PACRA Assigns Initial Instrument Rating to Pakistan's First Ever Green Bond -Parwaaz Financial Services Limited - PPTFC - PKR 1bln – March 25

Parwaaz Financial Services Limited (PFSL or "the Company") is a non-banking financial institution and a wholly owned subsidiary of Karandaaz Pakistan Limited (KRN). The Company is primarily engaged in addressing the credit requirements of Small and Medium Enterprises (SMEs), as defined by the International Finance Corporation (IFC). PFSL’s operations are framed within a clearly articulated governance structure, supported by a professional management team and a comprehensive risk management policy framework. This framework encompasses defined procedures for risk identification, assessment, and mitigation, forming the backbone of the Company’s credit operations. As of CY24 PFSL maintains an asset base of ~PKR 3.5bln (CY23: ~PKR 1.8bln), reflecting the Company’s progress in expanding its financing portfolio within the SME segment. A notable development during the period is the issuance of PFSL’s inaugural Green Bond. The proceeds from this instrument are earmarked solely for projects that align with sustainability-focused projects, including renewable energy, energy efficiency, clean transportation, sustainable agriculture, and pollution prevention & control. To support the Green Bond issuance, the Company has developed a Green Bond Framework that aligns with the Securities and Exchange Commission of Pakistan’s (SECP) Green Bond Guidelines and the Green Bond Principles issued by the International Capital Market Association (ICMA). This framework has undergone third-party validation and certification by PET Nature (Pvt.) Ltd., adding a layer of external oversight. The Company has also constituted a Green Bond Committee tasked with ensuring that all funded projects adhere to eligibility criteria in line with PFSL’s Environmental and Social Governance (ESG) Policy. The committee will oversee project selection, fund allocation, and ongoing monitoring. Transparency and accountability are integral to the Green Bond initiative. PFSL has committed to disclosing key performance indicators related to the allocation and impact of proceeds. The Company has engaged an independent auditor to conduct periodic reviews of fund utilization, reinforcing its governance and disclosure commitments. The credit rating assigned to PFSL’s Green Bond incorporates several factors: the Company’s institutional governance standards, its internal controls around risk management, and the structural safeguards established specifically for the bond issuance. These include the creation of dedicated oversight mechanisms and external validation of its sustainability framework.
The rating depends on PFSL's continued ability to achieve its strategic objectives while maintaining sound asset quality and adhering to regulatory and internal risk management frameworks. Compliance with SECP guidelines and external audit reviews remains crucial.

About the Entity
PFSL was incorporated in 2020 under the Companies Act, 2017. The Company operates as a Non-Banking Finance Company (NBFC), licensed to provide investment finance services.

About the Instrument
PFSL has issued its first privately placed Term Finance Certificate (TFC) amounting to PKR 1bln on March 21, 2025, with a tenor of three years. The bond carries a profit rate of 3-M KIBOR + 1%, payable quarterly in arrears. Principal amortization, along with markup, is scheduled in four equal quarterly installments during the final year. The instrument is secured by a registered hypothecation charge over PFSL’s existing and future receivables, loans & advances, with a 25% margin. DSRA is maintained by KRN, equivalent to one quarter’s peak profit installment amount throughout the tenor of the bond, and a lien is also provided by KRN in favor of the Investment Agent.