April 2019
MICROFINANCE PROVIDERS
Microfinance providers (MFPs) : Institutions offering financial services to low income and underprivileged populations, with a goal of financial inclusion and poverty alleviation in the society.
Microfinance
Banks
Microfinance
Institutions
Rural Support
Programmes
Dec’18: 11 (Dec’17:
11)
Regulated by the State Bank of
Pakistan.
Applicable Laws/Regulations:
• Prudential Regulations for MFBs,
2014
• Branchless Banking Regulations
• Microfinance Institutions Ordinance,
2001
Dec’18: 18
(Dec’17: 17)
Regulated by the Securities &
Exchange Commission of Pakistan
(SECP):
Applicable Laws/Regulations:
• NBFC Rules, 2003
• NBFC Notified Entities
Regulations, 2008
Dec’18: 7 (Dec’17: 6)
MFPs in Pakistan
Others*
Dec’18: 9 (Dec’17: 18)
*Others include organizations that are not primarily involved in microfinance activities.
MICROFINANCE | OVERVIEW
52,092 66,761
92,992
136,943
202,699
274,706
36%
28%
39%
47%48%
36%
0%
10%
20%
30%
40%
50%
60%
-
50,000
100,000
150,000
200,000
250,000
300,000
CY13 CY14 CY15 CY16 CY17 CY18
Gross Loan Portfolio
Gross Loan Portfolio (PKR mln) GLP Growth
60,418 81,358
150,544
196,680
248,783
37% 35%
85%
31%26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-
50,000
100,000
150,000
200,000
250,000
300,000
CY14 CY15 CY16 CY17 CY18
Sum Insured
Sum Insured (PKR mln) Growth (%)Source: PMN Quarterly Microwatch
34,784 43,497 63,089
120,089
185,646
238,667
50%25% 45%
90%
55%
29%
0%
20%
40%
60%
80%
100%
-
50,000
100,000
150,000
200,000
250,000
300,000
CY13 CY14 CY15 CY16 CY17 CY18
Deposits
Deposits (PKR mln) Growth (%)
MICROFINANCE | OVERVIEW | SEGMENTS
Loan Portfolio
• Microfinance Banks accounted for 69% of the total industry gross loan portfolio in CY18 (CY17: ~67%, CY16:
~66%), and ~46% of the sector borrowers (CY17: ~44%, CY16: ~43%).
29,591 37,017
55,697
89,940
136,369
188,613
11,217 14,535 19,183 26,264
37,580 52,548
9,246 12,275 14,219 16,520 23,152 28,319
2,038 2,934 3,893 4,219 5,599 5,226 -
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
C Y 1 3 C Y 1 4 C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
GROSS LOAN PORTFOLIO | TREND
MFBs MFIs RSPs Other MFPs
1,119,185 1,178,630 1,458,633
1,943,346
2,576,942
3,167,214
901,391 1,001,405 1,234,946
1,500,092
1,916,589
2,410,285
672,377 790,609 856,991 921,558 1,085,948 1,190,234
139,762 171,945 206,433 207,249 220,978 168,821 -
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
C Y 1 3 C Y 1 4 C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
BORROWERS
MFBs MFIs RSPs Other MFPs
Source: PMN Quarterly Microwatch
MICROFINANCE | OVERVIEW (CONT.)
Average Loan Size
• Amongst the three segments of the
Microfinance Industry, MFBs have
the largest average loan size. This is
so, since MFBs product portfolio
include microenterprise loans which
are of a higher ticket size.
26,440 31,407
38,184
46,281
52,919
59,552
12,444 14,515 15,533 17,508
19,608 21,802
13,751 15,526 16,592
17,926
21,320 23,793
14,582 17,064 18,858
20,357 25,337
30,956
C Y 1 3 C Y 1 4 C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
AVERAGE LOAN SIZE
MFBs MFIs RSPs Other MFPs
MICROFINANCE | OVERVIEW (CONT.)
Deposits
• Only SBP licensed MFBs are authorized to mobilize deposits from the public.
34,784 43,497 63,089
120,089
185,646
238,667
50%25% 45%
90%
55%
29%
0%
20%
40%
60%
80%
100%
-
50,000
100,000
150,000
200,000
250,000
300,000
CY13 CY14 CY15 CY16 CY17 CY18
Deposits
Deposits (PKR mln) Growth (%)
Source: PMN Quarterly Microwatch
MICROFINANCE BANKS(MFBs)
MFBS | SNAPSHOT
• Total number of districts covered as at
End-Dec’18 was 135.
• Average deposit size remained low due
to accelerated growth in branchless
deposit accounts which bear a lower
ticket size than conventional deposit.
• Growth in GLP slowed down during
CY18 in relation to the past years
coupled with inflated infection ratio and
reduced repayment capacity of average
borrowers in rising interest rate
environment in 2HCY18.
Outreach Dec-18 Dec-17 Dec-16 Dec-15
Total MFBs 11 11 11 11
Number of Branches 1,116 945 806 639
Growth (YoY) 18% 17% 26% 23%
Loan Portfolio
Active Borrowers 3,167,214 2,576,942 1,943,346 1,458,633
Growth YoY 23% 33% 33% 24%
Gross Loan Portfolio (PKR mln) 188,613 136,369 89,940 55,697
Growth (YoY) 38% 52% 61% 50%
Average Loan Size (PKR) 59,552 52,919 46,281 38,184
Portfolio at risk ( > 30days) 2.0% 1.5% 1.7% 1.3%
Funding
Number of deposit accounts 32,009,797 27,828,168 20,123,818 10,654,221
Growth (YoY) 15% 38% 89% 100%
Value of deposits (PKR mln) 238,667 185,646 120,089 63,089
Growth (YoY) 29% 55% 90% 52%
Average deposit size (PKR) 7,456 6,671 5,968 5,922
MICROFINANCE BANKS
Source: PMN Quarterly Microwatch
MFBS | UNIVERSESr. # Bank
Operational
Licence
Year of
Commencemen
t of Operations
Major Sponsors
As at End-Dec'18Outlook
Rating
Agency
1The First Microfinance Bank
LimitedNationwide Jan-02
HBL: 51%
Agha Khan Agency for Microfinance:
21%
Agha Khan RSP: 11%
Stable JCR A+/A1 Apr-18
2Khushhali Microfinance Bank
LimitedNationwide Aug-00
UBL: 30%
Incofin: 25%
responsibility Management Co. S.A:
20%
Stable JCR A+/A1 Apr-18
Rating Watch PACRA A+/A1 Nov-18
RW-Developing JCR A+/A1 Apr-18
4Mobilink Microfinance Bank
LimitedNationwide May-12 GTH S.A.E:100% Positive PACRA A/A1 Nov-18
Stable PACRA A/A1 Nov-18
Stable JCR A/A1 Apr-18
Stable PACRA A/A1 Nov-18
Stable JCR A/A1 Apr-18
7 U Microfinance Bank Limited Nationwide Jan-12 PTCL: 100% Stable JCR A/A1 Jan-19
8Pak Oman Microfinance
Bank LimitedNationwide May-06
LOLC Pvt Ltd.: 50%
Govt. of Oman: 33%
Pak Oman Inv Co. Ltd: 17%
Stable JCR A-/A2 Apr-18
9Sindh Microfinance Bank
Limited Provincial May-16 Sindh Bank: 100% Stable PACRA A-/A2 Oct-18
10Advans Microfinance Bank
LimitedProvincial Nov-12
Advans SA SICAR:75%
FMO: 25%Stable JCR BBB+ Apr-18
11Apna Microfinance Bank
Limited Nationwide Jan-05
United Insurance Co.: 44%
United Track System:26% Stable PACRA BBB+ Dec-18
Last Rating
Update
5
NRSP: 52%
IFC:16%
KfW:16%
6
3Telenor Microfinance Bank
Limited Nationwide Sep-05
Telenor Pakistan B.V: 66%
AliPay (Hong Kong) Holding Limited:
34%
Nationwide Mar-11
FINCA Microfinance Bank
LimitedNationwide Jan-13
NRSP Microfinance Bank
Limited
FINCA International: 86% Kashf
Holding: 5%
IFC: 5%
Source: PACRA In-house research
MFBS | LOAN PORTFOLIO
• Historically, MFBs advances have been witnessing a volatile yet high rate of growth.
• Industry portfolio is considerably inclined towards agri-based loans, therefore overall crop situation in the country and farmers’ capacity to pay
off are major determinants for growth and NPLs.
• Growth during 2018 remained relatively slow in contrast to the previous years on account of unfavorable conditions for sugarcane farmers, and
increase in policy rates in the second half of the year resulting in reduced payment capacities of the borrowers.
• 2016 – on the contrary was an overall favorable year for the sector due to promising performance of major crops, including sugarcane.
1,119,185 1,178,630 1,458,633
1,943,346
2,576,942
3,167,214
20%
5%
24%
33%
33%
23%
0%
5%
10%
15%
20%
25%
30%
35%
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
C Y 1 3 C Y 1 4 C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
BORROWERS
MFBs Active Borrowers Growth (%)
29,591 37,017
55,697
89,940
136,369
188,613
40%
25%
50%
61%
52%
38%
0%
10%
20%
30%
40%
50%
60%
70%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
CY13 CY14 CY15 CY16 CY17 CY18
MFBs | Gross Loan Portfolio
Gross Loan Portfolio (PKR mln) Growth in MFBs (%)
Source: PMN Quarterly Microwatch
MFBS | MARKET SHARE | GLP
• Market positioning remained largely stable in CY18, except for the change in First Microfinance Bank’s
position, which emerged as the 3rd largest bank in terms of GLP with an increase in share from 11% to
13%.
• Top 5 MFBs accounted for ~77% of the total MFBs Loan portfolio as at End-Dec’18.
24%
18%
11%
15%
11%
8%
7%
4%
1%
0.4%
0.3%
23%
18%
13%
13%
11%
9%
7%
5%
1%1%
0.3%
Khushhali Microfinance Bank Limited
Telenor Microfinance Bank Limited
The First MicrofinanceBank Limited
NRSP Microfinance Bank Limited
FINCA Microfinance Bank Limited
U Microfinance Bank Limited
Mobilink Microfinance Bank Limited
Apna Microfinance Bank Limited
Pak Oman Microfinance Bank Limited
Advans Microfinance Bank Limited
Sindh Microfinance Bank Limited
MFBs | Market Share
Market Share | GLP (%) -Dec'17 Market Share | GLP (%) -Dec'18
17
,68
9
23
,36
0 3
2,6
07
43
,45
0
12
,18
6
15
,94
5 25
,00
3 3
4,0
81
9,0
86
13
,27
1
20
,93
4
23
,77
8
5,6
16
8,2
41
14
,49
6 23
,40
5
5,5
46
10
,20
9
15
,11
1
20
,86
9
C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
GLP ( PKR mln) | TOP 5 MFBs
Khushhali Telenor NRSP First MFB FINCA
Source: Financial Statements
MFBS | ASSET HEALTH
BANK WISE NPLs RATIO
• Overall Industry PAR increased to 2.7% in CY18, emanating
from crop linked agri loans, particularly from sugarcane.
• Most affected banks included NRSP MFB and Pak Oman MFB
and Telenor MFB.
• Industry wide write-offs also inflated to PKR~2.6bln in CY18
(CY17: PKR~1.3bln) depicting a steep rise of ~97%.
0.7% 1.2% 1.0% 0.3% 0.3%1.5%
0.5%2.2%
3.6%
22.0%
0.0%0.9% 1.4%
4.1%
1.3%2.7% 1.9% 1.3%
2.8%
8.3%
13.0%
0.4%
The First MFB KhushhaliMFB
Telenor MFB Mobilink MFB NRSP MFB FINCA MFB U MFB Advans MFB Pak OmanMFB
Apna MFB Sindh MFB
Infection Ratio
Infection Ratio CY17 Infection Ratio CY18
0.7%
1.3%1.3%
1.7% 1.8%
2.7%
C Y 1 3 C Y 1 4 C Y 1 5 C Y 1 6 C Y 1 7 C Y 1 8
PAR > 30 DAYS ( %)
Source: Financial Statements
MFBS | FUNDING MIX
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
KhushhaliMFB
TelenorMFB
The FirstMFB
NRSP MFB FINCAMFB
U MFB MobilinkMFB
Apna MFB AdvansMFB
Sindh MFB Pak OmanMFB
FUNDING MIX | CY18
Borrowings Deposits
-
10,000
20,000
30,000
40,000
50,000
60,000
KhushhaliMFB
TelenorMFB
NRSP MFB The FirstMFB
FINCAMFB
MobilinkMFB
Apna MFB U MFB AdvansMFB
Pak OmanMFB
Sindh MFB
Funding Mix | CY17
Borrowings Deposits
• MFBs Funding mix is constituted majorly by
deposits mobilized from public (~93%) and
borrowings (~7%).
• Top 5 MFBs account for 75% of the total
deposit book of the sector.
Source: Financial Statements
MFBS | DEPOSITS
• MFBs funding mix majorly comprises deposits (93%).
• Overall Industry Average ADR ranges between 70% - 80%.
2,947,513 5,350,105
10,654,221
20,123,818
27,828,168
32,009,797
55%
82%
99% 89%
38%
15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
CY13 CY14 CY15 CY16 CY17 CY18
Number of Depositors
Number of Depositors Growth (%)
32,984 41,603 63,089
120,089
185,646
238,667
42%
26%
52%
90%
55%
29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
50,000
100,000
150,000
200,000
250,000
300,000
CY13 CY14 CY15 CY16 CY17 CY18
DEPOSITS (PKR mln) | TREND
Deposits (PKR mln) Growth in Deposits (%)
Source: Financial Statements
MFBS | BRANCHLESS BANKING
• Branchless Banking players in the Sector include:
Telenor Microfinance Bank
Mobilink Microfinance Bank
U Microfinance Bank
FINCA Microfinance Bank
• Telenor, Mobilink and U MFB emerged into the digital banking domain through support of their affiliate telecom
operators. Their respective digital brand names are EasyPaisa, JazzCash and Upaisa. FINCA MFB is a new
emerging bank in the branchless banking paradigm with its digital product known as SIMSIM.
MFBS | BRANCHLESS BANKING• Branchless Banking (BB) - is the future of the MFBs Sector. With the backbone of
their affiliate telcos, Telenor and Mobilink MFB are rapidly advancing into the
digital banking segment, with major developments underway.
• BB is broadly categorized into Over-the Counter (OTC) and Mobile Wallets
Transactional modality. OTC – the traditional mode of BB services is a means of
transactions involving dealer agents.
• BB players, including Telenor MFB and Mobilink MFB – are now shifting their
focus from OTC to M-wallet accounts, that includes both USSD code accounts and
application accounts.
• According to SBP’s Branchless Banking Newsletter for the 3rd Quarter CY18, MFBs
account for ~89% of the total Branchless Banking Deposit Accounts as at End-
Sep’18.
• The tables pertain to the performance and Deposit Accounts position of the two
major BB players – Telenor and Mobilink:
Total Deposits BB Deposits Total Deposits BB Deposits
CY18 CY17
42,275
8,119
36,665
9,440
22,091
12,963 14,943
8,430
Branch and Branchless Deposits
Telenor MFB Mobilink MFB
130,020 119,154
78,582 73,301
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Dealer Agents - CY18 Dealer Agents - CY17
DEALER AGENT NETWORK
Telenor MFB Mobilink MFB
7,360
(1,907)
7,775
(421)
5,166
152
4,415
301
BB Income (PKR mln) BB PBT (PKR mln) BB Income (PKR mln) BB PBT (PKR mln)
CY18 CY17
BB Performance
Telenor MFB Mobilink MFB
Source: Financial Statements & PACRA In-house research
MFBS | BRANCHLESS BANKING
Dec-17 Sep-18 Change (%)
Number of Dealer Agents 405,673 413,177 2%
Number of Deposit Accounts 37,260,215 43,102,952 16%
Active Accounts 19,259,427 22,617,247 17%
Deposits (PKR mln) 21,139 16,580 -22%
Average Number of Transactions per day 1,946,100 2,508,365 29%
Key Indicators | Branchless Banking
SBP’s Branchless Banking NewsLetter – 3QCY18
• The above tables represent Branchless Banking Data for both MFBs and Commercial Banks.
• In comparison to the same period last year, (Sep-17), deposits have increased by PKR~5.3bln or 47%. Historically, BB Deposits have
shown fluctuations based on the quantum of disbursements released under social welfare related payments. BISP remains the major
contributor in social welfare related payments (72%).
MICROFINANCE
INSTITUTIONS(MFIs)
MFIS | SNAPSHOT
Outreach Dec-18 June-18 June-17 June-16
Total MFIs 18 17 16 16
Number of Branches 1,763 1,667 1,369 1,114
Growth (Period-on-Period) 6% 22% 23% 48%
Loan Portfolio
Active Borrowers 2,410,285 2,214,331 1,754,050 1,324,871
Growth (Period-on-Period) 9% 26% 32% 16%
Gross Loan Portfolio (PKR bln) 53 47 33 22
Growth (Period-on-Period) 12% 42% 50% 22%
Average Loan Size (PKR) 39,344 21,225 18,814 16,605
Portfolio at risk ( > 30days) 1.4% 0.2% 0.2% 0.3%
Microfinance Institutions
Source: PMN Quarterly Microwatch
MFIS | LOAN PORTFOLIO
11,217 14,535
19,183
26,264
37,580
52,548
37%
30%32%
37%
43%
40%
0%
10%
20%
30%
40%
50%
-
10,000
20,000
30,000
40,000
50,000
60,000
CY13 CY14 CY15 CY16 CY17 CY18
Gross Loan Portfolio
Gross Loan Portfolio (PKR mln) Growth (%)
901,391 1,001,405 1,234,946
1,500,092
1,916,589
2,410,285
12,444 14,515
15,533 17,508
19,608
21,802
-
5,000
10,000
15,000
20,000
25,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
CY13 CY14 CY15 CY16 CY17 CY18
Borrowers and Average Loan Size
Active Borrowers Average Loan Size
Source: PMN Quarterly Microwatch
APPENDIX
S.No Microfinance Institutions
1 AGAHE Pakistan
2 Akhuwat
3 ASA Pakistan
4 BRAC Pakistan
5 CSC Empowerment & Inclusion Programme
6 DAMEN Support Programme
7 FFO Microfinance Company
8 Islamic Relief Pakistan
9 JWS Pakistan
10 Kashf Foundation
11 Micro Options Support Programme
12 MOJAZ Support Programme
13 Naymet Trust
14 Orangi Pilot Project
15 Saaya Microfinance Company
16 SAFCO Support Foundation
17 Soon Valley Development Programme
18 Wasil Foundation
S.No Rural Support Programmes
1 Al-Mehran Rural Development Organization
2 Ghazi Barotha Taraqiati Idara
3 National Rural Support Programme
4 Punjab Rural Support Programme
5 Sarhad Rural Support Programme
6 Sindh Rural Support Programme
7 Thardeep Microfinance Foundation
S.No Other MFPs
1 Badbaan Development Community Microfinance Company
2 OPD Support Programme
3 ORIX Leasing Pakistan Limited
4 Rural Community Development Programmes
5 SAATH Microfinance Foundation Pakistan
6 Shadab Rural Development Organization
7 Shah Sachal Sami Foundation
8 Support With Working Solutions
9 Villagers Development Organization
Source: PMN Quarterly Microwatch
BIBLIOGRAPHY
Analyst Saniya Tauseef
Supervising Senior - Ratings+92 42 3586 9504
Jhangeer Hanif
Unit Head – Ratings+92 42 3586 9504
1. Pakistan Microfinance Network Microwatch | Quarterly Issue
2. MFBs’ financial statements
3. SBP’s Branchless Banking NewsLetter 3QCY18
4. PACRA In-house Research
DISCLAIMERPACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but itsaccuracy or completeness is not guaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part,provided the source is duly acknowledged. The presentation should not be relied upon as professional advice.