The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of NRSP Microfinance Bank Limited

Rating Type Entity
(06-Nov-18 )
(30-Apr-18 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings incorporate the bank's notable position in the microfinance sector, evident from its ~10% share in MFBs' gross loan portfolio and ~12% in the MFBs' deposits. The design of lending product keeps the concentration high wherein a sizable portion of the loan book is dedicated to crop-linked loans, particularly to sugarcane crops. The bank's asset quality has been affected by low sugarcane prices and delay in release of payments by the sugarcane mills to the farmers. Short-term strategy, therefore, remains focal to consolidating the position, including recovery and simultaneously diversification of loan portfolio. The bank's financial risk profile is reflected by sanguine margins and average growth in loan portfolio. Funding base majorly accounts for deposits constituting a high chunk of time deposits. The ratings take comfort from association of NRSP Microfinance Bank with the National Rural Support Programme, the major shareholder, and with the three foreign development organizations - IFC, Acumen, and KfW, providing both technical and financial support to the bank. Focus on poverty alleviation for the underprivileged community remains pivotal in modelling the bank's strategy.

The ratings are dependent on the bank's ability to sustain its competitive position in the MFBs market. Reviving asset health is critical. Meanwhile, prudent management of liquidity profile alongside strengthening of capital base remain imperative.

About the Entity
NRSP Microfinance Bank Limited (NRSP Bank) commenced operations in Mar’11 as a nation level microfinance bank. The bank is majority (~52%) owned by National Rural Support Program (NRSP). Kreditanstalt für Wiederaufbau (KfW), International Finance Corporation (IFC), and Acumen each having ~16% shareholding in the Bank. With a network of 121 branches, the bank has its head office in Bahawalpur, a key district in Southern Punjab; placing it closer to its target market.

NRSP's board comprises 3 representatives from NRSP, 1 nominee each from IFC, KfW, and Acumen, 1 independent director and the CEO. Mr. Zahoor Hussain Khan - President since 2011 – an experienced microfinance banker. 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.