The two microfinance organisations Apna Microfinance Bank Limited and FINCA Microfinance Bank Limited have a Memorandum of Understanding in which they discuss the possibility of integrating their respective businesses to form a more effective microfinance bank.
According to the stock filing, the State Bank of Pakistan (SBP) has, in this regard, given preliminary approval under the condition that reciprocal due diligence be conducted in order to further examine the transaction envisioned in the MOU. This approval is subject to compliance with all applicable laws, rules, and regulations.
The Potential Transaction’s reciprocal due diligence was previously given the in-principle approval of the APNA Board of Directors.
Through economies of scale, the new combined entity is anticipated to produce significant benefits for all stakeholders. The Bank will be in a stronger financial position to provide flexible micro-financing and saving plans to low-income sectors across Pakistan thanks to the increasing market share and cost competitiveness.
A licence allowing Apna Microfinance Bank to operate all throughout the nation. Its footprint consists of 2 service centres and 111 branches.
The bank has been battling to turn a profit for the previous two years, and as of the end of September 2021, the total loss amounted at over Rs. 3.3 billion. The lockdowns due to COVID-19 and subsequent flooding that washed away their assets caused a slowdown in company operations for its clients.
Thus, the bank’s attempt to recover the debts was negatively impacted, which finally caused the microfinance bank to go into the red. The lack of paid-up capital requirements is another problem the microfinance bank is dealing with.
Through a branch network of more than 130 branches spread across 120 Pakistani cities, FINCA Pakistan conducts business. By the end of September 2021, the bank had accrued losses totaling Rs. 729 million. Due to the detrimental effects of COVID-19 and flooding in the areas where their clients lived, the bank experienced the same non-recovery of debts problem. Regarding its assets, deposits, and parental corporate financial assistance, the bank is in a healthy position.
The merger of the two banks will certainly be better for the microfinance industry, which has been struggling over the past two years, as well as the two banks.