Feb 28, 2017 - Fee and commission income. 2 112 803 ... GetBucks Financial Services Limited (âGetbucksâ or âthe Co
GETBUCKS 1646/1
GETBUCKS FINANCIAL SERVICES LIMITED UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six months ended 31 December 2016 CONDENSED STATEMENT OF COMPREHENSIVE INCOME
CHAIRMAN’S STATEMENT
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and judgements are evaluated on a continuous basis, and are based on past experience and other factors, including expectations with regard to future events. Accounting policies and management’s judgements for certain items are especially critical for the Company’s results and financial situation due to their materiality.
3.1
Income taxes The Company is subject to income tax in Zimbabwe. Significant judgement is required in determining the income tax payable. There are many transactions and calculations for which ultimate tax determination during the ordinary course of business is estimated. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from amounts that were initially recognised, such differences will impact the current and deferred income tax liabilities in the period in which such determination is made.
3.2
Impairment losses on loans and advances The Company reviews its loan portfolios to assess impairment at least monthly. In determining whether an impairment allowance should be recorded in the statement of comprehensive income, the Company makes judgements as to whether there is measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. Management uses estimates based on historical loss experience for assets with credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
For specific impairment allowance the expected cash flows are discounted using the original effective interest rate when the loan was granted.
4.
CASH AND CASH EQUIVALENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
INTRODUCTION It gives me great pleasure to present the results for six months ended 31December 2016. The company has continued to pursue innovation in the provision of Financial Services in Zimbabwe, by making it easier to obtain services when required through the use of online lending platforms and advanced banking technology. CURRENT ECONOMIC CONDITIONS The operating environment has been characterized by tight liquidity conditions, weak aggregate demand and low foreign direct investment. Most financial instituations have faced challenges accessing notes for their customers and our business has seen similar problems. The coming of the bond notes has brought some relief and more work is needed to build further confidence in the economy. Economic growth was estimated at 0.6% in 2016 and the Ministry of Finance projected growth of 1.7% in 2017, even though the World Bank estimated the same to end at 3.8%. Due to the persistence of a deflationary environment, the year closed with negative inflation of 0.9% with forecast of up to 2% in 2017 due to inflationery pressures. OPERATING RESULTS Despite these challenges, the company recorded a net profit of $1.7 million for the six months ended 31 December 2016. Interest Income increased by 15.5% from $3.7 million to $4.3 million. Operating expenses increased from $2.4 million to $3.2 million over the same period due to necessary staff increases to boulster our ability to serve customers. Total Assets grew by 10% from $20 million to $22 million and encouragingly customer deposits grew by 70% in the same period. Customer loans grew by a marginal 3% to $14.2 million driven by the new Small to Medium Enterprise loans. CAPITAL The company was adequately capitalized with a net equity position of $11.8 million as at 31 December 2016. This capital position is well above the minimum regulatory threshold of $5 million for Deposit Taking Microfinance Institutions. DIVIDEND The company strives to ensure that shareholders obtain a maximum return on their investment, and in keeping with this vision, the Board proposes an interim dividend of $350,000 being 0.032 cents per share. CORPORATE SOCIAL RESPONSIBILITY The Board and Management are fully committed to improving the social wellbeing of the communities that we serve, and GetBucks Financial Services has commenced a program to sponsor vulnerable groups in different provinces of the country. FINANCIAL INCLUSION As a fintech company, our goal is to provide financial products and services to the unbanked and underbanked consumer segment through the use of leading edge technology, thereby driving financial inclusion for this market. The group aims to ensure that its offering is fast, simple and trustworthy, and when compared to traditional methods, ultimately working towards enhancing the customer’s experience. OUTLOOK The company continues to expand its product offering, and has recently introduced 10 year mortgages to the public. These and other efforts are designed to ensure that the business diversifies its focus and continues to grow revenues. APPRECIATION I would therefore like to thank our directors, staff, partners, shareholders and other stakeholders who have contributed to our success, despite the many challenges we faced.
Note
31 Dec 2015 Unaudited US$
Interest income
12
4 377 232
3 789 482
Interest expense
13
(399 897)
(497 501)
Net Interest income
3 977 335
3 291 981
Fee and commission income
2 112 803
1 993 504
Total Net income
6 090 138
5 285 485
Impairment and allowances Operating expenses
14
Profit before taxation Income tax expense
15
(444 616)
(202 779)
(3 285 387)
(2 477 187)
2 360 135
2 605 519
(658 398)
(615 249)
Profit for the year
1 701 737
1 990 270
Total comprehensive income for the period, net of tax
1 701 737
1 990 270
Earnings per share (cents)
0.16
0.18
Diluted earnings per share (cents)
0.16
0.18
CONDENSED STATEMENT OF CHANGES IN EQUITY Share Share Share capital premium application fund US$ US$ reserve US$ Balance at 1 July 2015
Retained Earnings
Total equity
US$
US$
100
-
999 900
5 021 932 6 021 932
Profit for six months Total comprehensive income for the year
-
-
-
3 014 256 3 014 256
-
-
-
9 036 188 9 036 188
Share issue Share premium Share issue costs Dividends declared and paid
9 - 3 199 991 - (316 363) -
Total contributions by and distributions to owners of the Company recognised directly in equity
140 127 3 230 433 3 370 560
31 Dec 2016 US$
30 June 2016 US$
5 879 600 5 948 386 1 035 327 -
6 742 519 5 687 935 756 072 -
Gross carrying amount
12 863 313
13 186 526
Less credit impairment
979 921
572 266
Impairment allowance
979 921
572 266
Balance at 30 June 2016 Balance at 1 July 2016
109 2 883 628
Net carrying amount
Dividends declared and paid
Consumer loans Maturing within 3 months Maturing within 3 - 12 months Maturing 1- 5 years Maturing over 5 years
- (1 500 000) 1 383 637 999 900
6 536 188 10 419 825
1 701 737 1 701 737
-
-
-
1 701 737 1 701 737
Gross carrying amount
2 343 993
1 198 520
Less credit impairment
-
-
2 343 993
1 198 520
6 536 188 10 419 825
-
-
(251 520)
(251 520)
999 900
7 986 405 11 870 042
Net carrying amount
5.2
Irrevocable commitments There are no irrevocable commitments to extend credit, which can expose the Company to penalties or expense.
5.3
Sectorial Analysis 31 December 31 December 2016 2016 US$ % Consumer loans Small and Medium Enterprises ("SME")
CONDENSED STATEMENT OF CASHFLOWS 31 Dec 2016 US$
31 Dec 2015 US$
2 218 256 (516 707)
2 439 918 (551 745)
1 701 549
1 888 173
(59 191)
(96 945)
Proceeds from other financial liabilities Repayments of shareholders loan Dividends paid
56 137 (251 520)
547 348 (1 450 000) ( 1 000 000)
Non-resident shareholders tax and resident shareholder tax will be deducted from the gross dividends where applicable.
Net cash flows used in financing activities
(195 383)
(1 902 652)
By Order of the Board
Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
1 446 975
(111 424)
3 370 560
1 528 606
4 817 535
1 417 182
Note
Net cash flows generated from operating activities
The payment of this dividend will take place on or about 31 March 2017. The shares of the company will be traded cum-dividend (“with dividend”) on the Stock Exchange up to the market day of 10 March 2017 and ex-dividend as from 13 March 2017.
Mr. P. Soko Company Secretary 28 February 2017
Cash generated from operations Income tax paid
16
Cash flows from investing activities Purchase of equipment
5.4
Cash flows from financing activities
4
As at 31 Dec 2016 Consumer SME
5.5
Note
31 Dec 2016 Unaudited US$
30 Jun 2016 Audited US$
Total assets
4 817 535 14 227 385 2 831 391 467 038 29 897 42 850 219 828 22 635 925
3 370 560 13 812 780 2 623 191 452 941 13 466 271 128 20 544 066
109 999 900 2 883 628 6 536 188
11 870 037
10 419 825
1 587 387 1 113 698 8 064 803
1 233 433 657 888 17 009 8 215 911
Total liabilities
10 765 888
10 124 241
Total equity and liabilities
22 635 925
20 544 066
Total equity
9
The above statement of financial position should be read in conjunction with accompanying notes.
GetBucks Now Offers Banking & Online Credit
GetBucks Now Offers Banking & Online Credit
www.getbucks.com
14 227 385
100%
13 812 780
100%
11 999 894 1 198 520
162 883 -
288 987 -
162 496 12 614 260 - 1 198 520
13 198 414
162 883
288 987
162 496 13 812 780
10 923 766 1 827 922
157 486 321 380
103 725 62 536
698 416 11 883 393 132 154 2 343 992
12 751 688
478 866
166 261
830 570 14 227 385
Exposure to credit risk 31 Dec 2016 US$
30 Jun 2016 US$
756 008 112 278 170 473
369 104 460 074 260 496 12 096 852
1
Gross carrying amount Less credit impairment allowance
12 863 314 979 921
13 186 526 572 266
Carrying amount
11 883 393
12 614 260
132 154 62 536 321 380
-
Grade 1- 3
1 827 922
1 198 520
2 343 992
1 198 520
-
-
2 343 992
-
15 207 306 979 921 14 227 385
14 385 046 572 266 13 812 780
Opening balance Increase in impairment allowance Loans written off
572 265 444 616 (36 961)
446 186 954 601 (828 522)
Closing Balance All loans and advances are denominated in US Dollars
979 920
572 265
2 831 391
2 623 191
2 831 391
2 623 191
GENERAL INFORMATION GetBucks Financial Services Limited (“Getbucks” or “the Company”) is a registered Deposit Taking Microfinance Institution by the Reserve Bank of Zimbabwe, under the Zimbabwe Money Lending and Interest Rates Act (Chapter 14:41), and is a subsidiary of GetBucks Limited which holds 50.3% of the Company’s ordinary shares. The Company was listed on the Zimbabwe Stock exchange on 15 January 2016 and obtained its Deposit Taking Microfinance License during the same month.
SME loans Past due and impaired Grade 8 - 10 Grade 6 - 7 Grade 4 - 5
The Company is a limited liability company incorporated and domiciled in Zimbabwe.
The address of its registered office is MIPF House, 5 Central Avenue, Harare, Zimbabwe.
BASIS OF PREPARATION
Gross carrying amount
Statement of compliance These condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position of the company since the last annual financial statements as at the year ended 30 June 2016. These condensed interim financial statements do not include all the information required for the full annual financial statements prepared in accordance with International Financial Reporting Standards.
Less credit impairment allowance (note 5.6)
2
LIABILITIES 10 11
91% 9%
11 824 555
Equity attributable to owners of the company 109 999 900 2 883 628 7 986 400
12 614 260 1 198 520
Grade 1 – 3
EQUITY AND LIABILITIES
8
84% 16%
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
ASSETS 4 5 6 7
30 June 2015 %
11 883 392 2 343 993
Consumer loans Past due and impaired Grade 8 - 10 Grade 6 - 7 Grade 4 - 5
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
30 June 2015 US$
Analysis of Credit Quality by Sector Grade 1-3: Perfoming loans and loans with up to 30 days arrears Grade 4-5: Loans with 31-60 days arrears Grade 6-7: Loans with 61-90 days arrears Grade 8-10: Loans greater than 90 days arrears Grade Grade Grade Grade 1–3 4-5 6-7 8 - 10 TOTAL US$ US$ US$ US$ US$ As at 30 June 2016 Consumer SME
The above statement of cash flows should be read in conjunction with accompanying notes.
CONDENSED STATEMENT OF FINANCIAL POSITION
84 414 1 114 106
-
109 2 883 628
This dividend is in respect of the six months ended 31 December 2016 and will be payable in full to all shareholders of the company registered at close of business on 17 March 2017.
1 462 908 881 085
-
999 900
Total contributions by and distributions to owners of company recognised directly in equity
Cash flows from operation activities
12 614 260
-
-
Notice is hereby given that on 27 February 2017, the Board of Directors of Getbucks Financial Services Limited has declared an interim dividend of US$ 0.00032 (0.032 cents) per share payable in respect of all ordinary shares of the company.
11 883 393
SME loans Maturing within 3 months Maturing within 3 - 12 months
109 2 883 628
Profit for six months Total comprehensive income for the year
5 LOANS AND ADVANCES TO CUSTOMERS 5.1 Loans and advances maturities
9 - 3 199 991 - (316 363) - (1 500 000) (1 500 000)
9 2 883 628
DIVIDEND DECLARATION NOTICE
Other financial liabilities Deposits from customers Current income tax payable Deferred tax liabilities Borrowings
447 457 4 370 078 4 817 535
Cash and cash equivalents consists of: Cash on hand Bank balances
FOR THE PERIOD ENDED 31 DECEMBER 2016
FOR THE PERIOD ENDED 31 DECEMBER 2016
Share capital Share application funds reserve Share premium Retained profits
30 June 2016 US$
The above statement of changes in equity should be read in conjunction with accompanying notes.
28 February 2017
Cash and cash equivalents Loan and advances to customers Amounts due from shareholders Other assets Deferred tax assets Intangible assets Equipment
31 Dec 2016 US$
The above statement of comprehensive income should be read in conjunction with accompanying notes.
Balance at 31 December 2016
Mr G.N. Madzima CHAIRMAN OF THE BOARD OF DIRECTORS
31 Dec 2016 Unaudited US$
SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated. Taxes on income in the interim periods are accounted using the tax rate that would be applicable to the expected total annual profit or loss. There are no new International Financial Reporting Standards (“IFRSs”) or International Financial Reporting Interpretations (“IFRICs”) that are effective for the first time this interim period that would be expected to have a material effect on the Company. Management continuously assess the impact of the new standards on the financial statements. The principal accounting policies applied in the preparation of these financial statements are set out below.
2.1
Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are declared by the Company’s Directors.
3
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The Company’s financial statements and its financial results are influenced by accounting policies, assumptions, estimates and management judgement, which necessarily have to be made in the course of the preparation of the financial statements.
Carrying amount Gross carrying amount SME and Consumer Loans Impairment Net carrying amount Impairment loss on loans and advances
6
LOANS TO SHAREHOLDERS Brainworks Capital Management (Private) Limited The loan is secured, bears interest at 18% per annum. The loan is secured by shares in two Zimbabwe Stock exchange listed counters. These shares have been used as collateral to secure the NMB and TLG facilities. Current assets (no more than 12 months after the reporting period) Non-current (more than 12 months after the reporting period)
-
-
2 831 391
2 623 191
Directors: G. Madzima (Chairman), M. Muchando-Murevesi* (Managing Director), G.T. Fourie* (Operations Director), W.T. Kambwanji, G. Manyere, R. Mbire, D.Van Niekerk, M. Manjengwah, P. Saungweme. *Executive. Registered Office: Ground Floor, MIPF House. 5 Central Avenue, Harare, Zimbabwe. Investor Relations Website: www.getbuckszw.com
GETBUCKS 1646/2
GETBUCKS FINANCIAL SERVICES LIMITED UNAUDITED CONDENSED FINANCIAL STATEMENTS for the six months ended 31 December 2016 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTHS ENDED 31 DECEMBER 2016 7
8
17
RELATED PARTIES
17.1 Relationships Holding company MyBucks SA (Luxembourg) Intermediate holding 31 Dec 2016 30 Jun 2016 company GetBucks Limited (Mauritius) US$ US$ Shareholder Brainworks Capital Management (Private) Limited Fellow subsidiaries GetBucks (Proprietary) Limited (Botswana) Prepayments 330 473 189 924 BU Bucks (Proprietary) Limited Tax receivable 25 967 214 564 CashCorp (Proprietary) Limited Deposits 24 848 24 018 TU Loans (Proprietary) Limited Sundry receivables 85 750 24 435 GetBucks Limited (Malawi) Other receivables are all current 467 038 452 941 EMU-INYA Enterprises :Limited (Kenya) GetSure Botswana (Proprietary) Limited (Botswana) Other assets are current and their carrying GetBucks Invest GmbH (Austria) amounts approximate their fair values GetBucks Spain SL GetBucks Poland SP z.o.o. SHARE CAPITAL GetBucks Financial Services Limited (Zambia) Ligagu Investments (Proprietary) Limited (Swaziland) Authorized 20 000 000 000 ordinary shares with nominal Entities under 2 000 2 000 value of US$0.0000001 common control GetBucks (Proprietary) Limited (South Africa) VSS Financial Services (Proprietary) Limited Issued (South Africa) 1 093 567 251 ordinary shares with nominal GetSure (Proprietary) Limited (South Africa) 109 109 OTHER ASSETS
Assets Cash and cash equivalents Loan book Loans to shareholders Other receivables
Liabilities Financial borrowings Deposits from customers Trade payables Asset and liability gap Cumulative gap
17.2 Held at amortized cost Comarton U.G.P.F. This liability consists of various medium term notes. Interest is charged at 11% per annum and paid monthly. The loan is repayable in October 2019. TLG Capital The loan is secured with a bank guarantee using shares (note 6), bears interest at 11% per annum and is repayable in quarterly payments relating to interest and fees raised. The capital portion of the loan consists of US$2 500 000 and is repayable in February 2020.
31 Dec 2016 US$ 5 495 488
2 569 315
NMB Bank Limited The liability consists of a term loan that accrues interest at 14% per annum paid monthly The loan is secured by a bank guarantee of $2 500 000 (note 6). The loan is repayable in July 2017 The following covenants apply Portfolio at risk (PAR) < 10% Non-performing loans (NPL) < 10% Cost to Income ratio < 60% Capital adequacy ratio > 15%
-
5 215 911
Loan accounts - Owing by related parties Brainworks Capital Management (Private) Limited (note 6) Interest paid to/(earned from) related parties Brainworks Capital Management (Private) Limited
2 500 000
Management fees paid to/(received from) related parties GetBucks Limited (Mauritius)
500 000
18
8 064 803 Non-current liabilities (more than 12 months after reporting period) At amortised cost
8 064 803
‘Current liabilities (no more than 12 months after reporting period) At amortised cost
8 064 803
8 215 911 2 500 000
5 715 911 8 215 911
18.1
The Company was in compliance with all covenants during the financial period.
10
OTHER FINANCIAL LIABILITIES Accruals and other liabilities Management fees Statutory fees
Fair value of other payables Other payables carrying amounts approximates the fair value due to the short term nature of the payables. The carrying amounts of other payables are denominated in US$.
11
DEPOSITS FROM CUSTOMERS
Deposits from customers are primarily composed of amounts payable on demand
1 426 063 127 500 33 824
544 745 225 000 463 688
1 587 387
1 233 433
Individual
Current accounts Term deposits
29 835 29 835
19 050 19 050
865 530 218 333
462 557 176 281
1 083 863
638 838
1 113 698
657 888
Small and medium enterprises Current accounts Term deposits
Total Deposits
12
4 377 232
399 897
16
776 374 477 35 922 325 889 52 325 81 108 911 901 166 747 88 760 27 862 900 000 15 666 7 676 32 403 40 714 26 699 196 462
18 000 209 015 33 098 223 821 69 565 62 873 519 083 181 431 64 714 7 668 900 000 6 968 5 744 16 752 26 709 51 517 80 229
3 285 387
2 477 187
Current Local income tax – current period
705 304
574 582
Deferred Deferred tax
(46 906)
40 667
658 398
615 249
31 Dec 2016 US$
31 Dec 2015 US$
1 990 259
2 605 439
81 108 407 655 399 897 (236 454)
62 873 (25 548) -
(2 534 076) 1 300 103 455 810 353 954 2 218 256
584 383 (961 731) 174 502 2 439 918
GetBucks Now Offers Banking & Online Credit
GetBucks Now Offers Banking & Online Credit
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(208 200)
(187 351)
(208 200)
(187 351)
1 035 000
2 218 688
RISK MANAGEMENT AND CONTROL
For the Company to reduce uncertainty as to the level of future earnings and its book values, the Company manages several types of risks, that comprise the following: *Credit risk, *Liquidity risk, *Market risk, *Foreign currency risk. *Capital risk. *Other risks The Company manages its financial risk in accordance with risk management policies and structures. The Company seeks to minimise exposure to these risks by diversifying its activities among products, clients, and by limiting its exposures in various facilities accorded to its clients. Credit risk Credit risk from lending and investment activities and products represent the possibility of loss to the Company if a debtor fails to meet financial commitments stemming from a credit agreement. Credit risk and exposure to loss are inherent parts of the Company’s business. The Board Credit Committee periodically reviews and approves the Company’s policies and procedures to define, measure and monitor the credit and settlement risks arising from the Company’s activities. Limits are established to control these risks. Any facility exceeding established limits of management must be approved by the Board Credit Committee. Management evaluates the credit exposure and assures ongoing credit quality by reviewing individual credit and concentration and monitoring of corrective action. The Company’s Credit Department periodically prepares detailed reports on the quality of the customers and adequacy of loan impairment allowance for review. Any loan or portion thereof which is classified as a ‘loss’ is written off. To maintain an adequate allowance for credit losses, the Company generally provides for a loan or a portion thereof, when a loss is probable. Credit policies, procedures and limits The Company has sound and well-defined policies, procedures and limits which are reviewed and approved by the Board of Directors and strictly implemented by management. Credit risk limits include delegated approval and write-off limits for management and Board Credit Committee, counterparty limits, individual account limits and concentration limits. Credit risk mitigation and hedging As part of the Company’s credit risk mitigation and hedging strategy, various types of collateral is taken by the Company. These include mortgage bonds over residential, commercial and industrial properties, cession of book debts and the underlying moveable assets financed. Credit risk stress testing The Company recognises the possible events or future changes that could have a negative impact on the credit portfolios and affect the Company’s ability to generate more business. To mitigate this risk, the Company has putmechanisms in place to enhance its stress testing methodologies. Impaired loans and securities Impaired loans and securities are those for which the Company determines that it is probable that it will be unable to collect all principal and interest due according to the contractual terms of the loan. These loans are graded C to E in the Company’s internal credit risk grading system.
Loans with renegotiated terms Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and where the Company has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this category independent of satisfactory performance after restructuring.
18.2
Liabilities Financial borrowings Deposits from customers Trade payables Asset and liability gap
CASH GENERATED FROM/(USED IN) OPERATIONS
Profit before income tax Adjustment for: Depreciation and amortisation Net impairment Finance costs Other income Changes in working capital: Loans and advances to customers Other assets Increase in deposits from customers Other financial liabilities
2 623 191
Past due but not impaired loans These are loans and securities where contractual interest or principal payments are past due but the Company believes that impairment is not appropriate on the basis of the present value of security/collateral available and/or the stage of collection of amounts owed to the Company.
TAXATION EXPENSE Major components of the tax expense
2 831 391
Assets Cash and cash equivalents Loan book Loans to shareholders Other receivables
30 June 2016 US$
497 501
OPERATING EXPENSES Accommodation Advertising, marketing and sales expenses Bank charges Collection costs Consulting and professional fees Depreciation and amortisation Staff costs and directors fees Funding origination costs Lease rentals on operating lease License fees Management fees Repairs and maintenance Postage and courier Printing and stationery Telephone and fax Travel Other expenses
15
3 789 482
INTEREST EXPENSE Interest incurred
14
INTEREST INCOME Interest income
13
Related party balances
BORROWINGS
Allowances for impairment The Company establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment. Other considerations to provisioning policy The Company, though not required by Reserve Bank of Zimbabwe (“RBZ”), considers the provisioning requirements as set out in the Banking Regulation 2000 in order to align its policies to group accounting policies, and the provisions of International Accounting Standard (‘’IAS 39’’) – “Financial instruments: recognition and measurement” and makes the most prudent provision for its loans and advances based on the two methods. Where the regulatory provisions are higher than those required by the IAS 39 impairment losses, the excess is treated as an appropriation to a reserve. Write-off policy The Company writes off a loan/security balance (and any related allowances for impairment losses) when the Credit Department determines that the loans/securities are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in the borrower/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardised loans, write off decisions are generally based on a specific product past due status. The Company holds collateral against loans and advances to customers in the form of mortgage interest over property, other registered securities over assets and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as impaired. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises when assets and liabilities have differing maturities.
Up to 3 months US$
3 months – 1 year US$
1 year – 5 years US$
Total US$
4 817 537 5 532 705
14 251 515
677 766
4 817 537 20 461 986
2 831 391 391 696
-
-
2 831 391 391 696
13 573 329
14 251 515
677 766
28 502 610
219 176
220 839
10 194 880
10 634 895
898 370 2 564 252
284 367 -
-
1 182 737 2 564 252
3 681 798
505 206
10 194 880
14 381 884
9 891 531
13 746 309
(9 517 114)
14 120 724
9 891 531
23 637 840
14 120 726
-
3 370 560 9 013 433
10 851 930
792 369
3 370 560 20 657 732
238 377
2 859 278 -
-
2 859 278 238 377
12 622 370
13 711 208
792 369
27 125 947
1 002 370
5 566 523
3 195 140
9 764 033
886 269 744 420
98 446 -
128 983 -
1 113 698 744 420
2 633 059
5 664 969
3 324 123
11 622 151
9 989 312
8 046 239
(2 531 754)
15 503 796
9 989 312
18 035 551
15 503 797
-
Liquidity profiling 30 June 2016
value of US$0.0000001
9
Liquidity profiling as at 31 Dec 2016
Cumulative gap
18.3
Market risk The risk of a change in the actual or effective market value or earnings of a portfolio of financial instruments caused by adverse movements in market variables such as equity, bond and commodity prices, currency exchange rates and interest rates, credit spreads, recovery rates, correlations and implied volatilities in all of the above.
Interest rate risk Interest rate risk exposure stems from assets and liabilities maturing (or being repriced) at different times. For example: i) Liabilities may mature before assets, necessitating the rollover of such liabilities until sufficient quantity of assets mature to repay the liabilities. The risk lies in that interest rates may rise and that expensive funds may have to be used to fund assets that are yielding lower returns.
ii) Assets may mature before liabilities do, in which case they have to be reinvested until they are needed to repay the liabilities. If interest rates fall this investment may be made at rates below those being paid on the liabilities waiting to be retired.
Sensitivity This risk is managed through the Company’s Asset and Liabilities Committee (“ALCO”) through the analysis of rate sensitive assets and liabilities, using such models as Scenario Analysis and control and management of the identified gaps. 18.4
Foreign currency risk The Company operates locally and has no foreign customers, therefore has limited foreign currency risk.
Foreign currency risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency.
As at year end, the Company was not exposed to foreign currency risk because all amounts were denominated in United States of America Dollar (the “functional currency”).
18.5
Capital risk Capital risk refers to the risk of the Company’s own capital resources being adversely affected by unfavourable external developments.
The Company’s capital resources should therefore be adequate to absorb losses such as operating losses, and capital losses on investments. So long as net losses can be fully offset against capital invested by the Company’s owners, the legal claims of clients or other creditors are not compromised, and the Company can continue to function without interrupting its operations.
The Reserve Bank of Zimbabwe (“RBZ”) regulates the minimum capital requirements of all microfinance lenders.
The shareholders equity for the Company at 31 December 2016 of US$11 870 037, was in compliance with the RBZ’s minimumcapital requirement of US$5 000 000.
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders’ return is also recognised and the Company recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security afforded by a sound capital position.
The Company has complied with all externally imposed capital requirements throughout the period.
There have been no material changes in the Company’s management of capital during the period.
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FAIR VALUE OF ASSETS AND LIABILITIES IFRS 13 ‘Fair value measurement’ requires an entity to classify its assets and liabilities according to a hierarchy that reflects the observability of significant market inputs. The three levels of the fair value hierarchy are defined below.
Quoted market prices - level 1 Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets of liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.
Valuation technique using observable inputs - level 2 Assets and liabilities classified as level 2 have been valued using models whose inputs are observable in an active market either directly (that is, as prices) or indirectly (that is, derived from prices).
Valuation technique using significant and unobservable inputs - level 3 Assets and liabilities are classified as level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price.
Comparison of carrying amounts and fair values for assets and liabilities not held at fair value The fair value of loans advanced to customers, lines of credit and amounts due to group companies approximate the carrying amount due to the short term nature of the financial assets and liabilities
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OTHER RISKS Operational risk Operational risk is the risk of loss arising from the potential that inadequate information system, technology failures, breaches in internal controls, fraud, unforeseen catastrophes, or other operational problems may result in unexpected losses. The Company manages these risks through insurance policies, checking work, training of staff, segregation of duties, regular internal and independent audits and disaster recovery plans. In addition, the Company has operating manuals to guide staff on the execution of their duties. These manuals are updated regularly.
Reputational risk This is the potential that negative publicity regarding the Company, whether true or not will cause a decline in thecustomer base, costly litigation or revenue reductions.
The Board through the Executive Committee ensures effective reputational risk management through inter-alia; codes of conduct, staff training, policies and independent oversight of functions. Reviews of the Company business practices are done periodically by the Internal Audit, the Compliance Officer and Risk Management.
Compliance risk Compliance risk is the current and prospective risk to earnings or capital arising from violations of, or non- conformance with laws, rules, regulations, prescribed practices, internal policies and procedures or ethical standards.
The Board, through delegation to the Compliance Officer has put in place an adequate compliance program, covering the legal compliance issues associated with the Company operations.
The liquidity risk is managed by the Management Assets and Liabilities Committee (‘’ALCO’’) of the Company which reviews the Company’s liquidity profile by monitoring the difference in maturities between assets and liabilities and analysing the future level of funds required based on various assumptions, including its ability to liquidate investments and participate in money markets.
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The table below analyses the Company’s non-derivative financial assets and liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:
BORROWING POWERS The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party.
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CAPITAL COMMITMENTS There were no authorised and contracted or authorised but uncontracted capital expenditure as at 31 December 2016 (30 June 2016; nil)
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EVENTS AFTER THE REPORTING DATE There were no significant events after the balance sheet date.
Directors: G. Madzima (Chairman), M. Muchando-Murevesi* (Managing Director), G.T. Fourie* (Operations Director), W.T. Kambwanji, G. Manyere, R. Mbire, D.Van Niekerk, M. Manjengwah, P. Saungweme. *Executive. Registered Office: Ground Floor, MIPF House. 5 Central Avenue, Harare, Zimbabwe. Investor Relations Website: www.getbuckszw.com
