The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns Initial rating to Mobilink Microfinance Bank Limited | PPTFC | Dec-22

Rating Type Debt Instrument
(02-Feb-23 )
Action Initial
Long Term A-
Short Term -
Outlook Stable
Rating Watch -

The ratings take comfort from the bank's association with a leading global group – Veon Microfinance Holdings B.V (VMH) - and with Pakistan's largest cellular operator – Jazz (formerlyMobilink). Sponsor’s commitment to the bank is witnessed in the form of both technical collaboration and financial support. Ensuing synergies have strengthened the bank's penetration intarget markets. The management's confidence lies in keeping this segment's margins sustained and bring it at the forefront of mobile banking services, amidst rising competition. The bank held a market share of ~9% in the microfinance industry’s Gross loan portfolio as at End-Dec'21. While growth strategies for the Bank have been taken under consideration, overall performance indicators reflected a firm outlook in CY21 despite of economic slowdown, lately exacerbated by the aftermaths of global pandemic spread. Consequently, the Bank’s GLP upsurged. Asset quality impaired on account of expiry of SBP’s deferment scheme period, along-with small portion being unprovided. The Bank has been maintaining a provisioning cushion of 2% (instead of 1%required). Markup earned and net markup income increased in line with GLP. Consequently, the Bank reported bottom-line of PKR 728mln in CY21 (CY20: 530mln).
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. Meanwhile, the bank’s propensity to protect its performance indicators amidst constrained business environment, is imperative.

About the Entity
Mobilink Microfinance Bank Limited commenced its operations in 2012, as a nationwide Microfinance bank. The Bank is a subsidiary of Veon Microfinance Holdings B.V (VMH) (the Holding Company), with effect from March 27, 2020 upon transfer of 99.99% shareholding in the Bank, from Global Telecom Holdings (GTH). The Board of Directors comprises seven members consisting of four non-executive directors, two independent directors and the CEO - Mr. Ghazanfar Azzam, who carries with him over 35 years of experience in the banking sector. He is assisted by a qualified and experienced management team.

About the Instrument
Mobilink Microfinance Bank Limited has issued Rated, Privately Placed Listed/DSLR, Unsecured, Subordinated, Tier II Term Finance Certificates (TFC) of PKR 2,000mln to contribute towards the bank’s Tier II capital for complying with the Capital Adequacy Ratio(CAR) requirement prescribed by the SBP for Microfinance Banks. The instrument has a tenor of 07 years from the date of issue. The first such profit payment is falling due at the end of sixth (6th) months from the Issue Date and subsequently every six (06) months thereafter, with rate of 6MK+210bps. Principal of TFC shall be redeemed in four equal installments commencing from the end of 66th from the issue date .

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.