The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Assigns Initial Entity Ratings to The First Microfinance Bank Limited

Rating Type Entity
Action Initial
Long Term A+
Short Term A1
Outlook Stable
Rating Watch -

The ratings assigned to The First MicroFinanceBank Ltd (FMFB) underpin the Bank's affiliation with Aga Khan Development Network and Habib Bank Limited (HBL) – one of the largest banks of the country. The First MicroFinanceBank Ltd (FMFB) has been able to devise a sound strategy and establish strong footprint over the years. The Bank held a 19% market share amongst the microfinance banks as at end-Sep`21 in terms of GLP, being second highest in the industry, which grew by 216 basis points on a YoY basis. The recent growth recorded in the GLP is a result of enhanced outreach secured by the Bank. The same growth pattern is projected in the future as well; wherein the need to curb infection remains vital. During 9MCY21, the Bank recorded sizable improvement in markup income, due to enhanced portfolio as well as investment book. Sustainable and improving the fee and commission income has been supplementing the profitability. The Bank's higher provisioning expense in 2020 is attributable to increased general provisioning to create additional cushion on rescheduled loans. The Bank enjoys sizable increase in net profitability. The investment book is vested in the government securities which adds to the liquidity side. Funding is majorly fueled through deposits where high contribution arises from saving and demand deposits. However, the concentration of the Top-20 deposits is tilted towards higher side. A high equity base provides cushion in the risk absorption capacity of the Bank. Capital Adequacy Ratio (CAR) was recorded at 18.6% as at end-Sep’21 amid equity injection by parent company, HBL, in form of the share capital through right shares issuance of Rs. 2b in the ongoing year. Risk management framework is supported by Loan Origination System which has been implemented in 120+ branches as at end-Sep’21 while branchless banking (FirstPay) has been commercially launched in 1QCY21. Under the current scenario COVID-19 pandemic has poised challenge to business and asset quality; guarding against the infection is of prime importance.
The ratings are dependent on the Bank’s ability to sustain and improve the current market position. Given the strong business acumen of the sponsors, a distinct focus is vested to continue leading the market with good asset quality. Meanwhile, the Bank’s propensity to protect its performance indicators is imperative.

About the Entity
The First MicroFinance Bank Limited (FMFB), “the Bank”, was incorporated in 2002 as a nationwide microfinance bank, licensed by the State Bank of Pakistan. The Bank is majorly owned by Habib Bank Limited (HBL) (71.43%), followed by Aga Khan Agency for Microfinance (AKAM) (17.15%), Aga Khan Rural Support Programme (AKRSP) (6.34%), and Japan International Cooperation Agency (JICA) (5.07%). The Bank is a fast-growing microfinance bank currently operating with a nationwide network of 213 locations with its head office located in Islamabad.
The Board comprises eight directors; four representatives of Habib Bank Limited, two representatives of Aga Khan Agency for Microfinance, one representative of Aga Khan Rural Support Programme and one representative from Japan International Cooperation Agency. The CEO of the Bank is Mr. Muhammad Amir Khan. He has over three decades of experience in consumer and commercial banking and has worked in Standard Chartered Bank, ABN AMRO Bank, and Royal Bank of Scotland. He also served as CEO of Mobilink Microfinance Bank (then Waseela Microfinance Bank).

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.