Some far-sighted staff at Telenor Microfinance Bank Limited (TMBL) dug a financial hole several years ago, and the bank is slowly crawling out of it at a heavy cost.It may be hard to believe that a microfinance bank that claims to be one of the top three financial institutions in the country in terms of “active” monthly customers is actually a loss-maker for its shareholders. It is an institution.
“As an entity, we will be profitable in 2024,” Mudassar Aqil, president and CEO of TMBL, said in a recent interview with Dawn.”We are clearly on track to hit profitability. We expect EBITDA to be positive by the end of next year,” he said, a measure of gross profit representing earnings before interest, taxes, depreciation and amortization. Referring to said.Microlender poised to turn profitable in 2024, says CEO of Telenor Microfinance BankThe microfinance bank that owns Easypaisa, a digital payments platform that has become a household name for money transfers. Yet the bank posted a net loss of Rs 4.3 billion in the first six months of 2022, compared to a net loss of Rs 4.9 billion in the year-ago period. Its accumulated losses stood at Rs 42.4 billion at the end of June compared to Rs 37.9 billion at the start of 2022.So why is it that a bank credited with many firsts in microfinance and digital payments appears to be in financial meltdown?
According to the CEO, one of the two main reasons is the nearly Rs 14 billion impairment charge the bank took in its lending business in 2019 after detecting “irregularities and fraud”.Ignoring the portion of accumulated losses prior to the 2019 episode, TMBL’s loss is around Rs 27bn. In other words, irregularities and fraud accounted for more than half of the losses accumulated on the bank’s balance sheet during 2019, 2020 and 2021.”We undertook the largest and most transparent exercise in the history of Pakistan’s banking sector to clean up our books,” he said.The bank verified nearly half a million borrowers to find out which borrowers actually existed, whether they were solvent and if there were any irregularities in the loan documentation. In the subsequent 16 months, no new loan was granted by the bank.”We made advance provisioning for all the bad debts and cleaned up our book. Credit goes to both the shareholders (Telenor and Antgroups) who covered the impairment loss and to us. Asked to put the business back on a solid footing.As another reason, Mr. Aqil said that 13 billion rupees of the accumulated losses of 27 billion rupees since 2019 should be seen as investment in building Pakistan’s largest digital platform. “Acquiring new customers through digital channels is quite expensive,” he said, adding that the technology-based business model requires banks to invest upfront in developing the platform and realize its benefits in subsequent years. Should.”The loss we are incurring, which is being continuously funded by equity injections from our shareholders, is only due to the expansion of our digital payments platform,” he said.He said that the accumulated losses are a cause of concern for the shareholders. From a depositor’s point of view, more relevant indicators are capital adequacy ratio, minimum capital requirement, deposit book concentration, leverage limit and advances-to-deposits ratio – metrics in which TMBL is “one of the best” in the banking industry. ” Is.Telenor Group increased its shareholding in the micro-lender to 100 percent in 2016. Two years later, it sold a 45 percent shareholding to Ant Group’s Alipay (Hong Kong) Holding Limited for $184.5 million. In other words, TMBL was worth $410m in 2018.Since Ant Group acquired 45 percent of the shares in 2018, shareholders have collectively invested $270 million in the bank. Most recently, the two shareholders injected equity worth 3.9 billion rupees, or $22 million, in February to help management execute its business plan.Despite continuous injections of funds over the past four years, majority shareholder Telenor Group has taken over its full or partial stake in the micro-lender. According to publicly available information, MCB Bank Limited and United Bank Limited have expressed interest in TMBL for a possible purchase of 45 percent shareholding.Stating that there has been no material progress in the matter yet, Mr. Aqil declined to say whether other parties have also expressed interest in buying the shareholding at the sale.
