PowerPoint Presentation - PACRA...MICROFINANCE | OVERVIEW | SEGMENTS Loan Portfolio • Microfinance...

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


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


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


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


Deposits

Deposits (PKR mln) Growth (%)


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


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


MFBs | Gross Loan Portfolio

Gross Loan Portfolio (PKR mln) Growth in MFBs (%)


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 ( %)


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.


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


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


DEPOSITS (PKR mln) | TREND

Deposits (PKR mln) Growth in Deposits (%)


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


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


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


Gross Loan Portfolio (PKR bln) 53 47 33 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


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


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


Borrowers and Average Loan Size

Active Borrowers Average Loan Size


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


BIBLIOGRAPHY

Analyst Saniya Tauseef

Supervising Senior - Ratings+92 42 3586 9504

[email protected]

Jhangeer Hanif

Unit Head – Ratings+92 42 3586 9504

[email protected]

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.

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