PACRA Maintains the Rating of Mobilink Microfinance Bank Limited

Mobilink Microfinance Bank Limited's ("MMBL" or the "Bank") ratings are supported by its affiliation with Veon, a leading global telecom group, and Jazz, Pakistan’s largest cellular operator. During CY24, the microfinance industry faced substantial headwinds driven by rising NPLs amid a strained economic landscape marked by inflation, high interest rates, and asset quality concerns. These macroeconomic headwinds led to increased credit risk, especially among vulnerable segments such as agriculture and livestock, and negatively affected borrowers’ repayment capacity. In response to the backlog stemming from these challenges, MMBL markedly increased its credit loss provisions. The Bank reported Expected Credit Losses (ECLs) of PKR 19.9bln for CY24. This has contributed to a net loss of PKR 1.8bln for CY24 (profit for CY23: 1.03bln). To address the deteriorating credit environment, VEON Microfinance Holding B.V., the Bank’s majority shareholder, reinforced its support for MMBL’s long-term strategy through a capital injection of USD 15mln. An additional USD 20mln is expected in 2025. This capital infusion is intended to 1) enhance the Bank’s equity and provide a buffer for its Capital Adequacy Ratio (CAR), 2) support the growth of its MSME and digital lending portfolio, and 3) facilitate continued investments in digital transformation and technology upgrades. 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. As of CY24, the Bank captured a market share of 18% in terms of GLP with secured lending of 48% (CY23: 19%). During CY24, the Bank's net markup income inclined to PKR 40.5bln (CY23: PKR 24.8bln) of which PKR 26bln (CY23: PKR 11.9bln) stemmed from markup income on nano loans. The incline in markup income on nano loans was fueled by a 1.5 times expansion in nano loans portfolio, reaching PKR 19.2bln in CY24 (CY23: PKR 7.7bln). At the end of CY24, the CAR of the Bank was reported at 19.16% (CY23: 16.2%). Going forward, maintaining the Capital Adequacy Ratio (CAR) above the mandated regulatory threshold is considered imperative.
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.

About the Entity
Mobilink Microfinance Bank Limited, a nationwide Microfinance Bank, was established in 2012. The Bank is a subsidiary of Veon Microfinance Holdings B.V, one of the largest telecom groups worldwide. The Board of Directors is composed of seven members, including four non-executive directors, two independent directors, and the CEO. Mr. Haaris Mahmood Chaudhary was appointed as CEO of the Bank on Jan 15, 2025.