PACRA Maintains the Entity Ratings of Sindh Microfinance Bank Limited

The assigned rating of Sindh Microfinance Bank Limited (“SMFBL” or the “Bank”) reflects its sustained financial profile, consistent profitability, low infection ratio, robust capital adequacy, and well-structured recovery procedures. Following prudent and essential principles of microfinance, the Bank lays and practices a low-cost structure, which is integral to its sustained profile and overall performance. The Bank benefits from an experienced governance framework and a stable management team, which underpin its operational effectiveness. The Bank was granted a National Level License in early 2026, enabling it to expand operations across Pakistan. Additionally, SMFBL obtained in-principle approval for launching Islamic Banking products from SBP in 2025. With the approval, the Bank aims to introduce Shariah-compliant financial solutions alongside its existing conventional microfinance services, thereby serving a broader segment of the market nationwide. In line with its expansion strategy, the Bank plans to set up three branches and thirteen service centers across Punjab and Balochistan in the near term. This will support the Bank in penetrating the market and increase its market share, which is currently standing at a modest percentage 0.51% as of Dec'25 (Dec'24: 0.48%). Pakistan’s microfinance sector entered FY25 in cautious recovery after economic shocks and Covid-19. By late CY24–Oct’25, macro conditions improved modestly (inflation ~5.6%, stable currency, lower rates, positive GDP). While recent floods add some uncertainty, the impact appears limited vs. 2022. Despite this, the sector faces elevated credit risk, weak capital (notably MFBs), and uneven performance. Exposure remains skewed towards livestock and agriculture, which together present ~57% of outstanding loans. However, in this environment, SMFBL has performed strongly, with most lending focused on the "Sujjag Aurat Loan" and only a modest portion in agriculture and livestock. The Bank’s disciplined risk assessment and targeted lending approach have supported sustained portfolio quality. The Bank continues to follow a low-cost operating structure, which supports its earnings profile and overall efficiency. Additionally, its focus on disciplined lending and targeted market segments contributes to the stability of its operations and reinforces its position within the microfinance space. In line with its business strategy, the Bank is focusing on the adoption of digital platforms to enhance competitiveness, particularly by improving accessibility and user experience.
During CY25, the Bank’s profitability strengthened, with PAT increasing to PKR 329mln (CY24: PKR 153mln), reflecting a growth of ~115%. The Bank’s Gross micro-credit advances also witnessed growth, rising to PKR 2,722mln (CY24: PKR 2,239mln), indicating continued expansion in its lending portfolio. In line with its business strategy, the credit portfolio remains concentrated in the Sujjag Aurat Loan, comprising ~93% of the total portfolio. The Bank’s capital adequacy ratio (CAR) stood at 44.76% in CY25 (CY24: 44.26%), reflecting a stable capital position. Deposits declined to PKR 1,553mln (CY24: PKR 1,991mln), depicting a decrease of ~18%, while deposit concentration remained elevated, with top deposits accounting for ~97% (CY24: ~90%). The Bank’s equity improved to PKR 1,580mln (CY24: PKR 1,255mln), providing support to its overall financial profile. Strong sponsors backing of Sindh Bank Limited bodes well to the assigned rating.
Going forward, the rating will depend on the Bank’s ability to expand market penetration while effectively managing its risk profile. Sustaining strong liquidity, retaining earnings to bolster equity, and reducing depositor concentration will be critical to the rating.

About the Entity
Sindh Microfinance Bank was incorporated with the Securities and Exchange Commission of Pakistan (SECP) in 2015 and commenced operations in May 2016. The Bank is a wholly-owned subsidiary of Sindh Bank. The head office of the Bank is located in Karachi. Currently, the Bank operates in the province of Sindh with a network of 22 branches and 91 service centers spread across the province.