Apna Microfinance Bank Limited and FINCA Microfinance Bank Limited have entered into a Memorandum of Understanding in which the two microfinance entities are considering combining the operations of the two banks to create a more efficient microfinance bank.
In this regard, the State Bank of Pakistan (SBP) has granted in-principle conditional approval to commence reciprocal due diligence to further explore the transaction contemplated in the MOU subject to compliance with applicable laws, rules, and regulations, according to the stock filing.
The Board of Directors of APNA had already accorded its in-principal approval to conduct reciprocal due diligence for the Potential Transaction.
The resulting combined entity is expected to generate significant benefits for all stakeholders through economies of scale. The increased market share and cost competitiveness will strengthen the Bank’s financial position to better serve the low-income segments across Pakistan by providing flexible micro-financing and saving schemes.
Apna Microfinance Bank has a license to operate countrywide. It has footprints of 111 branches and 2 service centers.
The bank has been struggling to make a profit for the past two years with an accumulated loss stood at over Rs. 3.3 billion by end of September 2021. The slowdown in business activities of its customers affected by Covid-19-related lockdowns and then flood washed off their assets.
Hence, the bank’s recovery of the loans hit adversely which ultimately dragged the microfinance bank in the red. The microfinance bank is also facing the issue of a shortage of paid-up capital requirements.
FINCA Pakistan is operating through a branch network of over 130 branches across 120 cities in Pakistan. The bank is also running in losses which stretched to Rs. 729 million by the end of September 2021. The bank also faced the same situation of non-recovery of loans due to the negative impact of Covid-19 and floods in the areas of their customers. The bank’s position stands a strong position when it comes to its assets, deposits, and financial support from the parent company.
The merger of the two banks will likely be better not only for the two banks but for the microfinance sector which has been facing challenging time for the last two years