REG - ASA Intnl. Grp PLC - 2021 Full Year Results
26/04/2022 07:16
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RNS Number : 2793J ASA International Group PLC 26 April 2022
ASA International Group plc reports FY 2021 results
Amsterdam, The Netherlands, 26 April 2022 - ASA International Group plc, ('ASA
International', the 'Company' or the 'Group'), one of the world's largest
international microfinance institutions, today announces its full year
unaudited results for the year ended 31 December 2021.
Key performance indicators
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD millions)
% Change
(constant currency)
Number of clients (m) 2.4 2.4 2.5 0%
Number of branches 2,044 1,965 1,895 4%
Profit before tax 25.7 2.6 54.3 897% 890%
Net profit((1)) 6.4 -1.4 34.5 556% 523%
OLP((2)) 403.7 415.3 467.4 -3% 3%
Gross OLP 430.7 445.3 471.4 -3% 3%
PAR > 30 days((3)) 5.2% 13.1% 1.5%
((1)) Net profit was reduced due to a conservative approach of not recognising
a deferred tax asset for the tax losses carried forward by ASA India and the
IFRS requirement for the provision of deferred taxes on future dividend
payments by some of the Company's operating subsidiaries.
((2) )Outstanding loan portfolio ('OLP') includes off-book Business
Correspondence ('BC') loans and Direct Assignment loans, excludes interest
receivable, unamortized loan processing fees, and deducts modification losses
and ECL provisions from Gross OLP.
((3)) PAR>30 is the percentage of on-book OLP that has one or more
instalment of repayment of principal past due for more than 30 days and less
than 365 days, divided by the Gross OLP.
FY 2021 highlights
· The Company's operational and financial performance significantly
improved with pre-tax profit increasing from USD 2.6 million in FY 2020 to USD
25.7 million in FY 2021.
· The recovery from the pandemic was led by strong operational and
financial performance of ASA Savings & Loans in Ghana, ASA Pakistan and
ASA Tanzania, which delivered substantial OLP growth, PAR>30 of less than
0.5%, and substantially increased profitability.
· Pagasa Philippines, ASA Nigeria and ASA Kenya also made significant
positive contributions to the Group's net profitability.
· Due to the increased credit risk of the loan portfolio in 2021 caused
by the adverse impact of Covid on the Group's clients' businesses, the Group
charged USD 37.5 million (FY 2020: USD 27.2m) for expected credit losses
('ECL') into the Income Statement, of which USD 25.8 million was due to India.
· Following the end of the lockdowns in India, Sri Lanka, the
Philippines, Myanmar and Uganda, the Group granted certain clients a temporary
moratorium of the payment of one or more loan instalments (which, in effect,
extended the related loans for the moratorium period), which peaked at USD
48.3 million in June 2021 with 237K clients, mainly in India, benefiting from
the moratorium, and reduced to USD 28.7 million by year-end 2021.
· PAR>30 decreased from 13.1% to 5.2% (after the restructuring of
loans outstanding of approximately 38% of clients in India) by the end of
December 2021.
· At 31 December 2021, the Group had approximately USD 91 million of
unrestricted cash and cash equivalents, with a funding pipeline reaching
approximately USD 192 million.
· The Group successfully raised USD 191 million in fresh debt to fund
its operations in 2021.
Outlook
Whilst the impact of the Covid pandemic on the Group's operating subsidiaries
remains unpredictable, it is expected that, the Group's operating and
financial performance should substantially improve in 2022, based on the
positive developments during the second half of 2021 and first quarter of
2022. This is assuming that the impact of expected food, commodities and
energy inflation and related forex movements will not have a major adverse
impact on the Group.
Dirk Brouwer, Chief Executive Officer of ASA International, commented:
"We currently expect that the operating environment will further improve in
most of our operating countries in the current financial year.
There has been an improvement of the situation in India, where the regulator
introduced radical changes to the regulation of the Indian microfinance sector
effective 1 April 2022. These changes are a positive development for the
Company as it enables ASA India to price its loans based on the risk profile
thereof and create a level playing field for NBFC-MFIs and banks active in the
microfinance sector. The improvement in India has been partially offset by the
continued challenging operating environment in Myanmar due to Covid and the
military takeover, and in Sri Lanka which is currently suffering from an
economic crisis."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business review 2021
Due to the continuing impact of Covid in many of our operating countries in
2021, the operating environment remained challenging. We continued to focus on
providing a safe working environment for all our staff and enable them to stay
close to our clients during these difficult times. The pandemic continued to
have significant implications for our staff and clients with the death of two
of our 13,047 staff and 685 of our clients due to Covid in 2021. I express my
gratitude to all of our colleagues in our head offices and in the field in all
our countries for their commitment, hard work and for always keeping their
focus on supporting our clients in these difficult operating circumstances.
Financial performance
I am particularly pleased that all but two of our major operating subsidiaries
recovered to or exceeded pre-Covid operating and financial performance in
2021. Despite the ongoing challenges we face in India and Myanmar, the
performance of most of our other operating countries, including, particularly,
Ghana, Pakistan and Tanzania, was excellent in terms of portfolio quality,
growth and profitability. Most of our clients in these countries faced
significantly less disruption to their businesses compared to 2020. ASA
Nigeria and Pagasa Philippines also substantially improved their operating
performance in 2021.
The Group maintains a diversified risk profile with operations across thirteen
markets in Asia and Africa. As the impact of Covid on our clients
substantially varies per country, the Company benefits from this relatively
high level of diversification.
As a result of the improved operating performance in 2021 and despite a
substantial USD 37.5m expense for expected credit losses ('ECL') which was
primarily caused by the ongoing challenges we faced in India, the Group
realised pre-tax profits of USD 25.7 million, which was substantially better
than the USD 2.6 million generated in 2020.
Net income amounted to USD 6.4 million, which was adversely affected by the
deferred tax provision on future dividend payments by some of the Company's
operating subsidiaries in the current year. This resulted in a decrease of net
income by USD 2.3 million. Furthermore, the Company took a conservative
approach to the tax losses carried forward of ASA India, for which no deferred
tax asset was recognised. This reduced net income by USD 5.6 million.
Due to the combination of significant write-offs and reduced loan
disbursements in India, the Group's net OLP decreased by 3% to USD 404 million
with the number of clients stable at 2.4 million. In 2021, we opened 79
branches (+4%), the number of clients per branch decreased by 4% to 1,165 and
the Average Gross OLP per Client decreased by 3% to USD 181. The Group's
operating subsidiaries, excluding India, collectively have been able to reduce
PAR>30 to 1.7%. Ghana, Pakistan and Tanzania led the recovery with
substantial OLP growth and high portfolio quality, with PAR>30 at less than
0.5%.
India
Given the challenging environment in India, ASA India reduced the
disbursements of new loans and prioritised the recovery of existing loans.
Reduced loan disbursements and significant write-offs caused OLP to go down by
34%. ASA India benefited from the Reserve Bank of India ('RBI') approved
moratoriums, which were offered to many of its clients in September 2021,
following the major adverse impact on our clients' businesses as a result of
the widespread Delta variant. This, combined with significant write-offs in
the year improved PAR>30 from 31.9% to 19.7%. As a result of the adverse
impact of the Delta variant, ASA India maintained a very cautious business
profile with (i) selective disbursements of fresh loans, (ii) a strong focus
on the recovery of overdue loans, and (iii) strict cost control. Since the
beginning of 2022, we already have seen the positive benefits of this strategy
with loan repayments of overdue loans steadily increasing. In addition, the
RBI announced new regulation for all participants in the microfinance sector
in India, effective 1 April 2022. The Group's assessment is that this is a
positive development for ASA India as it creates a level playing field in the
microfinance sector. The key changes include (i) the removal of the interest
rate cap and margin cap, (ii) lenders will be restricted to provide
microfinance loans to clients up to a maximum of 50% of the client's household
income, and (iii) restrictions for banks which provide microfinance loans to
use client savings as security collateral.
Digital Financial Services
In 2021, we made substantial progress in designing and developing a digital
financial services ('DFS') platform for the Group. The objectives for building
this DFS platform are as follows:
· Enable our existing microfinance clients to online transact and
communicate by means of a proprietary application (the 'ASA App') designed for
use by a client through their smart phone.
· The main function of the ASA App will be for clients to (i) receive
loans, (ii) pay loan instalments, (iii) communicate with their designated loan
officer, group leader and other group members, (iv) deposit funds into an
interest-earning ASA deposit account, (v) make payments to third parties, such
as, for instance, utility bills, school fees, etc, (vi) purchase goods for
their specific business activity.
· Enable the broader public to deposit funds through our ASA App,
complemented by our newly acquired Temenos Core Banking System ('CBS'), at
competitive rates compared to any of our local banking peers.
· Since April 2021, the Group appointed a team of experienced DFS
advisors, app and wireframe developers, a DFS development firm and an expert
supplier market place ('SMP') development firm.
· Concurrently, the Group recruited, in support of our existing IT
department with 60 staff based in Dhaka, a strong team of senior managers with
substantial experience in (a) implementing and integrating DFS, CBS, SMP and
other external payment gateways with the ASA App and (b) establishing a robust
client support and fulfilment function, which conforms with the Group's
existing business processes and meets our clients' needs.
The Group already started with the implementation project of (i) DFS, CBS and
SMP in Ghana and (ii) CBS in Pakistan. The aim is to start the proof of
concept of DFS by the first quarter of 2023, followed by full implementation
in Ghana.
Competitive environment
The competitive landscape has not changed much across the Group. Our strongest
competitors are in India, the Philippines, Nigeria, Tanzania and Uganda. In
most other markets, we face less competition from traditional microfinance
institutions. Up until now, we have not noticed significant competition from
pure digital lenders.
Funding
The Group successfully raised USD 191m in fresh debt to fund its operations in
2021 and remains well capitalised with USD 91 million of unrestricted cash
(including fixed deposits) as of 31 December 2021. Also, the Group has a
strong funding pipeline of USD 192 million fresh loans, with over 58% having
agreed terms and can be accessed in the short to medium term as of 31 March
2022. This reaffirms the confidence lenders have in the strength of the
Group's business model and management's ongoing efforts to successfully steer
the Group through the Covid pandemic.
ECL provision
In FY 2021 the Company assessed its year-end provision for expected credit
losses at USD 27.5 million for its OLP, including the off-book BC portfolio
and interest receivables. This is similar to the ECL provision made in 2020.
Despite a majority of the Covid affected portfolio being written off in 2021
(USD 32.9 million vs USD 3.6 million in 2020), the Company maintained a
significant provision mainly due to the increased credit risk profile across
the portfolio due to the adverse impact of Covid on the businesses of clients,
particularly in India. The USD 27.5 million ECL provision on OLP and interest
receivables is concentrated in India (66%), the Philippines (7%) and Myanmar
(8%), with the remainder spread more evenly across the other countries as
percentage of each countries outstanding loan portfolio or as aggregate
amount. Following the removal or relaxation of restrictions in most countries,
collections have gradually improved with most countries now at pre-Covid
levels of collections. The assessment for the ECL provisions includes
uncertainty in the selected assumptions due to the lack of reliable historical
data on the Covid pandemic's impact on loan recovery. As such, the resulting
outcome of losses on the loan portfolio may be materially different. Further
details on the ECL calculation are provided in note 2.5.2 of the Full Year
Financial Report.
Dividend
The Board has decided not to declare a dividend for the year 2021 due to the
ongoing impact of Covid-19 on the Group's financial performance during 2021.
The Company will keep its dividend policy under review until next year.
Changes to the Board of Directors post 31 December 2021
On 25 April 2022, the Board appointed Karin Kersten to the Board and her
election will therefore be proposed (together with that of the other
Directors) at the Annual General Meeting to be held on 22 June 2022. As the
Executive Director Corporate Development, Ms Kersten supports the Company in
rolling out its strategy for the coming years. She joined the management of
the Group as Corporate Development Director on 1 October 2021. Praful Patel
will retire at the end of this year's AGM. We would like to thank Mr Patel for
his outstanding contribution to the Company since 2008.
Webcast
Management will be hosting an audio webcast and conference call, with Q&A
today at 14:00 (BST).
To access the audio webcast and download the 2021 FY results presentation,
please go to the Investor section of the Company's website: Investors | Asa
(asa-international.com) (https://www.asa-international.com/investors/) . or
use the following link:
https://webcasting.brrmedia.co.uk/broadcast/624c6725e1d0d456b32a2daf
(https://webcasting.brrmedia.co.uk/broadcast/624c6725e1d0d456b32a2daf)
The presentation can be downloaded before the start of the webcast.
In order to ask questions, analysts and investors are invited to submit
questions via the webcast.
2021 Statutory accounts
The financial information in this document do not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006 ("the
Act"). A copy of the accounts for the year ended 31 December 2020 was
delivered to the Registrar of Companies. The auditors' report on those
accounts was not qualified but made reference to a material uncertainty in
respect of going concern and did not contain statements under section 498 (2)
or 498 (3) of the Companies Act 2006. The audit of the statutory accounts for
the year ended 31 December 2021 is not yet complete. The Directors expect the
auditors' report to be unqualified and to make reference to a material
uncertainty in respect of going concern due to the impact of COVID-19 and
expect not to contain a statement under section 498 (2) or (3) of the Act.
These accounts will be finalised on the basis of the financial information
presented by the Directors in these preliminary results and will be delivered
to the Registrar of Companies following the Company's annual general meeting.
Full Year Annual Report and Accounts
On 29 April 2022, the Company will publish the Annual Report and Accounts for
the 12 months period ended 31 December 2021 on Investors | Asa
(asa-international.com) (https://www.asa-international.com/investors/) .
Annual General Meeting
The Annual General Meeting will be held on 22 June 2022.
Enquiries:
ASA International Group plc
Investor Relations
Véronique
Schyns
+31 6 2030 0139
vschyns@asa-international.com (mailto:vschyns@asa-international.com)
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD thousands)
% Change
(constant currency)
Profit before tax 25,705 2,578 54,336 897% 890%
Net profit 6,358 -1,395 34,497 556% 523%
Cost/income ratio 77% 98% 60%
Return on average assets (TTM)((1)) 1.1% -0.2% 6.7%
Return on average equity (TTM)((1)) 6.0% -1.3% 34.5%
Earnings growth (TTM)((1)) 556% -104% 6%
OLP 403,738 415,304 467,429 -3% 3%
Gross OLP 430,698 445,257 471,420 -3% 3%
Total assets 562,554 579,260 559,958 -3%
Client deposits ((2)) 87,812 80,174 78,080 10%
Interest-bearing debt ((2)) 314,413 337,632 317,810 -7%
Share capital and reserves 103,443 107,073 111,169 -3%
Number of clients 2,380,690 2,380,685 2,534,015 0%
Number of branches 2,044 1,965 1,895 4%
Average Gross OLP per client (USD) 181 187 186 -3% 3%
PAR > 30 days 5.2% 13.1% 1.5%
Client deposits as % of loan portfolio 22% 19% 17%
((1) )TTM refers to trailing twelve months.
((2) )Excludes interest payable.
Regional performance
South Asia
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD thousands)
% Change
(constant currency)
Profit before tax -8,229 -5,537 20,020 -49% -49%
Net profit -12,393 -4,360 14,098 -184% -189%
Cost/income ratio 154% 134% 50%
Return on average assets (TTM) -5.5% -1.7% 6.1%
Return on average equity (TTM) -27.3% -7.8% 26.6%
Earnings growth (TTM) -184% -131% -5%
OLP 182,329 217,843 254,361 -16% -11%
Gross OLP 201,405 238,738 256,578 -16% -11%
Total assets 198,393 253,360 252,034 -22%
Client deposits 2,464 2,610 2,082 -6%
Interest-bearing debt 146,522 183,756 177,257 -20%
Share capital and reserves 37,506 53,232 58,703 -30%
Number of clients 1,106,469 1,185,656 1,234,638 -7%
Number of branches 778 758 751 3%
Average Gross OLP per client (USD) 182 201 208 -10% -4%
PAR > 30 days 9.6% 21.3% 2.0%
Client deposits as % of loan portfolio 1% 1% 1%
· Pakistan continued to grow its OLP while maintaining a strong
portfolio quality since the end of 2020.
· Due to the second wave of infections of Covid-19 and associated
lockdowns, operations were substantially disrupted in India and Sri Lanka.
· A shrinking OLP along with increased provisions for expected credit
losses in India as well as currency depreciation in Pakistan and Sri Lanka
(PKR down 11% and LKR down 9% YoY against USD) led to South Asia's USD net
loss widening to USD 12.4 million.
India
ASA India shrank its operations over the past 12 months:
· Number of clients down from 714k to 541k (down 24% YoY)
· Number of branches down from 400 to 387 (down 3% YoY)
· OLP declined from INR 7.3bn (USD 101m) to INR 4.5bn (USD 61m) (down
38% YoY in INR)
· Off-book portfolio declined from INR 3.4bn (USD 46.4m) to INR 2.7bn
(USD 35.7m) (down 22% in INR). This now includes INR 133.9m (USD 1.8m) of the
portfolio transferred under a direct assignment ('DA') agreement to State Bank
of India
· Gross OLP/Client down from INR 17K to INR 16K (down 7% YoY in INR)
· PAR>30 decreased from 31.9% to 19.7%USD 22.9m monthly average of
moratoriums granted to 126k monthly average of clients whose loans were
restructured in line with RBI guidelines
*See note 13.1 to the consolidated financial statements for details on the
off-book portfolio.
Pakistan
ASA Pakistan grew its operations over the past 12 months:
· Number of clients increased from 416k to 512k (up 23% YoY)
· Number of branches up from 292 to 325 (up 11% YoY)
· OLP up from PKR 10.0bn (USD 62.5m) to PKR 13.8bn (USD 77.7m) (up 38%
in PKR)
· Gross OLP/Client up from PKR 24.8K (USD 155) to PKR 27.3K (USD 154)
(up 10% YoY in PKR)
· PAR>30 decreased from 4.0% to 0.2%
· No moratoriums granted to clients
Sri Lanka
Lak Jaya continued to feel the negative impact of Covid over the past 12
months:
· Number of clients down from 56k to 53k (down 5% YoY)
· Number of branches remained at 66
· OLP increased from LKR 1.56n (USD 8.4m) to LKR 1.57bn (USD 7.7m) (up
1% YoY in LKR)
· Gross OLP/Client up from LKR 30.2K (USD 163) to LKR 32.0K (USD 158)
(up 6% YoY in LKR)
· PAR>30 decreased from 7.6% to 6.0%
· USD 58k monthly average of moratoriums granted to 4k monthly average
of clients
South East Asia
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD thousands)
% Change
(constant currency)
Profit before tax 34 -4,348 7,511 101% 81%
Net profit -339 -3,366 5,349 90% 69%
Cost/income ratio 97% 135% 74%
Return on average assets (TTM) -0.3% -2.7% 4.8%
Return on average equity (TTM) -1.8% -16.1% 29.1%
Earnings growth (TTM) 90% -163% 38%
OLP 62,328 74,214 84,205 -16% -4%
Gross OLP 66,784 80,832 84,886 -17% -5%
Total assets 105,872 119,152 125,750 -11%
Client deposits 20,956 24,000 22,995 -13%
Interest-bearing debt 60,392 66,412 72,419 -9%
Share capital and reserves 16,827 20,259 21,453 -17%
Number of clients 400,021 428,645 491,813 -7%
Number of branches 420 415 405 1%
Average Gross OLP per client (USD) 167 189 173 -11% 1.5%
PAR > 30 days 2.1% 4.1% 1.0%
Client deposits as % of loan portfolio 34% 32% 27%
· Pagasa Philippines improved its collection efficiency and returned
towards growth of its OLP.
· In Myanmar, client and OLP growth stalled due in large part to
disruptions brought on by civil unrest and Covid.
The Philippines
Pagasa Philippines operations grew over the last 12 months despite the
impact from Covid:
· Number of clients down from 299k to 289k (down 4% YoY)
· Number of branches up from 322 to 324 (up 1% YoY)
· OLP up from PHP 2.2bn (USD 45.3m) to PHP 2.3bn (USD 44.6m) (up 5% YoY
in PHP)
· Gross OLP/Client increased from PHP 8.1K (USD 168) to PHP 8.2K (USD
161) (up 2% YoY in PHP)
· PAR>30 decreased from 6.4% to 2.5%
· USD 3k monthly average of moratoriums granted to 136 monthly average
of clients
Myanmar
ASA Myanmar saw a decline in clients and OLP over the trailing 12 months:
· Number of clients down from 129k to 111k (down 14% YoY)
· Number of branches increased from 93 to 96 (up 3% YoY)
· OLP down from to MMK 38.4bn (USD 28.9m) to MMK 31.5bn (USD 17.7m)
(down 18% YoY in MMK)
· Gross OLP/Client up from MMK 316K (USD 237) to MMK 324K (USD 182) (up
3% YoY in MMK)
· PAR>30 increased from 0.5% to 1.1%
· USD 834k monthly average of moratoriums granted to 41k monthly
average of clients
West Africa
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD thousands)
% Change
(constant currency)
Profit before tax 35,583 19,268 23,113 85% 89%
Net profit 25,019 13,443 15,935 86% 90%
Cost/income ratio 37% 49% 45%
Return on average assets (TTM) 20.6% 13.2% 17.3%
Return on average equity (TTM) 45.4% 31.1% 45.7%
Earnings growth (TTM) 86% -16% -6%
OLP 94,201 77,835 77,200 21% 29%
Gross OLP 95,879 79,499 78,078 21% 28%
Total assets 134,719 107,748 95,240 25%
Client deposits 46,548 39,788 38,195 17%
Interest-bearing debt 7,100 10,255 11,919 -31%
Share capital and reserves 61,222 49,033 37,452 25%
Number of clients 457,302 447,122 459,022 2%
Number of branches 440 433 423 2%
Average Gross OLP per client (USD) 210 178 170 18% 25%
PAR > 30 days 2.6% 2.7% 1.5%
Client deposits as % of loan portfolio 49% 51% 49%
· West Africa's operational and financial performance continued to
improve despite the market environment still being challenging due to Covid.
· A depreciation of NGN (7% down against USD in FY 2021) and SLL (12%
down against USD in FY 2021) impacted profitability and OLP growth in USD
terms.
Ghana
ASA Savings & Loans operations improved with OLP above pre-Covid levels
with excellent portfolio quality:
· Number of clients up from 158.0k to 158.4k (up 0.3% YoY)
· Number of branches up from 129 to 133 (up 3% YoY)
· OLP up from GHS 248.3m (USD 42.3m) to GHS 301.7m (USD 48.9m) (up 22%
YoY in GHS)
· Gross OLP/Client up from GHS 1.6k (USD 269) to GHS 1.9k (USD 310) (up
21% YoY in GHS)
· PAR>30 decreased from 0.4% to 0.3%
· No moratoriums granted to clients
Nigeria
ASA Nigeria saw an improvement of operations with OLP also above pre-Covid
levels in NGN:
· Number of clients up from 253k to 254k (up 0.3% YoY)
· Number of branches maintained at 263
· OLP up from NGN 12.0bn (USD 31.2m) to NGN 15.9bn (USD 38.5m) (up 32%
YoY in NGN)
· Gross OLP/Client up from NGN 50k (USD 129) to NGN 65k (USD 157) (up
31% YoY in NGN)
· PAR>30 decreased from 5.5% to 4.6%
· No moratoriums granted to clients
Sierra Leone
ASA Sierra Leone continued to successfully expand with client, branch and OLP
growth:
· Number of clients up from 36k to 45k (up 24% YoY)
· Number of branches up from 41 to 44 (up 7% YoY)
· OLP up from SLL 43.6bn (USD 4.3m) to SLL 76.1bn (USD 6.7m) (up 75%
YoY in SLL)
· Gross OLP/Client up from SLL 1.2m (USD 123) to SLL 1.7m (USD 154) (up
39% YoY in SLL)
· PAR>30 increased from 4.4% to 7.5%
· No moratoriums granted to clients
East Africa
(UNAUDITED) FY2021 FY2020 FY 2019 YoY YoY % Change
(Amounts in USD thousands)
% Change
(constant currency)
Profit before tax 6,605 1,652 8,785 300% 297%
Net profit 4,631 1,069 6,160 333% 326%
Cost/income ratio 75% 90% 62%
Return on average assets (TTM) 6.5% 1.8% 12.6%
Return on average equity (TTM) 25.5% 6.7% 51.0%
Earnings growth (TTM) 333% -83% 69%
OLP 64,881 45,413 51,664 43% 43%
Gross OLP 66,629 46,188 51,878 44% 44%
Total assets 83,602 59,802 59,356 40%
Client deposits 17,843 13,776 14,808 30%
Interest-bearing debt 41,201 26,292 25,835 57%
Share capital and reserves 19,973 16,313 15,476 22%
Number of clients 416,898 319,262 348,542 31%
Number of branches 406 359 316 13%
Average Gross OLP per client (USD) 160 145 149 10% 10%
PAR > 30 days 1.3% 13.2% 0.6%
Client deposits as % of loan portfolio 28% 30% 29%
· East Africa saw an improvement in operational performance and
profitability due to continued growth in Tanzania and improvements in the
operating environment in Kenya, Uganda and Rwanda.
Kenya
ASA Kenya expanded its operations over the 12 months period:
· Number of clients up from 92k to 119k (up 29% YoY) and above
pre-Covid levels
· Number of branches up from 100 to 112 (up 12% YoY)
· OLP up from KES 1.4bn (USD 12.7m) to KES 1.8bn (USD 16.1m) (up 32%
YoY in KES)
· Gross OLP/Client up from KES 15K (USD 142) to KES 16K (USD 140) (up
2% YoY in KES)
· PAR>30 decreased from 21.9% to 1.1%
· No moratoriums granted to clients
Uganda
ASA Uganda saw a growth in operations over the last 12 months:
· Number of clients up from 81k to 92k (up 13% YoY)
· Number of branches up from 98 to 103 (up 5% YoY)
· OLP up from UGX 29.3bn (USD 8.0m) to UGX 31.8bn (USD 9.0m) (up 9% YoY
in UGX)
· Gross OLP/Client up from UGX 366K (USD 100) to UGX 378K (USD 107) (up
3% YoY in UGX)
· PAR>30 decreased from 29.1% to 3.8%
· No moratoriums granted to clients
Tanzania
ASA Tanzania managed to significantly expand its operations over the last 12
months:
· Number of clients up from 121k to 174k (up 43% YoY)
· Number of branches up from 121 to 143 (up 18% YoY)
· OLP up from TZS 49.6bn (USD 21.4m) to TZS 79.0bn (USD 34.3m) (up 59%
YoY in TZS)
· Gross OLP/Client up from TZS 413k (USD 178) to TZS 460k (USD 200) (up
11% YoY in TZS)
· PAR>30 decreased from 2.5% to 0.5%
· No moratoriums granted to clients
Rwanda
ASA Rwanda saw an increase in OLP despite having fewer clients over the last
12 months:
· Number of clients declined from 19k to 18k (down 6% YoY)
· Number of branches maintained at 30
· OLP up from RWF 2.9bn (USD 2.9m) to RWF 3.4bn (USD 3.3m) (up 19% YoY
in RWF)
· Gross OLP/Client up from RWF 151K (USD 153) to RWF 193K (USD 187) (up
28% YoY in RWF)
· PAR>30 decreased from 10.1% to 4.5%
· No moratoriums granted to clients
Zambia
ASA Zambia managed to expand its operations:
· Number of clients increased from 5k to reach 15k
· Number of branches increased from 10 to 18
· OLP up from ZMW 7.9m (USD 372k) to ZMW 36.4m (USD 2m)
· Gross OLP/Client up from ZMW 1.6k (USD 76) to ZMW 2.5k (USD 151)
· PAR>30 declined to 0.3%
· No moratoriums granted to clients
Regulatory environment
The Company operates in a wide range of jurisdictions, each with their own
regulatory regimes applicable to microfinance institutions.
Key events 2022
India
· On 14 March 2022, the RBI announced the new regulation for the
microfinance sector in India, applicable to all banks, NBFC-MFIs and other
participants in the microfinance sector. The Group's preliminary assessment is
that this is a positive development for ASA India as it creates a level
playing field in the microfinance sector. The key changes include the removal
of the interest rate cap and margin cap, loans shall be collateral-free (also
for banks providing microfinance loans), and lenders will be restricted to
provide microfinance loans to clients up to a maximum of 50% of the client's
household income.
· As of 1 April 2022, ASA India offers an average interest rate of
24.5%, ranging from 23% to 27%, subject to the assessed risk of the loan.
Pakistan
· The State Bank of Pakistan completed the inspection of ASA Pakistan
in 2021. ASA Pakistan is now awaiting the microfinance bank license.
Sri Lanka
· In Sri Lanka measures have been taken including restricting loan
sizes in order to prevent clients from over-borrowing due to the current
economic crisis.
Myanmar
· Disruptions and civil unrest in Myanmar following the military's
takeover of the Government in February 2021 with nationwide protests and any
related governmental measures continue to impact the operations.
Tanzania
· ASA Tanzania is preparing the application for a deposit-taking
licence to be submitted to the central bank in 2022.
Kenya
· ASA Kenya is preparing the application for a deposit-taking licence
to be submitted to the central bank in 2022.
Regulatory capital
Many of the Group's operating subsidiaries are regulated and subject to
minimum regulatory capital requirements. As of 31 December 2021, the Group and
its subsidiaries were in full compliance with minimum regulatory capital
requirements.
Asset/liability and risk management
ASA International has strict policies and procedures for the management of its
assets and liabilities as well as various non-operational risks to ensure
that:
· The average tenor of loans to customers is substantially shorter than
the average tenor of debt provided by third-party banks and other third-party
lenders to the Group and any of its subsidiaries.
· Foreign exchange losses are minimised by having all loans to any of
the Group's operating subsidiaries denominated or duly hedged in the local
operating currency and all loans to any of the Group's subsidiaries
denominated in local currency are hedged in US Dollars.
· Foreign translation losses affecting the Group's balance sheet are
minimised by preventing over-capitalisation of any of the Group's subsidiaries
by distributing dividends and/or repaying capital as soon as reasonably
possible.
Nevertheless, the Group will always remain exposed to currency movements in
both (i) the profit and loss statement, which will be affected by the
translation of profits in local currencies into USD, and (ii) the balance
sheet, due to the erosion of capital of each of its operating subsidiaries in
local currency when translated in USD, in case the US Dollar strengthens
against the currency of any of its operating subsidiaries.
Funding
The funding profile of the Group has not materially changed during FY 2021:
In USD millions
31 Dec 21 31 Dec 20 31 Dec 19
Local deposits 87.8 80.2 78.1
Loans from financial institutions 249.8 274.1 260.6
Microfinance loan funds 36.5 23.5 27.2
Loans from dev. banks & foundations 28.1 40.0 30.0
Equity 103.4 107.1 111.2
Total funding 505.7 524.9 507.1
The Group maintains a favourable maturity profile with the average tenor of
all funding from third parties being substantially longer than the average
tenor at issuance of loans to customers which ranges from 6-12 months for the
bulk of the loans.
The Group and its subsidiaries have existing credit relationships with more
than 60 lenders throughout the world, which has provided reliable access to
competitively priced funding for the growth of its loan portfolio.
On 14 April 2022, the Company drew an additional USD 4.0 million from the
existing facility agreement signed in November 2021 with Symbiotics, a leading
impact platform for impact investing managed funds.
During 2021, a number of loan covenants, particularly related to portfolio
quality, were breached across the Group. As of 31 December 2021, the balance
for credit lines with breached covenants that did not have waivers amounted to
USD 111.0 million out of which waivers for USD 36.7 million have been
subsequently received. The majority of the waivers which are pending relate to
our India operations where a majority of our lenders are local institutions,
who usually provide waivers after the end of the statutory accounting period
(31 March 2022).
Based on the received waivers, ongoing discussions, prior experience, and new
funding commitments received, the Group has a high degree of confidence that
all the required waivers will be obtained. It should be noted that none of the
lenders have initiated any accelerated calls to any of the Group's outstanding
obligations during 2020 and 2021.
The Company has also received temporary waivers, no-action and/or comfort
letters from some of its major lenders for the remainder of 2022 due to
expected portfolio quality covenant breaches (primarily PAR>30). The impact
of these potential covenant breaches was further assessed in the evaluation of
the Company's going concern as disclosed in note 2.1.1 of the full year
financial report, where the Directors have concluded that there is a material
uncertainty that may cast significant doubt over the Group's ability to
continue as a going concern.
Impact of foreign exchange rates
As a USD reporting company with operations in thirteen different currencies,
currency movements can have a major effect on the Group's USD financial
performance and reporting.
The effect of this is that generally (i) existing and future local currency
earnings translate into less US Dollar earnings, and (ii) local currency
capital of any of the operating subsidiaries will translate into less US
Dollar capital.
Countries FY 2021 FY 2020 FY 2019 Δ FY 2020 - FY 2021
India (INR) 74.4 73.0 71.3 (2%)
Pakistan (PKR) 177.5 160.3 154.8 (11%)
Sri Lanka (LKR) 202.9 185.3 181.4 (9%)
The Philippines (PHP) 51.1 48.0 50.7 (6%)
Myanmar (MMK) 1778.5 1330.7 1487.0 (34%)
Ghana (GHS) 6.2 5.9 5.7 (5%)
Nigeria (NGN) 411.5 384.6 362.5 (7%)
Sierra Leone (SLL) 11289.0 10107.0 9782.7 (12%)
Kenya (KES) 113.2 109.0 101.4 (4%)
Uganda (UGX) 3546.2 3647.7 3665.4 3%
Tanzania (TZS) 2303.7 2317.2 2298.0 1%
Rwanda (RWF) 1031.8 986.4 943.2 (5%)
Zambia (ZMW) 16.7 21.1 14.1 21%
During FY 2021, the US Dollar particularly strengthened against PKR +11%, MMK
+34% and SLL +12%. This had an additional negative impact on the USD earnings
contribution of these subsidiaries to the Group and also contributed to an
increase in foreign exchange translation losses. The total contribution to the
foreign exchange translation loss reserve during FY 2021 amounted to USD 11.0m
of which USD 3.8m related to the depreciation of the PKR, USD 2.9m related to
the depreciation of the MMK, and USD 1.4m to depreciation of the NGN. This
compared to a total contribution to the foreign exchange translation reserve
of USD 2.0m in 2020.
Forward-looking statement and disclaimers
This announcement does not constitute or form part of any offer or invitation
to purchase, otherwise acquire, issue, subscribe for, sell or otherwise
dispose of any securities, nor any solicitation of any offer to purchase,
otherwise acquire, issue, subscribe for, sell, or otherwise dispose of any
securities. The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such restrictions.
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Notes 2021 2020
USD'000 USD'000
Interest income calculated using Effective Interest Rate ('EIR') 4.1. 175,732 131,339
Other interest and similar income 4.2. 14,035 10,747
Interest and similar income 189,767 142,086
Interest and similar expense 5. (42,439) (40,445)
Net interest income 147,328 101,641
Other operating income 6. 10,518 10,460
Total operating income 157,846 112,101
Credit loss expense 7. (37,509) (27,250)
Net operating income 120,337 84,851
Personnel expenses
8. (56,813) (51,608)
Depreciation on property and equipment 16. (1,985) (1,782)
Depreciation on right-of-use assets 17. (4,398) (4,428)
Other operating expenses 9. (29,904) (24,961)
Exchange rate differences 10. (1,532) 506
Total operating expenses (94,632) (82,273)
Profit before tax 25,705 2,578
Income tax expense 11. (15,594) (3,518)
Withholding tax expense 11.7. (3,753) (455)
Profit/(loss) for the period 6,358 (1,395)
Profit/(loss) for the period attributable to:
Equity holders of the parent 8,787 (720)
Non-controlling interest (2,429) (675)
6,358 (1,395)
Other comprehensive income:
Foreign currency exchange differences on translation of foreign operations (11,583) (2,130)
Movement in hedge accounting reserve 23. 1,381 322
Others (365) (3)
Total other comprehensive (loss)/income to be reclassified to profit or loss (10,567) (1,811)
in
subsequent periods, net of tax
(Loss)/gain on revaluation of MFX investment 15. (1) 6
Actuarial gains and (losses) on defined benefit liabilities 8.1. 698 (896)
Total other comprehensive income not to be reclassified to profit or loss in 697 (890)
subsequent
periods, net of tax
Total comprehensive (loss) for the period, net of tax (3,512) (4,096)
Total comprehensive income/(loss) attributable to:
Equity holders of the parent (1,096) (3,338)
Non-controlling interest (2,416) (758)
(3,512) (4,096)
Earnings per share 39. USD USD
Equity shareholders of the parent for the period:
Basic earnings per share 0.09 (0.01)
Diluted earnings per share 0.09 (0.01)
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Notes 2021 2020
USD'000 USD'000
ASSETS
Cash at bank and in hand 12. 87,951 90,165
Loans and advances to customers 13. 373,242 380,122
Due from banks 14. 65,259 73,279
Equity investments at Fair Value through Other Comprehensive Income 15. 237 238
('FVOCI')
Property and equipment 16. 4,085 4,617
Right-of-use assets 17. 5,031 5,195
Deferred tax assets 11.2. 13,362 11,303
Other assets 18. 8,939 13,600
Derivative assets 19. 3,966 708
Goodwill and intangible assets 20. 482 33
TOTAL ASSETS 562,554 579,260
EQUITY AND LIABILITIES
EQUITY
Issued capital 21. 1,310 1,310
Retained earnings 22. 155,405 147,291
Other reserves 23. 995 (718)
Foreign currency translation reserve 24. (54,132) (43,091)
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 103,578 104,792
Total equity attributable to non-controlling interest 31.6. (135) 2,281
TOTAL EQUITY 103,443 107,073
LIABILITIES
Debt issued and other borrowed funds 25. 318,674 342,186
Due to customers 26. 87,812 80,174
Retirement benefit liability 8.1. 5,391 5,446
Current tax liability 11.1. 6,265 2,502
Deferred tax liability 11.3. 2,296 -
Lease liability 17. 3,459 3,629
Derivative liabilities 19. 602 2,147
Other liabilities 27. 32,937 33,855
Provisions 28. 1,675 2,248
TOTAL LIABILITIES 459,111 472,187
TOTAL EQUITY AND LIABILITIES 562,554 579,260
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Issued capital Retained earnings Other reserves Foreign currency translation reserve Non-controlling interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2020 1,310 148,011 (147) (41,044) 3,039 111,169
(Loss) for the year - (720) - (675) (1,395)
Other comprehensive income:
Actuarial gains and losses on defined benefit liabilities - - (896) - - (896)
Foreign currency translation of assets and liabilities of subsidiaries - - - (2,047) (83) (2,130)
Movement in hedge accounting reserve - - 322 - - 322
Other comprehensive income (net of tax) - - 3 - - 3
Total comprehensive (loss)/ income for the period - (720) (571) (2,047) (758) (4,096)
Dividend - - - - - -
At 31 December 2020 1,310 147,291 (718) (43,091) 2,281 107,073
At 1 January 2021 1,310 147,291 (718) (43,091) 2,281 107,073
Profit for the year - 8,787 - (2,429) 6,358
Other comprehensive income:
Actuarial gains and losses on defined benefit liabilities - 698 - - 698
Foreign currency translation of assets and liabilities of subsidiaries - - (11,596) 13 (11,583)
Movement in hedge accounting reserve - 1,381 - - 1,381
Disposal of ASA Consulatancy limited and ASA Cambodia Holdings - (673) - 555 - (118)
Other comprehensive income (net of tax) - (366) - - (366)
Total comprehensive (loss)/ income for the period - 8,114 1,713 (11,041) (2,416) (3,630)
Dividend - - - - - -
At 31 December 2021 1,310 155,405 995 (54,132) (135) 103,443
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
Notes 2021 2020
USD'000 USD'000
OPERATING ACTIVITIES
Profit before tax 25,705 2,578
Adjustment for movement in:
Operating assets 29.1. (88,777) (42,513)
Operating liabilities 29.2. 13,004 10,443
Non-cash items 29.3. 76,843 38,202
Income tax paid (14,260) (16,871)
Net cash flows used in operating activities 12,515 (8,161)
INVESTING ACTIVITIES
Purchase of property and equipment 16. (1,713) (981)
Proceeds from sale of property, plant and equipment 652 31
Purchase of intangible assets (452) -
Net cash outflow from disposal of subsidiaries (673) -
Net cash flow used in investing activities (2,186) (950)
FINANCING ACTIVITIES
Proceeds from debt issued and other borrowed funds 181,053 171,749
Payments of debt issued and other borrowed funds (188,787) (151,524)
Payment of principal portion of lease liabilities (4,680) (4,389)
Net cash flow from financing activities (12,414) 15,836
Cash and cash equivalents at 1 January
71,733 65,545
Net increase in cash and cash equivalents (2,085) 6,725
Foreign exchange difference on cash and cash equivalents (3,239) (537)
Cash and cash equivalents as at 31 December 29.4. 66,409 71,733
Operational cash flows from interest
Interest received 193,848 131,341
Interest paid 42,146 39,944
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1. CORPORATE INFORMATION
ASA International Group plc ('ASA International', 'Group') is a publicly
listed company which was incorporated by Catalyst Microfinance Investors
('CMI') in England and Wales on 14 May 2018 for the purpose of the initial
public offer of ASA International Holding. ASA International Group plc
acquired 100% of the shares in ASA International Holding and all its
subsidiaries on 13 July 2018 in exchange for the issue of 100 million shares
in ASA International Group plc with a nominal value of GBP 1.00 each.
Investment strategy
ASA International is an international microfinance holding company with
operations in various countries throughout Asia and Africa.
Abbreviation list
Definitions Abbreviation
A1 Nigeria Consultancy Limited A1 Nigeria
ASA Consultancy Limited ASA Consultancy
ASA International Cambodia Holdings ASAI Cambodia Holdings
ASA International Group plc ASAIG
ASA International Holding ASAIH
ASA International India Microfinance Limited ASA India
ASA International Microfinance Limited (formerly 'ASA Limited') ASA Kenya
ASA International N.V. ASAI NV
ASA Leasing Limited ASA Leasing
ASA Lanka Private Limited ASA Lanka
ASA Microfinance (Myanmar) Ltd ASA Myanmar
ASA Microfinance (Rwanda) Limited ASA Rwanda
ASA Microfinance (Sierra Leone) ASA Sierra Leone
ASA Microfinance (Tanzania) Ltd ASA Tanzania
ASA Microfinance (Uganda) Limited ASA Uganda
ASA Microfinance Zambia Limited ASA Zambia
ASA NGO-MFI registered in Bangladesh ASA NGO Bangladesh
ASA Pakistan Limited ASA Pakistan
ASA Savings & Loans Limited ASA S&L
ASAI Investments & Management B.V ASAI I&M
ASAI Management Services Limited AMSL
ASHA Microfinance Bank Limited ASHA MFB
Association for Social Improvement and Economic Advancement ASIEA
C.M.I. Lanka Holding (Private) Limited CMI Lanka
Catalyst Continuity Limited Catalyst Continuity
Catalyst Microfinance Investment Company CMIC
Catalyst Microfinance Investors CMI
CMI International Holding CMIIH
Lak Jaya Micro Finance Limited Lak Jaya
Pagasa ng Masang Pinoy Microfinance, Inc Pagasa
PagASA ng Pinoy Mutual Benefit Association, Inc. MBA Philippines
Pagasa Consultancy Limited Pagasa Consultancy
Pagasa Philippines Finance Corporation PPFC
Pagasa Philippines Finance Corporation and Pagasa ng Masang Pinoy Pagasa Philippines
Microfinance, Inc
Pinoy Consultancy Limited Pinoy
Proswift Consultancy Private Limited Proswift
PT PAGASA Consultancy PT PAGASA Consultancy
Microfinance Institution MFI
Reserve Bank of India RBI
State Bank of India SBI
Sequoia B.V. Sequoia
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES
2.1 General
The consolidated financial statements of ASA International Group plc have been
prepared on a historical cost basis, except for derivative and equity
instruments, which have been kept at fair value. The consolidated financial
statements are presented in USD and all values are rounded to the nearest
thousand (USD'000), except when otherwise indicated.
After the issue of the financial statements the Company's owners or others do
not have the power to amend the financial statements.
2.1.1 Basis of preparation
These consolidated financial statements have been prepared on a going concern
basis. It should be noted that in the 2020 Annual Report and Accounts,
approved on 31 May 2021, the Directors concluded that the potential impact of
the Covid pandemic and the uncertainty over possible mitigating actions
represented a material uncertainty that may have cast significant doubt over
the Group's ability to continue as a going concern. In assessing going concern
covering 13 months from the date of the approval of the annual consolidated
financial statements and given the financial impact of the spread of Covid,
which continues to impact on certain markets of the Group, management has
analysed the Group's financial position and updated its budget and projections
for the period up to the end of May 2023 (the 'Assessment Period'). The
conclusion of this assessment remains consistent with that of the prior year;
the Directors have concluded that there is a material uncertainty that may
cast significant doubt over the Group's ability to continue as a going
concern.
The Group has updated its detailed financial model for its budget and
projections (the 'Projections') in line with current market conditions.
Management used the actual numbers up to December 2021 and updated the
operating projections for the Assessment Period. These Projections are based
on a detailed set of key operating and financial assumptions, including the
minimum required cash balances, capital and debt funding plan per operating
country, post-pandemic economic conditions of the countries, and management's
estimation of increased credit and funding risks in addition to a conservative
view of reduced demand for new microfinance loans where applicable.
The Group is well capitalised and has USD 91 million of unrestricted cash
(including fixed deposits) as of 31 December 2021. Also, the Group has a
strong funding pipeline of USD 192 million, with over 58% having agreed terms
and which can be accessed in the short to medium term at the time of approval
of the annual consolidated financial statements. This continues to reaffirm
the confidence lenders have in the strength of the Group's business model and
management's ongoing strategies to steer the Group through the current Covid
pandemic. It should be noted that the majority of this additional funding
contains loan covenants and there is a risk of covenant breaches in certain
stress scenarios, consistent with the risks detailed in the remainder of the
going concern assessment. The Group is confident it will generate positive
cash flows and will be able to fully fund the projected loan portfolio until
May 2023.
The Group does not expect an increase in credit loss expenses during the
assessment period as, in most of the entities, collections are back to the
high 90% range and the proportion of loans with outstanding payments greater
than 30 days (portfolio at risk greater than 30 days, or 'PAR>30') have
generally stabilised. However, India remains an outlier as collections are
still not at the pre-Covid levels while around 30% of existing customers have
their loans restructured until June 2022. Myanmar also continues to struggle
due to the ongoing political crisis which is creating operational and
liquidity challenges for the entity. Management is closely following up on the
developments in both these entities.
Due to the above challenges, the Group expects further breaches of loan
covenants during the going concern period. These covenants would mainly relate
to arrears levels (portfolio at risk greater than 30 days, or 'PAR>30'),
risk coverage ratios, the cost to income ratio, and write-off ratios on
account of higher expected credit loss provisions required due to the impact
of Covid. These breaches have not historically resulted in the immediate
repayment request from lenders and are further evidenced by the supportive
attitude of lenders in the last two years where the Group has been
continuously able to raise new funds from the lenders. As of 31 December 2021,
the balance for credit lines with breached covenants that did not have waivers
amounted to USD 111 million, out of which waivers for USD 36.7 million have
been subsequently received. Other lenders have confirmed that they are willing
to provide waivers, but will only do so in case of actual breaches and subject
to formal internal credit committee approvals. However, the majority of these
waivers are pending for the India operation where a majority of the lenders
are local and normally only provide waivers after the statutory accounting
period (31 March 2022).
Based on the received waivers, ongoing discussions, prior experience, and new
funding commitments received, the Group has a high degree of confidence that
all the required waivers will be obtained. It should be noted that none of the
lenders have ever initiated any sudden debt calls, also not during the Covid
pandemic.
In the event the waivers are not provided by the funders, there may be cases
where covenant breaches are considered as events of default under the loan
agreements which could lead to the debt being called due and potentially
significant liquidity challenges. It should also be noted that whilst the
Group has a strong cash position, there are still certain restrictions on
intra-Group cash movements and there is a risk that restrictions can continue
well into 2022 by local governments in response to the economic pressures
imposed by the Covid pandemic. However, based on recent discussions,
management expects that a period would be provided by the funders for
rectifying the breach of covenants before calling a default under the loan
agreements.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES
2.1.1 Basis of preparation (continued)
As of 31 December 2021, the total outstanding debt at the holding level (ASA
International Holding and ASAI International NV combined) is USD 70 million,
which is part of the USD 314 million consolidated debt for the Group. Most of
the covenants under these loan agreements are based on consolidated Group
results. Waivers have been obtained by the Group in respect of expected
covenant breaches on all loans to the holding companies from international
funders up to December 2021, but these waivers do not cover all of the going
concern period. As stated above, international funders have been supportive of
the Group and the microfinance sector in general during this pandemic. In the
absence of waivers, breach of covenants that are not rectified within the time
specified in the respective agreements, as applicable, would cause an event of
default under the loan agreements.
In terms of mitigations, the Group is shrinking its exposure in certain
countries by focusing on the collection of existing loans and curtailing
disbursements. This serves to increase the available cash in the business
although the timing of collections through this method could be delayed due to
potential future lockdown measures or other governmental interventions across
the Group's territories. This is not a preferred action but can be utilised to
create liquidity in any country's operation when unexpected repayments are
requested by lenders. Further, the holding entities within the Group did not
provide parent guarantees to funders of the operating entities, which protects
the Group against cross defaults.
Whilst the Projections are formed from management's best estimation of the
potential impact on the Group of the current pandemic, it is acknowledged that
there remains significant uncertainty as to how the Covid pandemic will
continue to affect borrowers, businesses and lenders across its operating
countries. Although most of the staff in Asian operating countries, along with
a good number of clients, have received Covid vaccinations, intake has been
poor in Africa due to a lack of general trust in the vaccines. It is expected
that the process to vaccinate a major part of the population will continue
well into 2022.
Management and the Board of Directors extensively challenged the Projections
and their underlying assumptions including the above considerations and
factors. They also considered the remaining uncertainties around possible new
lockdown periods, higher write-offs, and the risk of not obtaining waivers for
prospective covenant breaches. They also considered that since the beginning
of 2022 all operating countries have completely lifted Covid lockdowns, which
has allowed the field operations to re-open their branches, with collections
and new disbursements gradually returning to customary levels.
The Directors have also assessed the probable impact of any subsidiary failing
to maintain its required regulatory ratios. As stated above, the Group did not
provide parent guarantees to funders of the operating entities and hence, in
case of dissolution, the Group's risk is limited to its initial investment.
On 31 December 2021, the Group considers its present financial exposure to
climate-related risk to be low and accordingly has made limited reference to
the impacts of climate-related risk in the notes to the financial statements.
Thorough consideration has been given in particular to the possible financial
impacts of climate-related risks on ECL provisions (note 2.5.2E). Where
forward-looking information is relied on in preparing the financial
statements, the Group has given due consideration, where appropriate and
quantifiable, to potential future impacts of climate-related risk, but
recognises that governmental and societal responses to climate change risks
are still developing and thus their ultimate impacts on the Group are
inherently uncertain and cannot be fully known.
Management has also considered the global economic crisis, sparked by the
geopolitical situation in Eastern Europe, and the risks associated with the
inflation of fuel, food and other prices across the countries where the Group
operates. These risks have the potential to put pressure on the Group's
clients' ability to repay their loans in the future, although the Group has a
long history of working through such crises and has experienced limited losses
in the past as a result. As a microfinance lender, the Group has seen that the
loans provided to clients as an important factor for clients to continue their
businesses and their livelihoods as it provides resources and access to
capital to the financially underserved. Therefore, the Group has a high degree
of confidence that the additional risks posed by rising inflation will not
increase arrears materially.
There is a risk that further restrictions on the movement of people may lead
to a decline in the business activities of the Group's borrowers and the
Group's ability to collect on its loans which could lead to increased credit
losses on the loan portfolio and cause the Group to breach covenants on its
borrowings. Unless the majority of the covenant breach waivers are obtained,
the debt may be called due which could materially impact the ability of the
Group to meet its debt obligations. Although the Group has a history of
negotiating covenant waivers and recovering from natural disasters and debt
relief programmes, across particular locations, as evidenced by the lenders'
support to the Group in the last two years, the nature of the pandemic makes
it difficult to assess its likely scale of debt covenant breaches and whether
the waivers necessary to avoid the immediate repayment of debt will be
forthcoming. As a result, the Directors have concluded that this represents a
material uncertainty that may cast significant doubt over the Group's ability
to continue as a going concern.
Nevertheless, having assessed the Projections, downtrend analysis and
mitigations described above, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
next 13 months from the date of approval of these consolidated financial
statements, and through to 31 May 2023. For these reasons, they continue to
adopt a going concern basis for the preparation of the consolidated financial
statements. Accordingly, these financial statements do not include any
adjustments to the carrying amount or classification of assets and liabilities
that would result if the Group was unable to continue as a going concern.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.1.2 Statement of compliance
The Group and Parent Company financial statements are prepared in accordance
with UK adopted international accounting standards ('IAS' or 'IFRS').
The preparation of the consolidated financial statements in conformity with
IFRS requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis.
In preparing these financial statements, the Group has given consideration to
the recommendations laid out by the Task Force on Climate-related Financial
Disclosures ('TCFD'). The relevant assessment of the climate-related risks
outlined in the Group's Annual Report has been incorporated into judgements
associated with recognition, measurement, presentation and disclosure, where
so permitted by UK adopted International Accounting Standards.
2.1.3 Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Group and its subsidiaries as at 31 December for each year presented. The
financial statements of subsidiaries are similarly prepared for the year ended
31 December 2021 applying similar accounting policies. All intra-Group
balances, transactions, income and expenses and profits and losses resulting
from intercompany transactions are eliminated in full. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company. The
Company has control over a subsidiary when it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has the ability
to affect those returns through its power over the subsidiary. The results of
subsidiaries acquired or disposed of during the year are included (if any) in
the consolidated statement of comprehensive income from the date of
acquisition or up to the date of disposal, as appropriate. The Group disposed
ASA Leasing Ltd and ASA Consultancy Limited, two non-operating entities, in
2021. This did not have any significant impact over Group results.
Non-controlling interests represent the portion of profit or loss and net
assets not owned, directly or indirectly, by the Group and are presented
separately in the consolidated statement of comprehensive income and within
equity in the consolidated statement of financial position, separately from
the equity attributable to equity holders of the parent.
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree. Acquisition-related costs are
expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. If the business combination is achieved
in stages, the previously held equity interest is remeasured at its
acquisition date fair value and any resulting gain or loss is recognised in
profit or loss.
2.2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below:
2.2.1 Foreign currency translation
The consolidated financial statements are presented in USD, which is also the
Group's presentation currency. Each entity in the Group determines its own
functional currency and items included in the financial statements of each
entity are measured using that functional currency.
Transactions and balances - Transactions in foreign currencies are initially
recorded by the Group's entities at their respective functional currency at
the date the transaction first qualifies for recognition. Monetary assets and
liabilities denominated in foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date. All differences are
taken to 'Exchange rate differences' in the statement of profit or loss and
other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair
value was determined.
Group companies - As at the reporting date, the assets and liabilities of
subsidiaries are translated into the Group's presentation currency (USD) at
the rate of exchange ruling at the reporting date except investment in
subsidiaries and issued capital which are translated at historical rate, and
their statements of profit or loss and other comprehensive income are
translated at the weighted average exchange rates for the year. Currency
translation differences have been recorded in the Group's consolidated
statement of financial position as foreign currency translation reserve
through other comprehensive income.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.2 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
a) Financial assets - initial recognition and subsequent measurement
(1) Date of recognition
Purchases or sales of financial assets that require the delivery of assets
within the time frame generally established by regulation or convention in the
marketplace are recognised on the trade date, i.e. the date that the Group
commits to purchase or sell the asset.
(2) Initial recognition and measurement
The Group recognises a financial asset in its statement of financial position
when, and only when, the entity becomes a party to the contractual provisions
of the instrument. Financial assets are classified, at initial recognition,
and measured at fair value. Subsequently they are measured at amortised cost,
fair value through Other Comprehensive Income ('OCI'), and Fair Value Through
Profit or Loss ('FVTPL'). The classification of financial assets at initial
recognition depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them.
In order for a financial asset to be classified and measured at amortised cost
or fair value through OCI, it needs to give rise to cash flows that are Solely
Payments of Principal and Interest ('SPPI') on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed
at an instrument level. The Group's business model for managing financial
assets refers to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result from
collecting contractual cash flows, selling the financial assets, or both.
Financial assets classified and measured at amortised cost are held within a
business model with the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified and measured at fair
value through OCI are held within a business model with the objective of both
holding to collect contractual cash flows and selling.
(3) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in
three categories:
- Financial assets at amortised cost (loans and advances to customers, other
loans and receivables, cash at bank and in hand and due from banks);
- Financial assets designated at fair value through OCI with no recycling of
cumulative gains and losses upon derecognition (equity instruments); and
- Financial assets at FVTPL (derivatives).
Financial assets at amortised cost
Financial assets at amortised cost are subsequently measured using the
Effective Interest Rate ('EIR') method and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised,
modified or impaired. The Group's financial assets at amortised cost includes
Loans and advances to customers, Other loans and receivables, Cash and cash
equivalents and due from banks.
Financial assets designated at fair value through OCI without recycling
(equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its
equity investments as equity instruments designated at fair value through OCI
when they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on
an instrument-by-instrument basis. Investments at FVOCI are subsequently
measured at fair value with unrealised gains or losses recognised in OCI and
credited to the investments at FVOCI reserve. Gains and losses on these
financial assets are never recycled to profit or loss. Equity instruments
designated at fair value through OCI are not subject to impairment assessment.
Derivatives are initially recognised at FVTPL. However, as the Group applies
cash flow hedge accounting the impact is later moved to FVOCI.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is derecognised where:
-the right to receive cash flows from the asset has expired; or
-the Group has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a 'pass-through' arrangement; and
-either (a) the Group has transferred substantially all the risks and rewards
of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive cash flows from an asset
or has entered into a pass-through arrangement, and has neither transferred
nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the extent of the
Group's continuing involvement in the asset (see notes 2.5.6 to 2.5.8).
Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset
and the maximum amount of consideration that the Group could be required to
repay.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.2 Financial instruments (continued)
b) Impairment of financial assets
The Group recognises an allowance for Expected Credit Losses ('ECLs') on Loans
and advances to customers, Related party receivables, Cash at bank and Due
from banks.
Loans and advances to customers
Given the nature of the Group's loan exposures (generally short-term
exposures, <12 months) no distinction has been made between stage 1
(12-month ECL) and stage 2 loans (lifetime ECL) for the ECL calculation. For
disclosure purposes, normally stage 1 loans are defined as loans overdue
between 1-30 days. Stage 2 loans are overdue loans between 31-90 days. Similar
to 2020, in 2021, in response to the challenges raised by Covid, the Group
provided payment deferral periods to a proportion of its borrowers which
resulted in delays in scheduled payments and increased arrears levels arising
from collection difficulties. Payment deferral periods varied from country to
country, and sometimes within country, and were implemented due to local
governmental decisions and the decisions of local management to support the
borrower population. In order to factor in this information, the Group
introduced a 'last payment date' datapoint into the Significant Increase in
Credit Risk ('SICR') and ECL calculations. The objective of such is to
identify how many days the client has not paid any single instalment
irrespective of whether he or she was under payment moratorium or not. See
note 2.5.2A for more details. To avoid the complexity of calculating separate
probability of default and loss given default, the Group uses a 'loss rate
approach' for the measurement of ECLs. The 'loss rates' are a provision matrix
that is based on historical credit loss experience, adjusted for
forward-looking factors specific to economic environment.
The Group considers significant increase in credit risk when contractual
payments are 31 days past due. In addition, loans and advances are treated as
credit impaired (stage 3) when contractual payments are greater than 90 days
past due. These thresholds have been determined based on the historical trend
and industry practice where the Group operates.
Write-off
The Group uses judgement to determine bad loans which are written off. Based
on management experience in the local market and the microfinance industry
practice, loans over 365 days past due are bracketed as bad, unless there are
specific circumstances that lead local management to believe that there is a
reasonable expectation of recovery. The write-offs occur mainly two times in a
year (June and December). However, management (Group and/or subsidiary) can
write-off loans earlier if loans are deemed unrecoverable or delay write-offs
in case of national calamity or any regulatory reasons subject to Board
approval. From an operational perspective, all written-off loans are monitored
for recovery up to two years overdue.
Cash at bank, Due from banks and Related party
For Due from banks and Related party receivables, the Group used the S&P
matrix for default rates based on the most recent publicly made available
credit ratings of each counterparty. In the S&P matrix for default rates,
there is no specified default rates for each of our external counterparties.
Thus, ASAI applied the default rate for all financial institutions. Then, the
Group calculated the adjusted Probability of Default ('PD')/default rates by
accommodating management estimates. However, for non-credit rated external
counterparties, the PD/default rate is determined by choosing the riskier one
between the mid-point of credit ratings of banks the Group has business with
and a similar level rated entity. Management collects the credit ratings of
the banks where the funds are deposited and related parties (where applicable)
on a half-yearly basis and calculates the ECL on such items using the default
rate identified as above. The Group considers credit risk to have
significantly increased when the credit ratings of the bank and the related
parties have been downgraded, which in turn increases the probability of
default. The Group considers that the closure of a counterparty bank,
dissolution of a related party or a significant liquidity crisis, or any
objective evidence of impairment such as bankruptcy to be indicators for stage
3.
2.2.3 Financial liabilities - initial recognition and subsequent measurement
(1) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial
liabilities at amortised cost. All financial liabilities are recognised
initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs. The Group's financial
liabilities include Debt issued and other borrowed funds, Due to customers,
Lease liabilities, Other liabilities and Derivative financial instruments.
(2) Subsequent measurement
For the purposes of subsequent measurement, financial liabilities are
classified in two categories:
- Financial liabilities at amortised cost (Debt issued and other borrowed
funds, Due to customers and Lease liabilities); and
- Financial liabilities at FVTPL (Derivative instruments).
Financial liabilities at amortised cost
Debt issued and other borrowed funds, Other liabilities and Due to customers
are classified as liabilities where the substance of the contractual
arrangement results in the Group having an obligation either to deliver cash
or another financial asset to the holder, or to satisfy the obligation other
than by the exchange of a fixed amount of cash or another financial asset for
a fixed number of own equity shares. After initial measurement, Debt issued
and other borrowed funds including Due to customers are subsequently measured
at amortised cost using the effective interest rate method. Amortised cost is
calculated by considering any discount or premium on the issue and costs that
are an integral part of the effective interest rate.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2. Financial liabilities - initial recognition and subsequent measurement
(continued)
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised in
the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statement of financial position only if there is
a currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
2.2.4 Derivative instruments and hedge accounting
The Group uses derivative financial instruments, such as forward currency
contracts and cross-currency interest rate swaps, to hedge its foreign
currency risks and interest rate risks. Such derivative financial instruments
are initially recognised at fair value on the date on which a derivative
contract is entered into and are subsequently remeasured at fair value at the
end of every reporting period. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities when the fair
value is negative.
For the purpose of hedge accounting, hedges are classified as cash flow hedges
when hedging the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction or the foreign currency
risk in an unrecognised firm commitment.
The effective portion of the gain or loss on the hedging instrument is
recognised in OCI in the cash flow hedge reserve, while any ineffective
portion is recognised immediately in the statement of profit or loss. The cash
flow hedge reserve is adjusted to the lower of the cumulative gain or loss on
the hedging instrument and the cumulative change in fair value of the hedged
item. The Group uses forward currency contracts and cross-currency interest
rate swaps agreements as hedges of its exposure to foreign currency risk and
interest rate risk in forecast transactions and firm commitments.
The Group designates only the spot element of forward contracts as a hedging
instrument. The forward element and cross-currency basis risk is recognised in
OCI and accumulated in a separate component of equity under cost of hedging
reserve. The forward points and foreign exchange basis spreads are amortised
throughout the contract tenure and reclassified out of OCI into P&L as
interest expenses.
2.2.5 Recognition of income and expenses
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or
receivable, considering contractually defined terms of payment and excluding
taxes or duties. The Group has concluded that it is principal in all of its
revenue arrangements except for loans under BC model where the Group works as
an agent.
The following specific recognition criteria must also be met before revenue is
recognised:
(1) Interest and similar income and expense
Interest income and expense are recognised in the statement of profit or loss
and other comprehensive income based on the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument or, when appropriate, a shorter period to the net carrying amount
of the financial asset or financial liability. When calculating the effective
interest rate, the Group shall estimate cash flows considering all contractual
terms of the financial instrument but shall not consider future credit losses.
The calculation includes all amounts paid or received between parties to the
contract that are an integral part of the effective interest rate of a
financial instrument including transaction costs, and all other premiums or
discounts. Interest income is presented net of modification loss (note 2.5.3).
The Group recognises interest income on the stage 3 loans on the net loan
balance.
(2) Dividend income
Revenue is recognised when the Group's right to receive the payment is
established.
(3) Amortisation of loan processing fees
Revenue from amortisation of loan processing fees is recognised on an accrual
basis in the period to which it relates. The loan processing fee charged to
clients is allocated to the total loan period and recognised accordingly.
(4) Other income
Other income includes group members' admission fees, document fees, sale of
passbook, income on death and multipurpose risk funds and service fee from
off-book loans under the BC model.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.5 Recognition of income and expenses (continued)
(4) Other income (continued)
Group members' admission fees, document fees and sale of passbook fees are
recognised on receipt as the then admission and sale constitutes as
satisfactory performance obligation.
The Group collects fees for the death risk fund or multipurpose risk fund in
the Philippines, Sri Lanka, Kenya, Uganda and Tanzania. These fees cover
settlement of the outstanding loan amount and other financial assistance if a
borrower dies or is affected by natural calamities. The collections are
recognised upfront as income and a liability is recognised in the statement of
financial position for the claims resulting from these funds. The judgement
used to recognise the liability is disclosed in note 2.5.5.
Service fees from off-book loans under the BC model are recognised on the
basis of receipt as the amount is received only after completion of the
service.
2.2.6 Cash and cash equivalents and Cash at bank and in hand
Cash and cash equivalents as referred to in the statement of cash flows
comprises unrestricted cash in hand, current accounts with various commercial
banks and amounts due from banks on demand or term deposits with an original
maturity of three months or less. The cash flows from operating activities are
presented using the indirect method, whereby the profit or loss is adjusted
for the effects of non-cash transactions, accruals and deferrals, and items of
income or expense associated with investing or financing cash flows.
Cash in hand and in bank as referred to the statement of financial position
comprises cash and cash equivalents and restricted cash relating to Loan
Collateral Build Up ('LCBU') in the Philippines and against security deposits
from clients in Tanzania.
2.2.7 Property and equipment
Property and equipment is stated at cost excluding the costs of day-to-day
servicing, less accumulated depreciation and accumulated impairment in value.
Changes in the expected useful life are accounted for by changing the
depreciation period or method, as appropriate, and are treated as changes in
accounting estimates.
Depreciation is calculated using the straight-line method to write down the
cost of property and equipment to their residual values over their estimated
useful lives.
The estimated useful lives are as follows:
Furniture and fixtures: 5 years
Vehicles: 5 years
Office equipment including IT: 3 years
Buildings: 50 years
An item of property and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the
asset) is recognised in 'Other operating income' or 'Other operating expenses'
in the statement of profit or loss and other comprehensive income in the year
the asset is derecognised.
2.2.8 Taxes
(1) Current tax
Current tax assets and liabilities for the current and prior years are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the reporting date in the
countries where the Group operates and generates taxable income. Management
periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation
and establishes provisions where appropriate.
(2) Deferred tax
Deferred tax is provided on temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are recognised for all
taxable temporary differences, except: (i) where the deferred tax liability
arises from the initial recognition of goodwill or of an asset or liability in
a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss,
and (ii) in respect of taxable temporary differences associated with
investments in subsidiaries and associates, where the timing of the reversal
of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.8 Taxes (continued)
(2) Deferred tax (continued)
Deferred tax assets are recognised for all deductible temporary differences,
carry forward of unused tax credits and unused tax losses, to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses, can be set-off: (i) where the deferred tax asset
relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss, and (ii) in respect of
deductible temporary differences associated with investments in subsidiaries
and associates, deferred tax assets are recognised only to the extent that it
is probable that the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it becomes probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities can only be offset in the
statement of financial position if the Group has the legal right to settle
current tax amounts on a net basis and the deferred tax amounts are levied by
the same taxing authority on the same entity or different entities that intend
to realise the asset and settle the liability at the same time.
The Group has started to recognise deferred tax on undistributed dividends
from 2021. Reference is made to note 2.5.10 and note 11.7.
2.2.9 Dividend distribution on ordinary shares
Dividends on ordinary shares will be recognised as a liability and deducted
from equity when they are approved by the Group's shareholders. Interim
dividends are deducted from equity when they are declared and no longer at the
discretion of the Group. Dividends for the year that were approved after the
reporting date will be disclosed as an event after the reporting date.
2.2.10 Short-term employee benefits
Short-term benefits typically relate to the payment of salaries and wages.
These benefits are recorded on an accrual basis, so that at period end, if the
employee has provided service to the Group, but has not yet received payment
for that service, the unpaid amount is recorded as liability.
2.2.11 Post-employment benefits
2.2.11.1 Defined benefit plan
The Group maintains a defined benefit plan in some subsidiaries which leads to
retirement benefit obligations. The defined benefit obligation and the related
charge for the year are determined using assumptions required under actuarial
valuation techniques. These benefits are unfunded.
Remeasurements, comprising actuarial gains and losses, the effect of the asset
ceiling, excluding an amount included in net interest on the net defined
benefit liability and the return on plan assets (excluding amounts included in
net interest on the net defined benefit liability) are recognised immediately
in the statement of financial position with a corresponding debit or credit to
retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of (i) the
date of the plan amendment or curtailment, and (ii) the date that the Group
recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined
benefit liability or asset. The Group recognises the following changes in the
net defined benefit obligation under operating expenses in the consolidated
statement of comprehensive income: (i) service costs comprising current
service costs, past-service costs, gains and losses on curtailments and
non-routine settlements; and (ii) net interest expense or income. Reference is
made to note 2.5.4.
2.2.11.2 Defined contribution plan
Defined contribution plans are post-employment benefit plans under which an
entity pays fixed contributions into a separate entity (a fund) and will have
no legal or constructive obligation to pay further contributions if the fund
does not hold sufficient assets to pay all employee benefits relating to
employee service in the current and prior periods.
Similar to accounting for short-term employee benefits, defined contribution
employee benefits are expensed as they are paid, with an accrual recorded for
any benefits owed, but not yet paid. The expenses of the defined contribution
plan are incurred by the employer. The contributions are to be remitted by the
entities to the fund on a monthly basis. Employees are allowed to withdraw the
accumulated contribution in their accounts from this fund as per the terms and
conditions specified in the fund Acts.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.12 Goodwill
Goodwill is initially measured at cost (being the excess of the aggregate of
the consideration transferred and the amount recognised for non- controlling
interests and any previous interest held over the net identifiable assets
acquired and liabilities assumed). If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the Group
reassesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If the reassessment still
results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or
loss.
After initial recognition, the Group measures goodwill at cost less any
accumulated impairment losses. The Group tests goodwill for impairment
annually, or more frequently if events or changes in circumstances indicate
that it might be impaired. Impairment for goodwill is determined by assessing
the recoverable amount of the cash-generating unit ('CGU') (or group of
cash-generating units) to which the goodwill relates. Where the recoverable
amount of the cash-generating unit is less than the carrying amount, an
impairment loss is recognised. Impairment losses relating to goodwill cannot
be reversed in future periods.
2.2.13 Intangible assets
The Group has adopted a strategy to enrich the offering to its clients with
product diversification and by adding Digital Financial Services ('DFS'). The
DFS will be offered to its clients through a smartphone app, where clients
will be able to apply online for loans and other financial services like a
current account and a savings or deposit account. They will be able to see
their loan and account information and make payments including paying bills.
The DFS app will also include additional functions and services such as
digital group meetings and a chat function. As part of the DFS, ASAI is also
developing a Supplier Market Place app ('SMP') where clients can purchase
goods for their shops. SMP will be a separate app, but is part of the DFS
model to retain and attract loan and savings clients and generate payment
transactions that will generate commissions.
For the introduction of current accounts and savings and deposit accounts and
other digital services to our clients, ASAI needs to add a Core Banking System
('CBS') to its IT infrastructure. The Group made upfront payments to buy core
banking software licences. The licence for the software is granted for ten
years.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an
individual software project are recognised as an intangible asset when the
Group can demonstrate:
· The technical feasibility of completing the intangible asset so that the
asset will be available for use.
· Its intention to complete and its ability to use it or sell it.
· How the asset will generate future economic benefits.
· The availability of resources to complete the asset and use or sell it.
· The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the
asset is carried at cost less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins when development is
complete, and the asset is available for use. It is amortised over the period
of expected future benefit. During the period of development, the asset is
tested for impairment annually.
A summary of the policies applied to intangible assets is as follows:
Initial licence and set up costs Development costs
Useful life Finite (5-10 years) Finite (5-10 years)
Amortisation starts After installation of use After installation for use
Amortisation method used Amortised on a straight line basis over the period of licence Amortised on a straight line basis over the period of expected usage
Internally generated or acquired Acquired Internally generated
2.2.14 Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication
that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Group estimates the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's
or CGU's fair value less costs of disposal and its value in use. The
recoverable amount is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from
other assets or groups of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount. Impairment losses of continuing
operations are recognised in the statement of profit or loss in expense
categories. For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that previously
recognised impairment losses no longer exist or have decreased. If such
indication exists, the Group estimates the asset's or CGU's recoverable
amount. A previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's recoverable
amount since the last impairment loss was recognised. For Right Of Use Assets
('ROU') the fair value is determined based on estimated rental payments using
the Incremental Borrowing Rate ('IBR') used for each country where such ROU
exists. If there is a significant change in discount rates, the fair value is
reviewed to see if there is impairment. The sensitivity analysis on account of
IBR changes is shown in note 17.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.15 Liability for death and multipurpose risk funds
The Group collects 1-2% of disbursed loan amounts for death risk funds or
multipurpose risk funds in certain markets (the Philippines, Myanmar,
Tanzania, Uganda, Kenya and Sri Lanka). These funds cover settlement of the
outstanding loan amount and other financial assistance when the borrower dies
or is affected by natural calamities. The collected amounts are recognised
upfront as income and a liability is recognised in the statement of financial
position for the claims resulting from these funds. Reference is made to note
2.5.5 on the key judgement used.
2.2.16 Fair value measurement
The Group measures financial instruments, such as derivatives, at fair value
at each balance sheet date. Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either: (i) in the principal market for
the asset or liability; or (ii) in the absence of a principal market, in the
most advantageous market for the asset or liability. The principal or the most
advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions
that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities;
Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable; and
Level 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
When the fair values of financial assets and financial liabilities recorded in
the statement of financial position cannot be measured based on quoted prices
in active markets, their fair value is measured using valuation techniques
including the Discounted Cash Flow ('DCF') model. The inputs to these models
are taken from observable markets where possible, but where this is not
feasible, a degree of judgement is required in establishing fair values.
Judgements include considerations of inputs such as liquidity risk, credit
risk and volatility.
2.2.17 Leases
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease
(i.e. the date the underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the shorter of the lease term and
the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the
accounting policies in note 2.2.14 Impairment of non-financial assets.
Lease liabilities
(1) Initial measurement
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments less (if any) lease incentives
receivable, variable lease payments that depend on an index or a rate, and
amounts expected to be paid under residual value guarantees. There are no
obligatory extension clauses in the rental agreements. Although some lease
contracts comprise the optional extension clauses, these are not included on
initial recognition because it is not always reasonably certain that the Group
will take the option. In calculating the present value of lease payments, ASA
International uses the incremental borrowing rate at the lease commencement
date due to the reason that the interest rate of implicit in the lease is not
available. The incremental borrowing rate is calculated using a reference rate
(derived as country-specific risk-free rate) and adjusting it with
company-specific financing spread and integrating lease specific factors.
Refer to note 2.5.9 on accounting estimates and assumptions used to determine
the IBR rates.
(2) Subsequent measurement
After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term or a change in the in-substance fixed
lease payments which also impacts similarly the right-of-use assets.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.2.18 Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. When the Group expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the reimbursement is
recognised as a separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in the statement of
comprehensive income net of any reimbursement.
If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
2.3. New standards, interpretations and amendments adopted by the Group
The Group applied for the first time certain standards and amendments, which
are effective for annual periods beginning on or after 1 January 2021 (unless
otherwise stated). The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet effective.
2.3.1 Interest Rate Benchmark Reform - Phase 2: Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4
The amendments provide temporary reliefs which address the financial reporting
effects when an Interbank Offered Rate ('IBOR') is replaced with an
alternative nearly Risk-Free interest Rate ('RFR'). The amendments include the
following practical expedients:
- A practical expedient to require contractual changes, or changes to cash
flows that are directly required by the reform, to be treated as changes to a
floating interest rate, equivalent to a movement in a market rate of interest.
- Permit changes required by IBOR reform to be made to hedge designations and
hedge documentation without the hedging relationship being discontinued.
- Provide temporary relief to entities from having to meet the separately
identifiable requirement when an RFR instrument is designated as a hedge of a
risk component.
These amendments had no impact on the consolidated financial statements of the
Group. The Group intends to use the practical expedients in future periods if
they become applicable. Reference is made to note 30.5.
2.3.2 Covid-19-Related Rent Concessions beyond 30 June 2021 - Amendments to
IFRS 16
On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendments
to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS
16 guidance on lease modification accounting for rent concessions arising as a
direct consequence of the Covid pandemic. As a practical expedient, a lessee
may elect not to assess whether a Covid-related rent concession from a lessor
is a lease modification. A lessee that makes this election accounts for any
change in lease payments resulting from the Covid-related rent concession the
same way it would account for the change under IFRS 16, if the change were not
a lease modification.
The amendment was intended to apply until 30 June 2021, but as the impact of
the Covid pandemic is continuing, on 31 March 2021, the IASB extended the
period of application of the practical expedient to 30 June 2022. The
amendment applies to annual reporting periods beginning on or after 1 April
2021. However, the Group has not received any Covid-related rent concessions
in 2021, but plans to apply the practical expedient if it becomes applicable
within the allowed period of application.
2.4. Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's financial statements are
disclosed below. The Group intends to adopt these new and amended standards
and interpretations, if applicable, when they become effective.
2.4.1 IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts ('IFRS 17'), a
comprehensive new accounting standard for insurance contracts covering
recognition and measurement, presentation and disclosure. Once effective, IFRS
17 will replace IFRS 4 Insurance Contracts ('IFRS 4') that was issued in 2005.
IFRS 17 applies to all types of insurance contracts (i.e. life, non-life,
direct insurance and re-insurance), regardless of the type of entities that
issue them, as well as to certain guarantees and financial instruments with
discretionary participation features. A few scope exceptions will apply. The
overall objective of IFRS 17 is to provide an accounting model for insurance
contracts that is more useful and consistent for insurers. In contrast to the
requirements in IFRS 4, which are largely based on grandfathering previous
local accounting policies, IFRS 17 provides a comprehensive model for
insurance contracts, covering all relevant accounting aspects. The core of
IFRS 17 is the general model, supplemented by:
· A specific adaptation for contracts with direct participation features (the
variable fee approach).
· A simplified approach (the premium allocation approach) mainly for
short-duration contracts.
IFRS 17 is effective for reporting periods beginning on or after 1 January
2023, with comparative figures required. Early application is permitted,
provided the entity also applies IFRS 9 and IFRS 15 on or before the date it
first applies IFRS 17. The Group is assessing the impact of implementing IFRS
17.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
ACCOUNTING POLICIES (continued)
2.4. Standards issued but not yet effective (continued)
2.4.2 Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to
specify the requirements for classifying liabilities as current or
non-current. The amendments clarify what is meant by a right-to-defer
settlement:
· That a right to defer must exist at the end of the reporting period.
· That classification is unaffected by the likelihood that an entity will
exercise its deferral right.
· That only if an embedded derivative in a convertible liability is
itself an equity instrument would the terms of a liability not impact its
classification.
The amendments are effective for annual reporting periods beginning on or
after 1 January 2023 and must be applied retrospectively. The Group is
currently assessing the impact the amendments will have on current practice
and whether existing loan agreements may require renegotiation.
2.4.3 Reference to the Conceptual Framework - Amendments to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations -
Reference to the Conceptual Framework. The amendments are intended to replace
a reference to the Framework for the Preparation and Presentation of Financial
Statements, issued in 1989, with a reference to the Conceptual Framework for
Financial Reporting issued in March 2018 without significantly changing its
requirements. The Board also added an exception to the recognition principle
of IFRS 3 to avoid the issue of potential 'day 2' gains or losses arising for
liabilities and contingent liabilities that would be within the scope of IAS
37 or IFRIC 21 Levies, if incurred separately. At the same time, the Board
decided to clarify existing guidance in IFRS 3 for contingent assets that
would not be affected by replacing the reference to the Framework for the
Preparation and Presentation of Financial Statements. The amendments are
effective for annual reporting periods beginning on or after 1 January 2022
and apply prospectively.
2.4.4. Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment - Proceeds before
Intended Use, which prohibits entities deducting from the cost of an item of
property, plant and equipment, any proceeds from selling items produced while
bringing that asset to the location and condition necessary for it to be
capable of operating in the manner intended by management. Instead, an entity
recognises the proceeds from selling such items, and the costs of producing
those items, in profit or loss. The amendment is effective for annual
reporting periods beginning on or after 1 January 2022 and must be applied
retrospectively to items of property, plant and equipment made available for
use on or after the beginning of the earliest period presented when the entity
first applies the amendment. The amendments are not expected to have a
material impact on the Group.
2.4.5 Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS
37
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an
entity needs to include when assessing whether a contract is onerous or
loss-making. The amendments apply a 'directly related cost approach'. The
costs that relate directly to a contract to provide goods or services include
both incremental costs and an allocation of costs directly related to contract
activities. General and administrative costs do not relate directly to a
contract and are excluded unless they are explicitly chargeable to the
counterparty under the contract. The amendments are effective for annual
reporting periods beginning on or after 1 January 2022. The Group will apply
these amendments to contracts for which it has not yet fulfilled all its
obligations at the beginning of the annual reporting period in which it first
applies the amendments.
2.4.6 IFRS 1 First-time Adoption of International Financial Reporting
Standards - Subsidiary as a first-time adopter
As part of its 2018-2020 annual improvements to IFRS standards process, the
IASB issued an amendment to IFRS 1 First-time Adoption of International
Financial Reporting Standards. The amendment permits a subsidiary that elects
to apply paragraph D16(a) of IFRS 1 to measure cumulative translation
differences using the amounts reported by the parent, based on the parent's
date of transition to IFRS. This amendment is also applied to an associate or
joint venture that elects to apply paragraph D16(a) of IFRS 1. The amendment
is effective for annual reporting periods beginning on or after 1 January 2022
with earlier adoption permitted. The amendments are not expected to have a
material impact on the Group.
2.4.7 IFRS 9 Financial Instruments - Fees in the '10 per cent' test for
derecognition of financial liabilities
As part of its 2018-2020 annual improvements to IFRS standards process, the
IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an
entity includes when assessing whether the terms of a new or modified
financial liability are substantially different from the terms of the original
financial liability. These fees include only those paid or received between
the borrower and the lender, including fees paid or received by either the
borrower or lender on the other's behalf. An entity applies the amendment to
financial liabilities that are modified or exchanged on or after the beginning
of the annual reporting period in which the entity first applies the
amendment. The amendment is effective for annual reporting periods beginning
on or after 1 January 2022 with earlier adoption permitted. The Group will
apply the amendments to financial liabilities that are modified or exchanged
on or after the beginning of the annual reporting period in which the entity
first applies the amendment. The amendments are not expected to have a
material impact on the Group.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.4. Standards issued but not yet effective (continued)
2.4.8 Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces
a definition of 'accounting estimates'. The amendments clarify the distinction
between changes in accounting estimates and changes in accounting policies and
the correction of errors. Also, they clarify how entities use measurement
techniques and inputs to develop accounting estimates. The amendments are
effective for annual reporting periods beginning on or after 1 January 2023
and apply to changes in accounting policies and changes in accounting
estimates that occur on or after the start of that period. Earlier application
is permitted as long as this fact is disclosed. The amendments are not
expected to have a material impact on the Group.
2.4.9 Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice
Statement 2 - Making Materiality Judgements, in which it provides guidance and
examples to help entities apply materiality judgements to accounting policy
disclosures. The amendments aim to help entities provide accounting policy
disclosures that are more useful by replacing the requirement for entities to
disclose their 'significant' accounting policies with a requirement to
disclose their 'material' accounting policies and adding guidance on how
entities apply the concept of materiality in making decisions about accounting
policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or
after 1 January 2023 with earlier application permitted. Since the amendments
to the IFRS Practice Statement 2 provide non-mandatory guidance on the
application of the definition of material to accounting policy information, an
effective date for these amendments is not necessary. The Group is currently
assessing the impact of the amendments to determine the impact they will have
on the Group's accounting policy disclosures.
2.5 Significant accounting judgements and estimates
In the process of applying the Group's accounting policies, judgements and
estimates are applied in determining the amounts recognised in the financial
statements. Significant use of judgements and estimates are as follows:
2.5.1 Determining the lease term of contracts with renewal and termination
options
The Group determines the lease term as the non-cancellable term of the lease.
Any period covered by an option to extend the lease is not considered unless
it is compulsory to be exercised.
2.5.2 Allowance for Expected Credit Loss ('ECL') on loans and advances
The Group calculates the allowance for ECL in a three-step process as
described below under A to D. The Group reviews its loans at each reporting
date to assess the adequacy of the ECL as recorded in the financial
statements. In particular, judgement is required in the estimation of the
amount and timing of future cash flows when determining the level of allowance
required. Such estimates are based on certain assumptions such as the
financial situation of the borrowers, types of loan, maturity of the loans,
ageing of the portfolio, economic factors etc. The actual performance of loans
may differ from such estimates resulting in future changes to the allowance.
Due to the nature of the industry in which the Group operates, i.e. micro
credit to low-income clients, the loan portfolio consists of a very high
number of individual customers with low-value exposures. These characteristics
lead the Group to use a provisioning methodology based on a collective
assessment of similar loans. The Group's policy for calculating the allowance
for ECL is described below:
A) Determination of loan staging
The Group monitors the changes in credit risk in order to allocate the
exposure to the correct staging bucket. Given the nature of the Group's loan
exposures (generally short-term exposures, <12 months) no distinction has
been made between stage 1 (12-month ECL) and stage 2 loans (lifetime ECL) for
calculating the ECL provision with the exception of the application of the
management overlay detailed below. In 2021, the Group provided one-year
moratorium to approximately 30% of the clients in India, who were offered to
benefit from the one-time debt restructuring scheme established by the Reserve
Bank of India ('RBI'). In addition, multiple periodical moratoriums were
provided to clients in Myanmar and Sri Lanka as those entities faced multiple
national and/or local lockdowns on account of Covid. This resulted in clients'
overdue days remaining static (and not increasing due to a lack of payment)
and the time since the last payment was made increasing. Although the client
is on an agreed payment deferral the credit risk increases, albeit not at a
rate equivalent to arrears levels increasing. As a result, in addition to the
loans that are in arrears by more than 30 days and less than 91 days, loans
which are in arrears by less than 31 days but more than 31 days passed since
their last payment, are classified as stage 2.
Bucket based on last payment days
Bucket based on overdue age Within 7 days 8-30 days 31-90 days 91-180 days >180 days
Current Stage 1 Stage 2
1-30 days
31-90 days Stage 2
91-180 days Stage 3
>180 days
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates (continued)
2.5.2 Allowance for Expected Credit Loss ('ECL') on loans and advances
(continued)
B) Calculating ECL for stage 1-2 loans
To avoid the complexity of calculating the separate probabilities of default
and loss-given default, the Group uses a 'loss rate approach' for the
measurement of ECLs under IFRS 9. Using this approach, the Group developed
loss-rate statistics on the basis of the amounts written off over the last
five years. The historical loss rates include the impact of security deposits
held by the Group, which is adjusted with overdue amounts before loans are
written off. ECL recorded purely based on historical loss comes to USD 3.2
million (2020: USD 731K). The Group made considerable write-offs in 2021 as
most of the old loans impacted by Covid have crossed to being overdue by more
than 365 days, which is the threshold for write-offs. This resulted in a
higher write-off in 2021, which in turn increased the ECL as per historical
loss. Doubling the historical loss rate would add USD 3.2 million to the ECL.
The forward-looking element in the ECL is built by looking at the write-offs
trend in the most recent three-year period and applying the rate over to the
total outstanding loan portfolio. ECL as per the forward-looking element comes
to USD 7.2 million (2020: USD 1.0 million). Similar to historical loss, the
increased write-offs for 2021 have also increased the forward-looking loss.
Changing the write-off trend to two years, rather than three years for the
forward-looking assessment, would add USD 3.9 million to the ECL.
C) Calculating ECL for stage 3 loans
The Group considers a loan to be credit impaired when it is overdue for more
than 90 days. The ECL applied to net stage 3 loans (after adjusting the
security deposit) is at a rate below:
ECL for stage 3 loans
Loss %
Overdue age 2021 2020
91-180 days 50% 80%
181-365 days 70% 100%
Over 365 days 100% 100%
The loss rate for 2021 has been updated based on the last three years' actual
write-offs for each of these buckets. However, for the India operation,
management considered a higher loss rate (80% for the loans bucketed between
91-180 days and 100% for loans over 180 days overdue) in view of operating
challenges faced in country on account of the Covid pandemic.
Based on the above, ECL for stage 3 loans comes to USD 11.6 million (2020: USD
5.6 million). It should be noted that the additional risk arising in stage 3
is further captured in the management overlay, discussed below. If the Group
used the 2020 rates, ECL for stage 3 loans would have been USD 12.4 million.
An alternative assessment of stage 3 provisions would be to apply a 100% loss
rate across the entire stage 3 population (net of security deposit), being all
loans more than 90 days past due. This would increase the ECL on the stage 3
population to USD 13.0 million.
D) Management overlay
Due to the impact on our clients of government and regulatory actions related
to Covid, such as lockdowns and moratoriums, the Group incorporated an
additional management overlay. Given the unavailability of reliable
information as to the impact of the Covid pandemic on borrowers and the
recoverability of loans that have been subject to payment moratoriums, there
is significant uncertainty in the selection of the assumptions as to the
expected credit loss calculation. The management overlay is calculated using
the assumptions described below. The output is then compared to the ECL
arising out of the modelled provision in points B and C above. Any additional
ECL resulting from the matrix calculation is recorded as part of the
management overlay. This additional exercise was taken for India, Myanmar and
Sri Lanka where the Group provided moratoriums in 2021. The overlay
encompasses the below components:
Step 1: The OLP as of December 2021 has been segregated based on the number of
overdue days for each country to analyse the risk exposure for each bracket.
Note that there is some judgement in whether loans are written off when they
are over 365 days past due, although this is generally the practice across the
Group, and where loans have not been written off, they are provided for in
accordance with the matrix below. The buckets are further segregated based on
the last payment date of each individual loan so that any impact of
moratoriums on the overdue calculation can be factored into the expected
credit loss calculation.
Step 2: The Group's management then assessed the risks associated with the
loan portfolio under different overdue and last payment brackets independently
and provided their estimates for expected write-off percentages for each part
of the portfolio in the matrix. The longer the overdue/last payment brackets,
the higher the credit risk exposure. In addition to historical defaults
already considered in the modelled ECL, management considered previous
calamities and the related write-offs, current field experience of loan
officers and operational supervisors who have frequent contact with the
clients during this pandemic. The management at a Group and local level
applied expert judgement in defining the expectations of losses in each of the
positions in the overdue/last payment matrix. The loss rates have been
reviewed and revised in the current year based on a detailed historical
analysis of losses arising from loans in different overdue buckets. These were
then used to establish and check the reasonableness of the matrix percentages
applied and update them, where applicable.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (continued)
2.5.2 Allowance for Expected Credit Loss ('ECL') on loans and advances
(continued)
The matrix can be visualised as below:
Bucket based on last payment days
Bucket based on overdue age Within 7 days 8-30 days 31-90 days 91-180 days >180 days >365 days
Current 1.1% 6.1% 16.1% 31.1% 51.1% 76.1%
1-30 days 6.1% 11.1% 21.1% 36.1% 56.1% 81.1%
31-90 days 16.1% 21.1% 31.1% 46.1% 66.1% 91.1%
91-180 days 31.1% 36.1% 46.1% 61.1% 81.1% 100.0%
>180 days 51.1% 56.1% 66.1% 81.1% 100.0% 100.0%
>365 days 76.1% 81.1% 91.1% 100.0% 100.0% 100.0%
Step 3: In addition to that, management also provided a mark-up adjustment
over the estimated write-off percentage considering the future risk for each
market. While analysing this expected credit risk mark-up, customers' future
expected payment behaviour and the performance of competitors have been
considered therein. All the individual country assessments were then discussed
between local management and Group senior management where the assessments
were further discussed, challenged and agreed. Management have increased the
mark-up adjustment for India to capture the additional risk for the
significant amount of restructured loans balance as of 31 December 2021.
The total ECL recorded from the management overlay calculation described here
is USD 2.1 million. This is a significant reduction when compared to 31
December 2020 (USD 16.8 million) due to the larger proportion of the portfolio
moving into greater than 90 days past due buckets as moratoriums have come to
an end. This causes higher balances in stage 3 to be provided for in the
assessment for stage 3 described in C) above, with little impact from applying
the management overlay matrix described here - as additional ECL is only
recorded where the management overlay matrix returns a provision in excess of
the ECL calculated in steps B) and C) above. This is particularly evident in
the India loan portfolio where a greater proportion of the portfolio (USD 24.1
million) is now transferred to in stage 3 during the year, hence the resulting
reduction in the specific management overlay (USD 9.5 million), as the ECL is
being already recorded pre-management overlay.
E) Impact of climate change
The Group has identified the ECL provision as one of the main areas in which
it could be exposed to the financial impacts of climate change risk, as a
number of the Group's operating areas are prone to natural disasters such as
typhoons, flash floods or droughts. The Group's expected credit loss model
captures the expected impact of these risks through the historical loss data
that feeds the model, which includes where such natural disasters have
occurred. In addition, management monitors the situation in each of its
operating territories post the balance sheet date for any factors that should
be considered in its year-end ECL calculations. The Group's loans are
short-term and so the impact of such events over the life of the loans would
naturally be limited. However, given the evolving risks associated with
climate change, management will continue to monitor whether adjustments to its
ECL models are required for future periods.
F) Business Correspondence ('BC') portfolio, Direct Assignment ('DA')
portfolio and Securitisation portfolio of ASA India
A similar assessment has been performed for the off-book Business
Correspondence ('BC') portfolio of ASA India (see note 13 for details on the
BC portfolio). The off-book BC portfolio is subject to a maximum provision of
5% of OLP, which is the maximum credit risk exposure for ASA India as per the
agreement with IDFC First Bank. ECL for off-book BC portfolio comes to USD 1.7
million.
The portion of the DA portfolio of ASA India which is on book has also been
treated the same as a regular portfolio. No provision for the off-book portion
of the DA portfolio was made because, as per the agreement with the State Bank
of India, ASAI has no credit risk on this part of the DA portfolio.
The Securitisation portfolio of ASA India has been assessed in line with ASA
India's own portfolio.
G) ECL on interest receivable
A similar assessment (notes 2.5.2.B to 2.5.2.E) was conducted for the interest
receivable from customers to determine the expected credit loss on the
interest outstanding as of 31 December 2021. ECL for interest receivable comes
to USD 1.7 million.
Based on the above assessment, the total provision for expected credit losses
for loans and advances to customers can be summarised as follows:
2021 2020
Own Off-book Interest Own Off-book Interest
portfolio portfolio receivable portfolio portfolio receivable
Particulars USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
ECL as per historical default rate 3,204 339 148 731 28 26
Forward considerations 7,184 793 309 1,042 13 24
ECL under stage 3 loans 11,574 543 37 5,559 158 839
Management overlay 2,136 - 1,202 16,839 2,049 182
24,098 1,675 1,696 24,171 2,248 1,071
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates (continued)
2.5.2 Allowance for Expected Credit Loss ('ECL') in loans and advances
(continued)
2021 2020
Gross outstanding ECL Coverage Gross outstanding ECL Coverage
Allocated to: USD'000 USD'000 USD'000 USD'000
Own portfolio (notes 13.1 and 13.3) 393,298 24,098 6% 396,605 24,171 6%
Off-book BC portfolio (note 13.1 and note 28) 33,583 1,675 5% 44,982 2,248 5%
Interest receivable (notes 13.1 and 13.3) 10,700 1,696 16% 14,688 1,071 7%
437,581 27,469 6% 456,275 27,490 6%
ECL coverage for interest is much higher than OLP as more than 45% of the
interest receivable belongs to India (where a higher provision rate has been
applied).
2.5.3 Modification of loans
The Group provided moratoriums to its clients in India, Myanmar and Sri Lanka
(see note 30.4.1) in 2021. The main objective of these payment holidays was to
provide clients a temporary relief due to disruption of their livelihood on
account of Covid. Extending only the loan term is not considered as a
substantial modification and therefore does not result in derecognition and
the original effective interest rate is retained. The temporary catch-up
adjustment or modification gain/loss is then calculated as the difference
between the carrying amount of the loans and the discounted value of the
modified cash flows at the original effective interest rate. The modification
gain/loss is an adjustment to the carrying value of the loans and advances to
customers and interest income.
2.5.4 Defined benefit plans
The cost of the defined benefit plan is determined using actuarial valuations.
An actuarial valuation involves making various assumptions that may differ
from actual developments in the future. These include the determination of the
discount rate, future salary increases, staff turnover and retirement age. Due
to the complexities involved in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date. The
assumptions used in December 2021 and December 2020 are as follows:
Assumptions - defined benefit plan
2021 2020
ASA Pagasa ASA Pagasa
Lak Jaya Pakistan ASA India ASA Nigeria Philippines Lak Jaya Pakistan ASA India ASA Nigeria Philippines
Discount rate 11.2% 11.8% 7.2% 13.5% 5.1% 6.7% 9.8% 6.8% 8.0% 3.9%
Salary increment 10.0% 10.8% 9.5% 12.0% 4.0% 10.0% 8.8% 9.5% 7.5% 3.0%
Staff turnover 13.0% 15.9% 25.5% 5.0% 47.0% 16.6% 23.4% 21.2% 5.0% 54.0%
Retirement age 60 years 60 years 60-62 years 60 years 60 years 60 years 60 years 55-62 years 60 years 60 years
The parameter most subject to change is the discount rate. Management engages
third-party actuaries to conduct the valuation. The defined benefit costs have
been disclosed in note 8.2. The sensitivity analysis of the plan on account of
any change in discount rate and salary increment is disclosed in note 8.3.
Sensitivity analysis for changes in the other two assumptions were not done as
the effect is determined immaterial.
2.5.5 Liability for death and multipurpose risk funds
At the end of each period, management uses significant assumptions to reassess
the adequacy of the liability provided. These include estimating the number of
borrower deaths among the total number of borrowers by applying the local
mortality rates at the end of the period, outstanding loan amount per borrower
and other financial assistance to the family where applicable. The mortality
rate is based on historical mortality rates of the borrower for last three
years for the specific countries. As of December 2021, the rates were 0.30% in
Sri Lanka, 0.20% in Uganda, 0.25% in Tanzania and 0.21% in Kenya. The
liability is disclosed under note 27. No sensitivity analysis is done as the
amount is not material.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates
(continued)
2.5.6 Business Correspondence and partnership models
The portfolios under the Business Correspondence and partnership models in ASA
India ('BC model') are recognised on the statement of financial position when
the agreed exposure to credit risk on these portfolios exceeds the expected
credit risk of items similar in nature. The Group performs a sensitivity
analysis to estimate the expected credit risk considering various adverse
situations in India, probability of occurrence for these situations and three
scenarios (optimistic, realistic and pessimistic) for the estimated write-offs
for each situation. The overall credit risk on loans managed by ASA India is
analysed below 5%. Based on this analysis, the portfolios for MAS, Reliance
and IDBI are recognised on the statement of financial position as the agreed
exposure is higher than 5%, while the portfolio for IDFC First Bank is not
recognised on the balance sheet due to the fact that the agreed exposure is
below the expected credit risk. More information is available in note 13.
2.5.7 Securitisation agreements
ASA India has entered into a new securitisation agreement in 2021. The loans
to customers under the securitisation agreements do not qualify for
derecognition as ASA India provides cash collateral for credit losses and
thereby the credit risk is not substantially transferred. Hence, the loans to
customers continue to be recognised on the balance sheet of ASA India under
loans and advances to customers and the purchase consideration is presented
under borrowings.
Interest income from the customers continues to be recognised as interest
income and the related portion of the interest which is transferred to the
counterparty is presented as interest expense. The outstanding loan portfolio
as per end of 2021 under the securitisation agreements amounts to USD 747K (31
December 2020: USD 320K) and the related liability amounts to USD 1.2 million
(31 December 2020: USD 325K). The loan portfolio is disclosed under Gross loan
portfolio in note 13 'Loans and advances to customers' and the liability is
disclosed under Debt issued and other borrowed funds by operating subsidiaries
in note 25 'Debt issued and other borrowed funds'. The total pool principal
balance at the start date of the relevant securitisation agreement amounts to
USD 3.5 million (31 December 2020: USD 3.5 million) and the related liability
amounts to USD 3.5 million (31 December 2020: USD 3.5 million). The cash
collateral provided under these agreements amounts to USD 278K (31 December
2020: USD 305K) and is disclosed under note 14 'Due from banks'.
2.5.8 Direct Assignment
ASA India entered into two Direct Assignment agreements ('DA') with State Bank
of India ('SBI') in 2019 and 2020, through which the entity has sold a pool of
customers' loans amounting to USD 16.5 million against a purchase
consideration of USD 14 million. The balance (15%) is kept as minimum
retention as per guidelines issued by Reserve Bank of India ('RBI'). Based on
the agreement, the 85% loans are derecognised on the books on the grounds that
the entity transferred substantially all the risks and rewards of ownership of
financial assets. 15% remained on book. Further information is available in
note 13.
2.5.9 Leases - estimating the Incremental Borrowing Rate ('IBR')
The Group cannot readily determine the interest rate implicit in the lease;
therefore, it uses IBR to measure lease liabilities. The IBR is the rate of
interest that the Group would have to pay to borrow over a similar term, and
with a similar security, the funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar economic environment.
IFRS 16 describes the accounting for an individual lease and a discount rate
that should be determined on a lease-by-lease basis. However, as a practical
expedient, an entity may apply IFRS 16 to a portfolio of leases with similar
characteristics if the entity reasonably expects that the effects on the
financial statements of applying a portfolio approach instead of a
lease-by-lease basis would not differ materially from applying this standard
to the individual leases within that portfolio. If accounting for a portfolio,
an entity shall use estimates and assumptions that reflect the size and
composition of the portfolio.
The Group applied a discount rate per country based on leases with similar
characteristics applying a portfolio approach instead of a lease-by-lease
approach which had no material impact for the Group. The starting point for
estimating the reference rate is the local risk-free rate. The Group developed
an approach to determine IBR that is closely aligned with the definitions and
requirements prescribed in IFRS 16. In this approach the Group first
determined the country risk-free rate and adjusted that with the
Group-specific financing spread and lease-specific adjustments to consider IBR
rates.
The Group used country sovereign rates to determine the risk-free rate. If no
sovereign risk-free rate is available, a build-up approach is applied that
adjusts the USD-based United States Treasury bond for (i) the country risk
premium, to capture country-specific risk, and (ii) the long-term inflation
differential, to capture any currency risk.
The Group-specific financing spread is determined based on (i) the
Group-specific perspective/credit rating, (ii) the credit rating of the legal
entities (lessees) of ASA International, and (iii) the market interest
rates/yields on industry-specific bonds.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates (continued)
2.5.9 Leases - estimating the Incremental Borrowing Rate ('IBR') (continued)
The lease-specific adjustment depends on the type/nature of asset, and relates
to the fact that a secured bond will have a lower yield compared to an
unsecured bond. However, the yield difference varies based on the type/nature
of the asset that is used as collateral. The IBR used for different entities
in 2021 is as follows:
Country Lease Credit Approach IBR at different lease duration (year)
Currency Rating reference rate
Tenure of lease 1 2-4 5-6 7-9
Ghana GHS BBB local 18.4% 19.3% 19.9% 20.3%
Nigeria NGN BBB local 0.9% 2.8% 4.6% 5.8%
Sierra Leone SLL BB+ build-up 22.0% 23.2% 24.2% 24.8%
Kenya KES BB- local 9.6% 10.9% 11.9% 12.6%
Rwanda RWF B+ build-up 12.0% 12.6% 13.4% 14.0%
Tanzania TZS BBB- build-up 6.0% 6.6% 7.0% 7.4%
Uganda UGX BB- build-up 8.0% 9.5% 10.0% 10.3%
Zambia ZMW BB- local 35.0% 35.6% 36.1% 36.3%
Bangladesh BDT BBB- build-up 6.0% 6.5% 7.1% 7.6%
India INR BB local 4.5% 5.2% 5.9% 6.5%
Pakistan PKR BBB build-up 11.7% 11.7% 12.0% 12.3%
Sri Lanka LKR BB local 6.4% 6.6% 7.3% 7.9%
Myanmar MMK BBB- build-up 11.9% 13.3% 14.6% 15.5%
Philippines PHP BBB- local 2.0% 2.3% 2.7% 2.9%
2.5.10 Taxes
Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can
be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits, together with future tax
planning strategies.
As of 31 December 2021, unused tax losses of USD 10.7 million were not
recognised to calculate the deferred tax asset in ASA International Group plc
as currently it is not known when the entity will generate taxable profits.
The Group has concluded that the entity in question does not have a taxable
temporary difference and at the moment future taxable profit for it cannot be
readily ascertained. In addition deferred tax was not recognised on 2021
business losses amounting to USD 23 million in India as the Group concluded
that due to uncertain profitability of the operation future taxable profit
cannot be readily ascertained. If the Group was able to recognise all
unrecognised deferred tax assets, profit and equity would have increased by
USD 7.8 million.
As of 31 December 2021, the Group has undistributed profits in its
subsidiaries amounting to USD 63.7 million. The Group recognised a deferred
tax liability amounting to USD 2.3 million (see note 11.3) on USD 27.3 million
of undistributed profits on the assessment that these will be distributed in
the foreseeable future. No deferred tax liability was recognised on the
balance USD 36.4 million due to regulatory uncertainty on when those can be
distributed. If the Group recognises a deferred tax liability on these
profits, profit and equity would decrease by USD 3.9 million.
2.5.11 Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit
exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use. For property and equipment, the fair
value less costs of disposal calculation is based on available data from
similar assets or observable market prices less incremental costs of disposing
of the asset. For ROU the fair value is determined based on estimated rental
payments using incremental borrowing rates used for each country where such
ROU exists. If there is a significant change in discount rates, the fair value
is reviewed to see if there is impairment.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
3. SEGMENT INFORMATION
For management purposes, the Group is organised into reportable segments based
on its geographical areas and has five reportable segments, as follows:
· West Africa, which includes Ghana, Nigeria and Sierra Leone.
· East Africa, which includes Kenya, Uganda, Tanzania, Rwanda and Zambia.
· South Asia, which includes India, Pakistan and Sri Lanka.
· South East Asia, which includes Myanmar and the Philippines.
· Non-operating entities, which includes holding entities and other
entities without microfinance activities.
No operating segments have been aggregated to form the above reportable
operating segments. The Company primarily provides only one type of service to
its microfinance clients, being small microfinance loans which are managed
under the same ASA Model in all countries. The reportable operating segments
have been identified on the basis of organisational overlap like common Board
members, regional management structure and cultural and political similarity
due to their geographical proximity to each other.
The Executive Committee is the Chief Operating Decision Maker ('CODM') and
monitors the operating results of its reportable segments separately for the
purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operational profits and
losses and is measured consistently with profit or loss in the consolidated
financial statements. Transfer prices between operating and non-operating
segments are on an arm's length basis in a manner similar to transactions with
third parties and are based on the Group's transfer pricing framework.
Revenues and expenses as well as assets and liabilities of those entities that
are not assigned to the four reportable operating segments are reported under
'Non-operating entities'. Inter-segment revenues, expenses and balance sheet
items are eliminated on consolidation.
No revenue from transactions with a single external customer or counterparty
amounted to 10% or more of the Group's total revenue in 2021 or 2020.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
3. SEGMENT INFORMATION (continued)
The following table presents operating income and profit information for the
Group's operating segments for the year ended 31 December 2021.
As at 31 December 2021 Non-operating Adjustments and
West Africa East Africa South Asia South East Asia entities Total segments eliminations Consolidated
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
External interest and similar income 61,472 32,742 62,092 33,452 9 189,767 - 189,767
Inter-segment interest income - - - - 2,846 2,846 (2,846) -
External interest expense (3,891) (5,603) (22,453) (6,049) (4,443) (42,439) - (42,439)
Inter-segment interest expense (227) (521) (231) (389) (1,477) (2,845) 2,845 -
Net interest income 57,354 26,618 39,408 27,014 (3,065) 147,329 (1) 147,328
External other operating income 702 2,874 2,929 3,954 59 10,518 - 10,518
Inter-segment other operating income 1 - - - - 29,577 29,577 (29,577) -
Other inter-segment expense 220 (1,663) (206) (2,173) (3,373) (7,195) 7,195 -
Total operating income 58,276 27,829 42,131 28,795 23,198 180,229 (22,383) 157,846
Credit loss expense (1,655) (2,327) (27,622) (5,891) (14) (37,509) - (37,509)
Net operating income 56,621 25,502 14,509 22,904 23,184 142,720 (22,383) 120,337
Personnel expenses (13,630) (11,999) (14,810) (11,172) (5,202) (56,813) - (56,813)
Exchange rate differences (142) 151 (331) (562) (648) (1,532) - (1,532)
Depreciation of property and equipment (327) (458) (638) (346) (620) (2,389) 404 (1,985)
Amortisation of right-of-use assets (808) (1,033) (1,307) (1,167) (83) (4,398) - (4,398)
Other operating expenses (6,131) (5,558) (5,652) (9,623) (2,940) (29,904) - (29,904)
Tax expenses (10,564) (1,974) (4,164) (373) (2,272) (19,347) - (19,347)
Segment profit 25,019 4,631 (12,393) (339) 11,419 28,337 (21,979) 6,358
Total assets 134,719 83,602 198,393 105,872 396,864 919,450 (356,896) 562,554
Total liabilities 73,497 63,629 160,887 89,045 149,502 536,560 (77,449) 459,111
Explanation: Segment profit is net profit after tax
(3. Inter-segment operating income includes intercompany dividends,
management fees and share in results of the subsidiaries.)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
3. SEGMENT INFORMATION (continued)
The following table presents operating income and profit information for the
Group's operating segments for the year ended 31 December 2020.
As at 31 December 2020 Non-operating Adjustments and
West Africa East Africa South Asia South East Asia entities Total segments eliminations Consolidated
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
External interest and similar income 42,295 21,710 53,294 24,770 17 142,086 - 142,086
Inter-segment interest income - - - - 1,857 1,857 (1,857) -
External interest expense (4,058) (3,987) (22,177) (5,699) (4,524) (40,445) - (40,445)
Inter-segment interest expense (170) (384) (382) (779) (142) (1,857) 1,857 -
Net interest income 38,067 17,339 30,735 18,292 (2,792) 101,641 - 101,641
External other operating income 1,653 1,525 4,651 2,528 103 10,460 - 10,460
Inter-segment other operating income(1) - - - - 32,059 32,059 (32,059) -
Other inter-segment expense (864) (1,004) (127) (478) (3,651) (6,124) 6,124 -
Total operating income 38,856 17,860 35,259 20,342 25,719 138,036 (25,935) 112,101
Credit loss expense (1,233) (860) (19,427) (5,680) (50) (27,250) - (27,250)
Net operating income 37,623 17,000 15,832 14,662 25,669 110,786 (25,935) 84,851
Personnel expenses (12,130) (9,764) (14,641) (10,349) (4,724) (51,608) - (51,608)
Exchange rate differences (89) 24 (192) 842 (79) 506 - 506
Depreciation of property and equipment (391) (335) (526) (347) (1,568) (3,167) 1,385 (1,782)
Amortisation of right-of-use assets (870) (900) (1,315) (1,114) (229) (4,428) - (4,428)
Other operating expenses (4,876) (4,371) (4,696) (8,041) (2,977) (24,961) - (24,961)
Tax expenses (5,824) (585) 1,178 981 277 (3,973) - (3,973)
Segment profit 13,443 1,069 (4,360) (3,366) 16,369 23,155 (24,550) (1,395)
Total assets 107,748 59,802 253,360 119,152 387,488 927,550 (348,290) 579,260
Total liabilities 58,715 43,489 200,128 98,893 144,622 545,847 (73,660) 472,187
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
4. INTEREST AND SIMILAR INCOME
The interest and similar income consists of interest income on microfinance
loans to customers, and interest income on bank balances and fixed-term
deposits.
Notes 2021 2020
USD'000 USD'000
Interest income calculated using EIR 4.1. 175,732 131,339
Other interest and similar income 4.2. 14,035 10,747
189,767 142,086
2021 2020
USD'000 USD'000
4.1. Interest income calculated using EIR
Interest income on loans and advances to customers 175,732 131,324
Interest income from clients from on-book BC model (ASA India) - 15
175,732 131,339
In the notes to the financial statements for the year ended 31 December 2020
the modification loss for the year was reported as USD 3.5 million. This
disclosure did not include the modification loss arising on loans that had
completed before the end of the financial year, as required by International
Financial Reporting Standard 9: Financial Instruments, although this omission
had no impact on the consolidated statement of profit or loss and other
comprehensive income. In accordance with International Accounting Standard 8:
Changes in Accounting Policies, Changes in Estimates and Errors, these
accounts must disclose the restated prior year amount. This restated amount is
USD 15.5 million, to correct the previously reported USD 3.5 million. In 2021
the modification loss amounted to USD 2.1 million, including USD 670K relating
to loans outstanding at the year ended 31 December 2021 (and so impacting the
income statement) and USD 1.19 million relating to loans concluded in the
year. Interest income has increased compared to 2020 primarily due to the
difference in the modification loss recorded, increase in loan disbursements
across the period (2021: USD 944 million, 2020: 680 million) and charging
interest on overdue balance of loans.
2021 2020
USD'000 USD'000
4.2. Other interest and similar income
Interest income on short-term deposits 4,579 3,703
Amortisation of loan processing fees 8,898 5,874
Other interest income 558 1,170
14,035 10,747
5. INTEREST AND SIMILAR EXPENSE
Included in interest and similar expense are accruals for interest payments to
customers and other charges from banks.
Notes 2021 2020
USD'000 USD'000
Interest expense on loans (33,508) (32,656)
Interest expense on security deposits and others (4,631) (4,100)
Interest expense on lease liability (301) (276)
Commitment and processing fees (266) (266)
Amortisation of forward points of forward contracts and currency basis spread 37. (3,733) (3,147)
of swap contracts
(42,439) (40,445)
6. OTHER OPERATING INCOME
2021 2020
USD'000 USD'000
Member's admission fees 1,881 1,200
Document fees 856 554
Proceeds from sale of pass-books 159 144
Income from death and multipurpose risk funds 3,867 3,329
Service fees income from off-book BC model (ASA India) 2,503 4,166
Distribution fee MBA Philippines 846 603
Other 406 464
10,518 10,460
Other includes a number of small items that are smaller than USD 150K on an
individual basis.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
7. EXPECTED CREDIT LOSS EXPENSE
Notes 2021 2020
USD'000 USD'000
ECL on loans and advances to customers 13.2. (28,227) (23,411)
Expected credit loss recovered/(expensed) on on-book BC model - 10
Impairment on bank and intercompany balances 7.1. (109) 149
ECL on interest receivable (6,441) (1,131)
Other expected credit loss expense (2,732) (2,867)
(37,509) (27,250)
The key assumptions applied for the expected credit loss provision and related
expense are explained in note 2.5.2. Other expected credit loss includes ECL
for BC model portfolio which are off-book and loan and interest exemptions for
settlement of customer loans in case of death or disability.
2021 2020
USD'000 USD'000
7.1. Impairment on bank and intercompany balances
Impairment of bank balance (52) 303
Impairment of due from bank (51) (48)
Impairment of receivable from related parties (6) (106)
(109) 149
The loss is determined based on management assessment of cash and receivables.
8. PERSONNEL EXPENSES
Personnel expenses include total base salary expenses and employee benefit
plans:
Notes 2021 2020
USD'000 USD'000
Personnel expenses (51,287) (46,531)
Defined contribution plans (3,951) (3,385)
Defined benefit plans 8.2. (1,575) (1,692)
(56,813) (51,608)
Notes 2021 2020
USD'000 USD'000
8.1. Retirement benefit liability
Retirement benefit liability as at beginning of period 5,446 3,373
Payments made during the period (592) (413)
Charge for the period 8.2. 1,575 1,692
Actuarial gains and losses on defined benefit liabilities (OCI) (698) 896
Foreign exchange differences (340) (102)
Retirement benefit liability as at end of the period 5,391 5,446
ASA India, ASA Pakistan, Lak Jaya, Pagasa Philippines, ASA Nigeria and AMSL
are maintaining defined benefit pension plans in the form of gratuity plans at
retirement, death, incapacitation and termination of employment for eligible
employees. The funds for the plans in ASA Pakistan, Pagasa Philippines, Lak
Jaya, ASA Nigeria and AMSL are maintained by the entity itself and no plan
assets have been established separately. The funds for the plan of ASA India
are being maintained with Life Insurance Corporation of India and the entity's
obligation is determined by actuarial valuation. There are no other
post-retirement benefit plans available to the employees of the Group.
2021 2020
USD'000 USD'000
8.2. Charge for the period
Current service cost for the period (1,156) (1,282)
Interest cost for the period (419) (349)
Impact from change in assumptions (see note 2.5.5) - (61)
(1,575) (1,692)
8.3. Sensitivity analysis
A quantitative sensitivity analysis for significant assumptions as at 31
December 2021 and 31 December 2020 is shown below.
Assumptions Discount rate Future salary increases
1% 1% 1% 1%
Sensitivity level Year increase decrease increase decrease
USD'000 USD'000 USD'000 USD'000
Impact on defined benefit obligation 2021 (501) 1,384 1389 (513)
2020 (714) 1,330 1,316 (722)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
9. OTHER OPERATING EXPENSES
The other operating expenses include the following items:
Notes 2021 2020
USD'000 USD'000
Administrative expenses 9.1. (25,095) (20,668)
Professional fees 9.2. (2,707) (1,957)
Audit fees 9.3. (1,406) (1,365)
International travel (327) (298)
Other (369) (673)
(29,904) (24,961)
2021 2020
USD'000 USD'000
9.1. Administrative expenses
Office expenses (3,557) (2,814)
Transport and representation expenses (9,405) (7,079)
Gas, water and electricity (1,079) (1,120)
Telecommunications and internet expenses (2,865) (2,285)
VAT/Output tax/Service tax (3,414) (1,907)
Bank charges (1,747) (1,353)
Other administrative expenses (3,028) (4,110)
(25,095) (20,668)
Office and transport expenses increased compared to last year primarily due to
significantly fewer lockdowns in operating countries than 2020 and an increase
in branch and staff numbers.
Other administrative expenses include several small items that are smaller
than USD 150K on an individual basis.
2021 2020
USD'000 USD'000
9.2. Professional fees
Legal services fees (378) (397)
Other professional fees (2,329) (1,560)
(2,707) (1,957)
Other professional fees include fees for various consultants on tax, IT,
accounting and, actuary valuation services.
2021 2020
USD'000 USD'000
9.3. Fees payable to the Group's auditors is analysed as below:
Fees payable to the Group's auditor for the audit of the Group's annual (940) (884)
accounts
(269) (246)
Audit of the accounts of subsidiaries
(194) (225)
Audit related assurance services
(1,403) (1,335)
Total audit and audit related assurance services
Other assurance services (3) (10)
(1,406) (1,365)
10. EXCHANGE RATE DIFFERENCES
The Company incurred certain foreign exchange losses on monetary assets
denominated in currencies other than the Company's functional currency.
2021 2020
USD'000 USD'000
Foreign currency losses (7,530) (3,952)
Foreign currency gains 5,998 (4,458
(1,532) 506
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
11. INCOME TAX AND WITHHOLDING TAX EXPENSE
2021 2020
USD'000 USD'000
Income tax expense
Current income tax (18,844) (11,009)
Income tax for previous period 477 (28)
Changes in deferred income tax 2,773 7,519
(15,594) (3,518)
2021 2020
USD'000 USD'000
11.1. Current tax liability
Balance as at beginning of period 2,502 6,416
Tax charge:
Current period 18,844 11,009
Previous period (477) 28
Tax paid (14,085) (14,784)
Foreign exchange adjustment (519) (167)
Balance as at end of period 6,265 2,502
2021 2020
USD'000 USD'000
11.2. Deferred tax assets
Balance as at beginning of period 11,303 3,865
Change during the period 2,488 7,515
Foreign exchange adjustment (429) (77)
Balance as at end of period 13,362 11,303
Deferred tax assets are temporary differences recognised in accordance with
local tax regulations and with reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets can be
realised.
2021 2020
USD'000 USD'000
11.3. Deferred tax liability
Balance as at beginning of period - 76
Change during the period 2,296 (74)
Foreign exchange adjustment - (2)
Balance as at end of period 2,296 -
11.4. Deferred tax relates to:
2021 2020
Deferred tax relates to: Deferred tax Deferred tax Income Deferred tax Deferred tax Income
assets liabilities statement assets liabilities statement
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Allowance for ECL 6,205 - 1,365 4,881 - 4,069
Provision for retirement liabilities 1,505 - (95) 1,634 - 497
Provision on FX loss - (97) 200 - (482) (1,785)
Unused tax losses 3,244 - 1,803 1,469 - 1,176
Other temporary differences 1,682 310 254 1,253 654 2,080
IFRS 16 lease - (213) (40) - (172) (234)
Undistributed profit of subsidiary - 2,296 (2,296) - - -
Modification loss 812 - (715) 1,695 - 1,715
Other comprehensive (86) - (284) 371 - 71
income/revaluation of cash flow
hedge
13,362 2,296 192 11,303 - 7,589
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
11. INCOME TAX AND WITHHOLDING TAX EXPENSE (continued)
11.5. Reconciliation of the total tax charge 2021 2020
USD'000 USD'000
Accounting result before tax 25,705 2,578
Income tax expense at nominal rate of consolidated entities (9,565) (2,142)
Over/(under) provision for income tax previous year 477 (28)
Net allowable/(non-allowable) expenses (271) 223
Deferred tax recognised/(not recognised) on losses (6,191) (624)
Exempt income 185 116
Tax impact on elimination (11) (372)
Other permanent differences (218) (691)
Total income tax expense for the period (15,594) (3,518)
Weighted average nominal rate of consolidated entities 37% 83%
Consolidated effective tax rate 61% 136%
11.6. Income tax per region 2021 2020
USD'000 USD'000
Corporate income tax - West Africa (10,564) (5,824)
Corporate income tax - South Asia (4,164) 1,177
Corporate income tax - East Africa (1,974) (585)
Corporate income tax - South East Asia (344) 1,025
Corporate income tax - Non-operating entities 1,452 689
Total income tax per region (15,594) (3,518)
11.7. Withholding tax expense 2021 2020
USD'000 USD'000
Withholding tax on interest income, dividend, royalties and service fees (1,457) (455)
Deferred tax on undistributed dividend (2,296) -
Total withholding tax expense (3,753) (455)
Interest income, dividends, royalties and service fees are subject to
withholding tax in certain jurisdictions. The applicable withholding tax rates
vary per country and per type of income.
12. CASH AT BANK AND IN HAND
2021 2020
USD'000 USD'000
Cash at bank 87,684 90,012
Cash in hand 267 153
87,951 90,165
An amount of USD 21.5 million (2020: USD 18.4 million) of cash at bank is
restricted and cannot be readily available. Out of this, USD 16.3 million
(2020: USD 18.4 million) in the Philippines is restricted as per Securities
and Exchange Commission ('SEC') regulations as it relates to Loan Collateral
Build Up ('LCBU'), the collection of security collateral from clients of a
lending company. LCBU is placed into a segregated account. In Tanzania, USD
5.2 million (2020: nil) is restricted and kept in a separate account as per
the Bank of Tanzania requirement for non-deposit-taking microfinance
institutions as it relates to security deposits from the clients.
13. LOANS AND ADVANCES TO CUSTOMERS
Loans and advances to customers are net of allowance for expected credit loss.
2021 2020
Notes USD'000 USD'000
Gross loan portfolio 13.1. 393,298 396,605
Interest receivable on loans to customers 10,700 14,688
Allowance for expected credit loss 13.2. (25,794) (25,242)
Unamortised processing fee (3,775) (2,396)
Net impact of modification loss (1,187) (3,533)
Net loan portfolio 373,242 380,122
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
13. LOANS AND ADVANCES TO CUSTOMERS (continued)
13.1. Gross loan portfolio as of 31 December 2021 is USD 393.3 million (31
December 2020: 396.6 million).
Interest receivable on loans to customers is realisable in line with the loan
repayment schedules.
ASA India operates a Business Correspondent and partnership model with IDFC
First Bank. ASA India operates as agent in a pass-through arrangement, whereby
ASA India selects borrowers based on the selection criteria of the BC Partner.
After approval of the selected borrowers, the BC Partners disburse the loans
through ASA India and ASA India collects the interest and repayments from the
borrowers on behalf of the BC Partners. In exchange for these services, ASA
India receives service fees and processing fees.
The loans to borrowers of IDFC First Bank and related funding are not
recognised on the balance sheet since ASA India has a limited liability for
the non-performing loans under this agreement. The service fees for the IDFC
portfolio are reported under 'Other operating income' in note 6.
Under the agreements with the BC Partners, ASA India is liable for payment of
non-performing loans, which is regarded as a financial guarantee. This
liability for IDFC First Bank is reported under 'Provisions' in note 28. This
liability is based on the Group's ECL policy as explained in note 2.5.2 taking
into account any limits in the liability towards the BC Partners, because it
is the best estimate for the expected outflow of cash at the reporting date.
The related expense is reported under credit loss expenses in note 7.
ASA India provided security deposits to the BC partners as collateral for the
financial guarantees provided. These security deposits are reported under 'Due
from banks' in note 15. Other receivables and payables related to the BC model
are reported under 'Other assets' and 'Other liabilities'. More information is
available in note 2.5.
ASA India has entered into a Direct Assignment ('DA') agreement with the State
Bank of India ('SBI'). Under the agreement, the entity transferred a pool of
its loans to customers amounting to USD 16.5 million to the SBI against a
purchase consideration of USD 14 million, which is 85% of the loan portfolio.
15% is retained by ASA India as the Minimum Retention Rate ('MRR') as per the
guidance of RBI. ASA India will continue to collect the instalments from all
the borrowers and transfer the amount to the SBI where the SBI will retain
collections from 85% of the clients and adjust that with the purchase
consideration (borrowings) and repay collections from 15% of the customers to
ASA India. The 85% of the pool is hence not recognised in the books of ASA
India as the company transferred all significant risks and rewards of such
loans to the SBI.
The outstanding loans to borrowers under the BC model and DA model which are
not recognised on the balance sheet at 31 December 2021 amounted to USD 35.6
million and USD 1.8 million respectively (2020: USD 45.0 million and USD 3.7
million).
The loan portfolio is after the impact of the modification of financial assets
as explained in note 2.5.3.
The following table explains the movement of gross loan portfolio between the
stages:
13.2. Allowance for expected credit loss Notes 2021 2020
USD'000 USD'000
Balance as at beginning of the period (25,242) (4,227)
ECL on loans and advances 7. (28,227) (23,410)
ECL on interest receivable (6,441) (1,131)
Write-off of loans and interest 32,770 3,526
Exchange rate differences 1,346 -
Balance at end of the period (25,794) (25,242)
The key assumptions applied for the expected credit loss provision are
explained in note 2.5.2.
The Group provided significant moratorium in 2020 on account of Covid. A large
number of loans impacted by the pandemic moved over 365 days in 2021 and were
subsequently written off as per Group policy.
The provision for expected credit losses is high due to the increased credit
risk profile across the portfolio arising out of the local lockdowns,
political instability and economic hardship due to the Covid pandemic in
couple of operating entities. This has led to increased arrears and an
increased credit risk associated with the length of time. Management have
estimated the impact of these factors through a management overlay, the
mechanics of which are described in note 2.5.2. Management considered this to
be a reasonable best estimate given the available evidence of the impact of
these factors on the recoverability of the loans outstanding.
13.3. The breakdown of the allowance for expected credit loss is as
follows:
2021 2020
USD'000 USD'000
ECL on loans and advances (24,098) (24,171)
ECL on interest receivable (1,696) (1,071)
(25,794) (25,242)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
13. LOANS AND ADVANCES TO CUSTOMERS (continued)
13.4. The following tables explain the movement of gross OLP and
interest receivable and related provisions in stages.
Stage 1 Stage 2 Stage 3 Total
USD'000 USD'000 USD'000 USD'000
Gross OLP ECL Gross OLP ECL Gross OLP ECL Gross OLP ECL
At 1 January 2021 319,122 (1,901) 52,202 (8,258) 25,281 (14,012) 396,605 (24,171)
New assets originated 944,097 - - - - - 944,097 -
Assets realised (832,248) - (39,701) - (22,788) - (894,737) -
ECL charges (5,577) 1,333 (23,983) (28,227)
Transfers: - -
Stage 1 to Stage 2 (12,975) 77 12,975 (77) - - - -
Stage 2 to Stage 1 431 (68) (431) 68 - - - -
Stage 1 to Stage 3 (32,714) 195 - - 32,714 (195) - -
Stage 2 to Stage 3 - - (6,447) 1,020 6,447 (1,020) - -
Stage 3 to Stage 1 11 (6) - - (11) 6 - -
Stage 3 to Stage 2 - - 52 (29) (52) 29 - -
Write off - - - - (26,954) 26,954 (26,954) 26,954
Fx impact (23,768) 385 (1,469) 314 (476) 647 (25,713) 1,346
At 31 December 2021 361,956 (6,895) 17,181 (5,629) 14,161 (11,574) 393,298 (24,098)
Stage 1 Stage 2 Stage 3 Total
USD'000 USD'000 USD'000 USD'000
Gross OLP ECL Gross OLP ECL Gross OLP ECL Gross OLP ECL
At 1 January 2020 408,391 (916) 4,208 (1,224) 2,922 (1,851) 415,521 (3,991)
New assets originated 680,772 - - - - - 680,772 -
Assets realised (686,973) - (2,925) - (2,484) - (692,382) -
ECL charges - (1,358) - (6,797) - (15,245) - (23,400)
Transfers: - -
Stage 1 to Stage 2 (51,176) 244 51,176 (244) - - - -
Stage 2 to Stage 1 12 1 (12) (1) - - - -
Stage 1 to Stage 3 (26,972) 128 - - 26,972 (128) - -
Stage 2 to Stage 3 - - (1,735) 8 1,735 (8) - -
Write off - - - - (3,219) 3,219 (3,219) 3,219
Fx impact (4,932) - 1,490 - (645) - (4,087) -
At 31 December 2020 319,122 (1,901) 52,202 (8,258) 25,281 (14,013) 396,605 (24,171)
Stage 1 Stage 2 Stage 3 Total
USD'000 USD'000 USD'000 USD'000
Interest ECL Interest ECL Interest ECL Interest ECL
receivable receivable receivable receivable
USD'000 USD'000 USD'000 USD'000
At 1 January 2021 10,128 (60) - 3,377 (355) 1,183 (656) 14,688 (1,071)
Interest revenue for the year 151,521 15,436 8,775 175,732 -
Realised during the year (148,617) (15,768) (9,519) (173,904) -
ECL charges (117) (1,331) (4,993) - (6,441)
Transfer:
Stage 1 to Stage 2 (2,028) 12 2,028 (12) - -
Stage 1 to Stage 3 (3,518) 21 - 3,518 (21) - -
Stage 2 to Stage 1 51 - (51) - - -
Stage 2 to Stage 3 - - (1,949) 205 1,949 (205) - -
Stage 3 to Stage 1 3 - - - (3) - - -
Stage 3 to Stage 2 17 (2) (17) 2 - -
Write off (5,816) 5,816 (5,816) 5,816
At 31 December 2021 7,540 (144) 3,090 (1,495) 70 (57) 10,700 (1,696)
Stage 1 Stage 2 Stage 3 Total
USD'000 USD'000 USD'000 USD'000
Interest ECL Interest ECL Interest ECL Interest ECL
receivable receivable receivable receivable
At 1 January 2020 3,810 (213) - 48 (14) 32 (20) 3,890 (247)
Interest revenue for the year 117,655 - 9,123 - 4,561 - 131,339 -
Realised during the year (105,408) - (9,098) - (5,728) - (120,234) -
ECL charges (179) (173) (779) - (1,131)
Transfer: - -
Stage 1 to Stage 2 (3,376) 189 3,376 (189) - - -
Stage 1 to Stage 3 (2,553) 143 - 2,553 (143) - -
Stage 2 to Stage 3 - (72) 21 72 (21) - -
Write off - - (307) 307 (307) 307
At 31 December 2020 10,128 (60) 3,377 (355) 1,183 (656) 14,688 (1,071)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
14. DUE FROM BANKS
Notes 2021 2020
USD'000 USD'000
Due from banks 44,794 52,814
Escrow bank account at Citibank 14.1. 20,465 20,465
65,259 73,279
14.1. Escrow bank account at Citibank
In certain countries in which the Group operates, Non-Resident Capital Gains
Tax ('NRCGT') regimes have been enacted in recent years which may give rise to
an NRCGT liability if there is a change of control ('COC') (as defined by
relevant local tax authorities) of more than 50% of the underlying ownership
of a subsidiary of the Company resident in that country as measured over a
rolling three-year period. In each case, the liability is payable by the local
subsidiary. A COC of certain of the Group's subsidiaries resulting from the
offering to certain institutional and professional investors in view of the
admission of the Group to the London Stock Exchange in 2018 (the 'Global
Offer'), or thereafter, may trigger NRCGT liabilities in certain jurisdictions
for the affected subsidiaries. In connection with the potential NRCGT
liability, CMI, being the selling shareholder at the time of the listing of
the Group on 13 July 2018, agreed upon admission to place USD 20 million of
its net proceeds from the sale of shares in the Global Offer in an escrow
account for the sole benefit of the Company (the 'Escrow Account'). The Escrow
Amount may be applied to fund NRCTG liabilities in accordance with the escrow
deed dated 29 June 2018 between, inter alia, CMI and the Company. The Escrow
Account is established in the name of the Company and is therefore presented
as part of 'Due from banks'. The beneficial ownership of these funds,
including any interest accrued thereon and less any expenses, rests with CMI
because the Company will need to return all remaining funds to CMI in
accordance with the terms of the escrow deed. Therefore, the same amount is
presented as a liability to CMI under 'Other liabilities'.
15. EQUITY INVESTMENTS AT FVOCI
2021 2020
USD'000 USD'000
MFX Solutions, LLC
Balance at the beginning of the period 238 232
(Loss)/gain on revaluation (1) 6
Balance at the end of the period 237 238
The Group purchased 153,315 shares of MFX Solutions, LLC USA on 7 April 2017.
This represents 1% of the total number of issued shares of 15,331,330. The
purchase price per share was USD 1.3045. The investment has been classified as
equity investment and valued at fair value. The fair value has been classified
as level 2. The Group opts to report the changes in fair value through OCI.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
16. PROPERTY AND EQUIPMENT
Property and equipment consists of land and buildings, office furniture and
equipment. Depreciation policies are described in detail in the accounting
policies. The movements are as follows:
2021 2021 2021 2021 2021 2020 2020 2020 2020 2020
Furniture and Office Furniture and Office
Vehicles equipment Buildings Total Vehicles equipment Buildings Total
fixtures fixtures
including IT including IT
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Cost at the beginning of the period 1,999 400 8,621 1,306 12,326 1,867 371 8,042 1,149 11,429
Accumulated depreciation at the beginning of the period (1,366) (298) (5,908) (137) (7,709) (1,123) (250) (4,623) (102) (6,098)
Carrying value at the beginning of the period 633 102 2,713 1,169 4,617 744 121 3,419 1,047 5,331
Additions during the period at cost 168 6 1,539 - 1,713 160 33 697 91 981
Foreign currency adjustment (107) (21) (467) (77) (672) (14) (6) (99) 66 (53)
Disposal during the period (377) (65) (210) - (652) (14) 2 (19) - (31)
Depreciation during the period (254) (39) (1,667) (25) (1,985) (251) (50) (1,453) (28) (1,782)
Adjustment of depreciation for disposals 370 61 186 (4) 613 6 - 129 - 135
Foreign currency differences 84 24 334 9 451 2 2 39 (7) 36
Carrying value at the end of the period 517 68 2,428 1,072 4,085 633 102 2,713 1,169 4,617
Cost at the end of the period 1,683 320 9,483 1,229 12,715 1,999 400 8,621 1,306 12,326
Accumulated depreciation at the end of the period (1,166) (252) (7,055) (157) (8,630) (1,366) (298) (5,908) (137) (7,709)
Carrying value at the end of the period 517 68 2,428 1,072 4,085 633 102 2,713 1,169 4,617
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
17. RIGHT-OF-USE ASSETS AND LEASE LIABILITY
2021 2020
USD'000 USD'000
Right-of-use assets at the beginning of the period 5,195 5,882
Additions during the period 4,265 3,588
Amortisation during the period (4,398) (4,428)
Exchange rate differences (31) 153
Right-of-use assets at the end of the period 5,031 5,195
2021 2020
USD'000 USD'000
Lease liability at the beginning of the period 3,629 3,981
Interest expense of lease liability 301 276
Additions of lease liabilities during the period 4,265 3,588
Payment of lease liabilities (4,680) (4,389)
Exchange rate differences (56) 173
Lease liability at the end of the period 3,459 3,629
The Group recognises leased office premises under right-of-use assets.
Between January and December 2021, the Group entered into 984 new contracts
and renewal contracts. This excludes the new/renewal contracts of Ghana,
Nigeria and Tanzania as they have fully prepaid contracts and are not impacted
by IBRs. A sensitivity analysis of a 50% increase in the IBR rates for those
contracts gives a total impact in the net asset of negative USD 31K and in net
profit of negative USD 31K, which is insignificant.
18. OTHER ASSETS
The other assets comprise of the following: 2021 2020
Notes USD'000 USD'000
Receivables from related parties 18.1. 70 397
Prepayments 2,157 2,227
Employee advances 1,856 2,214
Advance income tax 2,150 3,432
Security deposit 236 137
Receivables under off-book BC model (ASA India) 18.2. 762 2,187
Insurance claim receivable 260 577
Interest receivable on due from banks 457 550
Receivable against DA 15 307
Other receivables 18.3. 976 1,572
8,939 13,600
Prepayments and employee advances are in line with security against housing
contracts, funding agreements and employee receivables.
Advance income tax will be set off against current tax payable after
completion of the tax assessment.
18.1. Receivables from related parties 2021 2020
USD'000 USD'000
Sequoia BV 53 52
MBA Philippines 5 225
ASAI Cambodia Holdings - 108
Catalyst Investment Management services 12 6
CMI International Holding - 6
70 397
The receivables from related parties are short-term in nature and do not
accrue interest.
18.2. Receivable under off-book BC model is presented net of impairment.
Gross amount receivable under off-book BC model is USD 2.08 million
(2020: 2.19 million).
18.3. Other receivables include various advances in relation to employees'
insurance, receivable from VAT and service tax authorities etc.
Individually, none of the advances are over USD 150K.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
19. DERIVATIVES 2021 2020
USD'000 USD'000
Forward contracts 3,143 -
Swap agreements 823 708
Derivative assets total 3,966 708
Forward contracts (602) (2,147)
Swap agreements - -
Derivative liabilities total (602) (2,147)
Total derivatives at fair value 3,364 (1,439)
19.1. The Group is holding the following foreign exchange forward contracts:
As of 31 December 2021 Maturity
<30 days 1-3 months 3-12 months >12 months Total
USD'000 USD'000 USD'000 USD'000 USD'000
Pakistan
Notional amount (in USD) 2,900 11,999 29,213 - 44,112
Average forward rate (USD/PKR) 171 168 180 - 173
Carrying amount (in USD) 104 838 2,201 - 3,143
Myanmar
Notional amount (in USD) 1,000 2,000 - - 3,000
Average forward rate (USD/KYAT) 1,947 1,942 - - 1,945
Carrying amount (in USD) (77) 56 - - (21)
Tanzania
Notional amount (in USD) 500 800 - - 1,300
Average forward rate (USD/TZS) 2,346 2,541 - - 2,444
Carrying amount (in USD) (5) (76) - - (81)
Sierra Leone
Notional amount (in USD) - - 2,000 - 2,000
Average forward rate (USD/SLL) - - 13,396 - 13,396
Carrying amount (in USD) - - (117) - (117)
Zambia
Notional amount (in USD) - - - 750 750
Average forward rate (USD/ZMW) - - - 32 32
Carrying amount (in USD) - - - (383) (383)
As of 31 December 2020 Maturity
<30 days 1-3 months 3-12 months >12 months Total
USD'000 USD'000 USD'000 USD'000 USD'000
Pakistan
Notional amount (in USD) - 4,000 22,800 - 26,800
Average forward rate (USD/PKR) - 168 174 - 171
Carrying amount (in USD) - (166) (787) - (953)
Myanmar
Notional amount (in USD) 1,000 - 800 3,000 4,800
Average forward rate (USD/KYAT) 1,630 - 1,808 1,944 1,794
Carrying amount (in USD) (215) - (238) (620) (1,073)
Tanzania
Notional amount (in USD) - 4,000 - - 4,000
Average forward rate (USD/TZS) - 2,372 - - 2,372
Carrying amount (in USD) - (70) - - (70)
Sierra Leone
Notional amount (in USD) - - - 2,000 2,000
Average forward rate (USD/SLL) - - - 13,396 13,396
Carrying amount (in USD) - - - (51) (51)
Please see notes 36 and 37 for more information.
19.2. The Group also holds the below swap contracts:
2021 2020
USD'000 USD'000
Cross-currency interest rate swap Notional value 16,104 16,482
Carrying value
823 708
At 31 December 2021, the Group had three cross-currency interest rate swap
agreements in place.
A swap agreement with a notional amount of USD 3 million was entered on 25
July 2019 by ASA India whereby ASA India pays a fixed rate of interest of
11.8% in Indian Rupee (INR) and receives interest at a variable rate equal to
six-month USD LIBOR +4.3% on the notional amount. The swap is being used to
hedge the exposure to changes in the cash flow of its six-month USD LIBOR
+4.3% USD loan.
A swap agreement with a notional amount of EUR 10 million on 9 December 2019
by the same whereby ASA India pays a fixed rate of interest of 12.55% in
Indian Rupee and receives interest at a variable rate equal to six-month
EURIBOR +4.3% on the notional amount. The swap is being used to hedge the
exposure to changes in the cash flow of its six-month EURIBOR +4.3% EUR loan.
A swap agreement with a notional amount of USD 1 million was entered on 7 July
2021 by ASA Sierra Leone whereby ASA Sierra Leone pays a fixed rate of
interest of 19.09% in SLL and receives interest at a fixed rate of 8% in USD
notional amount. The swap is being used to hedge the exposure to changes in
the cash flow of its 8% USD loan.
The applied valuation techniques include forward pricing and swap models,
using present value calculations by estimating future cash flows, using future
exchange rates and discounting them with the appropriate interest rate curves.
These derivative contracts are classified as Level 2 financial instruments.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
20. INTANGIBLE ASSETS AND GOODWILL
Goodwill Intangible assets Total
USD'000 USD'000 USD'000
Cost
At 1 January 2020 34 - 34
Additions - - -
Fx movement (1) - (1)
At 31 December 2020 33 - 33
Additions - 452 452
Fx movement (3) - (3)
At 31 December 2021 30 452 482
Goodwill arose from the acquisition of Lak Jaya by CMI Lanka in 2008.
For the year 2021, an impairment assessment on the remaining goodwill
concluded that goodwill remains unchanged. The main factors considered for
this assessment are: (i) expected growth in profitability; (ii) quality of the
loan portfolio; and (iii) regulatory status of Lak Jaya, the subsidiary of CMI
Lanka.
The intangible asset includes initial investments on a new project to develop
a Digital Financial Services ('DFS') platform. A pilot is expected to take
place in Ghana before year-end 2022 and, if successful and upon Central Bank
approval, this will be followed by the launch of a range of digital financial
and other services to support the growth of small businesses. These DFS will
add a digital channel to the existing branch model. The DFS will be offered to
its clients through a smartphone app, where clients will be able to apply
online for loans and other financial services like a current account and a
savings or deposit account. As part of the DFS, ASAI is also developing a
Supplier Marketplace app ('SMP') where clients can purchase goods for their
shops. SMP will be a separate app but is part of the DFS model to retain and
attract loan and savings clients and generate payment transactions that
generate commissions.
For the introduction of current accounts and savings and deposit accounts and
other digital services to our clients, ASAI needs to add a Core Banking System
('CBS') to its IT infrastructure. ASAI has obtained a ten-year licence to the
Temenos Financial Inclusion suite, which is an off-the-shelf CBS system.
21. ISSUED CAPITAL
2021 2020
USD'000 USD'000
ASA International Group plc 100 million shares of GBP 0.01 each 1,310 1,310
1,310 1,310
No movements in issued capital during 2020 and 2021.
22. RETAINED EARNINGS
Total retained earnings are calculated as follows: 2021 2020
USD'000 USD'000
Balance at the beginning of the period 147,291 148,011
Disposal of ASA Consultancy Limited and ASA Cambodia Holdings (673) -
Result for the period 8,787 (720)
Balance at the end of the period 155,405 147,291
Profit for the period
Attributable to equity holders of the parent 8,787 (720)
Non-controlling interest (2,429) (675)
6,358 (1,395)
Part of retained earnings relates to NGOs which are consolidated in these
financial statements. The retained earnings of these NGOs cannot be
distributed to their respective members. Retained earnings relating to NGOs
amounted to USD 1.7 million at 31 December 2021 (2020: USD 1.5 million).
ASA S&L, ASA India, ASHA Nigeria and ASAI NV have statutory requirements
to add a percentage of the net profits to a legal reserve. Therefore, part of
retained earnings cannot be distributed to shareholders. Retained earnings
relating to these legal reserves amounted to USD 18.1 million in December 2021
(2020: USD 13.0 million).
No dividend is declared in 2021.
23. OTHER RESERVES Notes
2021 2020
Total other reserves are calculated as follows: USD'000 USD'000
Balance at the beginning of the period (718) (147)
Actuarial gains and losses on defined benefit liabilities 8.1. 698 (896)
Movement in hedge accounting reserve 1,381 322
(Loss)/gain on revaluation of MFX investment 15. (1) 6
Others (365) (3)
Balance at the end of the period 995 (718)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
24. FOREIGN CURRENCY TRANSLATION RESERVE
The translation of the Company's subsidiaries and overseas branches from local
currency into the Company's presentation currency (USD) results in the
following currency translation differences:
2021 2020
USD'000 USD'000
Balance at the beginning of the period (43,091) (41,044)
Translation of assets and liabilities of subsidiaries to USD (11,596) (2,047)
Disposal of ASA Consultancy and ASA Cambodia Holdings 555 -
Balance at the end of the period (54,132) (43,091)
25. DEBT ISSUED AND OTHER BORROWED FUNDS
Notes 2021 2020
USD'000 USD'000
Debt issued and other borrowed funds by operating subsidiaries 25.1. 244,788 269,132
Loan from Symbiotics-managed funds (ASAIH/ASAI NV) 25.2. 29,000 20,000
Loan from Oikocredit (ASAIH) 25.3. 7,500 3,500
Loan from OPIC (ASAIH) 25.4. 5,000 20,000
Loan from BIO (ASAIH) 25.5. 10,000 10,000
Loan from OeEB (ASAIH) 25.6. 13,125 10,000
Loan from Citi (ASAI NV) 25.7. 5,000 5,000
Interest payable on third-party loans 4,261 4,554
318,674 342,186
25.1. Breakdown of borrowings by operating subsidiaries are shown below:
2021 2020
USD'000 USD'000
ASA India 94,911 139,109
PPFC 45,042 50,340
ASA Pakistan 47,844 36,037
ASA Tanzania 23,815 8,232
ASA Kenya 8,580 7,786
ASA S&L 2,929 4,619
ASA Myanmar 11,977 11,697
ASA Uganda 4,380 3,354
Lak Jaya 2,767 4,310
ASA Nigeria - 2,782
Others 2,543 866
244,788 269,132
Most of the loan agreements are subject to covenant clauses, whereby the
subsidiary is required to meet certain key financial ratios. Some subsidiaries
did not fulfil some of the ratios as required in contracts. Out of total loans
of USD 314 million, USD 131 million had breached loan covenants as at year
end. The Group was able to receive waivers from most of the lenders. As of 31
December, the balance for credit lines with breached covenants and which does
not have waivers amounts to USD 111 million, out of which waivers have been
subsequently received for USD 36.7 million. Due to these breaches of covenant
clauses, the lenders are contractually entitled to request for immediate
repayment of the outstanding loan amounts. The outstanding balance is
presented as on demand as at 31 December 2021.
The lenders have not requested any early repayment of the loan as of the date
when these financial statements were approved by the Board of Directors.
Management is in the process of renegotiating to get waivers for the remaining
balance.
25.2. Loan from Symbiotics-managed funds (ASAIH/ASAI NV)
ASAIH entered into loan agreements with three investment funds managed by
Symbiotics SA in November 2018 for a total amount of USD 5 million (the
'Symbiotics loans'). ASAIH took a new loan of USD 5 million on July 2019 at
6.25%. In October 2019, ASAI NV entered into a loan agreement with one
investment fund managed by Symbiotics SA for a total amount of USD 4.5 million
at 6.15%. In March 2020, ASAI NV received an additional USD 5.5 million at
6.15%. In November 2021, ASAI NV received an additional USD 10 million at
six-month LIBOR +4.75% per annum. All the loans will be repaid within three
years of disbursement.
25.3. Loan from Oikocredit (ASAIH)
On 12 July 2018, ASAIH entered into a new agreement with Oikocredit for a
credit line of USD 7.5 million which has been fully drawn as of December 2019.
The term of this credit line is five years. Interest on the loan is six-month
LIBOR or 3.5%, whichever is lower, plus a margin of 3% for the direct loan and
2.5% for the credit line.
25.4. Loan from OPIC (ASAIH)
ASAIH entered into an agreement with OPIC in 2016 for a loan amount of USD 20
million, of which USD 5 million was drawn in December 2016, USD 5 million was
drawn in July 2017 and another USD 10 million was drawn on November 2017. The
term of this loan is five years. Interest amounts to the US Treasury Constant
Maturity Yield +4.25% per annum.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
25. DEBT ISSUED AND OTHER BORROWED FUNDS (continued)
25.5. Loan from BIO (ASAIH)
ASAIH entered into a USD 10 million subordinated loan agreement with Belgian
Investment Company for Developing Countries SA/NV ('BIO') in December 2019.
The term of this loan is seven years. Interest amounts to LIBOR +5.9% per
annum.
25.6. Loan from OeEB (ASAIH)
ASAIH entered into a USD 15 million loan agreement with Oesterreichische
Entwicklungsbank Ag ('OeEB') in March 2020 of which USD 10 million is drawn up
to June 2020. The loan is repayable in eight equal instalments and the term of
this loan is five years. Interest amounts to LIBOR +3.5% per annum. ASAI NV is
also a co-borrower of the loan.
25.7. Loan from Citi (ASAI NV)
ASAI NV entered into a USD 10 million loan agreement with CITIBANK, N.A.,
JERSEY BRANCH ('Citi') on October 2020. The term of this loan is 30 months.
Interest amounts to LIBOR +4.55% per annum. ASAIH is also a co-borrower of the
loan. USD 5 million has been drawn until December 21.
26. DUE TO CUSTOMERS
Clients of the Company's subsidiaries contribute to a 'security deposit fund'.
These deposits can be withdrawn partly by clients but not in the full amount
unless the client has fully repaid the outstanding loan balance.
2021 2020
USD'000 USD'000
Clients' security deposits 73,518 68,103
Clients' voluntary savings 14,294 12,071
87,812 80,174
Clients can deposit voluntary savings where the subsidiary has a licence to do
so. The rate of interest on client security deposits and client voluntary
savings amount to 8% in Ghana and 7% in Nigeria. In ASA Myanmar the interest
rate on voluntary savings is 10% and for compulsory savings 14%. ASA Rwanda
provides 6% interest on voluntary savings.
27. OTHER LIABILITIES Notes
Other liabilities are as follows: 2021 2020
USD'000 USD'000
Security deposits 2,630 2,366
Other deposits 418 518
Liability for death and multipurpose risk funds 211 354
Accrued expenses 921 1,362
Accrued audit fees 1,192 928
Taxes payable, other than corporate income tax 2,830 1,465
Amount due to employees 1,111 1,354
Amount due to related parties 27.1. 102 518
Liability to CMI regarding Escrow Account at Citibank 14.1. 20,465 20,465
Liabilities under off-book BC model (ASA India) 364 1,638
Liabilities under off-book DA model (ASA India) 133 502
Industrial training fund 191 221
Other liabilities 27.2. 2,369 2,164
32,937 33,855
Security deposits mainly relate to deposits taken from employees as a form of
security. Other deposits relate to various smaller deposits in different
countries.
27.1. Amount due to related parties 2021 2020
USD'000 USD'000
CMI - 1
Sequoia BV 24 60
MBA Philippines 78 457
102 518
27.2. Other liabilities include various smaller accruals and provisions for
various entities in the Company. Individually none of the payables are over
USD 150K.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2021 2020
USD'000 USD'000
28. PROVISIONS
Provision for financial guarantees under off-book BC model (ASA India) 1,675 2,248
1,675 2,248
Provision for financial guarantees includes expected credit loss provision
against the off-book BC portfolio in India. The maximum credit loss under
financial guarantee is 5% of OLP. For details on the Group's ECL policy see
note 2.5.2. As at 31 December 2021, stage 3 loans under this portfolio amount
to USD 9.8 million (2020: USD 3.0 million).
29. ADDITIONAL CASH FLOW INFORMATION
2021 2020
USD'000 USD'000
29.1. Changes in operating assets
Loans and advances to customers (89,112) (2,374)
Movement in due from banks 5,500 (36,587)
Movement in restricted cash (4,168) 1,551
Movement in right-of-use assets (4,265) (3,588)
Other assets excluding income tax advances 3,268 (1,515)
(88,777) (42,513)
2021 2020
USD'000 USD'000
29.2. Changes in operating liabilities
Due to customers 13,024 2,768
Other liabilities (2,925) 2,469
Retirement benefit (592) (413)
Movement in lease liability 4,265 3,588
Movement in provisions (768) 2,031
13,004 10,443
2021 2020
USD'000 USD'000
29.3. Non-cash items
Depreciation on:
- Property and equipment 1,985 1,782
- Right-of-use assets 4,398 4,428
Interest expense on lease liability 301 276
Credit loss expense 37,509 27,250
Write-off of portfolio 32,965 3,342
Fair value movement of forward contracts (3,422) (62)
Charge against defined benefit plan 1,575 1,692
Foreign exchange result 1,532 (506)
76,843 38,202
2021 2020
USD'000 USD'000
29.4. Reconciliation of cash and cash equivalents
Cash and cash equivalents as per cash flow statement 66,409 71,733
Restricted cash in PPFC and ASA Tanzania 21,542 18,432
Cash at bank and in hand as per balance sheet 87,951 90,165
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT 30.1 General
Risk is inherent in the Group's activities, but it is managed through a
process of ongoing identification, measurement and monitoring, subject to
certain risk limits and other controls as described in the paragraphs below.
This process of risk management is critical to the Group's continuing
profitability and each individual within the Group is accountable for the risk
exposures relating to his or her responsibilities. The Group is, amongst
others, exposed to business risk, operational risk, IT risk, finance risk, and
legal and compliance risk.
The independent risk control process does not include business risks such as
changes in demand, technology and industry. These changes are monitored
through the Group's strategic planning process.
30.2 Risk management structure
The Group's risk management principles allow it to balance its risk and reward
effectively by aligning its risk appetite with its business strategy. The
Group's risk management framework is based on its three lines of defence
model, which has been adopted at both the Group level and at each of the
subsidiaries. The Group's objectives in using the three lines of defence model
include: identifying risk areas and minimising loss; protecting its clients by
minimising financial risk; protecting the interests of its shareholders and
investors; preserving its branches, data, records and physical assets;
maintaining its business and operational structure; enforcing a standard
operational procedure for managing risk; and providing guidelines in line with
internationally accepted risk management principles. The first line of defence
is the team, person or department that is responsible for executing particular
tasks/activities, as well as for mitigating any related risks. The second line
of defence is comprised of management of the respective departments and
personnel that oversee the first line of defence and provide expertise in risk
management to help develop strategies, policies and procedures to mitigate
risks and implement risk control measures. The third line of defence is the
Internal Audit department, which evaluates and improves the effectiveness of
the risk management, control and governance processes through independent
verification of risk control measures. The Internal Audit department is based
in the country head office of each of the Group's microfinance institutions
and audits each branch twice a year.
The Group's risk management philosophy is to promote a comprehensive risk
management strategy to maintain a sustainable financial institution. This
strategy is achieved by adapting an integrated approach to risk management
where clear communication and consensus establish the foundation of the
Group's risk management philosophy. To ensure that the Group's philosophy is
implemented across its various departments, there is a clear segregation of
duties between operational and risk management functions in the country head
office of each of the Group's microfinance institutions as well as at the
Group level.
The Group's risk culture is based on its values, beliefs, knowledge, attitudes
and understanding of risk across its various countries. The Group assesses its
risk culture by identifying and evaluating its quantifiable and
non-quantifiable risks. The Group's risk management principles allow it to
effectively balance its risk and reward by aligning its risk appetite with its
business strategy.
The Group evaluates its risk appetite on a quarterly basis. The Group first
identifies and reports its risk appetite at the microfinance institution
level, where a financial target is established and a risk appetite statement
is produced by each microfinance institution and submitted for consideration
to senior management at the Group's corporate headquarters. At the Group's
corporate headquarters, each microfinance institution's risk appetite report
is evaluated, and the Group establishes an overall risk appetite that is later
implemented across its countries.
The Covid crisis has caused numerous challenges for the Group that include
difficulties in disbursements, collection of reimbursements and meeting with
clients face-to-face, and reorganising internal systems and flow of work. The
Group offered rescheduling of loans in most of the markets during the national
lockdowns. Communication and interaction with clients changed dramatically
during the pandemic. This resulted in an increase in credit loss provisions
and ultimately significant loans were written off (refer to note 13.2).
As it was hard to make regular site visits for due diligence and monitoring,
the Group started to use various ways of communication with field offices and
clients such as Skype, Zoom, WhatsApp or Viber, and adjusted certain
procedures and requirements to match the current situation, for example
substituting physical documents with electronic documents when it is practical
and allowed. Adequate credit loss provisions are made to cater for the
increased bad loans.
The Group's key risk management areas are business risk, operational risk, IT
risk, finance risk, and legal and compliance risk.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (Continued)
Risk category Definition Risks Description
Business risk Business risk is an organization's exposure to factors that will lower its Growth risk Risks and challenges associated with the Group's operational expansion.
profit or lead it to fail. Anything that threatens a company's ability to
achieve its financial and operational goals is considered a business risk.
Competition risk Risk that Group might face for not responding to the competitive environment
or failing to meet customer needs.
Reputation risk Risk to earnings or capital arising from negative public opinion.
Climate Related risk Risk related to potential negative impact of climate change on the
organization.
Health & Environmental risk Risk arising from the threat of natural disasters and viral diseases.
Operational risk Operational risk refers to uncertainties a company faces when it attempts to Transaction risk Human or system errors within the Group's daily product delivery and services.
do its day-to-day business activities. It can result from breakdowns in
internal procedures, people and systems.
Human Resource risk Likelihood of negative results due to a failure within its human resource
department.
Fraud and Integrity risk Risk of incidents of fraud and misappropriation by staff or client.
IT risk Information technology risk is any threat to business data, critical systems IT business continuity This risk refers to loss of data in case of a catastrophic event.
and business processes due to IT failure. It is the risk associated with the
use, ownership, operation, involvement, influence and adoption of IT within an
organization.
System vulnerability This risk refers to the vulnerability of our IT system to different type of
cyber-attacks.
Network availability Risk of inadequate internet connectivity for running real time branch
operations.
IT support Risk of delay in resolving IT related issues which may negatively impact the
operations.
System access control Risk of misuse of system access.
IT fraud risk Risk of fraud due to control gap in IT system and processes.
Data migration risk Risk of loss of data during the time of data migration.
Finance risk The Group experiences financial risks such as credit risk, liquidity risk, Credit risk Risk that the Group will incur a loss because its clients or counterparties
exchange rate/currency risk and interest rate risk which can adversely impact fail to discharge their contractual obligations.
the earnings of the company.
Liquidity risk Risk that the Group will be unable to meet its payment obligations when they
fall due under normal and stress circumstances.
Exchange rate risk Possibility of financial loss to the Group arising from adverse movements in
foreign exchange rates.
Interest rate risk Risk arising from the possibility of change in the value of assets and
liabilities because of changes in market interest rates.
Legal & Compliance risk Financial and other losses the Group may suffer as a result of regulatory Local regulation Risk of non-compliance to local regulation.
changes or failure to comply with applicable laws and regulation.
Change of policy Risk of negative impact arising from change in policies by regulatory
authorities.
Product transparency Risk of negative public opinion for not ensuring product transparency.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (continued) 30.3 Risk mitigation
Business risk
The Group manages its business risks by adopting various mitigation strategies
at the Group level as well as at the subsidiary level. While setting growth
targets, the Group remains prudent as uncontrolled growth may lead to
increased overdue. Sites for new branches are selected after a thorough
assessment as per the operational manual.
When it comes to competition, the Group continuously monitors client
satisfaction and focuses on tailoring its products according to client needs.
In order to safeguard its reputational risk, the Group ensures that staff meet
the highest standards in terms of client protection principle and business
transparency.
Risk of climate change is thoroughly assessed by the Group. The Group has
started the process of collecting its carbon emission data to determine the
major emission sectors, so a carbon management plan can be put in place to
reduce emissions. During the year the Group's operations were adversely
impacted by the Covid pandemic; however, it was mitigated by proactively
amending operational procedures in order to adapt to changing conditions.
Operational risk
Transaction risk is mitigated by strictly following operational procedures and
ensuring thorough monitoring by supervisors. Human resource risk is mitigated
by attracting, retaining and developing staff by providing competitive
remuneration structures and long-term career opportunities, and by investing
in training and development of all staff. The Company evaluates its human
resource risk by observing the availability of skilled staff within its
compensation bands as well as compliance and regulatory issues that impact
staff, including visas or employment permits needed for its expatriate staff.
IT risk
The rise of the knowledge economy and the digital revolution has led to
organisations becoming increasingly dependent on information, information
processing and especially IT. IT business continuity is ensured by the Group
by maintaining secure data centres with disaster recovery sites either on
premises or on cloud. System vulnerability is regularly assessed and it is
ensured that virus guards, firewalls and other security measures are up to
date. Adequate internet connectivity is provided at all the branches to ensure
smooth running of operations; redundant internet connectivity is provided at
head office level. IT issues are addressed through the JIRA issue management
software based on priority. A strong password policy is in place to prevent
unauthorised system access and awareness is spread regarding the prohibition
of password sharing.
Finance risk
Regarding credit risk, the Group adheres strictly to the operating procedures
of the ASA Model, which includes setting limits on the amount of risk it is
willing to accept for each individual borrower, taking a security deposit
where it is customary and allowed under the current licence, preventing
over-borrowing and preventing excessive geographic concentration. The Group
continuously monitors changes in the portfolio and will take immediate action
when changes occur.
As for liquidity risk, the Company is diversified across thirteen countries,
remains well funded and continues to have good access to a wide range of
funding sources both at local and holding level. The Company maintains solid
relationships with its debt providers who continued to show strong interest to
fund its operations both locally and at the holding level.
The Group manages its currency risk through natural hedging, i.e. by matching
the relevant microfinance subsidiary's local currency assets with local
currency liabilities, and by obtaining funding denominated in local currency.
For USD funding to the subsidiaries the Company will continue to ensure that
close to 100% of its currency exposure is hedged.
The Group's strategy in evaluating and managing its interest rate risk is to
conduct a cost of funds analysis and to monitor interest rates in those
countries where there is a limit on the amount of interest it may charge.
Legal and compliance risk
New changes are proactively discussed with regulators; new requirements (such
as minimum capital requirements) are timely implemented; and the Company's ASA
Model and digital strategy is proactively discussed with different authorities
in order to be well understood when new regulations are being proposed and
drafted. The Group closely monitors the political developments in countries
like India and Myanmar.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.3 Risk mitigation
Proven microfinance methodology
The microfinance model followed by the Group is based on several core
principles: (i) standardised loan products; (ii) basic voluntary deposit
services; (iii) effective and rigid procedures for cost-effective delivery of
microcredit and limited deposit services; and (iv) zero tolerance on the late
deposit of loan instalments for loan officers. Each of the microfinance
operating entities owned and/or controlled by the Group have adopted and
implemented an internal operational manual. The operational manuals set forth
the principles and guidelines for managing the microfinance portfolios in the
various countries. They contain detailed procedures regarding the credit
methodologies and operating procedures.
These procedures, that are largely similar for all MFIs lending to
micro-entrepreneurs, have the following features - including, but not limited
to:
· Lending predominantly to low-income, female micro-entrepreneurs.
· Group selection without joint liability.
· Loans granted exclusively for income-generating activities.
· Full repayment via instalments before eligibility for new loan.
· No incentive or bonus payments for operating staff.
· Frequent client interactions through weekly collections.
· Ongoing assessment of client needs, benefits and satisfaction.
· Repeat loan cycles with set limits.
· Low ticket size.
· Standardised credit approval lending procedures, and standardised
internal monitoring and audit procedures.
The principles and procedures described above are based on the credit
methodologies and operating procedures that are part of the ASA Model of
microfinance.
General risk mitigation
Risk concentrations arise when a number of counterparties are engaged in
similar business activities, or activities in the same geographic region, or
have similar economic features that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic,
political or other conditions. In order to avoid excessive concentrations of
risk, the Group is focused on maintaining a diversified loan portfolio, by
means of operating in different geographic areas (also within each country).
Identified concentrations of credit risks are controlled and managed locally
according to the operational procedures above. The Group does not, in
principle, use collateral or guarantees, to reduce its credit risks (apart
from the client security deposit where permitted).
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.4 Financial risks
30.4.1 Credit risk
Credit risk is the risk that the Group will incur a loss because its
customers, clients or counterparties failed to discharge their contractual
obligations. The Group manages and controls credit risk by adhering strictly
to the operating procedures set forth in the operational manual, which
includes setting limits on the amount of risk it is willing to accept for
individual counterparties and for geographical concentrations, and by
monitoring exposures in relation to such limits.
Maximum exposure to credit risk
The maximum credit exposure is equal to the carrying amounts of the financial
instruments on the Group's statement of financial position except off-book BC
portfolio where the risk is determined as per contract with BC partners. As
mentioned above, the Group reduces its concentration risk by ensuring a widely
diverse portfolio, distributed amongst various countries and continents. At
present the Group invests in West Africa, East Africa, South Asia and South
East Asia.
Maximum exposure to credit risk
2021 2020
USD'000 USD'000
Cash and cash equivalents
(excluding cash in hand) 87,684 90,012
Loans and advances to customers 373,242 380,122
Customer security deposit (73,518) (68,103)
Off-book portfolio (BC model) 1 1,675 2,248
Due from banks 65,259 73,279
Other assets 8,598 8,649
Maximum credit exposure 462,940 486,207
1 Credit risk on off-book BC model portfolio is restricted to 5% of the
outstanding portfolio
Customer security deposits are cash collateral and are presented as part of
Due from customers in the statement of financial position. These security
deposits are considered as collateral for the loans to customers and therefore
reduce the credit risk on these loans.
There are no significant concentrations of credit risk through exposures to
individual customers, specific industry/sectors. On an entity level, ASA India
holds 20% of the Group's credit exposure in 2021 (2020: 34%). Management
regularly monitors the concentration risk and manages loan distribution if
required.
Geographic distribution of maximum credit exposure as at 31 December 2021.
Cash and cash Loans and Customer Off-book
equivalents Due from Other
advances to security portfolio (BC Total
(excluding cash in banks assets
customers deposit model)
hand)
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa 19,584 95,507 (34,731) 15,262 891 - 96,513
East Africa 13,167 64,188 (17,012) 2,500 341 - 63,184
South Asia 7,970 150,364 (2,464) 23,032 6,070 1,675 186,647
South East Asia 31,753 63,183 (19,311) 4,000 988 - 80,613
Non-operating entities 15,210 - - 20,465 308 - 35,983
Maximum credit exposure 87,684 373,242 (73,518) 65,259 8,598 1,675 462,940
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.4 Financial risk (continued)
30.4.1 Credit risk (continued)
Geographic distribution of maximum credit exposure as at 31 December 2020.
Cash and cash Loans and Customer Off-book
equivalents Due from Other
advances to security portfolio (BC Total
(excluding cash in banks assets
customers deposit model)
hand)
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa 7,617 78,767 (29,546) 16,590 995 - 74,423
East Africa 8,955 45,056 (12,998) 2,486 258 - 43,757
South Asia 24,453 180,701 (2,610) 30,738 5,409 2,248 240,939
South East Asia 32,805 75,598 (22,949) 3,000 1,506 - 89,960
Non-operating entities 16,182 - - 20,465 481 - 37,128
Maximum credit exposure 90,012 380,122 (68,103) 73,279 8,649 2,248 486,207
The Group provides direct lending to customers through the MFIs (owned and
controlled by it). In addition, the Group accepts savings in the countries
where it has a deposit-taking licence.
Credit risk from lending as at 31 December 2021
Total direct lending/IFRS 9 stages
Gross loans and
1 advances to Total lending Stage 1 Stage 2 Stage 3
Due from banks
customer
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa 15,262 95,879 111,141 92,675 1,400 1,805
East Africa 2,500 66,630 69,130 64,937 206 1,486
South Asia 23,032 164,005 187,037 142,015 12,014 9,977
South East Asia 4,000 66,784 70,785 62,329 3,561 893
Non-operating entities 20,465 - 20,465 - - -
Total 65,259 393,298 458,558 361,956 17,181 14,161
ECL provision - (24,098) (24,098) (6,895) (5,629) (11,574)
Coverage ratio 2 6.1% 5.3% 1.9% 32.8% 81.7%
1 Due from banks are neither past due nor credit impaired.
2 Coverage ratio is calculated as the total ECL provision divided by the
underlying assets' gross carrying amount.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.4 Financial risk (continued)
30.4.1 Credit risk (continued)
Credit risk from lending as at 31 December 2020
Total direct lending/IFRS 9 stages
Gross loans and
1 advances to Total lending Stage 1 Stage 2 Stage 3
Due from banks
customer
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa 16,590 79,499 96,089 76,888 620 1,991
East Africa 2,485 46,189 48,674 40,057 2,476 3,656
South Asia 30,738 190,086 220,824 149,086 23,931 17,069
South East Asia 3,000 80,831 83,831 53,091 25,175 2,565
Non-operating entities 20,465 - 20,465 - - -
Total 73,278 396,605 469,883 319,122 52,202 25,281
ECL provision - 24,172 24,172 1,901 8,258 14,013
Coverage ratio 2 6.1% 5.1% 0.6% 15.8% 55.4%
1 Due from banks are neither past due nor credit impaired.
2 Coverage ratio is calculated as the total ECL provision divided by the
underlying assets' gross carrying amount.
Overview of modified loans
In 2021, the Group provided one-year moratoriums to approximately 30% of the
clients in India, who were offered to benefit from the one-time debt
restructuring scheme established by the Reserve Bank of India ('RBI'). In
addition, multiple periodical moratoriums were provided to clients in Myanmar
and Sri Lanka as those entities faced multiple national and/or local lockdowns
on account of Covid. Also, the Group provided additional moratoriums in
multiple branches in Myanmar where business has been disrupted due to
political instability since the army took over control of the government in
February 2022, which resulted in sporadic violence between the army and the
opposition.
The modification itself was not deemed to be an indicator of Significant
Increase in Credit Risk ('SICR').
The outstanding balance of modified loans at 31 December 2021 is presented
below:
USD'000
Entity Stage 1 Stage 2 Stage 3 Total
India 19,650 10,401 6,494 36,545
Myanmar 7,812 2,788 165 10,765
Sri Lanka 922 128 544 1,594
28,384 13,317 7,203 48,904
2020
USD'000
Entity Stage 1 Stage 2 Stage 3 Total
India 48,407 17,639 10,955 77,001
Myanmar 7,502 14,612 224 22,338
Sri Lanka 2,916 543 585 4,044
Philippines 2,533 10,697 2,425 15,655
Nigeria 69 215 1,542 1,826
Pakistan 5,203 524 1,821 7,548
Kenya 132 557 2,288 2,977
Uganda 101 1,662 714 2,477
Tanzania 150 67 434 651
Rwanda 15 111 165 291
67,028 46,627 21,153 134,808
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.4 Financial risk (continued)
30.4.1 Credit risk (continued)
Overview of modified loans (continued)
The table below shows the total Stage 2 and 3 assets that were modified with
the related modification loss suffered by the Group.
2021
USD'000
Particulars Stage 2 Stage 3
Gross amortised cost 13,318 7,208
Net modification loss (239) (31)
Amortised cost after 13,079 7,177
modification loss
2020
USD'000
Particulars Stage 2 Stage 3
Gross amortised cost 46,627 21,153
Net modification loss (1,188) (327)
Amortised cost after 45,439 20,826
modification loss
30.4.2 Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its payment
obligations when they fall due under normal and stress circumstances. Most
subsidiaries of ASAI are now able to attract third-party funding and various
local currency and USD loans are in place.
Liquidity management is evaluated at the microfinance institution level and on
a consolidated Group basis. Each of the Group's microfinance institutions are
required to meet the financial obligations of their internal and external
stakeholders. Failure to manage liquidity risks may cause the Group to lose
business, miss opportunities for growth, or experience legal or reputational
consequences. To mitigate its liquidity management risk, the Group has
established liquidity management policies, published in its operation manual,
finance manual and its treasury manual.
The Group is confident it will be able to meet the payment obligations under
the aforementioned loans for various reasons, including, but not limited to:
· The main class of assets are loans to customers. Due to the
nature of the microfinance business the Company is engaged in, these loans to
customers have short-term maturities, hence the Company is in a position to
generate a constant stream of cash inflows. The Company is in the position to
accumulate sufficient funds to cover its obligations, although this may entail
limitations on new loan disbursements.
· As at 31 December 2021, the Company had an unrestricted cash
balance (including short-term deposits) of USD 91 million (2020: USD 101
million).
· The Company is able to fund its operations and budgeted growth of
its loan portfolio from new loan facilities supplied by third parties,
security collateral and/or savings provided by its clients, and internally
generated cash flows.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (continued)
30.4 Financial risk (continued)
The table below shows undiscounted cash flow analysis of liabilities according
to when they are expected to be recovered or to be settled.
Liabilities Sub-total Sub-total No fixed
FY2021 On demand <3 months 3-12 months 1-12 months 1-5 years Over 5 years >12 months maturity Total
in USD'000
Debt issued and other borrowed funds 75,608 51,782 84,207 211,597 107,077 - 107,077 - 318,674
Due to customers 13,153 33,984 40,526 87,663 149 - 149 - 87,812
Lease liability - 17 433 450 2,924 85 3,009 - 3,459
Derivative liabilities - 102 117 219 383 - 383 - 602
Other liabilities 835 4,710 3,328 8,873 596 - 596 23,468 32,937
Provisions - 384 752 1,136 539 - 539 - 1,675
89,596 90,979 129,363 309,938 111,668 85 111,753 23,468 445,159
Liabilities Sub-total Sub-total No fixed
FY2020 On demand <3 months 3-12 months 1-12 months 1-5 years Over 5 years >12 months maturity Total
in USD'000
Debt issued and other borrowed funds 32,496 26,347 125,928 184,771 142,143 15,272 157,415 - 342,186
Due to customers 10,891 35,447 33,610 79,948 226 - 226 - 80,174
Lease liability - 28 424 452 2,659 518 3,177 - 3,629
Derivative liabilities - 451 1,025 1,476 671 - 671 - 2,147
Other liabilities 588 6,376 2,862 9,826 635 - 635 23,394 33,855
Provisions - - 2,248 2,248 - - - - 2,248
43,975 68,649 166,097 278,721 146,334 15,790 162,124 23,394 464,239
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT(continued) 30.4 Financial risk (continued)
30.4.2 Liquidity risk (continued)
The table below shows undiscounted cash flow analysis of assets according to
when they are expected to be recovered or to be settled.
Assets Sub-total Sub-total No fixed
FY2021 On demand <3 months 3-12 months 1-12 months 1-5 years Over 5 years >12 months maturity Total
in USD'000
Cash at bank and in hand 62,443 3,667 21,841 87,951 - - - - 87,951
Loans and advances to customers 15,649 120,107 227,639 363,395 9,847 - 9,847 - 373,242
Due from banks - 27,066 7,228 34,294 10,499 - 10,499 20,466 65,259
Equity investments at FVOCI - - - - - - - 237 237
Derivative assets - 955 2,358 3,313 653 - 653 - 3,966
Other assets - 1,613 4,843 6,456 2,483 - 2,483 - 8,939
78,092 153,408 263,909 495,409 23,482 - 23,482 20,703 539,594
Assets Sub-total Sub-total No fixed
FY2020 On demand <3 months 3-12 months 1-12 months 1-5 years Over 5 years >12 months maturity Total
in USD'000
Cash at bank and in hand 68,763 2,771 18,631 90,165 - - - - 90,165
Loans and advances to customers 29,388 51,589 266,069 347,046 33,076 - 33,076 - 380,122
Due from banks - 44,753 5,843 50,596 2,218 - 2,218 20,465 73,279
Equity investments at FVOCI - - - - - - - 238 238
Derivative assets - - - - 708 - 708 - 708
Other assets - 2,647 7,633 10,280 3,125 - 3,125 195 13,600
98,151 101,760 298,176 498,087 39,127 - 39,127 20,898 558,112
Changes in liabilities arising from financing activities:
Foreign
1 January Non-cash exchange 31 December
FY2021 2021 Cash flows movement movement 2021
USD'000 USD'000 USD'000 USD'000 USD'000
Debt issued and borrowed funds 342,186 (7,734) - (15,778) 318,674
Lease liabilities 3,629 (4,680) 4,566 (56) 3,459
Total liabilities from financing activities 345,815 (12,414) 4,566 (15,834) 322,133
Foreign
1 January Non-cash exchange 31 December
FY2020 2020 Cash flows movement movement 2020
USD'000 USD'000 USD'000 USD'000 USD'000
Debt issued and borrowed funds 322,837 20,225 - (876) 342,186
Lease liabilities 3,981 (4,389) 3,864 173 3,629
Total liabilities from financing activities 326,818 15,836 3,864 (703) 345,815
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (continued)
30.4 Financial risk (continued)
30.4.3 Foreign exchange rate risk
Currency risk is the possibility of financial loss to the Group arising from
adverse movements in foreign exchange rates. Currency risk is a substantial
risk for the Group, as most loans to MFIs and borrowers are in local currency
in countries where currency depreciation against the USD is often considered
less predictable. At present the Group manages currency risk mainly through
natural hedging, i.e. by matching the MFI's local currency assets consisting
of the MFI's loan portfolio with local currency liabilities. The Group's risk
policy allows the Group treasurer the possibility of hedging with instruments
such as swaps and forward contracts if and when appropriate. In order to
mitigate the foreign exchange risk on foreign currency loans, ASA India, ASA
Pakistan, ASA Myanmar, ASA Sierra Leone and ASA Tanzania have entered into
hedging agreements. The Group applies hedge accounting to the foreign currency
loans and related hedge contracts. Reference is made to note 37.
While the Group faces significant translation exposure on its equity
investments in local MFIs (as the functional currency of the Group is USD),
the policy is not to hedge equity investments since the currency translation
gain and loss on the latter does not affect the net profit of the Group.
In summary, the Group takes a number of measures to manage its foreign
currency exposure:
· Investments are only made in countries that show a reasonable level of
macroeconomic stability. A detailed macroeconomic and socio-political
assessment is carried out before the Group decides to invest in a certain
country.
· The Group endeavours to procure its MFIs to secure local currency loans
(instead of foreign currency loans) to the extent possible or deemed
commercially advantageous.
Simulation: Foreign currency translation reserve
FX translation FX translation FX translation FX translation
reserve after Movement reserve after Movement
reserve - actual reserve - actual
-10% rate -10% rate
2021 2021 2021 2020 2020 2020
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa (26,017) (31,553) (5,536) (22,987) (27,440) (4,453)
East Africa (1,485) (3,317) (1,832) (1,477) (2,967) (1,490)
South Asia (22,814) (26,288) (3,477) (18,402) (23,979) (5,110)
South East Asia (3,453) (4,977) (1,524) 138 (1,745) (1,882)
Non-operating entities (365) (391) (25) (361) 89 (17)
Total (54,134) (66,526) (12,394) (43,089) (56,042) (12,952)
Analysis of the actual exchange rate fluctuations against the USD for the
period 2021 shows different trends for all the operating currencies. The
annual exchange rate fluctuations are between 27% and -25%, but most moved
within 3% to -10%. For the simulation of foreign currency effects the Company
has therefore assumed a maximum 10% movement year-on-year in these currencies
as compared to USD.
The following overview shows the actual foreign currency exchange results by
country for 2021 as well as the simulation of the impact of a 10% downward
movement of the FX rates on the foreign exchange results.
As at 31 December 2021 a 10% downward movement of FX rates against the USD has
a negative impact on the foreign currency exchange result of USD 0.6 million
(2020: USD 0.8 million). The lower impact on the result of the Company results
from the decrease in short-term intercompany USD loans which cannot be hedged.
Simulation: Foreign exchange profit and loss
Foreign exchange profit and loss actual Foreign exchange profit and loss after Movement Foreign exchange profit and loss actual Foreign exchange profit and loss after Movement
-10% rate
-10% rate
2021 2021 2021 2020 2020 2020
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa (142) 8 150 (94) (212) (117)
East Africa 151 225 73 24 (604) (628)
South Asia (331) (342) (11) (192) (204) (12)
South East Asia (562) (436) 126 842 797 (45)
Non-operating entities (648) (1,618) (969) (74) (114) (40)
Total (1,532) (2,163) (631) 506 (337) (842)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (continued) 30.4 Financial risk (continued)
30.4.4 Interest rate risk
Interest rate risk is the risk that profitability is affected by fluctuations
in interest rates. The greatest interest rate risk the Group experiences
occurs when the cost of funds increases faster than the Group can or is
willing to adjust its lending rates. The Group's strategy in evaluating and
managing its interest rate risk is to consider any risk at the pre-investment
stage, to conduct a cost of funds analysis and to consider interest rates, in
particular, where there is a limit on the amount of interest it may charge,
such as in India and Myanmar.
The credit methodology of the MFIs determines that loans to microfinance
clients have short-term maturities of less than one year and at fixed interest
rates. Third-party loans to MFIs, sourced from both local and international
financial institutions, mostly have relative short terms between one and three
years. 30% (2020: 27%) of the consolidated debt has variable interest rates.
Depending on the extent of the exposure and hedging possibilities with regard
to availability of hedging instruments and related pricing, the Group might
actively hedge its positions to safeguard the Group's profits and to reduce
the volatility of interest rates by using forwards, futures and interest rate
swaps. The very short tenor of the loans provided to microfinance dampens the
effect of interest rate fluctuations. The following table demonstrates the
sensitivity to a reasonably possible change in interest rates on the loans and
borrowings affected. With all other variables held constant, the Group's
profit before tax is affected through the impact on floating rate borrowings,
as follows:
2021 2020
Increase in Decrease in Effect on profit before Effect on profit before
basis points basis points tax tax
USD'000 USD'000 USD'000 USD'000
USD +100 -100 622 (798) 397 (425)
PKR +100 -100 72 (72) 127 (127)
INR +100 -100 62 (62) 159 (159)
30.5 Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken
globally, including the replacement of some interbank offered rates ('IBORs')
with alternative nearly risk-free rates (referred to as 'IBOR reform'). The
Group has exposures to IBORs on its financial instruments that will be
replaced or reformed as part of these market-wide initiatives. In March 2021,
the ICE Benchmark Administration (the administrator of LIBOR), in conjunction
with the UK's Financial Conduct Authority ('FCA') announced that it will stop
publishing the following LIBOR settings based on submissions from panel banks,
after 31 December 2021: all GBP, EUR, CHF and JPY LIBOR settings and the
one-week and two-month USD LIBOR settings. All remaining USD LIBOR settings
(i.e. the overnight and the one, three, six and twelve-month settings) will
cease to be published based on panel bank submissions after 30 June 2023. As
of 31 December 2021, the Group has loans amounting to USD 38.125 million which
are based on USD six-month LIBOR and will mature after 2023. The Group is in
discussion with the lenders for amending contracts of those affected loans.
The treasury and risk department has started the process to monitor and manage
the Group's transition to alternative rates. The department evaluates the
extent to which contracts reference IBOR cash flows, whether such contracts
will need to be amended as a result of IBOR reform and how to manage
communication about IBOR reform with counterparties. The department reports to
the Company's Board of Directors and collaborates with other business
functions as needed. It provides periodic reports to management of interest
rate risk and risks arising from IBOR reform.
Derivatives
The Group holds forward and cross-currency interest rate swaps for risk
management purposes which are designated in cash flow hedging relationships.
The interest rate swaps have floating legs that are indexed to either Euribor
or LIBOR. The Group's derivative instruments are governed by contracts based
on the International Swaps and Derivatives Association's master agreements. On
23 October 2020, the International Swaps and Derivatives Association ('ISDA')
published its IBOR fall-back protocol and supplements, which are designed to
address transition for those derivative contracts still outstanding on the
permanent cessation of an IBOR. The ISDA fall-back spread adjustments became
fixed on 5 March 2021. The Group currently plans to adhere to the protocol and
to monitor whether its counterparties will also adhere.
The Group's current hedge contracts will mature before the publication cession
date.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
30. RISK MANAGEMENT (continued)
30.5 Managing interest rate benchmark reform and associated risks (continued)
Hedge accounting
The Group has evaluated the extent to which its cash flow hedging
relationships are subject to uncertainty driven by IBOR reform as at 31
December 2021. The Group's hedged items and hedging instruments continue to be
indexed to Euribor or LIBOR. These benchmark rates are quoted each day and the
IBOR cash flows are exchanged with counterparties as usual. The calculation
methodology of Euribor changed during 2019. In July 2019, the Belgian
Financial Services and Markets Authority granted authorisation with respect to
Euribor under the European Union Benchmarks Regulation. This allows market
participants to continue to use Euribor for both existing and new contracts
and the Group expects that Euribor will continue to exist as a benchmark rate
for the foreseeable future.
In terms of the Group's LIBOR cash flow hedging relationships, all the
contracts will mature before the anticipated cessation date of June 2023. In
terms of non-hedged loans, the Group has loans linked to USD LIBOR which will
mature after the cessation date. The Group is in the process of amending
contracts of those affected loans.
30.6 Legal and compliance risk
Legal and compliance risks in the countries that the subsidiaries or MFIs are
active in will be mitigated through continuous monitoring of the regulatory
and legal environment, through inter alia, tier-one law firms and the local
corporate secretaries and compliance officers in certain countries. In most
countries the relevant microfinance subsidiary also maintains direct
relationships with the regulator, including central banks. In addition, the
Group believes it is, through its local and international network, well
positioned to identify any relevant changes in the law that will have a
material impact on any of the businesses it invests in. A number of
investments in the MFIs are made by ASAI NV in the Netherlands. The
Netherlands has entered into an extensive network of Bilateral Investment
Treaties that offer compensation in case any such investments are nationalised
or expropriated by a country in which an investment is made. Currently the
investments in the Philippines, Sri Lanka, Uganda, Kenya and Ghana are owned
by ASAI NV, an indirectly owned but wholly controlled subsidiary of the Group.
Product transparency is also key to the Group's strategy in mitigating its
legal and compliance risk. Because the education and knowledge levels of the
Group's target clients are low, the Group aims to be transparent in its
products and prices. The Group established a Legal and Compliance department
headed by the General Counsel. The General Counsel assigns and supervises all
legal matters involving the Group. The General Counsel, Deputy General Counsel
and Group Compliance Manager establish and maintain an operationally
independent Compliance function at the corporate level led by the Group.
Whilst the General Counsel bears overall responsibility for the Compliance
function, the General Counsel has delegated day-to-day responsibility for
managing the Compliance function to the Group Compliance Manager who performs
the compliance duties independently. The Group Compliance Manager is
responsible for overseeing and implementing the Group compliance framework,
including the Group compliance policy (the 'Compliance Policy'). The
Compliance Policy sets out the principles and standards for compliance and
management of compliance risks in the Group. The Group seeks to reduce
compliance risks taking into account the nature, scale and complexity of the
business and ensures the policies are in alignment with the Group strategy and
its core values.
30.7 Strategic risk
Strategic risk is the current or prospective risk to earnings and capital
arising from changes in the business environment and from adverse business
decisions, improper implementation of decisions or lack of responsiveness to
changes in the environment. The Group evaluates its strategic risk by
analysing its cost reduction and growth, its liquidity management and its
competition and reputational risk.
Competition and reputational risk are frequent in the microfinance industry.
The Group defines reputational risk as the risk to earnings or capital arising
from negative public opinion. The Group believes that reputational risk may
impact its ability to sell products and services or may limit its access to
capital or cash funds. To mitigate any competition or reputational risk, the
Group evaluates the introduction of highly subsidised competitors, movements
in average borrowing rates, and information sharing with different agencies.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
31. COMMITMENTS
The Group agreed certain commitments to BC Partners under the BC model in ASA
India. Reference is made to note 13. As per the current model, ASA India holds
5% risk on the portfolio managed on behalf of IDFC. As of 31 December 2021,
the risk of the Group on such BC portfolio stands at USD 1.7 million (2020:
USD 2.2 million).
The Group entered into an agreement with Temenos Headquarters S.A, a
Geneva-based IT company, on 29 December 2021 to procure its T24 software for
the Group. T24 is a core banking software used by many international banks and
finance companies around the world. The software will be initially piloted in
the Group's Pakistan and Ghana entities and upon successful implementation
will be rolled out to other entities. The initial purchase price of the
licence is USD 2 million, which can cater 4 million client accounts. The
licence is for ten years.
The Group also entered into a contract on 14 October 2021 with CSHARK Ltd, an
IT company based in Poland, to develop an Android-based digital financial
module for its clients. The initial cost of the application is estimated at
USD 1.6 million.
There are no other contingent liabilities at the balance sheet date except for
the pending litigation claims disclosed in note 34.
32. RELATED PARTY DISCLOSURES 32.1 Key management personnel
The Dhaka office is managed by a team of seasoned microfinance experts who
have previously held senior positions in ASA NGO Bangladesh, and have many
years of expertise in managing and supporting microfinance institutions across
Asia and Africa. In addition to supervising the performance of the Group's
local microfinance institutions, executive management in Dhaka is primarily
responsible for finance and accounts (including the Chief Financial Officer),
risk management, audit, IT, human resource management, and corporate
secretarial functions for the Group. All key management personnel stationed in
Dhaka are on the payroll of ASAI NV.
The Amsterdam office comprises key management personnel who provide support on
treasury, investor relations, legal, specialised accounting support and the
management of business development projects. They are on the payroll of ASAI
NV.
The seasoned CEOs that are deployed in the countries are part of key
management personnel. They are paid by their respective entities.
The Group CEO (based in Amsterdam) and Executive Director Operations (based in
Dhaka) are members of the Board and are paid by ASA International Group plc.
Remuneration of Directors
In 2021, the Directors of the Group received total compensation of USD 1.05
million (2020: USD 1.2 million).
Total remuneration to key management personnel of the Group
2021 2020
USD'000 USD'000
Short-term employee benefits 2,110 2,018
Post-employment pension and medical benefits - -
Termination benefits - -
Share-based payment transaction - -
2,110 2,018
Total remuneration takes the form of short-term employee benefits for ASAI. In
2021, total remuneration paid to key management personnel of the Group
amounted to USD 2.1 million (2020: USD 2.0 million).
No post-employment pension and medical benefits are accruing to Directors
under defined benefit schemes. The aggregate of emoluments of the highest paid
Director was USD 425K (2020: USD 425K).
32.2 Reporting dates of subsidiaries
All of the Group's subsidiaries have reporting dates of 31 December, with the
exception of ASA India, Pinoy, Pagasa Consultancy and ASA Myanmar (where the
market standard reporting date is 31 March). These entities have provided
financial statements for consolidation purposes for the year ended 31
December.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
32. RELATED PARTY DISCLOSURES(continued) 32.3 Subsidiaries
Country of incorporation 2021 ownership 2020 ownership
ASAIH subsidiaries:
ASA Consultancy Ghana N/A(1) 100%
ASA India India 90.02% 74.70%
Pagasa Consultancy India 99.99% 99.99%
Pinoy India 99.99% 99.99%
Proswift Consultancy India N/A 99.99%
ASA India India N/A 2
15.31%
Pagasa The Philippines 3 3
N/A N/A
PT PAGASA Consultancy Indonesia 99.00% 99.00%
A1 Nigeria Nigeria 100% 100%
ASHA MFB Nigeria 99.99% 99.99%
ASIEA Nigeria N/A N/A
ASA Pakistan Pakistan 99.99% 99.99%
ASA Tanzania Tanzania 99.99% 99.99%
ASA Myanmar Myanmar 99.99% 99.99%
ASA Zambia Zambia 99.99% 99.99%
ASA Rwanda Rwanda 99.99% 99.99%
ASA Sierra Leone Sierra Leone 99.99% 99.99%
ASAI NV subsidiaries: The Netherlands N/A N/A
PPFC The Philippines 100% 100%
ASA Leasing Sri Lanka 4 100%
N/A
ASA S&L Ghana 100% 100%
CMI Lanka Sri Lanka 5
100% 99.99%
Lak Jaya Sri Lanka 97.14% 97.14%
ASA Lanka Sri Lanka 100% 100%
ASA Kenya Kenya 6 6
100% 100%
ASA Uganda Uganda 99.99% 99.99%
AMSL Bangladesh 95% 95%
ASAI I&M The Netherlands 100% 100%
1 ASA Consultancy limited was
liquidated on
2 Calcutta High Court approved the merger of ASA India and Proswift on 19
December 2020. Final confirmation was received in March 2021.
3 ASAI officials/representatives
control the governing body and the Board.
4 ASA Leasing was dissolved in
September 2021.
5 This refers to the beneficial
ownership only. The legal ownership is held by CMI.
6 ASAIH holds 0.5% of the shares.
32.4 Relationship agreement
Relationship agreement with the Controlling Shareholder Group
The Company, its founders and Catalyst Continuity (jointly the 'Controlling
Shareholders') have entered into a relationship agreement (the 'Relationship
Agreement'), the principal purpose of which is to ensure that the Company will
be able, at all times, to carry out its business independently of the members
of the Controlling Shareholder Group and their respective associates. The
Relationship Agreement contains undertakings from each of the members of the
Controlling Shareholder Group that (i) transactions and relationships with it
and its associates will be conducted at arm's length and on normal commercial
terms, (ii) neither it nor any of its associates will take any action that
would have the effect of preventing the Company from complying with its
obligations under the Listing Rules, and (iii) neither it nor any of its
associates will propose or procure the proposal of a shareholder resolution
which is intended or appears to be intended to circumvent the proper
application of the Listing Rules. The Relationship Agreement also sets forth
the conditions for appointment of Non-Executive Directors by Controlling
Shareholders.
For so long as the Company has a controlling shareholder, the UK Listing Rules
require the election of any independent Director to be approved by majority
votes of both (i) the shareholders as a whole and (ii) the shareholders
excluding any controlling shareholder.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
32. RELATED PARTY DISCLOSURES (continued)
32.5 Other related parties
A list of related parties with which ASA International has transactions is
presented below. The transactions in 2021 and 2020 and the balances per the
end of the year 2021 and 2020 with related parties can be observed in the
notes below. Related party transactions take place at arm's length conditions.
Name of related party Relationship
CMI Major shareholder (30.4%)
Sequoia Service provider to the Company
ASA NGO Bangladesh Service provider to the Company
MBA Philippines Business partner
IDFC Minority shareholder in ASA India
ASAICH and CMIIH Subsidiaries of CMI
CMIMC Holding company of founders CMI
CMIC Investment manager of CMI
CMIH Subsidiary of CMI
ASA Social Service provider to the Parent
Services
CIMS BV Service provider to the Parent
Income from
related Expenses to Amount owed by Amount owed to
parties related parties related parties related parties
USD'000 USD'000 USD'000 USD'000
CMI 31 December 2021 - - - 20,465
31 December 2020 - - - 20,466
Sequoia 31 December 2021 185 129 53 24
31 December 2020 158 71 52 60
MBA Philippines 31 December 2021 846 - 5 78
31 December 2020 603 - 225 457
ASAICH 31 December 2021 - - - -
31 December 2020 - - 108 -
IDFC 31 December 2021 2,503 - 2,350 630
31 December 2020 4,166 - 2,187 1,638
CIMS BV 31 December 2021 - - 12 -
31 December 2020 - - 6 -
CMIIH 31 December 2021 - - - -
31 December 2020 - - 6 -
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
32. RELATED PARTY DISCLOSURES (continued) 32.6 Non-controlling
interest
The Company reports non-controlling interest ('NCI') in its subsidiaries ASA
India and Lak Jaya. The NCI in ASA India, having its principal place of
business in India, amounts to 9.98%. ASA India did not pay any dividend in
2021. The NCI in Lak Jaya, having its principal place of business in Sri
Lanka, amounts to 2.86%. Lak Jaya did not declare any dividend in 2021.
The summarised financial information of Lak Jaya and ASA India as at 31
December 2021 is as follows:
31 December 2021 31 December 2020
Lak Jaya ASA India Lak Jaya ASA India
USD'000 USD'000 USD'000 USD'000
Current assets 9,834 92,360 11,275 163,656
Non-current assets 465 6,381 607 6,133
Current liabilities 6,862 98,913 7,722 145,586
Non-current liabilities 421 2,386 467 2,435
Net operating income 2,367 (11,715) 1,718 2,072
Net loss (392) (22,289) (805) (6,520)
Non-controlling interest 86 (221) 106 2,175
The following table summarises financial information for each subsidiary that
has material non-controlling interest to the Group. The voting rights are
similar to NCI's shareholding percentage in India but in the case of Lak Jaya
the Group holds 91.3% of the voting rights. The amounts disclosed for each
subsidiary are before inter-company eliminations:
31 December 2021 31 December 2020
Lak Jaya ASA India Lak Jaya ASA India
Total no. of shares 10,704,955 195,950 10,704,955 195,950
Shares held by ASAI Group 10,398,950 176,369 10,398,950 176,369
Shares held by NCI 306,005 19,581 306,005 19,581
NCI % 2.86% 9.98% 2.86% 9.99%
31 December 2021 31 December 2020
Lak Jaya ASA India Lak Jaya ASA India
USD'000 USD'000 USD'000 USD'000
Summarised statement of financial position:
Net assets 3,016 (2,556) 3,694 21,768
Net assets attributable to NCI 86 (221) 106 2,175
Summarised statement of profit or loss and other comprehensive income:
Net operating income 2,367 (11,715) 1,718 2,072
Net loss after tax (392) (22,289) (805) (6,520)
Loss allocated to NCI (11) (2,429) (23) (652)
Dividend paid to NCI - - - -
Summarised statement of cash flow:
Cash flow from operation activities 378 24,145 177 3,624
Cash flow from investing activities (15) (45) (3) (77)
Cash flow from financing activities 252 (38,141) (225) (9,535)
Net cash flow attributable to NCI 18 (1,401) (1) (598)
Reference to note 32.3, the remaining shares in Pagasa Consultancy, Pinoy, A1
Nigeria, ASHA Nigeria, ASA Pakistan, ASA Tanzania, PPFC, ASA Uganda, CMI Lanka
and AMSL are held either by employees nominated by the Group or by ASAI
I&M, CMI or CMII. Hence those are not treated as non-controlling shares.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
33. SUBSEQUENT EVENTS DISCLOSURE
Most of the loan agreements are subject to covenant clauses, whereby the
subsidiary is required to meet certain key financial ratios. Some subsidiaries
did not fulfil some of the ratios as required in the contracts. Out of total
loans of USD 314 million, USD 131 million had breached loan covenants as at
year end. The Group was able to receive waivers from most of the lenders. As
of 31 December 2021, the balance for credit lines with breached covenants
without waivers is USD 111 million, which are fully drawn. The Group has
received waivers amounting to USD 36.7 million after the balance sheet date.
The Group is in discussions with the lenders for waivers on the remaining
balance and expects those waivers will be in place in the second quarter of
2022.
On 14 March 2022, the RBI announced new regulation for the microfinance sector
in India, applicable to all banks, NBFC-MFIs and other participants in the
microfinance sector. The Group's preliminary assessment is that this is a
positive development for ASA India as it creates a level playing field in the
microfinance sector. The key changes include the removal of the interest rate
cap and margin cap, loans shall be collateral-free (also for banks providing
microfinance loans), and lenders will be restricted to provide microfinance
loans to clients up to a maximum of 50% of the client's household income. The
new regulations are effective from 1 April 2022.
The geopolitical situation in Eastern Europe represents a non-adjusting
post-balance sheet event. The resulting global economic and political crisis
and rising inflation across certain territories in which the Group operates
have the potential to put pressure on the Group's clients' ability to repay
their loans in the future which could increase arrears levels and write-offs.
At the current time, it is not possible to estimate the impact of this
post-balance sheet event.
The Group is monitoring the political and economic crisis in Sri Lanka and its
impact on employees, clients and business operations. This situation may lead
to worsening performance of the Group's subsidiary in Sri Lanka, but the
impact is not currently possible to estimate.
The Company expects the operating environment to remain challenging in certain
markets. Although the disruption caused by Covid has reduced over time, any
new waves of infection can still have a material impact on the financial
performance of the Group in 2022 in terms of overdue and write-offs on the
loan portfolio, the disbursement of new loans, and the profitability of the
Group. We expect that in some markets the overdue will remain temporarily
high.
mAt the current time, it is not possible to estimate the financial impact on
the Group of the abovementioned post-balance sheet events. The Group has
performed several scenario forecasts to establish its going concern assessment
and these are detailed in note 2.1. These matters have been treated as
post-balance sheet non-adjusting events.
34. CONTINGENT LIABILITIES ASA India
A demand was raised by income tax authorities after the disallowance of some
expenditures such as the misappropriation of funds, gratuity etc. for the
assessment years ('AY') 2012-2013. The disallowance amount for AY 2011-2012 is
USD 177K and for AY 2012-2013 is USD 69K. The matters are pending before the
Commissioner of Taxes (Appeals) and no provision has been created.
A demand has been raised by the income tax authorities for USD 1.1 million for
the AY 2012-13 in December 2019 which has been challenged before the concerned
assessing officer. ASA India has also applied for a stay order of the demand.
No provision is created for such demand as management concludes that the merit
of such demand is low.
Lak Jaya
A demand was raised by the Department of Inland Revenue ('IRD') for 2016-2017
and 2017-2018 amounting to USD 332K and USD 412K respectively by disallowing
certain expenses. The Company has filed an appeal and submitted necessary
documentation. The matter is pending to the commissioner of IRD. No provision
is taken in the financial statements against such demand as management
concludes that the merit of such demand is low.
ASA Pakistan
A demand was raised by Federal Board of Revenue in Pakistan for USD 390K by
disallowing certain expenses against return of AY 2015-16.The management filed
an appeal to the Commissioner FBR against such order and a stay order was
granted. No provision was created for such demand as management concludes that
the merit of the demand is low.
35. CAPITAL MANAGEMENT
The Company is a public limited company, incorporated in England and Wales
with the registered number 11361159 and with its registered office situated at
Elder House, St Georges Business Park, 207 Brooklands Road, Weybridge KT13
0TS, United Kingdom. The Company listed its shares on the premium listing
segment of the London Stock Exchange on 18 July 2018. The Group is not subject
to externally imposed capital requirements and has no restrictions on the
issue and re-purchase of ordinary shares.
Many of the Group's operating subsidiaries are regulated and subject to
minimum regulatory capital requirements. As of 31 December 2021, the Group and
its subsidiaries were in full compliance with minimum regulatory capital
requirements.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
36 FINANCIAL INSTRUMENTS
The table below shows the classification of financial instruments, as well as
the fair value of those instruments not carried at fair value.
Carrying values Fair values
31 December 31 December 31 December 31 December
2021 2020 2021 2020
USD'000 USD'000 USD'000 USD'000
ASSETS
Equity investments at FVOCI 237 238 237 238
Derivative assets 3,966 708 3,966 708
Loans and advances to customers 373,242 380,122 373,242 380,122
Due from banks 65,259 73,279 65,259 73,279
Other assets 4,357 7,057 4,357 7,057
Cash at bank and in hand 87,951 90,165 87,951 90,165
LIABILITIES AND EQUITY
Financial liabilities measured at amortised cost
Debt issued and borrowed funds 318,674 342,186 318,674 342,186
Due to customers 87,812 80,174 87,812 80,174
Derivative liabilities 602 2,147 602 2,147
Other liabilities 32,937 33,855 32,937 33,855
· The carrying amounts of Cash and cash equivalents, Due from
banks, Due to customers, Other assets and Other liabilities approximate the
fair value due to the short-term maturities of these items.
· Loans and advances to customers are carried at amortised cost net
of ECL. Furthermore, the terms of the loans to the microfinance borrowers are
short (six to twelve months). Due to these circumstances, the carrying amount
approximates fair value.
· Regarding the 'Debt issued and other borrowed funds', this amount
reflects the loans from third parties on holding level as well as the loans
provided by third parties directly to the subsidiaries of ASA International.
The loans are held at amortised cost. The carrying amount is the best
approximation of the fair value.
37. HEDGE ACCOUNTING Forward contracts
The Group applies hedge accounting to USD and Euro loans provided to
subsidiaries reporting in foreign currencies and the related forward
contracts. The foreign currency risk exposure of the USD and Euro loans and
the potential negative impact on net result of the subsidiaries are being
mitigated by way of these forward contracts. Any positive impact is therefore
also limited. ASA International has only entered into non-deliverable forward
contracts. Management considers the hedges as cash flow hedges. The formal
designation and documentation of the hedging relationship and the entity's
risk management objective and strategy for undertaking the hedge are
documented in the individual files and memos for every forward contract.
Swaps
At 31 December 2021, the Group had three cross-currency interest rate swap
agreements in place.
A swap with a notional amount of USD 3 million was entered on 25 July 2019 by
ASAI India whereby ASA India pays a fixed rate of interest of 11.8% in Indian
Rupee ('INR') and receives interest at a variable rate equal to six-month
LIBOR +4.3% on the notional amount. The swap is being used to hedge the
exposure to changes in the cash flow of its six-month LIBOR +4.3% USD loan.
Another swap with a notional amount of EUR 10 million on 9 December 2019 by
the same, whereby ASA India pays a fixed rate of interest of 12.55% in INR and
receives interest at a variable rate equal to six-month EURIBOR +4.3% on the
notional amount. The swap is being used to hedge the exposure to changes in
the cash flow of its six-month Euribor +4.3% Euro loan.
A swap agreement with a notional amount of USD 1 million was entered on 7 July
2021 by ASA Sierra Leone whereby ASA Sierra Leone pays a fixed rate of
interest of 19.09% in SLL and receives interest at a fixed rate of 8% in USD
notional amount. The swap is being used to hedge the exposure to changes in
the cash flow of its 8% USD loan.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
37 HEDGE ACCOUNTING (continued)
The Group applies the qualitative approach for prospective testing
effectiveness because the critical terms of the hedged items and hedging
instruments are identical. The Company applies a rollover hedge strategy when
no forward instruments are available at reasonable pricing for the full term
of the hedged item. In those cases the Company accepts a rollover risk.
Retrospective effectiveness is measured by comparing the change in the fair
value of the actual derivative designated as the hedging instrument and the
change in the fair value of a hypothetical derivative representing the hedged
item.
There is an economic relationship between the hedged item and the hedging
instrument as the terms of the forward contracts and swap match the terms of
the fixed rate loan (i.e. notional amount, maturity, payment and reset dates).
The Group has established a hedge ratio of 1:1 for the hedging relationships
as the underlying risk of the interest rate swap and forward contracts are
identical to the hedged risk component. To test the hedge effectiveness, the
Group uses the hypothetical derivative method and compares the changes in the
fair value of the hedging instrument against the changes in fair value of the
hedged item attributable to the hedged risk.
The hedge ineffectiveness can arise from:
· Different interest rate curve applied to discount the hedged item and
hedging instrument.
· Differences in the timing of the cash flows of the hedged items and the
hedging instruments.
The Group assessed it had no ineffectiveness during 2021 in relation to the
foreign currency hedges.
Reference is made to note 30.4.3 for the strategy for currency exchange risk.
Additional information on the hedged items and hedging instruments as per 31
December 2021 is provided below:
ASA Pakistan ASA Sierra Leone ASA Myanmar ASA Tanzania ASA India ASA Zambia Total
As at 31 December 2021
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Fair value of derivative assets 3,143 170 - - 653 - 3,966
Fair value of derivative liabilities - 117 21 81 - 383 602
Notional amount hedged foreign currency loans 44,112 3,190 3,000 1,300 14,913 750 67,265
Period in which the cash flows are expected to occur:
cash flows in 2022 44,112 2,081 2,000 1,300 14,913 - 64,406
cash flows in 2023 - 81 1,000 - - 750 1,831
cash flows in 2024 - 1,028 - - - - 1,028
Total cash flows 44,112 3,190 3,000 1,300 14,913 750 67,265
Expected period to enter into the determination of profit or loss:
amortisation of forward points in 2022 1,493 308 115 11 28 240 2,195
amortisation of forward points in 2023 - 49 8 - - 88 145
amortisation of forward points in 2024 - 17 - - - - 17
Total amortisation of forward points 1,493 374 123 11 28 328 2,357
Amounts recognised in OCI during the period:
for amortisation of forward points/currency basis spread 2,707 350 352 161 31 132 3,733
for adjustment of net interest on swap - 27 - - 1,047 - 1,074
for changes in fair value of the forward contracts/swaps 2,502 41 662 (152) (1,131) (371) 1,551
for recycling of FX result of foreign currency loans (4,531) (322) (1,009) 7 663 215 (4,977)
Total amounts recognised in OCI during the period 678 96 5 16 610 (24) 1,381
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
37. HEDGE ACCOUNTING (continued)
ASA Pakistan ASA Sierra Leone ASA Myanmar ASA Tanzania ASA India Total
As at 31 December 2020
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Fair value of derivative assets - - - - 708 708
Fair value of derivative liabilities 953 51 1,073 70 - 2,147
Notional amount hedged foreign currency loans 26,800 2,000 4,800 4,000 16,482 54,082
Period in which the cash flows are expected to occur:
cash flows in 2021 26,800 - 1,800 4,000 609 33,209
cash flows in 2022 - 2,000 2,000 - 15,872 19,872
cash flows in 2023 - - 1,000 - - 1,000
Total cash flows 26,800 2,000 4,800 4,000 16,481 54,081
Expected period to enter into the determination of profit or loss:
amortisation of forward points in 2021 955 335 414 41 32 1,777
amortisation of forward points in 2022 - 289 153 - 29 471
amortisation of forward points in 2023 - - 11 - - 11
Total amortisation of forward points 955 624 578 41 61 2,259
Amounts recognised in OCI during the period:
for amortisation of forward points/currency basis spread 2,209 44 734 129 31 3,147
for adjustment of net interest on swap - - - - 994 994
for changes in fair value of the forward contracts/swaps (1,061) (51) (1,412) (149) 283 (2,390)
for recycling of FX result of foreign currency loans (862) (17) 870 (38) (1,382) (1,429)
Total amounts recognised in OCI during the period 286 (24) 192 (58) (74) 322
Changes in fair value of hedging instruments
Hedge
Effective portion: ineffectiveness:
Recognised Recognised in
As at 31 December 2021 in OCI income statement Total
USD'000 USD'000 USD'000
Cash flow hedge
Forward contracts 691 - 691
Cross-currency interest rate swaps 690 - 690
1,381 - 1,381
Changes in fair value of hedging instruments
As at 31 December 2020 Effective portion: recognised Hedge ineffectiveness: recognised in income statement Total
in OCI
USD'000 USD'000 USD'000
Cash flow hedge
Forward contracts 396 - 396
Cross-currency interest rate swaps (74) - (74)
322 - 322
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
38. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when
they are expected to be recovered or settled. Loans and advances to customers
are based on the same expected repayment behaviour as used for estimating the
EIR. Debt issued and other borrowed funds reflect the contractual repayments
except for debts where no waivers have been received against breached
covenants. Those borrowings are presented on demand.
Within 12 After 12
As at 31 December 2021 months months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in hand 87,951 - 87,951
Loans and advances to customers 363,395 9,847 373,242
Due from banks 34,294 30,965 65,259
Equity investment at FVOCI - 237 237
Property and equipment - 4,085 4,085
Right-of-use assets 1,013 4,018 5,031
Deferred tax assets - 13,362 13,262
Derivative assets 3,313 653 3,966
Other assets 6,456 2,483 8,939
Goodwill and intangible assets - 482 482
Total assets 496,422 66,132 562,554
Liabilities
Debt issued and other borrowed funds 211,597 107,077 318,674
Due to customers 87,663 149 87,812
Retirement benefit liability 7 5,384 5,391
Current tax liability 6,265 - 6,265
Deferred tax liability - 2,296 2,296
Lease liability 450 3,009 3,459
Derivative liabilities 219 383 602
Other liabilities 8,873 24,064 32,937
Provisions 1,136 539 1,675
Total liabilities 316,210 142,901 459,111
Net 180,212 (76,769) 103,443
Within 12 After 12
As at 31 December 2020 months months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in hand 90,165 - 90,165
Loans and advances to customers 347,046 33,076 380,122
Due from banks 50,596 22,683 73,279
Equity investment at FVOCI - 238 238
Property and equipment - 4,617 4,617
Right-of-use assets 1,145 4,050 5,195
Deferred tax assets - 11,303 11,303
Derivative assets - 708 708
Other assets 10,280 3,320 13,600
Goodwill and intangible assets - 33 33
Total assets 499,232 80,028 579,260
Liabilities
Debt issued and other borrowed funds 184,771 157,415 342,186
Due to customers 79,948 226 80,174
Retirement benefit liability 89 5,357 5,446
Current tax liability 2,502 - 2,502
Lease liability 452 3,177 3,629
Derivative liabilities 1,476 671 2,147
Other liabilities 9,826 24,029 33,855
Provisions 2,248 - 2,248
Total liabilities 281,312 190,875 472,187
Net 217,920 (110,847) 107,073
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
39. EARNINGS PER SHARE
Basic Earnings Per Share ('EPS') is calculated by dividing the net profit for
the year attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year.
There are no share options which will have a dilutive effect on EPS.
Therefore, the Company does not have dilutive potential ordinary shares and a
diluted earnings per share calculation is not applicable.
The following table shows the income and share data used in the basic and
diluted EPS calculations:
2021 2020
USD'000 USD'000
Net profit attributable to ordinary equity holders of the 8,787 (720)
parent
Weighted average number of ordinary shares for basic
earnings per share 100,000,000 100,000,000
Earnings per share USD USD
Equity shareholders of the parent for the year:
Basic earnings per share 0.09 (0.01)
Diluted earnings per share 0.09 (0.01)
The Company has applied the number of shares issued by ASA International Group
plc as at 31 December 2021 and 31 December 2020. There have been no
transactions involving ordinary shares or potential ordinary shares between
the reporting date and the date of the completion of financial statements
which would require the restatement of EPS. No dividend is declared for the
year 2021 (2020: nil).
The following table shows the dividend per share:
Dividend per share n/a n/a
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 December 2021
Notes 2021 2020
USD'000 USD'000
Interest and similar income (29) 2
Dividend income 3,529 1,000
Net revenue
3,500 1,002
Personnel expenses 40. (1,045) (1,177)
Professional fees 40.1. (1,661) (1,404)
Administrative expenses (533) (1,236)
Exchange rate differences 10 (5)
Total operating expenses (3,229) (3,822)
Profit before tax 271 (2,820)
Profit/total comprehensive profit for the period, net of
271 (2,820)
tax
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Notes 2021 2020
USD'000 USD'000
ASSETS
Cash at bank and in hand 383 359
Due from banks 14.1. 20,465 20,465
Investment in subsidiaries 41. 120,684 120,684
Other assets 42. 765 274
TOTAL ASSETS 142,297 141,782
EQUITY AND LIABILITIES
EQUITY
Issued capital 43. 1,310 1,310
Retained earnings 44. 92,779 92,508
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 94,089 93,818
LIABILITIES
Other liabilities 45. 48,208 47,964
TOTAL LIABILITIES 48,208 47,964
TOTAL EQUITY AND LIABILITIES
142,297 141,782
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2021
Retained
Issued capital earnings Total
USD'000 USD'000 USD'000
At 1 January 2020 1,310 95,328 96,638
(Loss) for the period - (2,820) (2,820)
Total comprehensive loss for the period 1,310 92,508 93,818
Dividend - - -
At 31 December 2020 1,310 92,508 93,818
At 1 January 2021 1,310 92,508 93,818
Profit for the period - 271 271
Total comprehensive loss for the period 1,310 92,779 94,089
Dividend - -
At 31 December 2021 1,310 94,098 94,089
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 December 2021
Notes
2021 2020
USD'000 USD'000
OPERATING ACTIVITIES
Profit before tax 271 (2,820)
Adjustment for movement in:
Operating assets 46. (491) (180)
Operating liabilities 46. 744 1,514
Net cash flows used in operating activities 524 (1,486)
FINANCING ACTIVITIES
Loan (repaid)/received (500) 500
Net cash flows used in financing activities (500) 500
Net increase in cash and cash equivalents
24 (986)
Cash and cash equivalents at the beginning of the period 359 1,345
Cash and cash equivalents as at 31 December 383 359
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2021
Separate financial statements
The accounting policies applied in the statutory financial statements are
similar to those used in the consolidated financial statements except for
investments in subsidiaries. Investments in subsidiaries are accounted for in
separate financial statements, using the cost method.
At each reporting date it is determined whether there is objective evidence
that the investment in the subsidiaries is impaired. If there is such
evidence, a calculation will be made for the impairment amount as the
difference between the recoverable amount of the subsidiaries and its carrying
value.
40. TOTAL OTHER OPERATING EXPENSES Notes
2021 2020
Total operating expenses include the following items: USD'000 USD'000
Personnel expenses (1,045) (1,177)
Professional fees 40.1. (1,661) (1,404)
Administrative expenses (533) (1,236)
(3,239) (3,817)
2021 2020
USD'000 USD'000
40.1. Professional fees
Audit service fee (1,006) (976)
Other professional fees (655) (428)
(1,661) (1,404)
2021 2020
USD'000 USD'000
40.2. Administrative expenses
Other administrative expenses (533) (1,236)
(533) (1,236)
41. INVESTMENTS IN SUBSIDIARIES 2021 2020
USD'000 USD'000
Investments in subsidiaries
ASA International Holding 75,195 75,195
ASA International NV 45,489 45,489
120,684 120,684
Name of company Country Nature of business 2021 2020
Ownership Ownership
ASA International Holding Mauritius MFI Holding Company 100% 100%
ASA International NV Netherlands MFI Holding Company 100% 100%
42. OTHER ASSETS 2021 2020
USD'000 USD'000
The other assets comprised the following:
Other receivables 482 244
Advances and prepayments 283 30
765 274
43. ISSUED CAPITAL
100 million ordinary shares of GBP 1.00 each and after capital reduction of
GBP 0.01 each. No movement occurred during 2021 and 2020.
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2021
44. RETAINED EARNINGS 2021 2020
USD'000 USD'000
Total retained earnings are calculated as follows:
Balance at the beginning of the period 92,508 95,328
Dividend - -
Result for the period 271 (2,820)
Balance at the end of the period 92,779 92,508
Profit for the period
Attributable to equity holders of the parent 271 (2,820)
45. OTHER LIABILITIES Notes 2021 2020
USD'000 USD'000
Short-term liabilities
Accrued audit fees 557 542
Accrued cost 288 199
Other intercompany payables 3,692 3,052
4,537 3,793
Long-term liabilities
Intercompany loan - 500
Escrow liability to CMI 14.1. 20,465 20,465
Purchase price for ASAI NV to ASAIH 23,206 23,206
43,671 44,171
48,208 47,964
46. ADDITIONAL CASH FLOW INFORMATION
2021 2020
USD'000 USD'000
Changes in operating assets
Due from banks - (33)
Other assets (491) (147)
(491) (180)
Changes in operating liabilities
Other liabilities 744 1,514
744 1,514
Changes in non-cash items
Foreign exchange result - -
- -
47. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when
they are expected to be recovered or settled.
Within 12
As at 31 December 2021 months After 12 months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in hand 383 - 383
Due from banks - 20,465 20,465
Investment in subsidiaries - 120,684 120,684
Other assets 765 - 765
1,148 141,149 142,297
Liabilities
Other liabilities 4,537 43,671 48,208
Net
(3,389) 97,478 94,089
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2021
47. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)
Within 12
As at 31 December 2020 months After 12 months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in hand 359 - 359
Due from banks - 20,465 20,465
Investment in subsidiaries - 120,684 120,684
Other assets 274 - 274
633 141,149 141,782
Liabilities
Other liabilities 3,793 44,171 47,964
Net
(3,160) 96,978 93,818
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