PACRA Maintains Rating of NRSP Microfinance Bank Limited | Tier II TFC

The ratings of NRSP Microfinance Bank Limited (the “Bank”) draw support from the demonstrated and reinforced commitment of its parent, National Rural Support Programme (NRSP), which holds ~91.14% of the Bank’s shares (Dec’25: ~81.75%). Sponsor support was evident in the PKR 1.0bln equity injection, which was a precondition for SBP’s approval to stagger an additional expected credit loss (ECL) allowance of PKR 2.33bln over five quarters. Pakistan’s microfinance banking landscape remains in a gradual recovery phase post-pandemic, with elevated credit risk, capitalization constraints, particularly among MFBs, and heterogeneous performance dynamics. Against this backdrop, the Bank holds a ~7.35% share of the microfinance sector’s gross loan portfolio (GLP) as at Jun’26. The Bank was not immune to these pressures, and its Capital Adequacy Ratio (CAR) had previously fallen below the regulatory minimum. Compliance was restored and sustained through the parent’s support and staggered provisioning, and the Bank has absorbed the full charge by Jun’26. CAR stood at 17.19% as at Jun’26 (Dec’25: 16.59%), above the 15% requirement. Notably, the Bank has weathered a challenging operating phase over the last three years and rebuilt its standalone footing through sponsor backing, tighter provisioning, and a recovering earnings base. The balance sheet remained broadly stable, with total assets at PKR 81.9bln (Dec’25: PKR 81.6bln). Gross advances grew ~2.3% to PKR 44.0bln, while net advances declined ~2.6% to PKR 39.9bln on higher provisioning. Asset quality remains under pressure, with the infection ratio at ~14.4% (Dec’25: ~13.9%). However, provisioning coverage of non-performing loans improved sharply to ~61.9% (Dec’25: ~32.5%), providing a meaningful cushion against further deterioration. The funding profile strengthened, with deposits rising ~4.4% on higher individual deposits (+~31%), which more than offset lower corporate deposits. Borrowings declined ~14%, and investments were lower at PKR 19.5bln (Dec’25: PKR 22.9bln) as the Bank deployed liquidity. Consequently, the ADR improved to ~73.0% (Dec’25: ~78.3%). On profitability, net mark-up income rose ~32% to PKR 4.09bln in 6MCY26 (6MCY25: PKR 3.10bln) on lower funding costs, absorbing the elevated provisioning. Nevertheless, cost plus ECL absorbed PKR 3.87bln of total income of PKR 4.18bln (6MCY25: PKR 1.90bln of PKR 3.19bln), limiting profit after tax to PKR 222mln (6MCY25: PKR 970mln).
Going forward, the ratings remain contingent upon the Bank’s ability to strengthen capital buffers, contain asset quality pressures and diversify its funding base. Management’s effectiveness, including the finance function transition, will remain a key rating consideration.

About the Entity
NRSP Microfinance Bank Limited, incorporated in October 2008 under Section 32 of the Companies Act 2017. The Bank is established to promote financial inclusion and poverty alleviation and provides microfinance and related services to low-income and underserved segments. NRSP holds a majority share of ~81.75%, while other shareholders include IFC, PROPARCO, and Acumen Fund (USA).

About the Instrument
In July 2021, NRSP Bank issued an unsecured, unlisted, and subordinated NRSP Microfinance BankLimited | Tier II TFC ("TFC" or the "Instrument") of PKR 770mln to strengthen its Tier II Capital. This 7-year TFC ranks pari passu with other Tier II instruments and above Additional Tier I instruments and common shares. It is callable after five years with SBP approval and carries a profit rate of 3MK plus 300bps, paid quarterly on the outstanding principal. The terms of the Tier II TFC require that, as per the Lock in Clause, neither profit nor principal, will be payable, if such payments will result in a shortfall in the bank's MCR/CAR or cause an increase in the shortfall.