PACRA Assigns Initial Entity Ratings to Parwaaz Financial Services Ltd.

Parwaaz Financial Services Ltd (hereinafter referred to as “PFSL” or “the Company”) is a wholly owned subsidiary of Karandaaz Pakistan Ltd (KRN), KRN is a notable not-for-profit company formed under section 42 of the Companies Act 2017, it functions as an implementation partner for various programs of the Foreign, Commonwealth & Development Office (FCDO), UK, and Bill and Melinda Gates Foundation, PFSL intends to develop a distinctive indigenous portfolio while also acting as an agent for KRN on its certain identified initiatives for SMEs. PFSL provides bespoke financing solutions to cater to the credit needs of Small and Medium Enterprises (SMEs) with a focus on the industrial and Agri value chains, renewable energy, health, and education segments. Currently, PFSL’s indigenous portfolio constitutes ~67% of deployed advances whereas ~33% is contributed by the funding disbursed on behalf of KRN. The board of PFSL has an independent oversight function and is comprised of experienced and technical personnel. The board exercises control through formal committees. The operations of the company are augmented by a team of professionals and industry specialists. The company has implemented a comprehensive risk management policy that includes risk assessment and mitigation mechanisms augmented by an internally developed Obligor Risk Rating Model to maintain sound asset quality. Thus, the assigned ratings reflect the strong ownership emanating from the presence of KRN, a well-defined governance structure complimented by an experienced management team, and supported by the presence of a strong risk management framework. An estimated 5.2mln SMEs are operating in the formal and informal segments across the country, As per the statistics published by SBP, as of Dec-23, outstanding loans to the SMEs were recorded at PKR 542.5bln, extended to ~172,300 active borrowers. reflecting a significant gap in the SME financing sector. PFSL is well-aligned to establish itself as a key player in the industry considering that the Company has amassed a loan portfolio of ~PKR 2,575mln and the asset quality is currently good. The Company has managed to develop a customer base comprising ~64 entities emerging from multiple sectors. PFSL is currently reliant on the equity of ~PKR 1.5bln and a concessional loan of PKR 1.5bln from the parent to fund its finance needs. Going forward, PFSL projects a sizeable growth in its loan portfolio. The Company intends to explore various alternate financing avenues to fund its growing capital needs, the materialization of which will be instrumental in paving the way for achieving sustainable growth for the Company. Moving forward, Equity augmentation is expected as per the desired plan. Additionally, PFSL is working on the end-to-end digitization of its loan disbursement process which will enhance its reach and improve customers’ experience by reducing turnaround time.
The ratings are contingent on the Company’s ability to materialize the envisaged strategy for the growth of its footprint and loan portfolio while ensuring a stable profitability matrix. Moreover, prudent risk management, sustainability of a healthy asset base, and conversion of the subordinated loan into equity and mutually agreed financial discipline will remain imperative to the ratings.

About the Entity
PFSL was incorporated in December 2020 under the Companies Act, 2017. The Company obtained the license to carry out investment finance services as a Non-banking Finance Company under the NBFC (Establishment and Regulation) Rules 2003 and NBFC and Notified Entities Regulations 2008. Mr. Nauman Ansari is the chairman of the board whereas Mr. Javed Iqbal is the CEO. Both are experienced professionals with industry experience of over 3 decades.