The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Mobilink Microfinance Bank Limited

Rating Type Entity
(29-Apr-23 )
(30-Apr-22 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

The bank's ratings are fortified by its association with Veon (previously VimpelCom), a premier global telecom group, and Jazz (previously Mobilink), the largest cellular operator in Pakistan. The bank's sponsor has displayed unwavering commitment by offering technical collaboration and financial backing, allowing the bank to penetrate its target markets with greater efficiency. The bank's business model prioritizes both core and branchless banking, utilizing the sponsor's network and brand name, JazzCash, to accelerate growth in the branchless banking sphere via mobile wallet accounts. Presently, the bank's strategy revolves around capitalizing on its digital banking infrastructure, fortified by support from its super-agent cellular operator. One such manifestation is the recent release of the Dost App to meet the microfinancing needs of branchless banking customers. The management remains self-assured in maintaining its margins and positioning the bank as a pioneering mobile banking services provider in the face of mounting competition. As at End Dec'22, the bank captured an 11.58% market share in the microfinance industry's gross loan portfolio. Nevertheless, the surge in the gross loan portfolio has resulted in an unfavorable impact on the bank's asset quality. NPL’s quantum recorded an increase YoY (end-Dec22: PKR 2.6bln, (end-Dec21: PKR 1.2bln). Further, higher provisioning expenses were recorded YoY. With the sizable increase in key policy rate YoY harnessing of NPLs remain vital. The bank's markup earned and net markup income rose proportionally, resulting in a net profit of PKR 972mln in the current year, up from PKR 728mln in the prior year. The bank's progress in the burgeoning SMP segment, which includes larger ticket sizes, is expected to provide support. Additionally, granular small ticket-size deposits in the branchless banking domain contribute positively to the bank's performance indicators.
The bank's ratings are contingent upon its capacity to effectively mitigate emerging risks under the prevailing circumstances to preserve its business and financial risk profile. At the same time, the bank's ability to safeguard its performance indicators in a challenging business environment is crucial.

About the Entity
Mobilink Microfinance Bank Limited, a nationwide microfinance bank, was established in 2012. The bank is a wholly-owned subsidiary of Global Telecom Holding (GTH), which is mostly owned by VEON (formerly Vimpeldomy), one of the largest telecom groups worldwide. Jazz (formerly Mobilink), the bank's super-agent in branchless banking, is also owned by VEON. The Board of Directors is composed of six members, including three non-executive directors, two independent directors, and the CEO, Mr. Ghazanfar Azzam, who has over 36 years of experience in the banking sector. Mr. Azzam leads a skilled and experienced 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.