Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of NRSP Microfinance Bank Limited at ‘A-/A2’. The medium to long-term rating of ‘A-‘ signifies good credit quality with adequate protection factors, although risk factors could vary with potential economic changes. The short-term rating of ‘A2’ indicates a strong likelihood of timely repayment of short-term obligations, supported by sound liquidity factors. The outlook remains ‘Stable’. The previous rating action was announced on May 6, 2024.
NRSP Microfinance Bank was incorporated in Pakistan on October 22, 2008, as a public limited company. It received a nationwide microfinance banking license from the State Bank of Pakistan on February 18, 2009, and began operations in March 2011.
The ratings are underpinned by an experienced management team and robust institutional sponsors. The bank has shown a notable improvement in asset quality, with enhanced provisioning coverage under the IFRS-9 framework. This progress is attributed to a portfolio shift towards secured lending, improved credit risk controls, and a disciplined recovery framework.
Liquidity buffers have been bolstered by mobilizing additional deposits and borrowings, which have been invested in high-quality liquid assets, providing resilience against funding shocks. Profitability is gradually recovering, aided by operational self-sufficiency and targeted cost control measures, although spreads remain under pressure. While capitalization levels have improved, they are still below the regulatory minimum, with planned capital injections expected to support compliance in the medium term.
Despite these developments, the bank faces challenges related to the timely execution of strategic initiatives, particularly in achieving planned capital augmentation and maintaining asset quality amid a challenging environment. The successful implementation of growth strategies, diversification of funding sources, and adherence to prudent underwriting standards remain crucial considerations for the ratings.