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2020 has been a challenging year for the microfinance sector. The outbreak of COVID-19 led to increased risk of non-recovery from customers who underwent distressed financial situations due to lockdown and exceptional circumstances.


Authors: Saniya Tauseef; Insia Raza

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Summary

Gross Loan Portfolio (GLP) clocked in at PKR~356bln - June’21, up by ~10% from PKR~324bln as at End-Dec’20. Almost equal growth of ~5% was observed in the 1st and 2nd Quarters of CY21.

Among peer groups, MFBs continued to hold the highest share of the GLP - ~73%, while MFIs and RSPs collectively held the rest (June’21).

Active borrowers increased to ~8mln – June’21, up by ~15% from ~7mln as at EndDec’20. Among peer groups, MFBs accounted for ~58% of the active borrowers while MFIs and RSPs accounted for the rest.

Credit quality of the Sector dropped further with Portfolio At Risk (PAR>30 days) rising to ~5.2% - June’21, up from ~3.7% as at End-Dec’20. Among peer groups, the highest to record infection were RSPs (~8.2%), though they hold a small system share. MFBs, holding the largest share in the pie, witnessed a weakened credit health with PAR>30 days increasing to ~4.5% - June’21 from ~2.9% as at End-Dec’20. The rise in NPLs is observed after the expiration of deferment/restructuring period in Mar’21. Meanwhile, MFIs recorded a marginal improvement registering PAR>30 days at ~4.1% - June’21 (~4.7% End-Dec’20).

Overall fresh disbursements were recorded at PKR~214bln in 1HCY21. Disbursements have gradually picked up since lockdown restrictions across the country have relaxed. In CY20, disbursements dropped by ~6% YoY as compared to CY19.

Deposit base of MFBs clocked in at PKR~378bln – June’21, up ~1.5% from PKR~373bln as at End-Dec’20. The sector’s deposits grew sharply by ~40% in CY20, majorly on account of better rates offered by the MFBs to attract funds.

Barring a few exceptions, the Sector’s bottom line closed in positive in CY20. Some deterioration was reflected in 1HCY21 majorly on account of reduced credit quality.

Publisher

The Pakistan Credit Rating Agency Limited PACRA

PACRA, established in 1994, is the first and leading Credit Rating Agency of Pakistan. Since inception, PACRA has over 8,000 rating opinions spread across 10 distinct financial and more than 45 corporate sectors. This demonstrates PACRA’s expertise, exceptional command, market leadership, and the confidence reposed in its opinions.