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