FLASHNEWS:

PACRA Maintains Entity Ratings of JWS Pakistan

Lahore, September 15, 2021 (PPI-OT):JWS Pakistan (‘JWSP’ or the ‘Institution’) is a Microfinance Institution (MFI) governed by the Securities and Exchange Commission of Pakistan (SECP) under Section 42 of the Companies Act, 2017. The Institution is licensed to operate under NBFC (Establishment and Regulations) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations 2008. It has been in operations since 2015. The key element is that MFIs are not permitted to mobilize deposits, while they are also not backed by any stakeholder equity due to their status of “Companies Limited by Guarantee”.

These two elements, in combination, provide funding constraints, while they also delimit the boundaries of risk. JWSP is a not-for-profit organization, hence, the source of funding comprises a) internal generation of profits, b) loans and c) grants. The profitability of the Institution has recorded improvement due to enhanced GLP. Mark-up earned on microfinance loan portfolio witnessed significant upsurge, partly due to management’s decision to include fee and commission income as part of mark-up earned. Moreover, with the expiration of SBP’s deferment scheme period, the Institution witnessed a significant upsurge in non-performing loans, resulting in increased provisioning expense.

Institution’s cost of funds remained under control. Second major source of funding is borrowings. The Institution majorly relies on local avenues for borrowings primarily PMIC. Governance structure takes strength from the body of members and board of directors. The ratings also incorporate the vulnerability in business due to low market share and limited geographical presence. A room for growth in the technological domain exists. The impact of economic slowdown lately exacerbated by the global pandemic spread had cast a rippling effect on different sectors of the country. Microfinance industry is expected to absorb the impact as disbursement, recoveries and liquidity patterns were influenced.

Positive outlook represents the Institution’s improved performance amidst the COVID-19 pandemic attributable to efficient field work which resulted in 100% cumulative recovery. Hereby, infection ratio remains one of the lowest in the industry. Furthermore, the Institution is adding more branches where cumulative number achieved will be 100 in FY22. Fresh finances, for the expansion, are in pipeline by lenders both international and local.

The ratings are dependent on the Institution’s aptness to sustain positive performance indicators amidst growth in business volumes. The ratings would also monitor the impact of technological progression on the operational and risk efficacy of the Institution. Meanwhile, the “Rating Watch” reflects the need to oversee the risk profile of the Institution against unavoidable challenges, particularly emanating from economic deterioration in the wake of Covid-19, and its ramifications on the disposable income of the customer base.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com