Mobilink Microfinance Bank Limited

CREDIT RATING REPORT | Apr-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
30-Apr-25 A A1 Stable Maintain -
30-Apr-24 A A1 Stable Maintain -
29-Apr-23 A A1 Stable Maintain -
30-Apr-22 A A1 Positive Maintain -
30-Apr-21 A A1 Positive Maintain -
About the Entity

Mobilink Microfinance Bank Limited, a nationwide Microfinance Bank, was established in 2012. The Bank is a subsidiary of Veon Microfinance Holdings B.V, one of the largest telecom groups worldwide. The Board of Directors is composed of seven members, including four non-executive directors, two independent directors, and the CEO. Mr. Haaris Mahmood Chaudhary was appointed as CEO of the Bank on Jan 15, 2025.

Rating Rationale

Mobilink Microfinance Bank Limited's ("MMBL" or the "Bank") ratings are supported by its affiliation with Veon, a leading global telecom group, and Jazz, Pakistan’s largest cellular operator. During CY24, the microfinance industry faced substantial headwinds driven by rising NPLs amid a strained economic landscape marked by inflation, high interest rates, and asset quality concerns. These macroeconomic headwinds led to increased credit risk, especially among vulnerable segments such as agriculture and livestock, and negatively affected borrowers’ repayment capacity. In response to the backlog stemming from these challenges, MMBL markedly increased its credit loss provisions. The Bank reported Expected Credit Losses (ECLs) of PKR 19.9bln for CY24. This has contributed to a net loss of PKR 1.8bln for CY24 (profit for CY23: 1.03bln). To address the deteriorating credit environment, VEON Microfinance Holding B.V., the Bank’s majority shareholder, reinforced its support for MMBL’s long-term strategy through a capital injection of USD 15mln. An additional USD 20mln is expected in 2025. This capital infusion is intended to 1) enhance the Bank’s equity and provide a buffer for its Capital Adequacy Ratio (CAR), 2) support the growth of its MSME and digital lending portfolio, and 3) facilitate continued investments in digital transformation and technology upgrades. The Bank's business model prioritizes both core and branchless banking, utilizing the sponsor's network and brand name, JazzCash, to accelerate growth in the branchless banking sphere. As of CY24, the Bank captured a market share of 18% in terms of GLP with secured lending of 48% (CY23: 19%). During CY24, the Bank's net markup income inclined to PKR 40.5bln (CY23: PKR 24.8bln) of which PKR 26bln (CY23: PKR 11.9bln) stemmed from markup income on nano loans. The incline in markup income on nano loans was fueled by a 1.5 times expansion in nano loans portfolio, reaching PKR 19.2bln in CY24 (CY23: PKR 7.7bln). At the end of CY24, the CAR of the Bank was reported at 19.16% (CY23: 16.2%). Going forward, maintaining the Capital Adequacy Ratio (CAR) above the mandated regulatory threshold is considered imperative.

Key Rating Drivers

The Bank's ratings are contingent upon its capacity to effectively mitigate emerging risks under the prevailing circumstances to preserve its business and financial risk profile.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Mobilink Microfinance Bank Limited

rating analysis

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Profile
Structure

Mobilink Microfinance Bank Limited (or the “Bank”) was incorporated in February 2012 under section 32 of the Companies Ordinance, 1984 (now Companies Act, 2017). The Bank has a network of 113 branches.


Background

The Bank commenced its operations in April 2012 and launched branchless banking services under the brand name "JazzCash" in partnership with Pakistan Mobile Communications Ltd. (Jazz), in November 2012.


Operations

Mobilink Microfinance Bank offers a range of micro-lending products comprising: (i) Karobar Loan, (ii) Khushhal Kisan Loan, iii) Fori Cash Loans, (iv) Livestock loans (v) House Loan, (vi) Tractor Loans, (vii) Passbook loan & (viii) Micro Enterprise Loan. As stated above, it also offers branchless banking services and is one of the largest digital banks in the Country.


Ownership
Ownership Structure

Mobilink Microfinance Bank Limited is a subsidiary of Veon Microfinance Holdings B.V (V.M.H), with effect from March 27, 2020, upon transfer of 99.99% shareholding in the Bank from Global Telecom Holdings (GTH). The ultimate parent of the Bank is Veon Holdings Limited.


Stability

The ownership structure of the Bank is considered stable, as it has sole ownership of a strong sponsor.


Business Acumen

Veon is an international telecommunication and technology-oriented business with more than 220 million customers.


Financial Strength

Business acumen is considered strong. Veon's total asset base clocked in at USD 7,496mln while equity stood at USD 1,274mln, as of end-9MCY24, depicting a robust financial position of the ultimate sponsor.


Governance
Board Structure

The overall control vests in the seven-member board of directors (BoD). The Board comprises four non-executive directors, two independent directors, and one executive director (the CEO of the Bank). Mr. Aamir Hafeez Ibrahim is the Chairperson of the Board.


Members’ Profile

The directors are experienced professionals, having exposure in different sectors, including microfinance and telecommunication.


Board Effectiveness

The Board exercises its oversight via four committees, namely (i) Audit Committee, (ii) Risk Management & Compliance Committee, (iii) HR & Compensation Committee, and (iv) IT Committee.


Transparency

M/S Yousuf Adil Chartered Accountants are the External Auditors of the Bank. They expressed an unqualified opinion on the financial statements of the Bank for the year ended December 31, 2024.


Management
Organizational Structure

The Bank has divided its organization structure into different departments with each department head reporting directly to the CEO, while the head of the internal audit department, reports to the Audit Committee.


Management Team

Mr. Haaris Mahmood Chaudhary has been appointed as a CEO of the Bank on Jan 15, 2025. He has over 21 years of experience in the banking sector. He is assisted by an experienced management team.


Effectiveness

The Bank has eighteen management committees in place. The committee meetings are conducted on a frequent basis to ensure a smooth flow of processes.


MIS

Detailed MIS reports are generated for the senior management on a daily and monthly basis pertaining to loan portfolio, disbursements, repayments, delinquencies, provisioning, recoveries, and deposits.


Risk Management framework

A separate Risk Management Department is in place to oversee various risks, including credit, operational, and market risks. The Risk Management Committee meets on a regular basis to ensure the risk profile of the Bank remains within the Board of Directors approved limits.


Technology Infrastructure

Backboned with strong sponsors and a natural affiliation with the telecom industry, the Bank is equipped with sound technological infrastructure. It deploys Temenos (T24) as its core banking software. The Bank has in place Middleware, an innovative technological platform, to facilitate branchless banking operations, ATM service, Utility bill payment, and G2P payments.


Business Risk
Industry Dynamics

The Microfinance Banking sector (" Sector ") continues to grapple with long-standing challenges in the form of declined asset quality, negative profitability, weakened Capital Adequacy Ratio (CAR) and particularly in relation to non-performing loans (NPLs) which is mainly driven by the historical impact of the COVID-19 pandemic in CY20 to the hazard of floods in Jul-Aug'22 followed by the economic slowdown in CY23 along with very high inflation and interest rates in the past couple of years, the Sector's resilience has been repeatedly tested. The prevailing macroeconomic headwinds heightened credit risk, particularly in vulnerable sectors such as agriculture and livestock, adversely impacting the repayment capacity of borrowers. During 6MCY24, the deposit base of MFBs increased by 6.7% to stand at PKR 637bln. The GLP of the Sector recorded a marginal uptick of 1.4% to stand at PKR 414bln. Whereas, the infection ratio jumped to 10.5% from 6.7% in CY23. The reported loss of the Sector soared to PKR 12.1bln from PKR 8.1bln in CY23. Consequently, the Sector 's equity base declined to PKR 22.6bln from PKR 37.4bln, resulting in the declined CAR of the Sector clocking in at 5.7% from 7.6% in CY23 falling far below the regulatory threshold of 15%. These factors cumulatively raise serious and persistent concerns about the performance of the Sector. Furthermore, during the year there was a significant credit crunch in South Punjab, coupled with intense wheat price crash, which adversely impacted the lending portfolio in the region.


Relative Position

The MMBL has a 19% market share in terms of Gross Loan Portfolio as of end-CY23 and 18% with secured lending of 48% at the end-CY24. In the branchless banking domain, the Bank is the leading player in the industry. The Bank is committed to maintaining its dominant position in branchless banking with its flagship product Jazz Cash.


Revenue

During CY24, mark-up income earned by the Bank increased by  73% to stand at PKR 53bln (CY23: PKR 31bln). Income from branchless banking increased to PKR 13bln (CY23: PKR 8bln), indicating an increase of 63%. During CY24, the NIMR of the Bank increased to PKR 41bln (CY23: PKR 25bln).


Profitability


The Bank reported Expected Credit Losses (ECLs) of PKR 19.9bln in CY24, which contributed to a net loss of PKR 1.8bln for the year CY24 (CY23: net profit of PKR 1.03bln).


Sustainability

The Bank plans to persist in strengthening its branchless banking operations. Micro-deposits continue to add strength to the Bank's performance indicators. The Bank's business model encompasses systems and practices to nurture BB and core banking results simultaneously. In light of the safety precautions taken during the global pandemic, the importance of branchless banking has risen manifold


Financial Risk
Credit Risk

At end-CY24, the Bank’s net advances clocked in at PKR 75bln (at end-CY23: PKR 71bln), depicting a minor growth of 6%. The Bank's non-performing loans increased significantly to PKR 10bln (end-CY23: PKR 5bln). Consequently, the infection ratio inclined to 11% (end-CY23: 7%).


Market Risk

At end-CY24, the Bank’s total investment significantly increased during the period, clocking in at PKR 61bln (end-CY22: PKR 33bn). The investment portfolio of the Bank comprises government securities only.


Funding

At end-CY24, the total deposits of the Bank increased by 30% to stand at PKR 155bln (end-CY23: PKR 119bln). The total borrowings increased to PKR 766mln (end-CY23: PKR 245bln) mainly due to long term borrowings from SBP amounting to PKR 687mln.


Cashflows & Coverages

Liquidity profile reflected a good position with available funds invested in Government Securities that yielded sanguine returns. The Bank's liquid assets-to-deposits ratio denotes a good profile.


Capital Adequacy

At end-CY24, the equity base of the Bank increased to PKR 9bln (end-CY23: PKR 7bln), attributable to enhanced profitability during the period. Consequently, the Bank's Capital Adequacy Ratio (CAR) stood at 19.16%, including a Tier I CAR of 14.51%, as of CY24, compared to a CAR of 16.2% and a Tier I CAR of 11.43% at the end of CY23. VEON, the Bank’s majority shareholder, injected USD 15mln into MMBL. An additional USD 20mln is expected in 2025, to strengthen capital, boost MSME and digital lending, and support digital growth.
 
 

Apr-25

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Mobilink Microfinance Bank Limited

financial summary

(PKR mln)

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Dec-24
12M		 Dec-23
12M		 Dec-22
12M
A. BALANCE SHEET
1. Total Finances - net 77,176 71,537 56,300
2. Investments 61,350 33,388 8,347
3. Other Earning Assets 22,972 18,429 5,611
4. Non-Earning Assets 26,131 21,752 11,306
5. Non-Performing Finances-net (2,244) (727) (86)
Total Assets 185,385 144,379 81,478
6. Deposits 154,951 119,286 64,765
7. Borrowings 2,782 2,275 3,488
8. Other Liabilities (Non-Interest Bearing) 18,237 15,835 7,335
Total Liabilities 175,970 137,396 75,588
Equity 9,415 6,983 5,890
B. INCOME STATEMENT
1. Mark Up Earned 52,981 30,662 17,335
2. Mark Up Expensed (12,476) (5,898) (2,785)
3. Non Mark Up Income 14,408 10,395 6,513
Total Income 54,913 35,158 21,063
4. Non-Mark Up Expenses (37,825) (25,361) (18,497)
5. Provisions/Write offs/Reversals (20,177) (8,340) (1,462)
Pre-Tax Profit (3,089) 1,458 1,104
6. Taxes 1,256 (424) (146)
Profit After Tax (1,833) 1,033 958
C. RATIO ANALYSIS
1. Performance
Portfolio Yield 68.5% 55.3% 45.8%
Minimum Lending Rate 86.1% 56.8% 46.8%
Operational Self Sufficiency (OSS) 95.6% 106.4% 104.9%
Return on Equity -22.4% 16.1% 15.9%
Cost per Borrower Ratio 13,115.0 10,398.5 8,054.1
2. Capital Adequacy
Net NPL/Equity -23.8% -10.4% -1.5%
Equity / Total Assets (D+E+F) 5.1% 4.8% 7.2%
Tier I Capital / Risk Weighted Assets 14.5% 11.4% 11.1%
Capital Adequacy Ratio 19.2% 16.2% 15.7%
Capital Formation Rate [(Profit After Tax - Cash Dividend ) / Equity] -26.2% 17.5% 15.6%
3. Funding & Liquidity
Liquid Assets as a % of Deposits & Short term Borrowings 54.3% 45.4% 31.3%
Demand Deposit Coverage Ratio 97.2% 91.1% 47.7%
Liquid Assets/Top 20 Depositors 205.2% 126.1% 152.8%
Funding Diversification (Deposits/(Deposits+Borrowings+Grants)) 98.2% 98.1% 94.9%
Net Advances to Deposits Ratio 48.4% 59.4% 86.8%
4. Credit Risk
Top 20 Advances / Advances 0.0% 0.0% 0.0%
PAR 30 Ratio 11.1% 7.0% 4.4%
Write Off Ratio 0.0% 0.0% 0.0%
True Infection Ratio 11.1% 7.0% 4.4%
Risk Coverage Ratio (PAR 30) 123.2% 113.5% 103.3%

Apr-25

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Mobilink Microfinance Bank Limited

rating scale

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Apr-25

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Mobilink Microfinance Bank Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
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  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
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Apr-25

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