PACRA Maintains Entity Ratings of SAFCO Microfinance Company (Private) Limited

Lahore, March 28, 2023 (PPI-OT): SAFCO Microfinance Company (Private) Limited (‘SMCPL’ or the ‘Company’) is a Microfinance Institution (MFI) governed by the Securities and Exchange Commission of Pakistan under Section 16 of the Companies Act, 2017. The company is licensed to operate under NBFC (Establishment and Regulations) Rules, 2003, Non-Banking Finance Companies, and Notified Entities Regulations 2008. It has been in operation since 2009. The key element is that MFIs are not permitted to mobilize deposits, this element provides funding constraints. SAFCO is a for-profit organization, hence, the source of funding comprises a) Shareholders’ equity, b) loans, and c) Internal generation of profits.

The company’s profitability culminates in integral capital generation at a decent rate. The second major source of funding is borrowings, for which the company majorly relies on local avenues primarily including PMIC, with some foreign portion. The ratings also incorporate the vulnerability in business due to low market share and limited geographical presence. Recently, the company has enhanced GLP, leading to an improvement in markup earned.

However, total income declined on account of the exchange losses and higher costs of borrowing and remained stagnant at PKR 468mln at the end-June’22 (FY21: PKR 492mln). The Quantum of NPLs has increased on a YoY basis, where the company prudently recorded higher provisions to provide a cushion against the current and potential NPLs. Provisioning against NPLs along with higher non-markup expenses caused net profitability to dilute. The Institution’s financial risk profile displays a stable outlook with fine profitability margins despite a fall in asset quality. Going forward, the sustainability of profits along with asset quality are key essentials.

For more information, contact:
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