entity
Mobilink Bank commenced operations in May 2012 as a nationwide microfinance bank. It is a wholly owned subsidiary of Global Telecom Holding (GTH), which in turn, is majority owned by Veon (formerly Vimplecom) - one of the world's largest telecom groups. Veon also owns Jazz (formerly Mobilink), bank's super-agent in branchless banking (BB).

The BoD comprises of three directors - Jazz executive as representative of GTH and two independent members. Mr. Ghazanfar Azzam - President/CEO – is an experienced microfinance and commercial banker with a career spanning over 30 years. He is assisted by a qualified management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.