TIDMASAI
RNS Number : 8020Z
ASA International Group PLC
26 May 2021
Please see below a link to the PDF of the Preliminary results
for the year ended 31 December 2020:
http://www.rns-pdf.londonstockexchange.com/rns/8020Z_1-2021-5-25.pdf
Appendix 1 - Preliminary results for the year ended 31 December
2020
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
Notes 2020 2019
USD'000 USD'000
Interest income calculated using
Effective Interest Rate (EIR) 4.1. 131,339 156,560
Other interest and similar income 4.2. 10,747 9,692
Interest and similar income 142,086 166,252
Interest and similar expense 5. (40,445) (39,200)
Net interest income 101,641 127,052
Other operating income 6. 10,460 13,621
Total operating income 112,101 140,673
Credit loss expense 7. (27,250) (4,249)
Net operating income 84,851 136,424
Personnel expenses 8. (51,608) (48,324)
Depreciation on property and equipment 16. (1,782) (1,898)
Depreciation on right-of-use assets 17. (4,428) (3,892)
Other operating expenses 9. (24,961) (27,679)
Exchange rate differences 506 (295)
Total operating expenses (82,273) (82,088)
Profit before tax 2,578 54,336
Income tax expense 11. (3,518) (18,595)
Withholding tax expense 11.7. (455) (1,244)
(Loss)/Profit for the period (1,395) 34,497
(Loss)/Profit for the period attributable
to:
Equity holders of the parent (720) 34,011
Non-controlling interest (675) 486
(1,395) 34,497
Other comprehensive income:
Foreign currency exchange differences
on translation of foreign operations (2,130) (4,348)
Movement in hedge accounting reserve 22. 322 (281)
Others (3) 341
Total other comprehensive (loss)/income
to be reclassified to profit
or loss in subsequent periods, net of
tax (1,811) (4,288)
(Loss)/Gain on revaluation of MFX
investment 15. 6 (7)
Actuarial gains and losses on defined
benefit liabilities 8.1. (896) (217)
Total other comprehensive income
not to be reclassified to profit
or loss in subsequent periods,
net of tax (890) (224)
Total comprehensive (loss)/ income
for the period, net of tax (4,096) 29,985
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent (3,338) 29,052
Non-controlling interest (758) 933
(4,096) 29,985
Earnings per share 38 USD USD
Equity shareholders of the parent
for the period:
Basic earnings per share -0.01 0.34
Diluted earnings per share -0.01 0.34
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
FOR THE YEARED 31 DECEMBER 2020
Notes 2020 2019
USD'000 USD'000
ASSETS
Cash at bank and in hand 12. 90,165 84,526
Loans and advances to customers 13. 380,122 412,304
Due from banks 14. 73,279 37,259
Equity investments at Fair Value
through Other Comprehensive Income 15.
238 232
(FVOCI)
Property and equipment 16. 4,617 5,331
Right-of-use assets 17. 5,195 5,882
Deferred tax assets 11.2. 11,303 3,865
Other assets 18. 13,600 10,525
Derivative assets 19. 708 -
Goodwill 20. 33 34
TOTAL ASSETS 579,260 559,958
EQUITY AND LIABILITIES
EQUITY
Issued capital 21. 1,310 1,310
Retained earnings 22. 147,291 148,011
Other reserves 22.1. (718) (147)
Foreign currency translation reserve 23. (43,091) (41,044)
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT 104,792 108,130
Total equity attributable to non-controlling
interest 31.6 2,281 3,039
TOTAL EQUITY 107,073 111,169
LIABILITIES
Debt issued and other borrowed
funds 24. 342,186 322,837
Due to customers 25. 80,174 78,108
Retirement benefit liability 8.1. 5,446 3,373
Current tax liability 11.1. 2,502 6,416
Deferred tax liability 11.3. - 76
Lease liability 17. 3,629 3,981
Derivative liabilities 19. 2,147 1,823
Other liabilities 26. 33,855 32,081
Provisions 27. 2,248 94
TOTAL LIABILITIES 472,187 448,789
TOTAL EQUITY AND LIABILITIES 579,260 559,958
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE YEARED 31 DECEMBER 2020
Foreign
Redeemable currency
preference Retained translation Non-controlling
Issued Other
capital shares earnings reserves reserve interest Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
At 1 January 2019 1,310 66 121,300 17 (36,249) 2,106 88,550
Profit for the year - - 34,011 - 486 34,497
Other comprehensive
income: - - - - - -
Actuarial gains and
losses
on defined benefit
liabilities - - (217) - - (217)
Foreign currency
translation
of assets and
liabilities
of subsidiaries - - - (4,795) 447 (4,348)
Movement in hedge
accounting
reserve - - (281) - - (281)
Other comprehensive
income
(net of tax) - - 334 - - 334
Total comprehensive
income
for the period - - 34,011 (164) (4,795) 933 29,985
Redemption of redeemable
preference shares - (66) - - - (66)
Dividend - - (7,300) - - - (7,300)
At 31 December 2019 1,310 - 148,011 (147) (41,044) 3,039 111,169
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
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
UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
Notes 2020 2019
USD USD
OPERATING ACTIVITIES
Profit before tax 2,578 54,336
Adjustment for movement in:
Operating assets 28.1. (42,513) (101,289)
Operating liabilities 28.2. 10,443 24,721
Non-cash items 28.3. 38,202 17,400
Income tax paid (16,871) (21,601)
Net cash flows used in operating
activities (8,161) (26,433)
INVESTING ACTIVITIES
Purchase of property and equipment 16. (981) (2,613)
Proceeds from sale of property,
plant and equipment 31 (196)
Net cash flow used in investing
activities (950) (2,809)
FINANCING ACTIVITIES
Proceeds from debt issued and
other borrowed funds 171,749 221,295
Payments of debt issued and
other borrowed funds (151,524) (171,563)
Payment of principal portion
of lease liabilities (4,389) (4,228)
Dividend paid - (7,300)
Net cash flow from financing
activities 15,836 38,204
Cash and cash equivalents at
1 January 65,545 58,106
Net increase in cash and cash
equivalents 6,725 8,962
Foreign exchange difference
on cash and cash equivalents (537) (1,523)
Cash and cash equivalents as
at 31 December 28.4. 71,733 65,545
Operational cash flows from
interest
Interest received 131,341 165,549
Interest paid 39,944 41,268
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
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
ASAI Cambodia
ASA International Cambodia Holdings 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 CMII
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 Microfinance, Inc Pagasa Philippines
Pinoy Consultancy Limited Pinoy
Proswift Consultancy Private Limited Proswift
PT ASA Microfinance PT ASA Microfinance
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 YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES
ACCOUNTING POLICIES
2.1 General
The unaudited preliminary consolidated financial statements of
ASA International Group plc have been prepared on a historical cost
basis, except for derivative instruments, which have been kept at
fair value. The unaudited preliminary 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
Whilst the financial information included in this preliminary
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with all IFRS disclosure requirements. The Company's 2020
Annual Report and Accounts will be prepared in compliance with
IFRS. The unaudited preliminary announcement does not constitute a
dissemination of the annual financial report and does not therefore
need to meet the dissemination requirements for annual financial
reports. A separate dissemination announcement in accordance with
Disclosure and Transparency Rules (DTR) 6.3 will be made when the
annual report and audited financial statements are available on the
Company's website.
The information for the year ended 31 December 2020 does 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 2019 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 2020 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
finalized 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.
These unaudited preliminary consolidated financial statements
have been prepared on a going concern basis. It should be noted
that in the 2019 Annual Report and Accounts, approved on 2 June
2020, the Directors concluded that the potential impact of the
COVID-19 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 12 months from the
date of the approval of the annual consolidated financial
statements and given the financial impact of the spread of
COVID-19, which has an impact on 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 2022 (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 2020 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 country
and consider the economic conditions of individual countries during
the pandemic and includes management's estimation of increased
credit and funding risks and a conservative view of reduced demand
for new microfinance loans.
The Group is well capitalised and has USD 101 million of
unrestricted cash (including fixed deposits) as of 31 December
2020. Also, the Group has a strong funding pipeline of USD 199
million, with over 70% 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 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 2022.
The increase in overdue loans is mainly due to four countries
(India, the Philippines, Uganda, and Kenya) which faced
significantly longer lockdowns and other measures related to
COVID-19. This resulted in covenant breaches in certain
subsidiaries. No lender has requested an early repayment of the
loans for any of the current breaches. The Group has already
received waivers from most of the lenders (see note 24.1 for
details).
Under the Projections, the Group expects further breaches of
loan covenants across the going concern period. These covenants
mainly relate to arrears levels (portfolio at risk greater than 30
days, or 'PAR>30'), risk coverage ratios, cost to income ratio,
and provisioning ratios on account of higher expected credit loss
provisions required due to the impact of COVID-19. These breaches
have not historically resulted in the immediate repayment request
from lenders and these further evidences the supportive attitude of
lenders during the challenges faced by COVID-19.
During the unprecedented situation of the COVID-19 pandemic, the
Group has reached out to its lenders to seek waivers or no-action
letters regarding prospective covenant breaches and in most of the
cases received waivers or no-action letters from the lenders. 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.
Based on the received waivers, ongoing discussions, prior
experience, and new funding commitments received since the outbreak
of COVID- 19, we have a high degree of confidence that we will
obtain all the required waivers.
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 certain restrictions on intra-Group cash
movements and there is a risk that further restrictions are imposed
by local governments in response to the economic pressures imposed
by the COVID-10 pandemic. However, given the unprecedented
worldwide situation of COVID-19 and based on prior experience and
recent discussions, we expect that a period would be provided by
the funders for rectifying the breach of covenants before calling a
default under the loan agreements. It is noted that none of the
lenders initiated any debt calls during 2020.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES
2.1.1 Basis of preparation (continued)
In terms of mitigations, the Group could shrink its operations
in certain countries by focusing on the collection of existing
loans and through curtailing disbursements, as we did in India
during the 'Andhra Pradesh crisis'. This would serve to
significantly 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 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.
As of 31 December 2020, the total outstanding debt at the
holding level (ASA International Holding and ASAI International NV
combined) is USD 68.5 million which is part of the USD 342.2
million consolidated debt for the Group. The debt from the
international funders and most of the covenants under the
respective loan agreements for the USD 68.5 million are based on
consolidated group statements. 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 2020.
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 addition, the Group prepared a downside analysis with a
stress assumption on the operations of four of its main
subsidiaries (ASA India, PPFC, ASA Myanmar, and ASA Nigeria) and
the related mitigating actions. The downside analysis of its
business was carried out to see the sustainability of the operation
if additional stress is provided to the operation in addition to
the existing management assumptions. These assumptions included an
additional 10% write-off of its portfolio over the base case
(approved budget) assumption, 10% reduction of customer, 30% lower
additional borrowings, and extended lockdown due to political
instability in Myanmar.
The Projections and above downtrend point analysis show that the
Group remains compliant with the regulatory requirements in the
operating countries where these are applicable.
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-19 pandemic will continue to affect
borrowers, businesses, and lenders across its operating countries,
as certain countries, are seeing further waves of infections.
Although in most of the operating countries the initial phase of
vaccination has started, it is expected that the process will take
at least 2022 to vaccinate a major part of the population.
Management and the Board of Directors extensively challenged the
Projections and downtrend analysis and its 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 in
recent months most countries have completely lifted or relaxed
COVID-19 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 assessed that there is a risk that
restrictions on the movement of people leads 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 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, the unprecedented nature of the COVID-19
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 12 months from the
date of approval of the consolidated financial statements, and
through to 31 May 2022. For these reasons, they continue to adopt a
going concern basis for the preparation of the unaudited
preliminary consolidated financial statements. Accordingly, these
unaudited preliminary 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 YEARED 31 DECEMBER 2020
ACCOUNTING POLICIES (continued)
2.1.2 Statement of compliance
The Group and Parent Company unaudited preliminary financial
statements are prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006. Under the Financial Conduct Authority's Disclosure Guidance
and Transparency Rules, the Group unaudited preliminary financial
statements are required to be prepared in accordance with IFRSs
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.
The preparation of the unaudited preliminary 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.
2.1.3 Basis of consolidation
The unaudited preliminary consolidated financial statements
comprise the unaudited preliminary 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 2020 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. No
subsidiaries were acquired or disposed of in 2020.
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 unaudited preliminary consolidated financial statements are
set out below:
2.2.1 Foreign currency translation
The unaudited preliminary consolidated financial statements are
presented in USD, which also is 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 statement 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 YEARED 31 DECEMBER 2020
1 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, as subsequently measured at
amortised cost, fair value through other comprehensive income
(OCI), and fair value through profit or loss. 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 fair value through 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. 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 YEARED 31 DECEMBER 2020
4. ACCOUNTING POLICIES (continued)
2.2.3 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 (12M 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. In 2020, in response to the
challenges raised by COVID- 19, 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 s/he was under payment moratorium or not. See note 2.5.2 A
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 30 days past due. In addition, Loans and
advances are treated as credit impaired (stage 3) when contractual
payments are 90 days or more past due. These thresholds have been
determined based on the historical trend and industry practice
where the Group operates.
Write-off
A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows. The Group
considers financial assets as bad when those are over 365 days past
due. As per the Group policy all bad assets are written off. The
write-offs occur mainly two times in a year (June and December).
However, the management (group and or subsidiary) can write-off
loans earlier in case of national calamity or any regulatory
reasons subject to Board approval. Management monitors post
write-off amounts for the previous two years to determine whether
any of such amounts are recoverable. Any recovered amount is
recognised as other income.
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 midpoint 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
quarterly basis and calculates the ECL on such items based 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 down-graded which in turn
increase 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.
c) 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 YEARED 31 DECEMBER 2020
5. ACCOUNTING POLICIES (continued)
2.2.3 Financial instruments (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. 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 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.
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-2.5.4).
The Group charged interest to clients in certain countries for
providing moratoria during Government instituted lockdown periods
and clients' request. The additional interest is recognised on
accrual basis in India, Pakistan and Sri Lanka where the Group have
been able to obtain clients consent and it is customary to charge
additional interest to the clients for providing moratoriums.
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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (continued)
2.2.5 Recognition of income and expenses (continued)
(3) Amortisation of loan processing fees
Revenue from amortisation of loan processing fee is recognised
on accrual basis in the period to which they relate. The loan
processing fee charged to clients is allocated to the total loan
period and recognised accordingly.
(4) Other income
Other income includes group member's admission fees, document
fees, sale of passbook, income on death and multipurpose risk funds
and service fee from off-book loans under BC model.
Group member's admission fees, document fees and sale of
passbook fees are recognised on receipt as the then admission and
sale can constitute as satisfactory performance obligation.
The Group collects fees for the death risk fund or multipurpose
risk fund in the Philippines, Ghana, Sri Lanka, Kenya, Uganda,
Myanmar and Tanzania. These fees cover settlement of the
outstanding loan amount and other financial assistance when the
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 2.5.6.
Service fees from off-book loans under the BC model is
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 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 in the statement of
financial position comprises cash and cash equivalents and
restricted cash relating to Loan Collateral Build Up (LCBU) in the
Philippines.
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 &
1. Fixtures: 5 Years
2. Vehicles: 5 Years
Office equipment
3. including IT: 3 Years
4. 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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
ACCOUNTING POLICIES (continued)
2.2.8 Taxes (continued)
(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.
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.
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 2.5.5.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (continued)
2.2.11 Post-employment benefits (continued)
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.
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 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 assets 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. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in the statement of profit or loss unless the asset is
carried at a revalued amount, in which case, the reversal is
treated as a revaluation increase. For Right of Use Assets ('ROU')
the fair value is determined based on estimated rental payments
using 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.
2.2.14 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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
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, Ghana, 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 2.5.6 on the key judgement
used.
2.2.16 Fair value measurement
The Group measures financial instruments such as derivatives,
and non-financial assets such as goodwill, 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 unaudited preliminary 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 2.2.13 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 section 2.5.10 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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (continued)
2.3. New standards, interpretations and amendments adopted by
the Group
The accounting policies adopted in the preparation of the
unaudited preliminary consolidated financial statements are
consistent with those followed in the preparation of the Group's
unaudited preliminary consolidated financial statements for the
year ended 31 December 2019, except for the adoption of new
standards effective as of 1 January 2020. The Group has not early
adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
Several amendments and interpretations apply for the first time
in 2020, but do not have a material impact on the unaudited
preliminary consolidated financial statements of the Group.
2.3.1 Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 clarifies that to be considered a
business, an integrated set of activities and assets must include,
at a minimum, an input and a substantive process that together
significantly contribute to the ability to create output.
Furthermore, it clarified that a business can exist without
including all of the inputs and processes needed to create outputs.
These amendments had no impact on the unaudited preliminary
consolidated financial statements of the Group, but may impact
future periods should the Group enter into any business
combinations.
2.3.2 Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate
Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments:
Recognition and Measurement provide a number of reliefs, which
apply to all hedging relationships that are directly affected by
interest rate benchmark reform. A hedging relationship is affected
if the reform gives rise to uncertainties about the timing and or
amount of benchmark-based cash flows of the hedged item or the
hedging instrument. These amendments had no impact on the unaudited
preliminary consolidated financial statements of the Group as there
are no hedged exposures related to IBOR that go beyond the
cessation date for any currency.
2.3.3 Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states
information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the
primary users of general-purpose financial statements make on the
basis of those financial statements, which provide financial
information about a specific reporting entity.' The amendments
clarify that materiality will depend on the nature or magnitude of
information, either individually or in combination with other
information, in the context of the financial statements. A
misstatement of information is material if it could reasonably be
expected to influence decisions made by the primary users. These
amendments had no impact on the unaudited preliminary consolidated
financial statements of, nor is there expected to be any future
impact to the Group.
2.3.4 Conceptual Framework for Financial Reporting issued on 29
March 2018
The Conceptual Framework is not a standard, and none of the
concepts contained therein override the concepts or requirements in
any standard. The purpose of the Conceptual Framework is to assist
the IASB in developing standards, to help preparers develop
consistent accounting policies where there is no applicable
standard in place and to assist all parties to understand and
interpret the standards. The revised Conceptual Framework includes
some new concepts, provides updated definitions and recognition
criteria for assets and liabilities and clarifies some important
concepts. These amendments had no impact on the unaudited
preliminary consolidated financial statements of the Group.
2.3.5 Amendments to IFRS 16 COVID-19 Related Rent
Concessions
On 28 May 2020, the IASB issued COVID-19-Related Rent
Concessions - amendment 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- 19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a COVID-19 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-19 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 applies to annual reporting
periods beginning on or after 1 June 2020. Earlier application is
permitted. This amendment had no material impact on the unaudited
preliminary consolidated financial statements of the Group.
2.3.6 Other pronouncements
Other accounting pronouncements which have become effective from
1 January 2020 and have therefore been adopted do not have a
significant impact on the Group's financial results or
position.
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 unaudited preliminary financial statements are disclosed
below. The Group intends to adopt these new and amended standards
and interpretations, if applicable, when they become effective.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
ACCOUNTING POLICIES (continued)
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
Group is assessing the impact of implementing IFRS 17.
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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (continued)
2.4. Standards issued but not yet effective (continued)
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 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.
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 unaudited preliminary 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 periods 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) in loans and
advances
The Group calculates the allowance for ECL in a three step
process as described below under A to C. The Group reviews its
loans at each reporting date to assess the adequacy of the ECL as
recorded in the financial statement. 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. Actual performance
of loans may differ from such estimates resulting in future changes
to the allowance. Due to the nature of the industry 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 have been made between
stage 1 (12 months ECL) and stage 2 loans (Lifetime ECL) for
calculating the ECL provision. For disclosure purposes, the Group
previously defined stage 1 loans as loans overdue between 1-30 days
overdue and Stage 2 loans between 31-180 days. However, in 2020 due
to COVID-19, the Group provided significant moratoriums to the
clients which 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, loans
which are in arrears by more than 30 days and less than 91 days or
have more than 30 days but less then 91 days since their last
payment, are classified as stage 2. The stage comparison between
2019 and 2020 is shown below:
For FY 2020 For FY 2019
Bucket based on last payment days
Bucket based Within 7-30 days 31-90 91-180 >180
on overdue 7 days days days days
age
Current Stage Stage 2 Stage 1
1
1-30 days
31-90 days Stage 2 Stage 2
91-180 Stage 3
days
> 180 days Stage 3
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
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)
B) Calculating ECL for stage 1-2 loans
For avoiding complexity of calculating separate probability of
default and loss given default, the Group use 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 reduces the resulting write- off. ECL as per
historical loss rate comes to USD 731K. Doubling the historical
loss rate would add USD 731K 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. ECL as
per forward looking element comes to USD 1.04 million. Changing the
write-off trend to two years, rather than three years for forward
looking assessment, would add USD 251K to the ECL.
C) Assessing the existence of stage 3 loans
As a change in accounting estimate the Group has adjusted the
threshold at which it considers a loan to be credit impaired from
180 days at 31 December 2019 to 90 days at 31 December 2020. This
change was implemented, in part, in response to challenges raised
by COVID-19 and the increasing risk profile in the portfolio, and
the knock-on impact of how the Group views loans in arrears more
than 90 days. As the ECL applied to stage 3, at this stage in the
ECL calculation, is calculated based on the balance of loans in
excess of 180 days, the change in the ECL applied as a result of
this change in accounting estimate is nil. ECL for stage 3 loans
comes to 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. An alternative assessment of stage 3
provisions would be to apply a 75% loss rate across the entire
stage 3 population, being all loans more than 90 days past due.
This would increase the ECL on the stage 3 population to $18.9
million.
D) Management Overlay
Due to the expected impact on our clients of recent government
and regulatory actions related to COVID-19, like lockdowns and
moratoriums, the Group considered an additional management overlay.
Given the unavailability of reliable information as to the impact
of the COVID-19 pandemic on borrowers and the recoverability of
loans that have been subject to payment moratoria, 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. The
overlay encompasses the below components:
Step-1: The OLP as of December 2020 have been segregated based
on 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.
Step-2: The buckets are further segregated based on the last
payment date of each individual loans so that any impact of
moratoriums on the overdue calculation can be factored into the
expected credit loss calculation.
Step-3: Each country management then assessed the risks
associated with 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. While
analysing this expected credit risk matrix, 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. 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, provided
above.
Step-4: If After estimating total ECL provision as of 31
December 2020 by using the above expected credit risk matrix,
additional provision under management overlay was taken for each
country if the total estimated loss as per matrix exceeds the
estimated loss under step 2 and 3 above. The additional provision
under management overlay was only taken if the outcome of the
matrix analysis was higher than the Step 2 and 3. The provision was
not reduced when the matrix analysis showed a lower required ECL
provision.
On top of this ECL Matrix assessment, an additional provision of
USD 8.07 million were recorded in relation to expected credit
losses in ASA India, which is equivalent to 10% of OLP<90 days
in West Bengal and Assam state in India. This additional provision
was taken considering underlying reasons which were not yet visible
in the ECL Matrix. These risk factors are mainly driven by the
threat of government intervention and political activism in Assam
and West Bengal due to the upcoming provincial election in both of
these states, which may lead to restrictions on some of the
customary operating procedures of MFIs, such as restrictions on the
collection of loan instalments at the client's doorstep. In
addition, the portfolio in the southern districts of West Bengal is
still impacted by the difficulties faced by clients after the
cyclone 'Amphan' in May 2020, but is not showing as long overdue
because of the COVID-19 related government-instructed moratoriums
to clients. Total ECL as per management overlay comes to USD 16.8
million.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (continued)
2.5.2 Allowance for expected credit loss (ECL) in loans and
advances (continued)
The matrix can be visualised as below:
Bucket based on last payment days
Bucket based Within 7-30 days 31-90 91-180 >180
on overdue 7 days days days days
age
Current 0.01%-1.2% 0.03%-20% 20%-50% 50%-75% 100%
1-30 days
31-90
days 0.03%-20%
91-180
days
181-365
days 20%-50% 50%-75% 100%
>365 days 50%-75% 100%
E) Business Correspondence ("BC") portfolio, Direct Assignment
("DA") Portfolio and Securitisation portfolio of ASAI 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 provision rates for the
on-book BC portfolio are the same as for ASA India's regular
portfolio. For the off-book BC portfolio, similar process was
followed subject to 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
2.2 million.
The portion of the DA portfolio of ASA India which is on-book
has also been treated the same as 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's of ASA India been assessed in
line with ASAI India's own portfolio.
F) ECL on Interest receivable
A similar assessment (2.5.2.B - 2.5.2.D) was conducted for the
interest receivable from customer to determine the expected credit
loss on the interest outstanding as of 31 December 2020. ECL for
interest receivable comes to USD 1.07 million.
Based on the above assessment the total provision for expected
credit losses for loans and advances to customers can be summarised
as follows:
2020 2019
Particulars USD'000 USD'000
ECL as per historical
default rate 785 750
Forward considerations 1,078 535
ECL under stage 3
loans 6,555 2,923
Management overlay 19,072 50
27,490 4,258
2020 2019
Gross outstanding ECL Gross outstanding ECL
Allocated to: USD'000 USD'000 USD'000 USD'000
Own Portfolio (note
7.2, note 13.1 and
13.3) 396,605 24,171 415,348 3,980
On book BC portfolio - 172 10
Off book BC portfolio
(note 13.1 and note
27) 44,982 2,248 49,785 21
Interest receivable
(note 13.1 and note
13.3) 14,688 1,071 3,890 247
456,275 27,490 469,195 4,258
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates
(continued)
2.5.3 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. All bad loans are written off for
accounting purposes. From an operational perspective all overdue
loans are monitored for recovery up to two years overdue.
2.5.4 Modification of loans
The Group decided to treat the period of the lockdowns
instituted by the National Government and/or local authorities of
each of our operating Entities due to COVID-19 as a payment holiday
with no attempt by individual branches to collect loan instalments
during the lockdown period. In addition, after the lockdown, the
Group granted a temporary moratorium of payments to selected
clients by senior management of the operating entities subject to
approval by the Group management. In addition, in all operating
countries except India, Pakistan and Sri Lanka no interest was
charged to the clients for the extended period resulting from this
payment holiday. The main objective of these payment holiday was to
provide clients a temporary relief due to disruption of their
livelihood on account of COVID-19. 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 catch-up adjustment or modification 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 loss is an
adjustment to the carrying value of the loans and advances to
customers and interest income. Any interest received for the
outstanding loan balance during the lockdowns was considered in the
calculation of the modification loss. Management have refined the
calculation of modification loss from the half year to the year
end. The modification loss amounted to USD 3.53 million for the
year ended 31 December 2020 and is disclosed in note 13.
2.5.5 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 2020 and December
2019 are as follows:
Assumptions defined benefit plan
2020 2019
ASA ASA Pagasa ASA Pagasa
Lak ASA
Jaya Pakistan ASA India Nigeria Philippines Lak Jaya Pakistan ASA India Nigeria Philippines
Discount
rate 6.7% 9.8% 6.8% 8.0% 3.9% 10.0% 11.3% 7.1% 14.0% 5.2%
Salary
increment 10.0% 8.8% 9.5% 7.5% 3.0% 10.0% 10.3% 9.5% 11.5% 5.0%
Staff
turnover 16.6% 23.4% 21.2% 5.0% 54.0% 21.0% 31.0% 24.6% 6.3% 53.0%
Retirement 55-62 55-62
age 60 Yrs 60 Yrs years 60 Yrs 60 Yrs 60 years 60 years 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 other two assumptions were not
done as the effect is determined immaterial.
2.5.6 Liability for death and multipurpose risk funds
At the end of each period, management uses significant
assumptions to reassesses the adequacy of the liability provided.
These include estimated number of borrowers 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 2020,
mortality rates were 0.37% in Sri Lanka, 0.26% in Ghana, 0.17% in
Uganda, 0.26% in Tanzania and 0.19% in Kenya. The liability is
disclosed under note 26. No sensitivity analysis is done as the
amount is not material.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgements and estimates
(continued)
2.5.7 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 expected credit risk. 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.
2.5.8 Securitisation agreements
ASA India has entered into several securitisation agreements
during 2018 and 2019. The loans to customers under the
securitisation agreements do not qualify for derecognition as ASAI
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 2020 under the
securitisation agreements amounts to USD 320K (31 December 2019:
USD 3.2 million) and the related liability amounts to USD 325K (31
December 2019: USD 4.3 million). The loan portfolio is disclosed
under note 13 'Loans and advances to customers' and the liability
is disclosed under note 24 'Debt issued and other borrowed funds'.
The loan portfolio balance at the start date of the relevant
securitisation agreements as per end of 2020 amounts to USD 3.5
million (31 December 2019: USD 23.1 million) and the related
liability amounts to USD 3.5 million (31 December 2019: USD 23.1
million). The cash collateral provided under these agreements
amounts to USD 305K million (31 December 2019: USD 1.8 million) is
disclosed under note 14 'Due from banks'. The agreement ended in
January 2021.
2.5.9 Direct Assignment
ASA India entered into two Direct Assignment agreement (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 guideline issued
by Reserve Bank of India (RBI). Based on the agreement the 85%
loans are derecognised on the books on the ground 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.
2.5.10 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 YEARED 31 DECEMBER 2020
2. ACCOUNTING POLICIES (Continued)
2.5 Significant accounting judgments and estimates
(continued)
2.5.10 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 2020 is
as follows:
Country Lease Credit Approach IBR at different lease
Currency Rating reference duration (year)
rate
Tenure of
lease 1 2-4 5-6 7-9
Ghana GHS BBB+ Local 20.7% 21.4% 21.8% 22.0%
Nigeria NGN BBB+ Local 4.5% 7.5% 10.6% 10.6%
Sierra Leone SLL BB- Build-Up 16.7% 18.9% 19.1% 19.9%
Kenya KES BBB Local 10.4% 10.8% 11.2% 11.5%
Rwanda RWF BB Build-Up 2.9% 4.9% 4.7% 5.0%
Tanzania TZS BBB Build-Up 4.1% 5.7% 4.8% 5.0%
Uganda UGX BBB Local 11.8% 14.5% 15.6% 16.3%
Zambia ZMW BB- Local 31.8% 32.2% 32.7% 33.1%
Bangladesh BDT B+ Build-Up 6.2% 9.2% 7.6% 8.6%
India INR BBB Local 6.1% 6.4% 6.8% 7.0%
Pakistan PKR BBB+ Build-Up 12.5% 10.7% 8.7% 9.0%
Sri Lanka LKR BB+ Local 9.1% 9.3% 10.0% 10.5%
Myanmar MMK BB Build-Up 7.3% 9.1% 8.9% 9.4%
Philippines PHP BBB Build-Up 4.0% 4.1% 4.3% 4.4%
2.5.11 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 2020, unused tax losses of USD 7.9 million
were not recognised to calculate the deferred tax asset in ASA
International Group Plc and ASA Zambia as currently it is not
probable when these entities will generate taxable profit. The
Group has concluded that subsidiaries in question do not have a
taxable temporary difference and at the moment future taxable
profit for these subsidiaries cannot be readily ascertained. If the
Group was able to recognise all unrecognised deferred tax assets,
profit and equity would have increased by USD 1.6 million.
2.5.12 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 for 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 YEARED 31 DECEMBER 2020
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 unaudited
preliminary 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 2020 or 2019.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
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 Adjustments
2020 Non-operating and
South
West East South East Total
Africa Africa Asia Asia entities 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
Explanation: Segment profit is net profit after tax
(1) 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 YEARED 31 DECEMBER 2020
3. SEGMENT INFORMATION (continued)
The following table present operating income and profit
information for the Group's operating segments for the year ended
31 December 2019
As at 31
December Adjustments
2019 Non-operating and
South East
West Africa East Africa South Asia 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 45,678 24,532 62,558 33,458 25 166,252 1 166,263
Inter-segment
interest
income - - - - 2,593 2,593 (2,593) -
External
interest
expense (3,227) (3,090) (23,825) (5,550) (3,457) (39,199) (1) (39,200)
Inter-segment
interest
expense (495) (605) (443) (840) (210) (2,594) 2,593 (1)
Net interest
income 41,906 20,837 38,290 27,068 (1,090) 127,053) (1) 127,052
External other
operating
income 2,009 2,332 4,751 4,469 416 13,978 (356) 13,622
Inter-segment
other
operating
income(1) - - - - 69,230 69,230 (69,230) -
Other
inter-segment
expense - - (77) (2,869) (3,822) (6,768) 6,768 -
Total
operating
income 43,915 23,169 42,965 28,669 64,775 203,493 (62,819) 140,674
Credit loss
expense (1,322) (208) (2,836) (612) (112) (5,090) 841 (4,249)
Net operating
income 42,953 22,962 40,169 28,057 64,662 198,403 61,678 136,425
Personnel
expenses (12,418) (8,636) (12,754) (10,555) (4,022) (48,385) 61 (48,325)
Exchange rate
differences (208) (39) 10 199 (257) (295) - (295)
Depreciation
of property
and equipment (494) (365) (599) (298) (142) (1,898) - (1,898)
Amortisation
of
right-of-use
assets (765) (803) (1,202) (859) (264) (3,892) - (3,892)
Other
operating
expenses (5,595) (4,333) (5,563) (9,032) (3,499) (28,021) 342 (27,679)
Tax expenses (7,179) (2,626) (5,923) (2,163) (1,641) (19,532) (307) (19,838)
Segment profit 15,935 6,160 14,098 5,349 54,838 96,379 61,881 34,498
Total assets 95,240 59,356 252,034 125,751 320,076 852,438 (292,496) 559,962
Total
liabilities 57,788 43,880 193,331 104,298 109,554 508,851 (60,062) 448,789
Explanation: Segment profit is net profit after tax
(2) 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 YEARED 31 DECEMBER 2020
4. INTEREST AND SIMILAR INCOME
The interest and similar income consist of interest income on
microfinance loans to customers, and interest income on bank
balances and fixed-term deposits.
Notes 2020 2019
USD'000 USD'000
Interest income calculated using
EIR 4.1. 131,339 156,560
Other interest and similar income 4.2. 10,747 9,692
142,086 166,252
2020 2019
USD'000 USD'000
Interest income calculated using
4.1. EIR
Interest income on loans and
advances to customers 131,324 155,894
Interest income from clients
from on-book BC Model (ASA India) 15 666
131,339 156,560
Interest income includes a modification loss for the changes in
the expected original cash flows discounted at the original EIR due
to payment holidays provided to clients on account of COVID-19
lockdowns and moratoriums. The amount of the modification loss is
USD 3.53 million and further disclosed in note 13.
2020 2019
USD'000 USD'000
4.2. Other interest and similar income
Interest income on short-term deposits 3,703 3,115
Amortisation of loan processing fees 5,874 6,192
Other interest income 1,170 385
10,747 9,692
Other interest income includes additional interest charged to
borrowers for the payment extension provided during Government
instituted national lockdown periods in addition to the fixed
interest amount in the loan agreements.
5. INTEREST AND SIMILAR EXPENSE
Included in interest and similar expense are accruals for
interest payments to customers and other charges from banks.
Notes 2020 2019
USD'000 USD'000
Interest expense on loans (32,656) (31,484)
Interest expense on security
deposits & others (4,100) (3,921)
Interest expense on lease liability (276) (395)
Commitment and processing fees (266) (274)
Amortisation of forward points
of forward contracts and currency
basis spread of swap contracts 36. (3,147) (3,126)
(40,445) (39,200)
6. OTHER OPERATING INCOME
2020 2019
USD'000 USD'000
Member's admission fees 1,200 1,719
Document fees 554 980
Proceeds from sale of pass-books 144 185
Income from death and multipurpose risk
funds 3,329 5,246
Service fees income from off-book BC
model (ASA India) 4,166 3,903
Distribution fee MBA Philippines 603 745
Other 464 843
10,460 13,621
Other includes a number of small items that are smaller than USD
100,000 on an individual basis.
7. EXPECTED CREDIT LOSS EXPENSE
Notes 2020 2019
USD'000 USD'000
ECL on loans advances 13.2. (23,411) (3,188)
Expected credit loss recovered/(expensed)
on on-book BC model 13.3. 10 46
Impairment loss 7.1. 149 (445)
Other expected credit loss expense (3,998) (662)
(27,250) (4,249)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
7. EXPECTED CREDIT LOSS EXPENSE (continued)
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 loss allowance provided against
interest receivable from customers and BC model which are off-book
and loan and interest exemptions for settlement of customer loans
in case of death or disability.
2020 2019
USD'000 USD'000
7.1. Impairment loss
Impairment of bank balance 303 (285)
Impairment of due from bank (48) (32)
Impairment of receivable from related
parties (106) (128)
149 (445)
The loss includes impairment of receivable for ASAI Cambodia
Holdings, ASA Leasing, ASA Lanka. Credit loss provided previously
on GN Bank
in Ghana has been released as all funds has been received. There
was no material change in credit risk in any banks or related party
balances.
7.2. The following table provides the movement of the Expected
credit loss for customers (including On-book BC) for the period of
January to
December 2020:
Stage Stage
Stage 1 2 3 Total
USD'000 USD'000 USD'000 USD'000
Opening Balance during
the period (916) (1,224) (1,851) (3,990)
Charge during the year (1,358) (6,797) (15,245) (23,400)
Transfer:
Stage 1 to Stage 2 244 (244) - -
Stage 2 to Stage 1 1 (1) - -
Stage 1 to Stage 3 128 - (128) -
Stage 2 to Stage 3 - 8 (8) -
Write off - - 3,219 3,219
Fx impact - - - -
Closing Balance during
the period (1,901) (8,258) (14,013) (24,171)
Movement of the Expected credit loss for customer for the year
January to December 2019 is as follows:
Stage
Stage 1 2 Stage 3 Total
USD'000 USD'000 USD'000 USD'000
Opening Balance during the
period (650) (426) (740) (1,816)
Charge during the year (300) (900) (1,942) (3,142)
Transfer: - - - -
Stage 1 to Stage 2 8 (8) - -
Stage 1 to Stage 3 6 - (6) -
Stage 2 to Stage 3 - 83 (83) -
Write off - - 879 879
Fx impact 20 27 41 89
Closing Balance during the
period (916) (1,224) (1,851) (3,990)
8. PERSONNEL EXPENSES
Personnel expenses include total base salary expenses and
employee benefit plans:
Notes 2020 2019
USD'000 USD'000
Personnel expenses (46,531) (43,520)
Defined contribution plans (3,385) (2,865)
Defined benefit plans 8.2. (1,692) (1,939)
(51,608) (48,324)
Notes 2020 2019
USD'000 USD'000
8.1. Retirement benefit liability
Retirement benefit liability
as at beginning of period 3,373 1,469
Payments made during the period (413) (177)
Charge for the period 8.2. 1,692 1,939
Actuarial gains and losses on
defined benefit liabilities
(OCI) 896 217
Foreign exchange differences (102) (75)
Retirement benefit liability
as at end of the period 5,446 3,373
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
8. PERSONNEL EXPENSES (continued)
ASA India, ASA Pakistan, Lak Jaya, Pagasa Philippines and ASA
Nigeria 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 Phillipines and Lak Jaya and ASA
Nigeria 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. ASA
Nigeria also maintains retirement benefits in the form of gratuity.
There are no other post-retirement benefit plans available to the
employees of the Group.
2020 2019
USD'000 USD'000
8.2. Charge for the period
Current service cost for the period (1,282) (1,793)
Interest cost for the period (349) (146)
Impact from change in assumptions (see
note 2.5.5) (61) -
(1,692) (1,939)
8.3. Sensitivity analysis
A quantitative sensitivity analysis for significant assumptions
as at 31 December 2020 and 31 December 2019 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 2020 (714) 1,329 1,316 (722)
2019 (291) 345 355 (314)
9. OTHER OPERATING EXPENSES
The other operating expenses include the following items:
Notes 2020 2019
USD'000 USD'000
Administrative expenses 9.1. (20,668) (22,295)
Professional fees 9.2. (1,957) (3,043)
Audit fees 9.3. (1,630) (1,167)
International travel (298) (624)
Other (408) (550)
(24,961) (27,679)
2020 2019
USD'000 USD'000
9.1. Administrative expenses
Office expenses (2,814) (3,077)
Transport and representation
expenses (7,079) (7,848)
Gas, water and electricity (1,120) (1,225)
Telecommunications and internet
expenses (2,285) (1,937)
VAT/ Output tax/ Service
tax (1,907) (3,144)
Bank charges (1,353) (1,693)
Other administrative expenses (4,110) (3,371)
(20,668) (22,295)
Other administrative expenses include several small items that
are smaller than USD 150,000 on an individual basis.
2020 2019
USD'000 USD'000
9.2. Professional fees
Technical assistance fees to ASA Bangladesh - (61)
Legal services fees (397) (417)
Other professional fees (1,560) (2,565)
(1,957) (3,043)
Other professional fees include fees for various consultants on
tax, IT, accounting and, actuary valuation services.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
9. OTHER OPERATING EXPENSES (continued)
2020 2019
USD'000 USD'000
Fees payable to Group auditors is analysed
9.3. as below:
Fees payable to the Group's auditor
for the audit of the Group's annual
accounts (884) (780)
Fees payable to the Group's auditor
for the other services:
Audit of the accounts of subsidiaries (246) (200)
Audit related assurance services (225) (181)
Total audit and audit related assurance
services (1,355) (1,161)
Other assurance services (275) (6)
(1,630) (1,167)
10. EXCHANGE RATE DIFFERENCES
The Company incurred certain foreign exchange losses on monetary
assets denominated in currencies other than the Company's
functional currency.
2020 2019
USD'000 USD'000
Foreign currency losses (3,952) (1,934)
Foreign currency gains 4,458 1,639
506 (295)
11. INCOME TAX AND WITHHOLDING TAX EXPENSE
2020 2019
USD'000 USD'000
Income tax expense
Current income tax (11,009) (19,789)
Income tax for previous period (28) (143)
Changes in deferred income tax 7,519 1,337
(3,518) (18,595)
2020 2019
USD'000 USD'000
11.1. Current tax liability
Balance as at beginning of period 6,416 7,263
Tax charge:
Current period 11,009 19,789
Previous period 28 143
Tax paid (14,784) (20,423)
Foreign exchange adjustment (167) (356)
Balance as at end of period 2,502 6,416
2020 2019
USD'000 USD'000
11.2. Deferred tax assets
Balance as at beginning of period 3,865 2,588
Change during the period 7,515 1,430
Foreign exchange adjustment (77) (153)
Balance as at end of period 11,303 3,865
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.
2020 2019
USD'000 USD'000
11.3. Deferred tax liability
Balance as at beginning of period 76 69
Change during the period (74) 40
Foreign exchange adjustment (2) (33)
Balance as at end of period - 76
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
11. INCOME TAX AND WITHHOLDING TAX EXPENSE (continued)
11.4. Deferred
tax relates to:
2020 2019
Deferred Deferred Deferred Deferred
tax tax Income tax tax Income
Deferred tax relates
to:
assets liabilities statement assets liabilities statement
2020 2019
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Allowance for
ECL 4,881 - 4,069 1,100 - 697
Provision for
retirement liabilities 1,634 - 497 1,066 - 584
Provision on FX
loss - (482) (1,785) 884 - (367)
Unused tax losses 1,469 - 1,176 304 - 304
Other temporary
differences 1,253 654 2,080 463 24 163
IFRS 16 Lease - (172) (234) - 53 (43)
Modification loss 1,695 - 1,715 - - -
Other comprehensive 371 - 71 48 - 53
income/Revaluation
of cash flow
hedge
11,303 - 7,589 3,865 77 1,391
11.5. Reconciliation of the total tax charge 2020 2019
USD'000 USD'000
Accounting result before tax 2,578 54,335
Income tax expense at nominal rate of
consolidated entities (2,142) (16,572)
Over/ (under) provision for income tax
previous year (28) (143)
Net allowable /(Non allowable) expenses 223 (353)
Deferred tax recognised/(not recognised)
on losses (624) (467)
Exempt income 1,476 125
Consolidation adjustment (1,731) -
Other permanent differences (691) (1,186)
Total income tax expense for the period (3,518) (18,596)
Weighted average nominal rate of consolidated
entities 83% 30%
Consolidated effective tax rate 136% 34%
11.6. Income tax per region 2020 2019
USD'000 USD'000
Corporate income tax- West Africa (5,824) (7,663)
Corporate income tax- South Asia 1,177 (7,093)
Corporate income tax- East Africa (585) (1,565)
Corporate income tax-South East Asia 1,025 (1,855)
Corporate income tax- Non operating
entities 689 (139)
Total income tax per region (3,518) (18,315)
11.7. Withholding tax expense 2020 2019
USD'000 USD'000
Withholding tax on interest income,
dividend, royalties and service fees (455) (1,244)
Total withholding tax expense (455) (1,244)
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
2020 2019
USD'000 USD'000
Cash at bank 90,012 84,397
Cash in hand 153 129
90,165 84,526
An amount of USD 18.4 million (2019: USD 19.0 million) of cash
at bank 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.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
13. LOANS AND ADVANCES TO CUSTOMERS
Loans and advances to customers are net of allowance for
expected credit loss.
2020 2019
Notes USD'000 USD'000
Gross loan portfolio 13.1. 396,605 415,348
Allowance for expected credit
loss 13.2. (25,242) (4,228)
Interest receivable on loans
to customers 14,688 3,890
Unamortised processing fee (2,396) (2,868)
Loan portfolio on-book BC model
(ASA India) - 172
Allowance for expected credit
loss on-book BC model (ASA India) 13.4. - (10)
Modification loss (3,533) -
Net loan portfolio 380,122 412,304
Interest receivable on loans to customers is realisable in line
with the loan repayment schedules.
During 2016 and 2017 ASA India started to operate under Business
correspondent and partnership model (BC) for four BC Partners:
Reliance Capital, IDBI, MAS and 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 Partners. 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 loans to borrowers and related funding for the other
three BC Partners are recognised on the balance sheet similar to
its own loan portfolio and funding thereof. The service fees for
the IDFC portfolio are reported under "Other operating income" in
note 6. Interest income and interest expense for the other three
loan portfolios are presented in line with its own portfolio.
Under the agreements with the BC loan 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 27. This liability for the other three
BC Partners is deducted from the related loan portfolio. This
liability is based on Group 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 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 new Direct Assignment ("DA")
agreement with State Bank of India ("SBI:) in 28 January 2020. This
time, the entity transferred a pool of its loans to customers
amounting to USD 8.2 million to the SBI against a purchase
consideration of USD 7 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 borrower 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 gain on transfer amounting to USD 372K is
recognised as other interest income in note 4.2.
The outstanding loans to borrowers under the BC model and DA
model which are not recognised on the balance sheet at 31 December
2020 amounted to USD 45 million and USD 3.7 million respectively
(2019: USD 49.8 million and USD 6.1 million).
The modification loss of USD 3.53 million is explained in note
2.5.4.
13.1. The following table explains the movement of Gross loan
portfolio (including on book BC) between the stages:
Stage Stage
Stage 1 2 3 Total
USD'000 USD'000 USD'000 USD'000
Gross carrying value at
1st January 2020 408,391 4,208 2,922 415,521
New assets originated 680,772 680,772
Assets realised (686,973) (2,925) (2,484) (692,382)
Transfers:
Stage 1 to Stage 2 (51,176) 51,176 - -
Stage 2 to Stage 1 12 (12) - -
Stage 1 to Stage 3 (26,972) - 26,972 -
Stage 2 to Stage 3 - (1,735) 1,735 -
Write off- - - (3,219) (3,219)
Fx impact (4,932) 1,490 (645) (4,087)
Gross carrying value at
31 December 2020 319,122 52,202 25,281 396,605
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEARED 31 DECEMBER 2020
13. LOANS AND ADVANCES TO CUSTOMERS (continued)
Stage Stage
Stage 1 2 3 Total
USD'000 USD'000 USD'000 USD'000
Gross carrying value at
1st January 2019 341,358 1,418 836 343,612
New assets originated 965,352 965,352
Assets realised (878,352) (1,143) (568) (879,767)
Transfers:
Stage 1 to Stage 2 (4,352) 4,352 - -
Stage 1 to Stage 3 (3,289) - 3,289 -
Stage 2 to Stage 3 - (275) 275 -
Write off- - - (879) (879)
Fx impact (12,622) (144) (31) (12,797)
Gross carrying value at
31 December 2019 408,391 4,208 2,922 415,521
13.2. Allowance for Expected credit
loss Notes 2020 2019
USD'000 USD'000
Balance as at beginning of the
period (4,227) (1,837)
ECL on loans and advances 7. (23,410) (3,188)
ECL for overdue interest receivable
on loans from customers (824) (168)
Exchange rate differences - 87
Write-off of loans 3,219 879
Balance at end of the period (25,242) (4,227)
The key assumptions applied for the expected credit loss
provision are explained in note 2.5.2.
The provision for expected credit losses has increased due to
the increased credit risk profile across the portfolio arising out
of the local lockdowns and various moratoria introduced and
economic hardship due to COVID-19 pandemic. This has led to
increased arrears and an increased credit risk associated with the
length of time that the Group has not been able to collect upon the
loans outstanding. 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:
2020 2019
USD'000 USD'000
ECL on OLP (24,171) (3,980)
ECL on Interest receivable (1,071) (247)
(25,242) (4,227)
13.4. Allowance for ECL on-book BC
model 2020 2019
USD'000 USD'000
Balance as at beginning of the period (11) (59)
Credit loss (expense)/recovered -10 46
Exchange rate differences 1 2
Balance at end of the period - (11)
With all other variables constant, a 10% sensitivity in the loss
rate for management overlay will impact the ECL provision as
below:
Change in loss
rate
1% + 1%-
USD'000 USD'000
ECL on OLP 26,603 21,882
ECL on Interest Receivable 1,203 941
27,806 22,823
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
14. DUE FROM BANKS
Notes 2020 2019
USD'000 USD'000
Due from banks 52,814 16,827
Escrow bank account at
Citibank 14.1. 20,465 20,432
73,279 37,259
Escrow bank account at
14.1. 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 (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 (a 'COC'). 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 (the 'Escrow Amount') 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
2020 2019
USD'000 USD'000
MFX Solutions, LLC
Balance at the beginning of the period 232 239
(Loss)/Gain on revaluation 6 (7)
Balance at the end of the period 238 232
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 YEARED 31 DECEMBER 2020
16. PROPERTY AND EQUIPMENT
Property and equipment consists of land and buildings, office
furniture, equipment and software. Depreciation policies are
described in detail in the accounting policies. The movements are
as follows.
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
Office Office
Furniture Furniture
& &
Vehicles equipment Buildings Total Vehicles equipment Buildings Total
fixtures fixtures
including including
IT 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 1,867 371 8,042 1,149 11,429 1,503 335 6,305 935 9,078
Accumulated
depreciation
at the
beginning of
the
period (1,123) (250) (4,623) (102) (6,098) (925) (238) (3,334) (75) (4,572)
Carrying
value at the
beginning
of the
period 744 121 3,419 1,047 5,331 578 97 2,971 860 4,506
Additions
during the
period
at cost 160 33 697 91 981 384 58 1,992 180 2,614
Foreign
currency
adjustment (14) (6) (99) 66 (53) (20) (12) (215) 34 (213)
Disposal
during the
period (14) 2 (19) - (31) - (10) (40) - (50)
Depreciation
during the
period (251) (50) (1,453) (28) (1,782) (241) (43) (1,590) (24) (1,898)
Adjustment of
depreciation
for
disposals 6 - 129 - 135 34 23 189 - 246
Foreign
currency
differences 2 2 39 (7) 36 9 8 112 (3) 126
Carrying
value at the
end
of the
period 633 102 2,713 1,169 4,617 744 121 3,419 1,047 5,331
Cost at the
end 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 end
of the
period (1,366) (298) (5,908) (137) (7,709) (1,123) (250) (4,623) (102) (6,098)
Carrying
value at the
end
of the
period 633 102 2,713 1,169 4,617 744 121 3,419 1,047 5,331
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
17. RIGHT-OF-USE ASSETS AND LEASE LIABILITY
2020 2019
USD'000 USD'000
Right-of-use assets at the beginning
of the period 5,882 5,553
Additions during the period 3,588 4,167
Amortisation during the period (4,428) (3,892)
Exchange rate differences 153 54
Right-of-use assets at the end of the
period 5,195 5,882
2020 2019
USD'000 USD'000
Lease liability at the beginning of
the period 3,981 3,723
Interest expense of lease liability 276 395
Additions of lease liabilities during
the period 3,588 4,167
Payment of lease liabilities (4,389) (4,227)
Exchange rate differences 173 (77)
Lease liability at the end of the period 3,629 3,981
The Group recognises leased office premises under Right of Use
Assets.
Due to the COVID-19 global pandemic many countries had
instituted country-wide lockdowns which may have impacted the
economic conditions of the respective countries. Hence, the IBRs
used to calculate the IFRS 16 balances may have changed since the
lockdown started. The lockdown period started in April 2020 and
therefore, any contract with a start date on or after 1 April 2020
might have a different IBR than those entered before the
lockdown.
Between April-December 2020, the Group entered into 579 new
contracts (excluding the new contracts of Ghana, Nigeria and
Tanzania as they have fully prepaid contracts and are not impacted
by IBRs). A sensitivity analysis on the impact of a 50% increase in
the IBR rates for those contracts gives a total impact in the net
asset of negative USD 7K and in net profit of negative USD 7K,
which is insignificant. Based on the above, management has decided
not to take in any impairment on the ROU as of 31 December
2020.
18. OTHER ASSETS
The other assets comprise
of the following: 2020 2019
Notes USD'000 USD'000
Receivables from related parties 18.1. 397 720
Prepayments 2,227 2,378
Employee advances 2,214 1,827
Advance income tax 3,432 1,800
Security deposit 137 102
Receivables under on-book
and off-book BC model (ASA
India) 2,187 452
Insurance claim receivable 577 570
Interest receivable on due
from banks 550 603
Securitisation and DA gain
receivable 307 376
Other receivables 18.2. 1,572 1,697
13,600 10,525
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 2020 2019
USD'000 USD'000
CMI - 173
ASA Bangladesh - 189
Sequoia BV 52 -
MBA Philippines 225 220
ASAI Cambodia Holdings 108 108
Catalyst Investment Management services 6 -
CMI International Holding 6 -
Catalyst Continuity - 16
ASA Social Services Ltd. - 13
CMIC - 1
397 720
The receivables from related parties are short term in nature
and do not accrue interest.
18.2. Other receivables include various advances in relation to
employee's 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 YEARED 31 DECEMBER 2020
19. DERIVATIVES 2020 2019
USD'000 USD'000
Forward
contracts - -
Swap agreements 708 -
Derivative assets total 708 -
Forward
contracts (2,147) (1,659)
Swap agreements - (164)
Derivative
liabilities total (2,147) (1,823)
Total Derivatives at fair value (1,439) (1,823)
19.1. The Group is holding the following foreign exchange forward contracts:
As of 31 December
2020 Maturity
<30 days 1-3 months 3-12 months >12 months Total
Pakistan
Notional amount
(in USD) - 4,000 22,800 - 26,800
Average forward
rate (USD/PKR) - 168 174 - 342
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 5,382
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/PHP) - - - 13,396 13,396
Carrying amount
(in USD) - - - (51) (51)
As of 31 December 2019 Maturity
<30
days 1-3 months 3-12 months >12 months Total
Pakistan
Notional amount (in USD) 667 4,000 21,842 - 26,509
Average forward rate
(USD/PKR) 169 148 169 -
Carrying amount (in USD) (29) 203 (891) (717)
Myanmar
Notional amount (in USD) 3,000 - 3,500 3,800 10,300
Average forward rate
(USD/KYAT) 1,628 - 1,717 1,839
Carrying amount (in USD) (285) - (352) (228) (865)
Tanzania
Notional amount (in USD) - - 2,500 - 2,500
Average forward rate
(USD/TZS) - - 2,482 -
Carrying amount (in USD) - - (77) - (77)
Please see note 36 for
more information.
19.2. The Group also
holds the below swap
contracts:
2020 2019
USD'000 USD'000
Cross-currency interest
rate swap Notional value 16,482 16,141
Carrying value 708 (164)
At 31 December 2020, the Group had two 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 of interest of
11.8% in Indian Rupee (INR) and receives interest at a variable
rate equal to six months LIBOR +4.3% on swap is being used to hedge
the exposure to changes in the cash flow of its six months LIBOR
+4.3% USD loan
A swap with a notional amount of Euro 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 months 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 months EURIBOR +4.3% Euro 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 instrument.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
20. GOODWILL
Goodwill arose from the acquisition
of Lak Jaya by CMI Lanka in
2008.
2020 2019
USD'000 USD'000
Balance at the beginning of
the period 34 33
Foreign exchange differences
during the period (1) 1
Balance at the end of the period 33 34
For the year 2020, 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.
21. ISSUED CAPITAL
2020 2019
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 2019 and 2020.
22. RETAINED EARNINGS
Total retained earnings are
calculated as follows: 2020 2019
USD'000 USD'000
Balance at the beginning of
the period 148,011 121,300
Dividend declared - (7,300)
Result for the period (720) 34,011
Balance at the end of the period 147,291 148,011
Profit for the period
Attributable to equity holders
of the parent (720) 34,011
Non-controlling interest (675) 486
(1,395) 34,497
Part of retained earnings relates to NGOs which are consolidated
in these unaudited preliminary financial statements. The retained
earnings of these NGOs cannot be distributed to their respective
members. Retained earnings relating to NGOs amounted to USD 1.5
million at 31 December 2020 (2019: USD 17.2 million). The reduction
during 2020 relates to the acquisition of assets and liabilities of
ASIEA by ASHA MFB in Nigeria as per 1 April 2020.
ASA S&L, ASA India and ASHA Nigeria 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 13 million in December 2020 (2019: USD 11.6
million).
No dividend is declared in 2020.
22.1. OTHER RESERVES Notes
2020 2019
Total other reserves are calculated
as follows: USD'000 USD'000
Balance at the beginning of
the period - 147 17
Actuarial gains and losses
on defined benefit liabilities 8.1. (896) (217)
Movement in hedge accounting
reserve 322 (281)
(Loss)/Gain on revaluation
of MFX investment 15. 6 (7)
Others (3) 341
Balance at the end of the period (718) (147)
23. 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:
2020 2019
USD'000 USD'000
Balance at the beginning of the period (41,044) (36,249)
Translation of assets and liabilities
of subsidiaries to USD (2,047) (4,795)
Balance at the end of the period (43,091) (41,044)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
DEBT ISSUED AND OTHER BORROWED
24. FUNDS
Notes 2020 2019
USD'000 USD'000
Debt issued and other borrowed
funds by operating subsidiaries 24.1. 269,132 260,643
Participation agreements Blue
Orchard-managed funds (ASAIH) 24.2. - 3,500
Loan from Symbiotics-managed
funds (ASAIH/ASAI NV) 24.3. 20,000 14,500
Loan from Oikocredit (ASAIH) 24.4. 3,500 9,167
Loan from OPIC (ASAIH) 24.5. 20,000 20,000
Loan from BIO (ASAIH) 24.6. 10,000 10,000
Loan from OeEb (ASAIH) 24.7. 10,000 -
Loan from Citi (ASAINV) 24.8. 5,000 -
Interest payable on third-party
loans 4,554 5,027
342,186 322,837
Break down of borrowings by
operating subsidiaries are
24.1. shown below:
2020 2019
USD'000 USD'000
ASA India 139,109 130,654
PPFC 50,340 52,271
ASA Pakistan 36,037 35,899
ASA Tanzania 8,232 8,414
ASA Kenya 7,786 8,358
ASA S&L 4,619 6,560
ASA Myanmar 11,697 5,853
ASA Uganda 3,354 4,601
Lak Jaya 4,310 4,429
ASA Nigeria 2,782 2,951
Others 866 654
269,132 260,644
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 342 million, USD
198 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, balance for credit lines with breached covenants and does
not have waivers is amounting to USD 31.5 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 2020.
The lenders have not requested any early repayment of the loan
as of the date when these unaudited preliminary financial
statements were approved by the Board of Directors. Management is
in the process of renegotiating to get waivers for the remaining
balance.
24.2. Participation agreements Blue Orchard-managed funds (ASAIH)
ASAIHH entered into three participation agreements with MIFA - a
fund managed by Blue Orchard ("MIFA") - pursuant where to ASAIH
sold and assigned the interest in its shareholder loans to ASAI
Pakistan for a total amount of USD 10 million ("Participation
Agreements"). All instalments and interest under the shareholder
loans are paid by ASA Pakistan to ASAIH and from ASAIH to MIFA,
whereby ASAIH is only acting as a pass-through. The amount has been
repaid in 2020.
24.3. Loan from Symbiotics-managed funds (ASAIH/ASAINV)
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%
. All the loans will be repaid within three years of
disbursement.
24.4. Loan from Oikocredit (ASAIH)
ASAIH entered into an agreement with Oikocredit in 24 July 2015
for a direct loan amount of USD 7.5 million and a credit line of
USD 2.5 million (the "Oikocredit loans"). The term of the
Oikocredit loans is five years. As of 31 December 2019, the
outstanding balance was USD 1.7 million. 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 loans 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.
24.5. 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 plus 4.25% per annum.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
24. DEBT ISSUED AND OTHER BORROWED FUNDS (continued)
24.6. Loan from BIO (ASAIH)
ASAIH entered into a USD 10 million subordinated loan agreement
with Belgian Investment Company for Developing Countries SA/NV
("BIO") on December 2019. The term of this loan is seven years.
Interest amounts to Libor plus 5.9% per annum.
24.7. 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 at eight equal instalments and the term of this loan is
five years. Interest amounts to Libor plus 3.5% per annum. ASAI NV
is also a co-borrower of the loan. The Loan is subject to certain
covenant clauses in respect of certain ratios. As of June 2020,
some of the required ratios was not fulfilled. The Group already
received waivers for from lender against such breaches.
24.8. 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 plus 4.55% per
annum. ASAIH is also a co-borrower of the loan.
25. 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.
2020 2019
USD'000 USD'000
Clients' security deposits 68,103 66,279
Clients' voluntary savings 12,071 11,801
Interest payable on deposits and savings - 28
80,174 78,108
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.
26. OTHER LIABILITIES Notes
Other liabilities are as follows: 2020 2019
USD'000 USD'000
Security deposits 2,366 1,539
Other deposits 518 806
Liability for death and multipurpose
risk funds 354 254
Accrued expenses 1,362 886
Accrued audit fees 928 891
Taxes payable, other than
corporate income tax 1,465 1,781
Amount due to employees 1,354 1,530
Amount due to related parties 26.1. 518 1,050
Liability to CMI regarding
Escrow Account at Citibank 20,465 20,432
Liabilities under on-book
and off-book BC model (ASA
India) 1,638 701
Liabilities under off-book
DA model (ASA India) 502 -
Other liabilities 26.2. 2,385 2,211
33,855 32,081
Security deposits mainly relate to deposits taken from employees
as a form of security. Other deposits relate to various smaller
deposits in different countries.
26.1. Amount due to related parties 2020 2019
USD'000 USD'000
CMI 1 747
Sequoia BV 60 68
MBA Philippines 457 125
518 1,049
26.2. Other liabilities include various smaller accruals and
provisions for various entities in the Company. Individually none
of the payables are over USD 150 K.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
2020 2019
USD'000 USD'000
27. PROVISIONS
Provision for financial guarantees
under off-book BC model (ASA India) 2,248 21
Provision for service tax (ASA India) - 73
2,248 94
Provision for financial guarantees include expect loss provided
against off-book BC portfolio in India. As at 31 December 2020,
stage 3 loans under this portfolio is USD 2.98 million.
The provision for financial guarantee under off book BC model is
made based on the risk percentage of the Group on such portfolio.
ASA India uses the risk percentage for each BC contract to
determine the risk for the entity and then uses the Group
provisioning policy on such risk adjusted amount to calculate the
provision required. For details on group ECL policy see
note-2.5.2
28. ADDITIONAL CASH FLOW INFORMATION
2020 2019
USD'000 USD'000
28.1. Changes in operating assets
Loans and advances to customers (2,374) (87,554)
Movement in due from banks (36,587) 205
Movement in restricted cash 1,551 (3,530)
Movement in right-of-use assets (3,588) (9,720)
Other assets excluding income tax advances (1,515) (690)
(42,513) (101,289)
2020 2019
USD USD
28.2. Changes in operating liabilities
Due to customers 2,768 17,019
Other liabilities 2,469 1,043
Retirement benefit (413) (177)
Movement in lease liability 3,588 7,890
Movement in provisions 2,031 (1,054)
10,443 24,721
2020 2019
USD'000 USD'000
Non-cash items included in the statement
28.3. of comprehensive income
Depreciation on:
- Property and equipment 1,782 1,897
- Right-of-use assets 4,428 3,892
Interest expense on lease liability 276 395
Credit loss expense 27,250 4,249
Write-off of loans 3,342 879
Fair value movement of forward contracts (62) 3,854
Charge against defined benefit plan 1,692 1,939
Foreign exchange result (506) 295
38,202 17,400
2020 2019
USD'000 USD'000
28.4. Reconciliation of cash and cash equivalents
Cash and cash equivalents as per cash
flow statement 71,733 65,545
Restricted cash for Loan Collateral
Build Up ('LCBU') in PPFC 18,432 18,981
Cash at bank and in hand as per balance
sheet 90,165 84,526
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT 29.1 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 operational risk, financial risk, legal and
compliance risk, and strategic risks.
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.
29.2 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
defense 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 Group's key risk management areas are operational risk,
financial risk, legal and compliance risk and strategic risk.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (Continued)
Risk category Definition Risks Description
Operational The risk of loss resulting Growth risk All risk and challenges
from inadequate or failed associated in the Group's
internal processes, human operational expansion
behaviour and
systems from external
events.
Fraud and integrity Fraud and misappropriation
Information and technology Maintenance of effective
technology and security of
systems
Human resources Likelihood of negative
results due to a failure
within its human resource
department
Transaction risk Human or system errors
within the Group's daily
product delivery and
services
Social, Health and Global and regional economic
environmental risk conditions and natural
disasters
Risks related to the Loss or theft of
disclosure of confidential confidential or sensitive
or sensitive information information
Financial The Group experiences Credit risk Risk that the Group will
financial risks such as incur a loss because its
credit risk, liquidity risk, clients or counterparties
exchange rate/currency fail to discharge
risk and interest rate risk. their contractual
The Group encounters impacts obligations
on the Group's earning.
Interest rate risk Risk that the Group's
profitability or result of
operations will be affected
by fluctuations
in interest rates
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/currency risk Possibility of financial
loss to the Group arising
from adverse movements in
foreign exchange
rates
Legal (regulatory) and Financial and other losses Regulatory: changes in local Anticipating and responding
compliance the Group may suffer as a regulations and including to changes in laws or
result of regulatory changes political risks regulations and political
or failure changes
to comply with applicable
laws and regulation.
Legal and compliance Compliance with applicable
laws and regulations
Interest rate caps Anticipating and responding
to change limits on (i) the
amount of interest or fees
charged
to customers, or (ii) our
net interest margin
Foreign ownership Risks associated with
foreign ownership or
shareholder concentration
restrictions
Legal uncertainty Anticipating and responding
to lack of legal certainty
in some jurisdictions. Risk
inherent
to investing in emerging
markets, including
nationalisation,
expropriation or
confiscatory
taxation, and political
instability
Strategic Current or prospective risk Competition risk Risk that Group might face
to earnings and capital by not responding to the
arising from changes in the competitive environment or
business environment failing to
and from adverse business ensure our proposition meets
decisions, improper customer needs
implementation of decisions
or lack of responsiveness
to changes in the
environment.
Reputational risk Risk to earnings or capital
arising from negative public
opinion
29.3 Operational Risk
Operational risks can be substantial where large amounts of cash
are distributed to, and collected from, a large group of clients
through extensive branch networks. Examples of certain operational
risks include fraud or misappropriation, and other operational and
managerial errors and/or omissions as well as information
technology risk, human resources risk, and social and environmental
risk. The Company requires its subsidiaries and associates to
develop and implement prudent systems to substantially mitigate
operational risk, including proper control measures, sufficient and
qualified management staff, and proactive corporate governance. By
means of proactive measures and frequent monitoring, which is part
of the standardised operational procedures adopted by all MFIs,
risks can be identified and controlled at an early stage. COVID-19
has contributed largely towards health hazard and operational
movement. The Group has taken adequate steps in maintaining all
health and safety guidelines and regular off-site monitoring.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.3 Operational Risk (continued)
Information and technology risk
Information and technology risks are not uncommon in
microfinance institutions. The Group regularly analyses risks that
arise from password hacking or sharing, changes in its data and
varying roles of its users. To mitigate its potential information
and technology risks, the Group ensures that its staff have
appropriate technical support and computer skills. Furthermore, the
Group has implemented disaster management strategies, quality
control and ensures that it has data security policies in
place.
Human resource risk
Human resource risk is the likelihood that an organisation would
experience negative results due to a failure within its human
resource department. This may occur due to lack of proper
recruitment techniques or training or low staff retention rates.
The Group 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 work employment permits needed for its expatriate staff
and the impact of its health and safety policies.
Social and environmental risk
Social and environmental risk may be caused by the Group itself,
by its clients or because of natural disasters. The Group monitors
and evaluates its social and environmental risk by assessing each
microfinance institution's natural environment, each target
client's business sector and the number of clients involved in
businesses that may lead to harmful impacts on the environment. The
Group generates reports on any social and environmental policy
violations and the number of client and staff complaints it
receives and resolves. Furthermore, the Group evaluates the number
of branches located in zones or areas prone to natural disasters
and keeps track of the proportion of loans classified as more than
30 days overdue within those zones or areas.
The Group requires its microfinance institutions to develop and
implement prudent systems to substantially mitigate operational
risk, including proper control measures, sufficient and qualified
management staff, and proactive corporate governance. By means of
proactive measures and frequent monitoring, which is part of the
standardised operational procedures adopted by all the Group's
microfinance institutions, risks can be identified and controlled
at an early stage.
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 repayment of loan
instalments. 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. It contains 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 procedure
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 nor guarantees, to
reduce its credit risks (apart from the client security deposit
where permitted).
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.4 Financial risk
29.4.1 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
2020 2019
USD'000 USD'000
Cash and cash equivalents
(excluding cash
in hand) 90,012 84,397
Loans and advances to
customers 380,122 412,304
Customer security
deposit (68,103) (66,279)
1
Off-book portfolio
(BC model) 2,248 2,488
Due from banks 73,279 37,259
Other assets 8,649 6,347
Maximum credit
exposure 486,207 476,516
1
Credit risk on off-book BC model portfolio
is restricted to 5% of the outstanding
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.
However, India holds 34% of the Group's credit exposure in 2020
(2019: 35%). Management regularly monitors the concentration risk
and manages loan distribution if required.
Geographic distribution of maximum credit exposure as at 31
December 2020.
Cash and
cash
Loans
and Customer Off-book
Due
equivalents from Other
advances portfolio
to security (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
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued)
29. 4 Financial Risk (continued)
29.4.1 Credit Risk (continued)
Geographic distribution of maximum credit exposure as at 31
December 2019.
Cash and
cash
Loans and Customer Off-book
equivalents Due from Other
advances portfolio
to security (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 9,308 77,538 (27,350) 4,084 1,026 - 64,606
East Africa 4,671 50,933 (14,040) 1,085 186 - 42,835
South Asia 31,544 198,848 (2,082) 11,657 3,054 2,488 245,509
South East
Asia 35,123 84,986 (22,807) - 1,245 - 98,547
Non-operating
entities 3,752 - - 20,432 834 - 25,018
Maximum credit
exposure 84,398 412,305 (66,279) 37,258 6,345 2,488 476,515
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 2020
Total direct lending/IFRS
9 stages
Gross Loans
and
Due from Advances Stage Stage Stage
banks(1) to Total lending 1 2 3
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 - - 24,171 1,901 8,258 14,013
(1) Due from banks are neither past due nor credit impaired
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.4 Financial Risk (continued)
29.4.1 Credit Risk (continued)
Credit risk from lending as at 31 December 2019
Total direct lending/IFRS
9 stages
Gross Loans
and
1
Stage Stage
Due from banks Advances to Total lending Stage 1 2 3
Customer
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa 4,084 78,078 82,163 76,654 660 - 764
East Africa 1,085 51,878 52,963 51,529 215 - 134
South Asia 11,657 200,679 212,336 196,230 2,956 - 1,492
South East
Asia - 84,886 84,886 83,978 377 - 532
Non-operating
entities 20,432 - 20,432 - - - -
Total 37,258 415,521 452,780 408,391 4,208 2,922
ECL provision - - 3,990 265 1,225 2,500
1
Due from banks are neither past
due nor credit impaired
Overview of modified loans
ASAI provided moratoriums to customer during the lockdown period
instituted by the local and national government. The
modification
itself was not deemed to be an indicator of SICR.
The summary of the lockdown period and affected loan portfolio
is shown below:
Clients
under OLP under
Lock Down
lockdown lockdown
Countries Lockdown level Start date End date (in (in
(weeks)
USD'000
'000) )
1 India National 23/03/2020 31/05/2020 11 weeks 490 122,906
2 Pakistan National 25/03/2020 09/05/2020 6 weeks 438 60,342
National, but
3 Sri Lanka 20/03/2020 11/05/2020 7 weeks 62 9,805
organized regionally
Initially national,
mostly localized
The and
4 15/03/2020 30/06/2020 15 weeks 341 52,772
regionwide in
Philippines Luzon,
Visayas and
Mindanao
5 Myanmar Localised 03/04/2020 10/05/2020 5 weeks 150 33,643
6 Nigeria Localised 30/03/2020 04/05/2020 5 weeks 252 28,555
7 Ghana Localised 30/03/2020 20/04/2020 3 weeks 154 38,502
07/04/2020
Sierra 05/04/20 &
8 National 6 days 35 3,408
Leone 03/05/20 05/04/20
9 Kenya National 27/03/2020 11/05/2020 6 weeks 100 15,402
10 Tanzania Localised 07/04/2020 17/05/2020 6 weeks 118 18,363
11 Uganda National 30/03/2020 02/06/2020 10 weeks 98 9,404
12 Rwanda National 22/03/2020 18/05/2020 8 weeks 21 2,853
13 Zambia None - -
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.4 Financial Risk (continued)
29.4.1 Credit Risk (continued)
Overview of modified loans (continued)
In addition, the Group provided temporary moratoriums to
selected clients based on need. . Moratoriums provided per month in
addition to the lockdown period is shown below:
Clients under moratoria in '000
Countries Jul Aug Sep Oct Nov Dec
India 182 166 - - - -
Pakistan - - - - - -
Sri Lanka 9 - - 23 - 11
Myanmar 65 60 100 95 81 58
The Philippines 8 15 32 65 9 86
Ghana 10 - - - - -
Nigeria - - - - - -
Sierra Leone 1 - - - - -
Kenya 27 - - - - -
Tanzania - - - - - -
Uganda 60 50 4 - - -
Rwanda 5 3 - - - -
Zambia - - - - - -
Total 367 294 136 183 90 155
OLP under moratoria (in USD'000)
Countries Jul Aug Sep Oct Nov Dec
India 5,379 3,666 - - - -
Pakistan - - - - - -
Sri Lanka 237 2 23 250 - 190
Myanmar 2,102 2,245 3,913 4,884 3,880 2,229
The Philippines 231 373 802 1,803 227 3,951
Ghana 431 - - - - -
Nigeria - - - - - -
Sierra Leone 20 - - - - -
Kenya 799 - - - - -
Tanzania - - - - - -
Uganda 1,567 1,180 158 - - -
Rwanda 123 74 - - - -
Zambia - - - - -
Total 10,889 7,540 4,896 6,937 4,107 6,370
The table below includes Stage 2 and 3 assets that were modified
with the related modification loss suffered by the Group.
In USD'000
Particulars Stage 2 Stage 3
Gross Amortised
cost 4,208 2,922
Net modification
loss (1,188) (327)
Amortised cost
after
3,020 2,595
modification loss
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued)
29.4 Financial Risk (continued)
29.4.2 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 its 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 2020 the Company had a cash balance of USD
90.2 million (2019: USD 84.5 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.
The table below shows undiscounted cash flow analysis of
liabilities according to when they are expected to be recovered or
to be settled.
Liabilities
FY2020
in USD'000 Sub-total Sub-total No fixed
3-12 Over 5
On demand <3 months months 1-12 months 1-5 years years >12 months maturity Total
Debt issued
and other borrowed
Fund 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 liabilities - 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 68,649 166,092 278,721 146,334 15,790 162,124 23,394 464,239
Liabilities Sub-total Sub-total No fixed
On <3 3-12 1-12 1-5 Over >12
FY2019 demand months months months years 5 years months maturity Total
in USD'000
Debt issued
and
other
borrowed
funds 10,383 12,957 125,108 148,448 174,389 - 174,389 - 322,837
Due to
customers 7,941 27,086 42,914 77,941 167 - 167 - 78,108
Lease
liability - 27 471 498 2,893 590 3,483 - 3,981
Derivative
Liabilities - 112 1,319 1,431 392 - 392 - 1,823
Other
liabilities 442 4,239 4,090 8,771 118 - 118 23,192 32,081
Provisions - - 72 72 22 - 22 - 94
18,766 44,421 173,974 237,161 177,981 590 178,571 23,192 438,924
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.4 Financial Risk (continued)
29.4.2 Liquidity risk (continued)
The table below shows undiscounted cash flow analysis of assets
according to when they are expected to be recovered or to
settled.
Assets Sub-total Sub-total No fixed
3-12 1-12 Over
FY2020 On demand <3 months months months 1-5 years 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
Assets Sub-total Sub-total No fixed
3-12 1-12 Over
FY2019 On demand <3 months months months 1-5 years 5 years >12 months maturity Total
in USD'000
Cash at bank
and in hand 63,966 - 20,269 84,235 291 - 291 - 84,526
Loans and advances
to customers 1,278 65,412 305,770 372,460 39,844 - 39,844 - 412,304
Due from banks - 3,919 9,400 13,319 3,508 - 3,508 20,432 37,259
Equity investments
at FVOCI - - - - - - - 232 232
Derivative assets - - - - - - - - -
Other assets - 371 8,087 8,458 1,941 112 2,053 14 10,525
65,244 69,702 343,526 478,472 45,584 112 45,696 20,678 544,846
Changes in liabilities arising from financing activities:
Foreign
1 January Non cash exchange 31 December
FY 2020 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
Foreign
1 January Non cash exchange 31 December
FY 2019 2019 Cash flows movement movement 2019
USD'000 USD'000 USD'000 USD'000 USD'000
Debt issued and borrowed
funds 280,082 49,732 - (6,977) 322,837
Lease liabilities 3,723 (4,227) 4,562 (77) 3,981
Total liabilities from
financing activities 283,805 45,505 4,562 (7,054) 326,818
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued)
29. 4 Financial Risk (continued)
29.4.3 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 has entered into
hedging agreements. The Group applies hedge accounting to the
foreign currency loans and related hedge contracts. Reference is
made to note 36.
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 do 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 FX
translation translation
FX FX
translation translation
reserve reserve
after Movement after Movement
reserve reserve
Actual Actual
-10% rate -10% rate
2020 2020 2020 2019 2019 2019
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa (22,987) (27,440) (4,453) (20,998) (24,392) (3,395)
East Africa (1,477) (2,967) (1,490) (839) (2,246) (1,357)
South Asia (18,402) (23,979) (5,110) (16,863) (21,987) (5,125)
South East
Asia 137 (1,745) (1,882) (2,035) (3,985) (1,950)
Non-operating
entities (362) 89 (17) (308) (314) (5)
Total (43,091) (56,042) (12,952) (41,043) (52,924) (11,832)
Analysis of the actual exchange rate fluctuations against the
USD for the period 2020 shows different trends for the all
operating currencies. The annual exchange rate fluctuations are
between -1% and 33%, but most moved within -1% to 9%. 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 2020 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 2020 a 10% downward movement of FX rates
against the USD has a negative impact on the foreign currency
exchange result of USD 0.8 million (2019: USD 1.5 million). The
higher impact on the result of the Company results from increase in
short term intercompany USD loans which cannot be hedged.
Simulation: Foreign exchange profit and loss
Foreign Foreign
Foreign
exchange Foreign exchange
exchange
exchange profit
profit profit and
and loss loss after Movement Movement
profit and loss
and loss after
actual -10% rate
actual -10% rate
2020 2020 2020 2019 2019 2019
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
West Africa (94) (212) (117) (208) (449) (241)
East Africa 24 (604) (628) (39) (347) (308)
South Asia (192) (204) (12) 10 154 144
South East
Asia 842 797 (45) 199 (455) (654)
Non-operating
entities (74) (114) (40) (257) (739) (482)
Total 506 (337) (842) (295) (1,836) (1,541)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued) 29.4 Financial Risk (continued)
29.4.4 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. 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:
2020 2019
Decrease Effect on profit Effect on profit
Increase in in before before
Basis points Basis points tax tax
USD'000 USD'000 USD'000 USD'000
USD +100 -100 397 (425) 527 (527)
PKR +100 -100 127 (127) 137 (137)
INR +100 -100 159 (159) 213 (213)
29.5 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. There is uncertainty over the
timing and the methods of transition in some jurisdictions that the
Group operates in. The Group anticipates that IBOR reform will
impact its risk management and hedge accounting. In terms of
non-hedged loans, the Group has loans linked to USD LIBOR which
will mature after cessation date. The Group is in the process of
amending contracts of those affected loans.
The treasury and risk department have started the process to
monitor and manages the Group's transition to alternative rates.
The committee 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 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 (ISDA)'s master agreements.
ISDA has published new fallbacks for derivatives linked to key
interbank offered rates (IBORs) in January 2021 to ensure a viable
safety net is in place in the event an IBOR becomes permanently
unavailable while firms continue to have exposure to that rate. The
fallbacks for a particular currency will apply following a
permanent cessation of the IBOR in that currency. For derivatives
that reference LIBOR, the fallbacks in the relevant currency would
also apply following a determination by the UK Financial Conduct
Authority that LIBOR in that currency is no longer representative
of its underlying market. In each case, the fallbacks will be
adjusted versions of the risk-free rates identified in each
currency. The Group plans to adhere to the protocol.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
29. RISK MANAGEMENT (continued)
29.5 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 2020. 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 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 cessation date. The Group is in
the process of amending contracts of those affected loans.
29.6 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 of 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.
29.7 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 YEARED 31 DECEMBER 2020
30. COMMITMENTS
The Group agreed certain commitments to BC Partners under the BC
model in ASAI India. Reference is made to note 13. As per the
current model ASAI India holds 5% risk on the portfolio managed on
behalf of IDFC. Similar commitments were agreed with MAS Financial
Services Ltd in India. As of 31 December 2020, the risk of the
Group on such BC portfolio stands at USD 2.2 million (2019: USD 2.5
million).
There are no other contingent liabilities at the balance sheet
date except for the pending litigation claims disclosed in note
33.
31. RELATED PARTY DISCLOSURES 31.1 Key management personnel
In 2017 ASAI Management Services Ltd ("AMSL") was incorporated
by the Company in Bangladesh and from 1 April 2018 all staff
deployed in Dhaka are on the pay-roll of AMSL or ASAIH. 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, risk management, audit, IT,
human resource management, and corporate secretarial functions for
the Group. The Amsterdam office, which hosts executive management
(including the Chief Executive Officer), provides specialised
accounting, finance, legal, corporate and compliance functions
along with investment, treasury, (international) tax and funding,
as well as the management of business development projects. All
Amsterdam based staff are on the payroll of ASAI NV. In 2020, all
Dhaka based Directors were also brought under the payroll of ASAI
NV.
The remuneration for the Non-Executive Chairman, CEO and
Executive Director are paid by ASA International Group plc.
Remuneration of Directors
In 2020, the Directors of the Group received total compensation
of USD 1.2 million (2019: USD 1.2 million ).
Total remuneration to key management personnel of the Group
2020 2019
USD'000 USD'000
Short-term employee benefit 2,018 1,919
Post-employment pension
and medical benefit - -
Termination benefit - -
Share based payment transaction - -
2,018 1,919
Total remuneration takes the form of short-term employee
benefits. In 2020, total remuneration paid to key management
personnel of the Group amounted to USD 2.0 million (2019: USD 1.9
million ).
No retirement benefits are accruing to Directors under defined
benefit schemes. The aggregate of emoluments and amounts receivable
under incentive schemes of the highest paid Director was USD
425K.
31.2 Reporting dates of subsidiaries
All of the Group's subsidiaries have reporting dates of 31
December, with the exception of ASAI India, Proswift, 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 YEARED 31 DECEMBER 2020
31. RELATED PARTY DISCLOSURES (continued) 31.3 Subsidiaries
Country of Incorporation 2020 ownership 2019 ownership
ASAIH subsidiaries:
ASA Consultancy Ghana 100% 100%
ASA India India 74.70% 74.70%
Pagasa Consultancy India 99.99% 99.99%
Pinoy India 99.99% 99.99%
Proswift Consultancy: India 99.99% 99.99%
1
ASA India India 15.31% 15.31%
2 1
Pagasa The Philippines N/A N/A
PT PAGASA Consultancy Indonesia 99.00% 99.00%
A1 Nigeria Nigeria 100% 100%
ASHA MFB Nigeria 99.99% 99.99%
3 2
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 100% 100%
ASA S&L Ghana 100% 100%
4 3
CMI Lanka Sri Lanka 99.99% 99.99%
Lak Jaya Sri Lanka 97.14% 97.14%
ASA Lanka Sri Lanka 100% 100%
5 4
ASA Kenya Kenya 100% 100%
ASA Uganda Uganda 99.99% 99.99%
AMSL Bangladesh 95% 95%
ASAI I&M The Netherlands 100% 100%
1 Calcutta High court approved the merger of ASA India and
Proswift on 19 December 2020. Final Confirmation is pending.
2 ASAI officials/representatives control the governing body and the Board.
3 ASAHA MFB purchased the assets and liabilities of ASIEA . The
process was completed by 1 April 2020.
4 This refers to the beneficial ownership only. The legal ownership is held by CMI.
5 ASAIH holds 0.5% of the shares.
31.4 Relationship Agreement
Relationship agreement with the Controlling Shareholder
Group
The Group, CMI, Catalyst Continuity and Mr. Dirk Brouwer and Mr.
Md. Shafiqual Haque Choudhury (CMI, Catalyst Continuity Ltd and Mr.
Dirk Brouwer and Mr. Md. Shafiqual Haque Choudhury jointly the
"Controlling Shareholders") have entered into a relationship
agreement (the "Relationship Agreement"), the principal purpose of
which is to ensure that the Group will be able, at all times, to
carry out its business independently of the members of the
Controlling Shareholder Group and their respective associates and
that all transactions and relationships between the Group and the
Controlling Shareholder Group are at arm's length and on a normal
commercial basis.
For so long as the Group has a controlling shareholder, the
articles allow for the election of any independent Director to be
approved by separate resolutions of (i) the shareholders' and (ii)
the shareholders excluding any controlling shareholder. If either
of the resolutions is defeated, the Group may propose a further
resolution to elect or re-elect the proposed independent Director
which (a) may be voted on within a period commencing 90 days and
ending 120 days from the original vote, and (b) may be passed by a
vote of the shareholders voting as a single class. Furthermore, in
the event that the Group wishes the Financial Conduct Authority of
the United Kingdom ("FCA") to cancel the listing of the shares on
the premium segment of the official list maintained by the FCA or
transfer the shares to the standard listing segment of the official
list of the FCA, the Group must obtain at a general meeting the
prior approval of (i) a majority of not less than 75% of the votes
attaching to the shares voted on the resolution and (ii) a majority
of the votes attaching to the shares voted on the resolution
excluding any shares voted by a controlling shareholder.
In all other circumstances, each of CMI and Catalyst Continuity
has, and will have, the same voting rights attached to the shares
as all other shareholders.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
31. RELATED PARTY DISCLOSURES (continued) 31.5 Other related parties
A list of related parties with which ASA International has
transactions is presented below. The transactions in 2020 and 2019
and the balances per the end of the year 2020 and 2019 with related
parties can be observed in notes below. Related party transactions
take place at arm's length conditions.
Name of related
party Relationship
Major shareholder (2020: 30.4%,
CMI 2019: 30.4%)
Sequoia Service provider to the Company
ASA NGO Bangladesh Service provider to the Company
MBA Philippines Business partner
Minority shareholder in ASA
IDFC India
ASAICH and Subsidiaries of
CMIIH CMI
Holding company of founders
CMIMC CMI
CMIC Investment manager of CMI
CMII Subsidiary of CMI
ASA Social
Services Service provider to the Parent
CIMS BV Service provider to the Parent
Income from
Expenses Amount owed by Amount
related to owed to
related related
parties parties related parties parties
USD'000 USD'000 USD'000 USD'000
31 December
CMI 2020 - - - 20,466
31 December
2019 - - 173 21,179
31 December
CMIC 2020 - - - -
31 December
2019 1
31 December
Sequoia 2020 158 71 52 60
31 December
2019 109 127 - 68
31 December
ASA Bangladesh 2020 - - - -
31 December
2019 - 61 189 -
31 December
MBA Philippines 2020 603 - 225 457
31 December
2019 745 - 220 125
31 December
ASAICH 2020 - - 108 -
31 December
2019 - - 108 -
31 December
CMIMC 2020 - - - -
31 December
2019 - - - 109
31 December
IDFC 2020 4,166 - 2,187 1,638
31 December
2019 3,903 - 450 701
31 December
Catalyst Continuity 2020 - - - -
31 December
2019 - - 16 -
31 December
CIMS BV 2020 - - 6 -
31 December
2019 - - - -
ASA Social 31 December
Services 2020 - - - -
31 December
2019 - - 13 -
31 December
CMII 2020 - 6 -
31 December
2019 - - - -
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
31. RELATED PARTY DISCLOSURES (continued) 31.6 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 9.99%. ASA
India did not pay any dividend in 2020. 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 2020.
The summarised financial information of Lak Jaya and ASAI India
as at 31 December 2020 is as follows:
31 December 2020 31 December 2019
Lak Jaya ASA India Lak Jaya ASA India
USD'000 USD'000 USD'000 USD'000
Current assets 11,275 163,656 12,196 164,318
Non-current assets 607 6,133 517 2,436
Current liabilities 7,722 145,586 7,681 135,724
Non-current liabilities 467 2,435 440 1,940
Net operating
income 1,718 2,072 3,481 16,589
Profit (805) (6,520) 136 4,823
Non-controlling
interest 106 2,175 131 2,907
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 2020 31 December 2019
Lak Jaya ASA India Lak Jaya ASA India
USD'000 USD'000 USD'000 USD'000
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 % 2.860% 9.994% 2.860% 9.994%
31 December 2020 31 December 2019
Lak Jaya ASA India Lak Jaya ASA India
USD'000 USD'000 USD'000 USD'000
Summarised statement of
financial position:
Net assets 3,694 21,768 4,592 29,090
Net assets attributable
to NCI 106 2,175 131 2,906
Summarised statement of profit or loss
and other comprehensive income:
Net operating income 1,718 2,072 3,481 16,589
Profit after tax (805) (6,520) 136 4,823
Profit allocated to
NCI (23) (652) 4 482
Dividend paid to NCI - - - -
Summarised statement
of cash flow:
Cash flow from operation
activities 177 3,624 1,660 (22,053)
Cash flow from investing
activities (3) (77) (29) (326)
Cash flow from financing
activities (225) (9,535) (1,612) 42,395
Net cash flow attributable
to NCI (1) (598) 1 2,000
Reference to note 31.3, the remaining shares in Pagasa
Consultancy, Pinoy, Proswift Consultancy, A1 Nigeria, ASHA Nigeria,
ASA Pakistan, ASA Tanzania, PPFC, ASA Uganda, CMI Lanka and AMSL is
held either by employee's 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 YEARED 31 DECEMBER 2020
32. 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 contracts. Out of total loans of USD 342 million, USD
198 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 2020, the balance for credit lines with breached covenants
without waivers is USD 31.5 million, which are fully drawn. The
Group has received waivers amounting to USD 10 million and fully
repaid loans amounting to USD 6.9 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 2021.
The Company expects the operating environment to remain
challenging in many countries. Although we assume that the
disruption caused by COVID-19 will continue to reduce over time,
the pandemic will still have a material impact on the financial
performance of the Group in 2021 in terms of overdue and write-offs
on the loan portfolio, the disbursement of new loans, and the
profitability of the Group as some subsidiaries are facing new
waves of infections. We expect that in some markets the overdue
will remain temporarily high.
The Reserve Bank of India proposed new uniform regulations for
all lenders in microfinance, including banks, which had fewer
restrictions so far compared to NBFC-MFIs. This may have a positive
impact on NBFC-MFIs, including ASA India. There is a threat of
government intervention, including possible loan and/or interest
waivers, in the microfinance sector in the State of Assam following
aggressive lending practices in the certain districts of the
State.
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 could have a
material impact on our performance in that country.
At the current time, it is not possible to estimate the
financial impact on the Group of the above mentioned 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 incidents have been treated as post-balance sheet
non-adjusting events.
33. CONTINGENT LIABILITIES ASAI 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) 2011-2012 and
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. ASAI 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 commissioner of IRD. No provision is taken in the
financial statement against such demand as management concludes
that the merit of such demand is low.
ASA Uganda
Demand was raised by the Uganda Revenue Authority ('URA') for
2016-2020 amounting to USD 288K by disallowing certain expenses.
The management filed an appeal to the Appellate tribunal against
such order. The matter is resolved in March 2021 at USD 57K.
34. 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 2020, the Group and its subsidiaries were in full
compliance with minimum regulatory capital requirements.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
35. 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
2020 2019 2020 2019
USD'000 USD'000 USD'000 USD'000
ASSETS
Equity investments at FVOCI 238 232 238 232
Derivative assets 708 - 708 -
Loans and advances to customers 380,122 412,304 380,122 412,304
Due from banks 73,279 37,259 73,279 37,259
Other assets 7,057 5,401 7,057 5,401
90,165 84,526 90,165 84,526
Cash at bank and in hand
LIABILITIES AND EQUITY
Financial liabilities measured
at amortised cost
Debt issued and borrowed
funds 342,186 322,837 342,186 322,837
Due to customers 80,174 78,108 80,174 78,108
Derivative liabilities 2,147 1,823 2,147 1,823
Other liabilities 33,855 32,081 33,855 32,081
-- 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 term 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.
36. 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.
Swap
At 31 December 2020, the Group had two cross-currency interest
rate swap agreements in place.
1) A swap with a notional amount of USD 3 million was entered on
25 July 2019 by ASAI India whereby ASAI India pays a fixed rate of
interest of 11.8% in Indian Rupee (INR) and receives interest at a
variable rate equal to six months 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 months LIBOR +4.3% USD loan.
2) Another swap with a notional amount of Euro 10 million on 9
December 2019 by the same whereby the ASAI India pays a fixed rate
of interest of 12.55% in INR and receives interest at a variable
rate equal to six months 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 months Euribor +4.3% Euro loan.
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
36 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 2020 in
relation to the foreign currency hedges.
Reference is made to note 29.4.3 for the strategy for currency
exchange risk. Additional information on the hedged items and
hedging instruments as per 31 December 2020 is provided below:
ASA Sierra
As at 31 December 2020 ASA Pakistan Leone ASA Myanmar ASA Tanzania ASA India Total
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
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
36 HEDGE ACCOUNTING (continued)
As at 31 December 2019 ASA Pakistan PPFC ASA Myanmar ASA Tanzania ASAI India Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Fair value of Derivative
assets - - - - - -
Fair value of Derivative
liabilities 717 - 865 77 164 1,823
Notional amount hedged foreign
currency loans 26,508 - 10,300 2,500 16,141 55,449
Period in which the cash
flows are expected to occur: - - - - - -
cash flows in 2020 26,508 - 6,500 2,500 644 36,152
cash flows in 2021 - - 1,800 - 641 2,441
cash flows in 2022 - - 2,000 - 14,856 16,856
Total cash flows 26,508 - 10,300 2,500 16,141 55,449
Expected period to enter
into the determination of
profit or loss:
amortisation of forward points
in 2020 1,420 - 590 80 33 2,123
amortisation of forward points
in 2021 - - 266 - 33 299
amortisation of forward points
in 2022 - - 32 - 30 62
Total amortisation of forward
points 1,420 - 888 80 96 2,484
Amounts recognised in OCI
during the period:
for amortisation of forward
points/currency basis spread 1,932 - 990 204 3 3,129
for adjustment of net interest
on swap - - - - 117 117
for changes in fair value
of the forward contracts/
swaps 1,482 (37) (1,255) (262) (164) (236)
for recycling of FX result
of foreign currency loans (3,488) 3 381 102 (290) (3,292)
Total amounts recognised
in OCI during the period (74) (34) 116 44 (334) (282)
Changes in fair value
of hedging instruments
Hedge
ineffectiveness:
Effective Recognised
portion: in
Recognised income
As at 31 December 2019 in OCI statement Total
USD'000 USD'000 USD'000
Cash flow hedge
Forward contracts 396 - 396
Cross-currency interest rate swap (74) - (74)
(322) - (322)
Changes in fair value
of hedging instruments
Hedge
ineffectiveness:
Effective Recognised
portion: in
Recognised income
As at 31 December 2019 in OCI statement Total
USD'000 USD'000 USD'000
Cash flow hedge
Forward contracts 52 - 52
Cross-currency interest rate swap (334) - (334)
(282) - (282)
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
37. 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 has been received against breached
covenants. Those borrowings are presented on demand.
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 - 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
Within 12 After 12
As at 31 December 2019 months months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in hand 84,235 291 84,526
Loans and advances to
customers 372,460 39,844 412,304
Due from banks 13,319 23,940 37,259
Equity investment at FVOCI - 232 232
Property and equipment - 5,331 5,331
Right-of-use assets 1,085 4,797 5,882
Deferred tax assets - 3,865 3,865
Derivative assets - - -
Other assets 8,458 2,067 10,525
Goodwill - 34 34
Total assets 479,557 80,401 559,958
Liabilities
Debt issued and other
borrowed funds 148,448 174,389 322,837
Due to customers 77,941 167 78,108
Retirement benefit liability 32 3,341 3,373
Current tax liability 6,416 - 6,416
Deferred tax liability 7 69 76
Lease liability 498 3,483 3,981
Derivative liabilities 1,431 392 1,823
Other liabilities 8,771 23,310 32,081
Provisions 72 22 94
Total liabilities 243,616 205,173 448,789
Net 235,941 (124,772) 111,169
NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
38. 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 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:
2020 2019
USD'000 USD'000
Net profit attributable to ordinary
equity holders of the
-720 34,011
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 -0.01 0.34
Diluted earnings per share -0.01 0.34
The Company has applied the number of shares issued by ASA
International Group plc as at 31 December 2020 and 31 December
2019. There have been no transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date
of the completion of the unaudited preliminary financial statements
which would require the restatement of EPS. No dividend is declared
for the year 2020 (2019: USD 7.3 million).
The following table shows the
dividend per share:
Dividend per share 0.00 0.07
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
Notes 2020 2019
USD'000 USD'000
Interest and similar income 2 15
Dividend income 1,000 30,683
Net revenue 1,002 30,698
Personnel expenses 39. (1,177) (1,167)
Professional fees 39.1. (1,404) (1,430)
Administrative expenses (1,236) (103)
Exchange rate differences (5) 119
Total operating expenses (3,822) (2,581)
Profit before tax (2,820) 28,117
Profit/Total comprehensive
profit for the period, net
of
(2,820) 28,117
tax
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2020
Notes 2020 2019
USD'000 USD'000
ASSETS
Cash at bank and in hand 359 1,345
Due from banks 14.1. 20,465 20,432
Investment in subsidiaries 40. 120,684 120,684
Other assets 41. 274 127
TOTAL ASSETS 141,782 142,588
EQUITY AND LIABILITIES
EQUITY
Issued capital 42. 1,310 1,310
Retained earnings 44. 92,508 95,328
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT 93,818 96,638
LIABILITIES
Other liabilities 45. 47,964 45,950
TOTAL LIABILITIES 47,964 45,950
TOTAL EQUITY AND LIABILITIES 141,782 142,588
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF CHANGES IN
EQUITY
FOR THE YEARED 31 DECEMBER 2020
Redeemable
preference Retained
Issued capital shares earnings Total
USD'000 USD'000 USD'000 USD'000
At 1 January 2019 1,310 66 74,511 75,887
Profit for the period - - 28,117 28,117
Total comprehensive loss for the
period 1,310 66 102,628 104,004
Redemption of redeemable preference
shares - (66) - (66)
Dividend - - (7,300) (7,300)
At 31 December 2019 1,310 - 95,328 96,638
At 1 January 2020 1,310 - 95,328 96,638
Profit 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
UNAUDITED PRELIMINARY STATUTORY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2020
Notes
2020 2019
USD'000 USD'000
OPERATING ACTIVITIES
Profit before tax (2,820) 28,117
Adjustment for movement in:
Operating assets 46. (180) 1,626
Operating liabilities 46. 1,514 (21,098)
Non-cash items 46. - -
Net cash flows used in operating
activities (1,486) 8,645
FINANCING ACTIVITIES
Dividend paid - (7,300)
Loan received 500 -
Net cash flows used in financing
activities 500 (7,300)
Net increase in cash and
cash equivalents (986) 1,345
Cash and cash equivalents
at the beginning of the period 1,345 -
Cash and cash equivalents
as at 31 December 359 1,345
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
Separate unaudited preliminary financial statements
The accounting policies applied in the unaudited preliminary
statutory financial statements are similar to those used in the
unaudited preliminary consolidated financial statements except for
investments in subsidiaries. Investments in subsidiaries are
accounted in the unaudited preliminary 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.
TOTAL OTHER OPERATING
39. EXPENSES Notes
2020 2019
Total operating expenses
include the following
items: USD'000 USD'000
Personnel expenses (1,177) (1,167)
Professional
fees 39.1. (1,404) (1,430)
Administrative
expenses (1,236) (103)
(3,817) (2,700)
2020 2019
USD'000 USD'000
Professional
39.1. fees
Audit service
fee (976) (989)
Other professional
fees (428) (440)
(1,404) (1,429)
INVESTMENTS IN
40. SUBSIDIARIES 2020 2019
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
2020 2019
Name of Company Country Nature of Business
Ownership Ownership
ASA International MFI Holding
Holding Mauritius Company 100% 100%
ASA International MFI Holding
NV Netherlands Company 100% 100%
41. OTHER ASSETS 2020 2019
USD'000 USD'000
The other assets comprised
the following:
Other receivables 244 104
Advances and
prepayments 30 23
274 127
42. ISSUED CAPITAL
100 million ordinary shares of GBP 1.00 each and after capital
reduction of GBP 0.01 each. No movement occurred during 2020 and
2019.
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
43. REDEEMABLE PREFERENCE SHARES
50,000 redeemable preference shares
of GBP 1.00 each.
2020 2019
USD'000 USD'000
Movements in redeemable preference shares
Amount at the beginning of the period -66
Issuance of redeemable preference
shares -(66)
Balance at the end of the period --
The redeemable preference shares were issued to CMI on 15 May
2018 to ensure sufficient paid-up share capital to apply for a
trading certificate. The issue was on an "undertaking to pay" basis
which provided that CMI would pay for these shares on 15 May 2023
or, if sooner, upon a written demand by the Company. On 30 May
2019, all of these redeemable preference shares were redeemed by
the Company in compliance with the requirements of the Company's
articles of association and the Companies Act 2006.
44. RETAINED EARNINGS 2020 2019
USD'000 USD'000
Total retained earnings are calculated as follows:
Balance at the beginning
of the period 95,328 74,511
Capital reduction - -
Dividend - (7,300)
Result for the period (2,820) 28,117
Balance at the end of
the period 92,508 95,328
Profit for the period
Attributable to equity
holders of the parent (2,820) 28,117
45. OTHER LIABILITIES Notes 2020 2019
USD'000 USD'000
Short-term liabilities
Accrued audit fees 542 489
Accrued cost 199 76
Other payables intercompany 3,052 1,747
3,793 2,312
Long-term liabilities
Intercompany loan 500
Escrow liability to CMI 14.1. 20,465 20,432
Purchase price for ASAI
NV to ASAIH 23,206 23,206
44,171 43,638
47,964 45,950
46. ADDITIONAL CASH FLOW INFORMATION 2020 2019
USD USD
Changes in operating assets
Due from banks (33) (294)
Other assets (147) 1,920
(180) 1,626
Changes in operating liabilities
Other liabilities 1,514 (21,098)
1,514 (21,098)
Changes in non-cash items
Foreign exchange result - -
- -
NOTES TO THE UNAUDITED PRELIMINARY STATUATORY FINANCIAL
STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
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
After 12
As at 31 December 2020 months 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
Within
12
After 12
As at 31 December 2019 months months Total
USD'000 USD'000 USD'000
Assets
Cash at bank and in
hand 1,345 - 1,345
Due from banks - 20,432 20,432
Investment in subsidiaries - 120,684 120,684
Other assets 127 - 127
1,472 141,116 142,588
Liabilities
Other liabilities 2,312 43,638 45,950
Net (840) 97,478 96,638
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