Financial statements for the period - MIKRO ALDI...Mostly women from Bosnian-Podrinja and Sarajevo...

Microcredit foundation “MIKRO ALDI" - GORAŽDE

Financial statements for the period

ended 31 December 2008

Microcredit organisation "MIKRO ALDI"

Contents

Page

Responsibility for the financial statements 2

Independent Auditor's Report 4

General information 5

Organizational Structure 8

Ratio analysis 9

Financial Statements:

Income Statement 10

Balance sheet 11

Statement of changes in equity 12

Cash flow statement for the year 13

Notes to the Financial Statements 14-36

2

No: 200 - - 04/09

Date: 7 April 2009

Responsibility for the financial statements

This statement is issued related to Audit of Financial Statements of Micro landing

foundation MIKRO ALDI for the period ended December 31, 2008.

For the purpose of expressing of opinion do the financial statements give true and fair view

of the financial position of MIKRO ALDI as at December 31, 2008, results of its

operations and cash flow for the period than ended, we as the Management are responsible

for ensuring that financial statements are prepared for each financial year in accordance

with the Law on accounting and Auditing of the Federation of Bosnia and Herzegovina

(Official Gazette of the Federation of Bosnia and Herzegovina No 32/05) in accordance

with International Financial Reporting Standards (IFRS) and International Standards of

Audit as published by the International Accounting Standards Board (IASB).

After making enquiries, the Management has a reasonable expectation that the bank has

adequate resources to continue in operational existence for the foreseeable future. For this

reason, the Management continues to adopt the going concern basis in preparing the

financial statements.

In preparing those financial statements, the responsibilities of the foundation

include ensuring that:

suitable accounting policies are selected and then applied consistently;

judgements and estimates are reasonable and prudent;

applicable accounting standards are followed, subject to any material departures

disclosed and explained in the financial statements; and

the financial statements are prepared on the going concern basis unless it is

inappropriate to presume that the foundation will continue in business.

The Management is responsible for keeping proper accounting records, which disclose with

reasonable accuracy at any time the financial position of the foundation and must also

ensure that the financial statements comply with the Accounting Law and Audit of

Federation of Bosnia and Herzegovina. The Management is also responsible for

safeguarding the assets of the foundation and hence for taking reasonable steps for the

prevention and detection of fraud and other irregularities.

Signed on behalf of the Management

Ferida Softić, Director

Safija Pleh, Finance manager

Panorama bb Tel: (++ 387) 38 226 456

73000 Goražde (++ 387) 38 221 004

Bosna i Hercegovina Fax: (++ 387) 38 221 004

www. mikroaldi.org E-mail [email protected]

mailto:[email protected]

REVIK D.O.O. SARAJEVO AUDIT, ACCOUNTING AND CONSULTING

Branilaca Sarajeva 20

tel./fax (00387) (33) 200-383 and 660-571

e-mail: revik@ bih.net.ba

2

To the Board of directors

Micro credit foundation "MIKRO ALDI"

Report of the Independent Auditors

Introduction

We have audited the financial statements of Micro credit foundation "MIKRO ALDI" –

Goražde on 31 December 2008. These financial statements are the responsibility of the

"MIKRO ALDI"’s management. Our responsibility is to express an opinion on these

financial statements based on our audit.

Scope

We conducted our audit in accordance with International Standards on Auditing. Those

Standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. An audit includes

examining on a test basis,evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant

estimates made by management. as well as evaluating the overall presentation of the

financial statements. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Micro credit foundation "MIKRO ALDI" - Goražde as at 31 December 2008

and the results of its operations and its cash flows for the period from 1 January 2008 to 31

December 2008 in accordance with International Financial Reporting Standards.

Revik d.o.o. Sarajevo

Enver Mulalić , partner

Edin Udovčić, certified auditor

Sarajevo, 7 April 2008

Microcredit foundation "MIKRO ALDI" Goražde

3

1. General Information

Establishment and activities

Micro credit organization “MIKRO-ALDI”, as legal predecessor of microcredit foundation

MCF "MIKRO- ALDI", is established in Federation of Bosnia and Herzegovina in accordance

with the Law on micro credit organizations (“Official Gazette of Federation B&H, number

24/00), under the number R1M-5/00 and it has a license issued by the Federal Ministry of

Social Affairs, Displaced Persons and Refugees to work as a micro credit institution, which

provides loans to micro entrepreneurs (entrepreneurs with low income). This program is part

of the overall efforts to stimulate the economic growth and post-war recovery.

Microcredit project was started as a part of the Association of Citizens for Local Initiatives

(ALDI) in Goražde. Microcredit operations were initiated with the support of the UNHCR

loan assets project and technical assistance by the Local Initiatives Department until 1999.

After 1999, the microcredit project received additional loan fund from OXFAM and NOVIB.

Microcredit organization “MIKRO-ALDI” was registered on December 14, 2000 in

accordance with the Law on microcredit organization (“Official Gazette of Federation B&H,

number 24/00), under the number 05-4-35-M1-1796/00 as a non-profit, nongovernmental and

non-deposit organization.

In accordance with the Decision on establishment from 2000, ALDI is the founder of the

microcredit organization MIKRO-ALDI. ALDI provided the following assets:

1. Founder’s equity in the amount of KM 24,825 (furniture and equipment)

2. Transfer of all rights and liabilities related to microcredit activities: microcredit fund

through contract with UNHCR in the amount of KM 200,000; microcredit fund through

contract with OXFAM in the amount of KM 500,000.

3. In accordance with the Decision of the Board of Directors, Association of Citizens „ALDI“

as of September 15, 2001 transferred the ownership of KM 104.000 to „MIKRO-ALDI“ into

microcredit fund and the Decision is valid as of October 01, 2001.


4

Main mission and vision of microcredit foundation “MIKRO-ALDI”:

Mission - MIKRO ALDI mission is to provide suitable financial services to economically

active population with low-income rate, in order to improve living conditions within local

economies that enables creation of an environment for development of an opened,

democratically orientated society with economically independent population.

Vision - The vision of MIKRO ALDI is to become leading microcredit institution in area of

Southeast Bosnia and Herzegovina, and to ensure a positive influence to the global trends of

economy development by its long term presence.

Goal - The goal of MIKRO ALDI is to build and develop a long term, self sustainable

institution that will provide microfinance services to low-income population.

Purpose - The purpose of MIKRO ALDI existence is to alleviate poverty among population

through financial services for start-up and development of a small business in order to

contribute the global development of economy.

Clients:

Mostly women from Bosnian-Podrinja and Sarajevo Cantons of Federation of B&H and

southeastern part of Republic Srpska.

Loans are mostly utilized for financing working capital and equipment. The largest portion of

portfolio is invested in agricultural activities followed by trade, service, and small-scale

production.

Credit methodology:

“MIKRO-ALDI” works in accordance with the solidarity group methodology, as well as in

accordance with the individual methodology.

Group crediting means forming of solidarity groups made of 2-5 women, microentrepreneurs.

All members of the solidarity group are guarantor to each other (no other form of collateral is

used).

Loan sizes grow with each new loan cycle. Loan cycles are from 3 to 36 months, with monthly

repayment of principal and interest (12% up to 18% annually), average 15%.

Legal status:

New Law on Microcredit organisation was published in Official Gazette of Federation B&H,

at 4 October 2006 prescribing that microcredit organisations have obligation to adjust their

legal status in accordance with stipulations of this law within 12 months.


5

Federal Ministry of Justice issued a decree number 04-05-2-1708/07 at 30 April 2008 on

registration of Microcredit foundation "MIKRO ALDI" Goražde in Registar of microcredit

foundation in Federation B&H.

Board of directors

1. Ibrahim Imamović President

2. Vesna Nemec – Klisura Member

3. Hasan Đozo Member

4. Mehmed Ćulov Member

5. Elvedina Zec Member

Management Board

1. Ferida Softić Director

2. Safija Pleh Financial manager

3. Selma Pilav Credit manager

Audit committee

1. Mirsad Žuga President

2. Hazira Živojević Member

3. Mirza Hadžić Member

Activities of the Organisation are performed through:

1. Central office Goražde, Panorama bb street

2. Branch office Višegrad, Kralja Petra I bb street

3. Branch office Pale, Nikole Tesle bb street

4. Office Foča, Krajiška 20 street

5. Branch office Trebinje, Trebinjskih brigada 5 street .


6

Organizational Structure on 31 December 2008


7

Ratio analysis

Efficiency ratios December

31, 2008

December

31, 2007

Active loan clients/ number of staff 126 135

Active clients/number of loan officers 196 207

Net outstanding portfolio/number of loan officers 456,919 370,030

Percentage total operating expenses/ Average net portfolio 23.72 % 24.04%

Financial ratios December

31, 2008

December

31, 2007

Return on assets: Net operational income/average total assets 6.35 % 7.25 %

Return on equity: Net operational income/average equity 15.11 % 16.09%

Yield on portfolio: Interest income and/or fees / average net

portfolio outstanding

30.60 %

31.93%


8

Income Statement

(All amounts expressed in KM)

Notes

Year ended 31

December 2008

Year ended 31

December 2007

Interest income and loan fee income 3 1,952,875 1,484,423

Interest expense 3 (328,380) (200,320)

Operating income 3 1,624,495 1,284,103

Operating expenses 4 (891,086) (810,498)

Bad and doubtful debts expense 6 (286,216) (83,197)

Operating expenses (1,177,302) (893,695)

Other income 7 141,752 44,260

Net operational income/ expense 588,945 434,668

Grant income 8 16,588 25,115

Net income after grants 605,533 459,783

The accompanying notes are an integral part of these financial statements


9

Balance sheet


Notes As at 31

December 2008

As at 31

December 2007

ASSETS

Cash and cash equivalent 10 444,263 315,874

Deposits with banks 11 80,000 20,000

Loans and advances to customers 12 7,100,295 5,595,450

Other assets 13 79,846 39,816

Tangible assets 14 198,878 196,433

Intangible assets 15 7,934 3,805

Total assets 7,911,216 6,171,378

LIABILITIES AND EQUITY

Other liabilities 16 100,363 118,790

Deferred income (donations) 17 74,781 85,827

Liabilities for loans 18 4,473,143 3,309,365

Total liabilities 4,648,287 3,513,982

Association of citizens "ALDI" 19 128,825 128,825

Capitalization 700,000 700,000

Retained earnings 20 2,434,104 1,828,571

Total equity 3,262,929 2,657,396

Total equity and liabilities 7,911,216 6,171,378



10

Statement of changes in equity

(All amounts expressed

in KM)

Founder's

equity

Association

of citizens

"ALDI"

Loan fund

Association

of citizens

"ALDI"

Loan fund

UNHCR

Loan

Fund

OXFAM

Retained

earnings

/(loss)

Total

Balance at 31 December 2005

24,825

104,000

200,000

500,000

939,544

1,768,369

Net result for the period - - - - 429,244 429,244 Balance at 31 December 2006

24,825

104,000

200,000

500,000

1,368,788

2,197,613


24,825

104,000

200,000

500,000

1,828,571

2,657,396


24,825

104,000

200,000

500,000

2,434,104

3,262,929



11

Cash flow statement


December 31,

2008

December 31,

2007

Net operational result 605,533 459,783

Depreciation 45,291 33,625

Cash flows from operating profits before changes in

operating assets and liabilities 650,824

493,408

Changes in operating assets and liabilities

Net increase in loans and advances to customers (1,504,845) (1,488,844)

Net increase in other assets (40,030) (598)

Net decrease /( increase) in other liabilities (18,427) 18,024

Net cash from operating activities (1,563,302) (1,471,418)

Cash flows from investing activities

Purchase of property and equipment (44,255) (53,333)

Purchase of intangible fixed assets (7,610) (2,687)

Net cash from investing activities (51,865) (56,023)

Cash flow from financing activities

Net increase / (decrease) in deposits with banks (60,000) 165,633

Net increase in liabilities for loans 1,163,778 1,076,291

Net increase /( decrease) of deferred income (11,046) 12,894

Net cash from financing activities 1,092,732 1,254,818

Net decrease / (increase) in cash and cash equivalents 128,389 220,785

Cash and cash equivalents at beginning of year 315,874 95,089

Cash and cash equivalents at end of the year 444,263 315,874



12

Notes to the financial statements

1. Summary of significant accounting policies

The principal accounting policies adopted for the preparation of the Financial Statements of

the "MIKRO ALDI" and principal risks which have to be taken into account when assessing

these accounting policies are set out below:

(a) Risks

Concentration of risks that may have a significant impact on the "MIKRO ALDI" is as

follows:

Credit risk, the loan portfolio of the "MIKRO ALDI" consists only of micro

enterprises and citizens;

Direct and indirect dependence of micro entrepreneurs on the economic situation in

the local environment and wider region

(b) Basis of presentation

The financial statements are prepared in accordance with International Financial Reporting

Standards (IFRS). The financial statements are prepared under the historical cost convention

as modified by the fair valuation of available-for-sale securities, financial assets and financial

liabilities held for trading and all derivative contracts, if any.

The financial statements are stated in the Federation Bosnia and Herzegovina’s official

monetary unit, Konvertibilna Marka (KM), which is pledged to the Euro (EUR 1 = KM

1.95583).


13

(c) Foreign currencies

Transactions denominated in foreign currencies are translated into KM at the official Central

Bank of Bosnia and Herzegovina exchange rate on the date of the transaction. Any gain or

loss resulting from the change in rates of exchange subsequent to the date of transaction is

included in the Statement of Income as a gain or loss from the revaluation of foreign currency

positions.

The exchange rates used for the Financial Statements are the official exchange rates as issued

by the Central Bank of the Bosnia and Herzegovina. As of May 31 / December 31, the

principal exchange rate is:

(in KM) December 31,

2008

December 31,

2007

1 EUR 1.95583 1.95583

(d) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet

when there is a legally enforceable right to set off the recognised amounts and there is an

intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

(e) Interest and Fees Income and Expense

Interest income and expenditures are recognized in income statement on accrual principles.

Anticipated income interest is differed.

Income from basic activity refers to interest income. Financial income relates to interest

earned on time deposits.

Expenses from operational activity are recognized at the moment of increase in liabilities or

decrease in assets.Financial expenditures are expenditures which include interest on borrowed

assets, loan loss cost, etc.


14

Interest income and expenses are recognized in the income statement on an accrual basis.

Interest income is suspended when loans become doubtful of collection by more then 15 days.

Interest income is not recognized until received.

Fees consist of fees related to loans. Loan origination fees are amortized to income over the

life of the loan. (Note 17.)

(f) Donations / Grants

Donations / Grants are assistance by government or other parties in the form of transfer of

resources to the organization. These grants are recognised as income, whenever there is

reasonable assurance that the organisation will comply with the conditions attaching to them

(if any) and the grants will be received.

Donations of fixed assets are recorded as long term accruals and released to the income

statement in the same manner depreciation of the related fixed assets is charged to the income

statement.

There were no non-cash donations.

(g) In kind donation

In - kind donation are benefits or subsidies that the organization receives to support

operations, but which are paid by a third party,

(h) Originated loans and provisions for loan impairment

Loans originated by the Agency by providing money directly to the borrower at draw down

are categorised as Loans and advances to customers and are carried at amortised cost. Third

party expenses are treated as part of the cost of the transaction.

All loans and advances are recognised when cash is advanced to borrowers.

A credit risk provision for loan impairment is established if there is objective evidence that

the Organisation will not be able to collect all amounts due. The amount of the provision is

the difference between the carrying amount and the recoverable amount, being the present

value of expected cash flows including amounts recoverable from guarantees and collateral,

discounted based on the interest rate at inception.


15

The loan loss provision also covers losses where there is objective evidence that probable

losses are present in components of the loan portfolio at the balance sheet date. These have

been estimated based upon historical patterns of losses in each component, the credit ratings

allocated to the borrowers and reflecting the current economic climate in which the borrowers

operate. When a loan is uncollectible, it is written off against the related provision for

impairments, subsequent recoveries are credited to the bad and doubtful debt expense in the

income statement.

If the amount of the impairment subsequently decreases due to an event occurring after the

write-down, the release of the provision is credited to the bad and doubtful debt expense,

In determining the overall level of the provisions required management considers numerous

factors including, but not limited to, the financial condition of the borrower, existence and

quality of collateral, domestic economic conditions, the composition of the loan portfolio and

prior bad debt experience and repayments after year-end.

The following percentages of provisioning are applied for loans in arrears:

Provisioning

Days in arrears 2008 2007

1-15 days 2% -

16-30 days 15% 20%

31-60 days 50% 40%

61-90 days 80% 60%

91-120 days 100% 80%

121-180 days 100% 100%

>180 days (written off) 100% 100%

(i) MIS development costs

MIS development costs are recognised as an expense as incurred. However, expenditure that

enhances and extends the benefits of computer software programmes beyond their original

specifications and lives is recognised as a capital improvement and added to the original cost

of the software. Computer software development costs recognised as assets are amortised

using the straight-line method over their useful lives but not exceeding a period of five years.

Costs associated with the maintenance of existing computer software programmes are

expensed as incurred.


16

(j) Property and equipment

Property and equipment is stated in principal at historical cost less depreciation.

Depreciation is calculated on the straight-line method to write off the cost of each asset to their

residual values over their estimated useful life as follows:

December 31,

2008

December 31,

2007

% %

Buildings 2.0 2.0

Furniture and equipment 10-20 10-20

Vehicles 15.5 15.5

Computer equipment 33.33 33.33

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is

written down immediately to its recoverable amount. Gains and losses on disposal of property

and equipment are determined by reference to their carrying amount and are taken into

account in determining operating profit. Repairs and renewals are charged to the income

statement when the expenditure is incurred.

(k) Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise of balances

with maturity less than 90 days including cash and amounts due from other banks.

(l) Provisions

Provisions are recognised when the Organisation has a present legal or constructive obligation

as a result of past events, it is probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable estimate of the amount of the

obligation can be made.

(m) Reclassification

Certain amounts in the previous year financial statements have been reclassified to conform to

the current year


17

2. Risks associated with financial instruments

In the normal course of business, the Organisation provides to its customers a variety of

financial instruments. These financial instruments involve various degrees of risk as follows:

Credit risk

In conducting business activities, the Organisation is exposed to the possibility that borrowers

may default on their obligations to the Organisation, To minimize this risk the Organisation

evaluates each customer’s credit worthiness on a case-by-case basis, The amount of collateral

obtained, if it is deemed necessary by the Organisation upon the extension of credit, is based

on credit officer's credit evaluation of the client, Collateral held varies but may include

guarantees, payment orders and acceptance letters, The Organisation strives to maintain a

credit risk profile that is diverse in terms of industry and borrower concentration,

Market risk

In the normal course of business, the Organisation is exposed to market risks, Market risks

arise from open positions in interest rate and currency, all of which are exposed to general and

specific market movements,

Currency risk

The Organisation may invest in assets denominated in currencies other than its reporting

currency, the convertible mark (KM), Consequently, the Organisation is exposed to risks that

the exchange rate of the convertible mark relative to other currencies may change in a manner

which has an adverse effect on the reported value of that portion of the Organisation’s assets

which are denominated in currencies other than the convertible mark,

Interest rate risk

The Organisation takes on exposure to the effects of fluctuations in the prevailing levels of

market interest rates on its financial position and cash flows, Interest margins may increase as

a result of such changes but may reduce or create losses in the event that unexpected

movements arise,

Liquidity risk

Liquidity risk arises from the possibility that the Organisation may be unable to satisfy current

and future financial commitments,


18

The Organisation is exposed to calls on its available cash resources from maturing loans

received by the Organisation and loan drawdown, The Organisation does not maintain cash

resources to meet these needs as experience shows that a minimum level of reinvestment of

maturing funds can be predicted with a high level of certainty,

Notes to the Income Statement

3. Net operating income


December 31,

2008

December 31,

2007

Interest income and commission

Interest on loans 1,751,936 1,326,831

Loan fee income 190,444 157,592

Penalty interest 10,495 -

1,952,875 1,484,423

Interest expense

Cost of capital from NOVIB (36,993) (71,260)

Cost of capital from Raiffeisen Bank Sarajevo (78,061) (58,707)

Cost of capital from NLB CBS Banka (32,939) (27,628)

Cost of capital from DBF Microcredit fond - (3,746)

Cost of capital from BLUE ORCHARD (21,550) (19,181)

Cost of capital UniCredit Zarebačka Bank (39,896) (16,075)

Cost of capital Planet Responsibility Fond (42,744) (3,462)

Cost of capital EFSE (67,404) -

Cost of capital from INTESA banka d.d. Sarajevo (3,978) -

Cost of capital from ABS banka d.d. Sarajevo (2,933) -

Cost of capital from PBS banka d.d. Sarajevo (1,882) -

(328,380) (200,320)

Net operating income 1,624,495 1,284,103

All income arises within Federation of Bosnia and Herzegovina and Republika Srpska.

Income from loan fees is charged as 2% of the loan amount when loan is issued, and that

income is deferred during the life time of the loan.


19

4. Operating expenses


December 31,

2008

December 31,

2007

Staff costs (Note 5) 617,171 597,785

Depreciation 45,290 33,625

Bank services 23,232 17,810

Audit fee 6,201 4,680

Education 5,773 11,352

Maintains of equipment 7,575 2,644

Communication 28,398 22,173

Energy 10,022 8,503

Fuel 37,602 45,082

Insurance of fixed assets 7,598 7,466

Stationery 8,397 6,414

Advertisement 8,285 6,652

Rent 16,358 10,742

Membership-AMFI 4,800 4,134

Promotion services 12,577 -

Currency exchange differences incomes - 8,782

Communal and republic fees 7,400 4.000

Fees paid to Bank Agency of Federation BiH and

Republic of Srpska

7,605

-

Tax after deduction and other tax and fees 12,681 -

Other 24,121 18.654

Total 891,086 810,498

5. Staff costs


December 31,

2008

December 31,

2007

Wages and salaries (net) 342,119 320,201

Taxes and contribution on salary 220,023 203,831

Travel costs 2,443 10,539

Temporary services contract 620 17,428

Food allowance 31,416 32,176

Holliday allowance 12,962 13,610

Fees for maternity leave 2,095 -

Other fees 5,503 -

Total (Note 4) 617,171 597,785


20

The average number of persons employed by the "MIKRO ALDI" on 31 December 2008 was

25 (2007 - 23).

The Foundation does not have any other retirement packages expect the one through the

retirement system of the Federation of Bosnia and Herzegovina and Republic of Srpska.

According to this system, the employer is obliged to calculate the current contributions in a

percentage from current gross salaries, and expenses debit the income statement in a period in

which employees earned their salaries. The Foundation does not have any obligations to pay

out retirement checks to employees in the future.

Foundation does not have obligation to pay out retirement checks to employees on 31

December 2008.

Foundation is calculated provision regarding expecting future payments to the employees after

retirement in amount of 3 monthly salary's on the level Foundation , but did not made

liabilities because management have opinion that amount of provision does not represent

material significant item.(0.73 % Foundation's profit before taxation for the period from 1

January 2008 to 31 December 2008).

In future, Foundation will calculate provision in accordance with MRS 19 –Employee

Benefits.

6. Bad and doubtful debts expense


December 31,

2008

December

31, 2007

Loans and advances to customers (Note 12.f.) 257,655 83,197

Interest (Note 13.a.) 28,561 -

286,216 83,197


21

7. Other income


December 31,

2008

December 31,

2007

Release of provision for credit risks * 112,810 -

Income from previously write-off loans 21,911 23,913

Income from previously write-off interest 759 -

Reimbursement from insurance company 2,322 9,625

Currency exchange differences expenses - 8,782

Interest on deposits in banks 546 473

Collected court fees 2,750 1,467

Prepaid loans 654 -

Total 141,752 44,260

Based on decision of Board of Directors of MCF MIKRO ALDI number: 100-13-5/08 dated

19 May 2008, Foundation has recorded income relating to release of provision for credit risks

in amount of 112,810 KM, incurred in previous period.

8. Grant income


December 31,

2008

December 31,

2007

Donation from IDB CGAP - 14,516

Donation from NOVIB for fixed assets* 16,010 10,599

Donation from EFSE 578 - Total

16,588 25,115

* See Note 17.

9. Taxation

The Foundation is tax exempted in respect of corporate tax according to the Law on Micro

Finance Organizations, which determines that micro credit foundations should be regarded as

non-profit organisations.


22

Notes to the Balance Sheet

10. Cash and cash equivalents


December 31,

2008

December 31,

2007

Cash at hand 427 585 EFSE 2,055 122,780 INTESA bank, Sarajevo 121,783 - ABS bank, Goražde 80,328 - PBS bank, Goražde 82,365 - Raiffeisen Bank, Goražde 56,139 141,303 UniCredit Zagrebačka Bank 44,040 26,244 CBS NLB Bank 57,552 24,771 Nova Bank, Foča - 191 Transfer account (426) -

Total 444,263 315,874

Interest rates on transaction accounts at banks on 31 December 2008 are 0.10 % annually.

(2007.:0,25 % annually).

11. Deposits with banks


December 31,

2008

December 31,

2007

UniCredit Zagrebačka bank ( Term deposit ) * 20,000 20,000

NLB Tuzlanska banka (oročena sredstva) ** 60,000 -

Total 80,000 20,000

*Term deposit represents restricted deposit at UniCredit Zagrebačka Bank, Mostar, and

contract number 15000015-ND-1/08 at 05.09.2008 and is utilized as a guarantee for a loan

received from UniCredit Zagrebačka Bank, number 15000015-KK-1/08.

Interest on a term deposit is 2.35% annually, with maturity of one year (see note 18.a.4.)


23

** Specialty interest-free deposits at the bank NLB Tuzla dd Tuzla under contract no.

102055811/NZ as of 08. October 2008. year, which serves as an instrument to allow payment

long-term loans for business activities no. 102052901 at the Bank (See Note 18.a.3.)

12. Loans and advances to customers

(a) Portfolio

Organization offers four loan products:

- Business loans

- Extra loan

- Loan for other purposes

- Agricultural loan

Every loan product has its own sub-products for various types of business like agriculture,

fixed or current assets for other businesses.

Loans are granted for the period up to 48 months (2006: generally due within 36 months) but

average repayment period is 23 months (2007: 19 months). Foundation does not have renewed

loans.

Number of active clients is 3,143 (2007.:3,100).

Total number of disbursed loans – 2,460 (2007.:2,809).

The percentage of female clients is 75 % (2007.: 78 %) and male clients 25 % (2007.:22 %).

(b) Analysis by interest rates

Interest rate on all extended loans is 12 % to18 % p.a.

Organization is calculating the interest rate according to declining method. The annual

interest rate is charged monthly and is ranging from 1% to 1.5%, depending on the loan

product and loan cycle.


24

c) Analysis by type of borrower

Economic sector risk concentrations within the customer loan portfolio were as follows:


December 31,

2008

December 31,

2007

Individual production companies 430,083 472,764

Individual trade companies 2,233,564 1,683,936

Individual service companies 2,000,575 1,507,390

Agriculture 2,260,823 2,078,782

Other 385,664 -

Total (gross) 7,310,708 5,742,872

Specific provision for credit risks (210,413) (147,422)

Total (net) 7,100,295 5,595,450

(d) Geographical analysis

As of 31 December 2008 all loans were disbursed to citizens of, or companies incorporated in

the Federation of Bosnia and Herzegovina and Republika Srpska.


December 31,

2008

December 31,

2007

Federation BiH 1,902,571 1,580,387

Republic Srpska 5,408,137 4,162,485

Total (gross) 7,310,708 5,742,872

Specific provision for credit risks (210,413) (147,422)

Total (net) 7,100,295 5,595,450


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(e) Arrears

The amounts of loans in arrears are analysed as follows:


December 31,

2008

December 31,

2007

Principal in

arrears

Principal in

arrears

Current loans 6,816,931 5,641,491

1-15 days 131,427 -

16- 30 days 97,475 62,667

31 - 60 days 121,347 22,087

61 - 90 days 55,193 6,264

91- 180 days 88,335 10,363

over 180 - -

Total 7,310,708 5,742,872

Arrears include all amounts of loan principal due but not collected.

(f) Provisions

The movements in provisions for loan losses are as follows:


December 31,

2008

December 31,

2007

Balance at 1 January 147,422 96,967

Doubtful debts expense - loan ( Note 6 ) 257,655 83,197

Bad debts written off (81,854) (32,742)

Release of specific provisions for loans (Note 7) (112,810) -

Balance at 31 May/December 210,413 147, 422

Micro Aldi is writing loan offs after 180 days, which in accordance with the Foundation’s

business policy.

13. Other assets


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December 31,

2008

December

31, 2007

Accrued interest receivable 61,398 36,413

Prepaid rent expenses* 23,144 1,763

Prepaid expenses for processing of loan applications** 10,323 -

Other receivables (refundation of fees for maternity leave) 1,614 846

Consumable stores *** - 794

96,479 39,816

Specific provision for interest (16,633) -

Total 79,846 39.816

* Prepaid expenses refers to: rent expenses for offices in Sarajevo, Pale and Trebinje.

** This item represents prepaid expenses for processing of loan applications to EFSE in

amount of KM 7,823 and NLB Tuzlanska Bank in amount of KM 2,500.

*** Consumable stores are written off 100 % when put into use and rest at the end of using

period.

(a) Provisions for interest

The movements in provisions for interest losses are as follows:


December 31,

2008

December 31,

2007

Balance at 1 January - -

Doubtful debts expense - interest ( Note 6 ) 28,561 -

Bad debts written off (11,928) -

Balance at 31 December 16,633 -

14. Property and equipment


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Buildings

Furniture &

equipment

Vehicles

Computer

equipment

Total

Cost

As at January 1, 2008 114,403 30,239 101,879 88,277 334,798

Additions - 17,249 21,685 5,321 44,255

Writte off's - (1,667) - (9,679) (11,346)

As at December 31, 2008 114.403 45.821 123.564 83.919 367.707

Accumulated depreciation

As at January 1, 2008 9,415 23,134 67,383 38,433 138,365

Depreciation 2,291 1,628 15,123 22,768 41,810

Writte off's - (1,667) - (9,679) (11,346)

As at December 31, 2008 11,706 23,095 82,506 51,522 168,829

Net book value as at 31

December 2008 102,697 22,726 41,058 32,397 198,878

Net book value as at

31 December 2007 104,988 7,105 34,496 49,884 196,433

Micro ALDI possesses business premise in Goražde of 142 m2 which net book value is KM

99,410; part of this premise (95m2) was pledged as collateral to Raiffeisen Bank for a loan.

Organization has insurance contracts with Sarajevo Osiguranje against risks of theft, fire and

water accidents.

15. Intangible assets


December 31,

2008

December 31,

2007

Software 11,557 8,870

Additions 7,610 2,687

Accumulated depreciation (11,233) (7,752)

Total 7,934 3,805

16. Other liabilities


28


December 31,

2008

December 31,

2007

Salaries (net) 17,176 43,801

Contributions and taxes on salaries 6,131 27,914

Suppliers 15,348 24,477

Accrued interest payable 55,243 17,928

Accrued other costs 465 4,670

Total 100,363 118,790

17. Deferred income (donations)


December 31,

2008

December 31,

2007

Deferred revenue (fee) * 74,781 69,817

Deferred revenue (donation of fixed assets)

(NOVIB) ** -

16,010

Total 74,781 85,827

* Deferred revenue (fee) represents 2% fee collected at extension of loans that will be

recognized as income through repayment period of respective loan (Note 1.e).

Movements during the year are presented bellow:


December 31,

2008

December 31,

2007

As at January 1 69,817 46,324

Additions during year 145,330 141,376

Transferred to revenue (Notes 1.e and 3) (140,366) (117,883)

As at December 31 74,781 69,817

** MIKRO ALDI has received a donation in 2002 from NOVIB in amount of KM 80,000 for

fixed assets. Income from this donation is recorded in the amount of depreciation.

Movements during the year are presented bellow:


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December 31,

2008

December 31,

2007

As at January 1 16,010 26,609

Depreciation of fixed assets donated by NOVIB

(Notes 2.f. and 9)

16,010

(10,599)

As at December 31

-

16,010

18. Liabilities for loans

a) Analysis by type of loan


December 31,

2008

December 31,

2007

NOVIB(1) 312,688 552,033

Raiffeisen bank Sarajevo(2) 275,000 1,275,000

CBS NLB banka (3) 525,000 300,000

UNICREDIT Zagrebačka Bank(4) 600,000 400,000

PLANET RESPONSIBILIT FOND(5) 293,374 293,374

BLUE ORCHARD (6) 195,583 195,583

EFSE(7) 1,173,498 293,375

Intesa Sanpaolo bank Sarajevo (8) 498,000 -

PBS DD filijala Goražde (9) 200,000 -

ABS DD filijala Goražde (10) 400,000 -

4,473,143 3,309,365

(1) NOVIB

MIKRO ALDI signed contract with NOVIB for amount of EUR 512,000 on March 25,


30

2002. Interest rate is 9 % p.a. Maturity of the loan is 5 years and 9 months with grace period

of 2 years. Repayment started on December 31, 2004.

An additional contract with NOVIB under number FDE-503123/L-64 was signed for amount

of EUR 300.000 on 1 February 2004. The main condition of the contract is that the purpose of

the loan is lending of loans only to the target population. Interest rate is 8 %.

Maturity of the loan is 5 years with grace period of 1 year on principal.

The guarantee for the both of loan is the portfolio which is separately recorded as NOVIB

assets.

(2) Raiffeisen bank Sarajevo

Mikrocredit organization has signed an ANEX 9 on General contract for a loan and business

cooperation with Raiffeisen bank d.d Sarajevo at 12 December 2007 number OU -5-052/03

and approved:

Short term loan number 14275/07 at 12.12.2007 in amount of 500,000 KM with

interest rate 7,35 % annually

Long term loan number 06766/07 at June 01 , 2007 in amount of 500,000 KM with

interest rate 8 % and with maturity June , 01,2009

Long term loan number 10224/07 at 3 September 2007 in amount of 400,000 KM with

interest rate 8 % annually and with maturity 3 September 2009

Guarantees for this loan are property of the Organization MIKRO ALDI (part of business

premises 95 m2) and business premises of its founder U.G. ALDI 207 m

2 and portfolio from

Raiffeisen bank funds.

(3) NLB Tuzlanska bank

MKF MIKRO Aldi is concluded as at 12 August 2008. year with NLB Tuzla BANK d.d.

Tuzla agreement on long-term loan number 102052901 in the amount of KM 600,000 (EUR

306.775,13) for a period of 24 months at a rate of 6-month EURIBOR + 4% per year.

Guarantee for this loan are: bills Foundation, assignment for the benefit of all bank claims

from the users of credit in the ratio of 1:1,5 and 10% interest-free deposit from the first

tranche loan of 60,000 KM (see Note 11).

(4) UNICREDIT ZAGREBAČKA Bank


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At 8 February 2008, Foundation concluded a new short term loan agreement number:

09/2008/0342, for period of 12 months and interest rate at 7,3%. Guarantees for this loan are:

bills of exchange of the Foundation (5), cession to the bank.

Fuundation was concluded as at 05 September 2008. under the number 09/2008/0342 new

short-term loan in the amount of KM 200,000 for a period of 12 months and interest rate of

8% (see Note 11).

(5) Planet Finance ( Responsibility SICAV ( LUX ) Mikrofinanz-Fonds )

September 11 , 2007 MIKRO ALDI has signed a short term loan for the financing credit

portfolio in amount of 150,000 EUR ( 293.375 KM ) with interest rate of 9 % annually

contract with Planet Finance ( Responsibility SICAV ( LUX ) Mikrofinanz-Fonds) from

Luxemburg . Guarantees for this loan are cession to the lender.

(6) BLUE ORCHARD

MIKRO ALDI has at April 27, 2007 signed a contract with BLUE ORCHARD on short term

loan in amount of 100,000 EUR with interest rate six months EUROLIBOR plus 6.75 % p.a.

This credit was returned at 27 April 2008. Blue Orchard is at April 28 , 2008 approved a new

loan to the Organization in amount of 100,000 EUR with interest rate six months

EUROLIBOR plus 5.50 % p.a.

There are no guarantees for this loan.

(7) EFSE

Mikrocredit organization based on General contract with European Fund for Southeast Europe

(EFSE) at 13 December 2007 has signed a long term loan contract No.XXBAS ALDI 001 in

amount of 600,000 EUR. Loan is approved with interest rate of 8.47 % on 3 years and 15

mounts grace period, with maturity 22 March 2009. MIKRO ALDI repays principal and

interest for these loans according to the contracted repayment schedules.

(8) Intesa Sanpaolo bank Sarajevo


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Microcredit Foundation is concluded with Intesa Sanpaolo bank dd Sarajevo Agreement on

short-term borrowings by the principle of current account as follows:

Contract no. KM-201508-KK/08 as of 28 October 2008. year to 166,000 KM, with

interest rate 3-month EURIBOR / Reuters / + 2.70% year;

Contract No. KM-201600-KK/08 as of 17. Novembar 2008. year to 166,000 KM, with

interest rate 3-month EURIBOR / Reuters / + 2.70% per year

Contract no. KM-201685-KK/08 as of 04. Decembar 2008. year to 166,000 KM, with

interest rate 3-month EURIBOR / Reuters / + 2.70% per year

Guarantees for this loan are bills and cession of the credit portfolio to the lender

(9) PBS DD branch office Goražde

MKF MIKRO Aldi is concluded 26. Novembar 2008. year with PBS DD branch Goražde

agreement on short-term loan for the current operation no. IV-02-183-3/08 amounting to

200,000 KM at a rate of 10% per year.

Collateral for this loan are: bills Foundation and the cession od the credit portfolio to the

lender in the amount of 400,000 KM.

(10) ABS DD branch office Goražde

Fundation is concluded 28.Novembar 2008. year with ABS banka dd - branch Goražde

agreement on short-term loan no. 054-Kp-043/08 amounting to 400,000 KM at a rate of

8.80% per annum

Collateral for this loan are: bills Foundation and the cession od the credit portfolio to the

lender

b) Maturity analysis


December 31,

2008

December 31,

2007


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Up to 1 year (with possibility of prolongation) 3,065,812 2,242,615

Over 1 year 1,407,331 1,066,750 4,473,143 3,309,365

19. Founder’s equity

Since the MKF "MIKRO ALDI" is a non-profit organisation, there is no share capital issued,

but in accordance with Law on Micro credit organisation it has founders' equity,

20. Retained earnings/ (loss)

(a) Movement schedule


December 31,

2008

December 31,

2007

Balance as at 1 January 1,828,571 1,368,788

Net result of the year (before donations) 588,945 434,668

Donations from NOVIB and EFSA 16,588 25,115

Balance as at 31 December 2,434,104 1,828,571

(b) Distribution of the profit

The profit of the micro credit Fondation has to be used for the micro credit activities.

21. Related party transactions

As at 31 December 2008. the Foundation had transactions with the Managing Board and

Audit Committee as related parties on the basis of compensation as shown in the note 22.

Foundation does not have internal loans. Foundation has rules about conflict of interests

which does not allow issuing of loans to employees or to members of the Boards of Directors

and Audit Commitee.

22. Directors’ remuneration


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A listing of the members of the Management Board is shown on page 7 of the Financial

Statements. In the period from 1 January 2008 to 31 december 2008 the total remuneration of

the management was in amounts of KM 123.995 (2007: KM 115,880). The Board of Directors

and Audit Commitee as shown on page 6 of the Financial Statements has received in period

from 1 January 2008 to 31 December 2008 compensations in amount of KM 2.574.

23. Maturity analysis

The amount of total assets and total liabilities analyzed by maturity at December 31, 2008

is as follows:


Demand

(Including

arrears)

Up to 6

months

From 6

months to

1 year

Over 1

year

Total

2008

ASSETS

Cash and cash equivalents 444,263 - - - 444,263

Deposits with banks - - 80,000 - 80,000

Loans and advances to customers 256,489 1,401,650 1,775,280 3,666,876 7,100,295

Other assets 47,955 7,880 9,456 14,555 79,846

Property, plant and equipment - - - 198,878 198,878

Intangible assets - - - 7,934 7,934

TOTAL ASSETS 748,707 1,409,530 1,864,736 3,888,243 7,911,216

LIABILITIES

Other liabilities 100,363 - - - 100,363

Deferred income (donations) 2,242 24,264 20,316 27,959 74,781

Liabilities for loans 32,011 1,485,838 1,547,963 1,407,331 4,473,143

TOTAL LIABILITIES 134,616 1,510,102 1,568,279 1,435,290 4,648,287

TOTAL ASSETS -/-

LIABILITIES 614,091 (100,572) 296,457 2,452,953 3,262,929

24. Currency analysis


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The amount of total assets and total liabilities analysed by currency at December 31, 2008 is

as follows:


KM

EUR

Total

ASSETS

Cash and cash equivalent 444.263 - 444.263

Deposits with banks 80.000 - 80.000

Loans and advances to customers 7.100.295 - 7.100.295

Other current assets 79.846 - 79.846

Property, plant and equipment 198.878 - 198.878

Intangible assets 7.934 - 7.934

TOTAL ASSETS 7.911.216 - 7.911.216

LIABILITIES

Other liabilities 100.363 - 100.363

Deferred income (donations) 74.781 - 74.781

Liabilities for loans 2.497.999 1.975.144 4.473.143

TOTAL LIABILITIES 2.673.143 1.975.144 4.648.287

TOTAL ASSETS -/- LIABILITIES 5.238.073 (1.975.144) 3.262.929

Having in mind that local currency (KM) is linked to EURO, there is no foreign exchange risk

exposure (Bosnia and Herzegovina applies “Currency Board” Principle that is based on EUR).

25. Post Balance Sheet Events


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No any events have occurred since the balance sheet date, which significantly affect the state

of affairs of the Organisation at the balance sheet date or which require additional disclosure.

Financial statements for the period - MIKRO ALDI...Mostly women from Bosnian-Podrinja and Sarajevo...

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