MICRO - CREDIT FUND “IMON”mcf-imon.tj/wp-content/uploads/2019/04/Audit-Report_MCF...MICRO CREDIT...

MICRO-LOAN ORGANIZATION “IMON” LLC

MICRO - CREDIT FUND “IMON”

FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL

REPORTING STANDARDS (IFRS) FOR THE YEAR ENDED DECEMBER 31, 2016

AND INDEPENDENT AUDITORS' REPORT

Original

MICRO CREDIT FUND “IMON” FINANCIAL STATEMENT WHICH IS IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STATDARDS (IFRS) FOR THE YEAR ENDED ON DECEMBER 31, 2016 (in Tajik Somoni, unless otherwise indicated)

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CONTENTS

___________________________________________________________________________________________

CONFIRMATION OF MANAGEMENT RESPONSIBILITY FOR THE FINANCIAL STATEMENTS ............ 3

INDEPENDENT AUDITORS' REPORT ................................................................................................................ 4

STATEMENT OF FINANCIAL POSITION .......................................................................................................... 6

STATEMENT OF COMPREHENSIVE INCOME ................................................................................................. 7

STATEMENT OF CASH FLOWS .......................................................................................................................... 8

STATEMENT OF CHANGES IN EQUITY ........................................................................................................... 9

NOTES TO THE FINANCIAL STATEMENTS .................................................................................................. 10


3

STATEMENT OF MANAGEMENT RESPONSIBILITY FOR PREPARING AND APPROVING

FINANCIAL STATEMENTS, FOR THE YEAR ENDING ON DECEMBER 31, 2016

The following statement should be considered with a statement of auditor’s responsibility, which is

presented in the independent auditors’ report on page 4. This statement is prepared with a view of

distinguishing the respective responsibilities of the management and those of the independent

auditors in relation to the financial statements of Micro-Credit Fund “Imon” (hereafter called

“MCF”).

The management of the MCF is responsible for preparation of the financial statements that present

fairly the financial position, as of December 31, 2016, results of its operations, cash flows and

changes in equity for the year then ended in accordance with International Financial Reporting

Standards (“IFRS”).

In preparing the financial statements, management is responsible for:

selecting suitable accounting policies and applying them consistently;

making judgments and estimates that are reasonable and prudent;

stating whether IFRS have been followed, subject to any material departures disclosed and

explained in the financial statements; and

preparing the financial statements on a going concern basis, unless it is inappropriate to

presume that the MCF will continue in business for the foreseeable future.

Management, within its competencies, is also responsible for:

designing, implementing and maintaining an effective system of internal controls

throughout the MCF;

maintaining statutory accounting records in compliance with local legislation and

accounting standards in the respective jurisdictions in which the MCF operates;

taking steps to safeguard the assets of the MCF; and

detecting and preventing fraud and other irregularities.

The financial statements for the year ended on December 31, 2016 were approved

February 23, 2017.

On behalf of MCF “Imon”

__________________ ____________________

Pulotova Aziza Daler Davlatov

General Director Chief Accountant

INDEPENDENT AUDITOR’S REPORT

To the Shareholders and the Board of Directors of Micro-Credit Fund “Imon”.

Introduction

We have audited the separate financial statements of Limited Liability Company Micro-Credit

Fund “Imon” (the “Company”), without applying the consolidation of financial statements with its

subsidiary - Microcredit Deposit-Taking Organization “Imon International” and not taking into

consideration the investments in MDO “Imon International” under the equity method of

accounting. These financial statements comprise the statement of financial position as at December

31, 2016, and accoumpaning statement of comprehensive income, statement of changes in equity

and statement of cash flows for the year then ended, and a summary of significant accounting

policies and other explanatory information.

Management’s Responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with International Financial Reporting Standards. This responsibility includes:

designing, implementing and maintaining of the internal control relevant to the preparation and fair

presentation of the financial statements that are free from material misstatement, whether due to

fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable under the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on the separate financial statements based on our audit.

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

require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditors’ judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error.

Audit | Legal | Tax | Advisory www.crowehorwath.net Crowe Horwath International is a leading international organization of separate and independent accounting and consulting firms that may be licensed to use “Crowe Horwath” or “Horwath” in connection with the provision of accounting, auditing, tax, consulting or other professional services to their clients. Crowe Horwath International itself is a non-practicing entity, and does not provide professional services in its own right. Neither Crowe Horwath International nor any member is liable or responsible for the professional services performed by any other member.

Crowe Horwath - ACG Member Crowe Horwath International

45 MirzoTursunzoda street,

306 office, Business Center

“Poytaht ”, Dushanbe, Tajikistan

+ 992 (44) 640 41 41 Tel

+ 992 (44) 640 51 51 Tel

www.crowehorwath.net/tj

http://www.crowehorwath.net/

http://www.crowehorwath.net/tj

In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements in order to design audit procedures that

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the separate financial statements present fairly, in all material respects, (or give a

true and fair view of) the financial position of the Company as at December 31, 2016, and its

financial performance and its cash flows for the year then ended in accordance with International

Financial Reporting Standards.

Rahimbek Akramov

Auditor / Managing Partner

LLC “Crowe Horwath ACG”

February 26, 2017

State license on auditing of the financial institutions in the

Republic of Tajikistan issued by the National Bank of Tajikistan,

number 0000064 on December 28, 2016

State license on performing general purpose audit activities in

Tajikistan under the number 000095 issued by the Ministry of

Finance of the Republic of Tajikistan on November 1, 2016

Qualification certificate of an auditor of the Republic of

Tajikistan, issued by the Ministry of Finance of the Republic of

Tajikistan, number 0000115 on December 4, 2013

Qualification certificate of an auditor of the Republic of

Tajikistan, issued by the National Bank of Tajikistan, number 58

on January 8, 2014

Audit | Legal | Tax | Advisory www.crowehorwath.net Crowe Horwath International is a leading international organization of separate and independent accounting and consulting firms that may be licensed to use “Crowe Horwath” or “Horwath” in connection with the provision of accounting, auditing, tax, consulting or other professional services to their clients. Crowe Horwath International itself is a non-practicing entity, and does not provide professional services in its own right. Neither Crowe Horwath International nor any member is liable or responsible for the professional services performed by any other member.

Crowe Horwath - ACG Member Crowe Horwath International

45 MirzoTursunzoda street,

306 office, Business Center

“Poytaht ”, Dushanbe, Tajikistan

+ 992 (44) 640 41 41 Tel

+ 992 (44) 640 51 51 Tel

www.crowehorwath.net/tj

http://www.crowehorwath.net/

http://www.crowehorwath.net/tj


6

STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, 2016

Notes For the year ended

December 31, 2016

For the year ended

December 31, 2015

Interest Income 4.1 3 636 623 2 891 472 Interest Expense 4.1 - -

Net interest income 3 636 623 2 891 472 Expenses for bad debts

5.2 (1 729 203) (561 970)

Net income on commission fee and

services 1 907 420 2 329 502 Net income on operations with

foreign currencies

4.2 2 510 130 5 399 476 Other operating income 4.3 722 040 4 326 362 Operating expenses 4.4 (1 292 549) (1 265 932)

Profit (loss) before income tax 3 847 041 10 789 408

Corporate income tax 4.5 (1 076 283) (2 739 341)

Net profit (loss) for the period 2 770 758 8 050 067


__________________ ____________________



The notes on pages 10-28 form an integral part of the financial statements. The Independent Auditors' Report is on pages 4-5.


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STATEMENT OF FINANCIAL POSITION

As of December 31, 2016

Notes For the year ended

December 31, 2016

For the year ended

December 31, 2015

ASSETS

Cash on hand 5.1 - 7 807

Funds in local banks 5.1 2 292 569 2 304 282

Placements with other banks 5.2 17 268 110 17 194 810

Loans to customers, net 5.3 10 528 528 11 931 971

Investment 5.4 48 384 985 48 384 985

Property, plant and equipment 5.5 308 063 186 677

Other assets 5.6 3 377 038 2 905 087

Deferred tax asset 4.5 1 557 -

Total assets

82 160 850 82 915 619

LIABILITIES

Accrued liabilities 5.7 1 071 397 2 781 021

Other liabilities

2 934

3239

Total liabilities

1 074 331 2 787 260

EQUITY

Retained earnings 5.8 31 662 251 23 901 807

General provision 5.9 46 653 510 48 210 072

Current year profit 5.8 2 770 758 8 019 480

Total of equity

81 086 519 80 131 359

Total of equity and liabilities

82 160 850 82 915 619


__________________ ____________________





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CASH FLOWS STATEMENT For the year ended December 31, 2016

Notes

For the year ended

December 31, 2016

For the year ended

December 31, 2015

OPERATING ACTIVITY:

Received interest and commission 3 636 623 2 775 459

Paid interest and commission - (19 191 )

Foreign operations income 3 636 623 4 794 098

Other received income 720 040 4 007 833

Other operating expenses (1 245 266) (890 432)

Paid income tax (4 125 789) (1 552 807)

Operating activity cash flow before changes in

operating assets and liabilities: 9 114 960

Changes in operating assets and liabilities:

Net increase/ (decrease) in loans and advance - (3 300 254) Net increase/ (decrease) in funds from financial

institutions - (7 121 515)

Net increase/ (decrease) in other assets

Net increase/ (decrease) in other liabilities

Operating activity cash flow after changes in

operating assets and liabilities: 2 624 232 (10 421 769)

Net operating activity cash flow 2 624 232 (1 306 809)

INVESTMENT ACTIVITY:

Cash paid at purchase of PPE

Cash received at sale of PPE (168 670) (125 675)

Cash paid at purchase of securities

Dividends received - -

Net investment activity cash flow -

FINANCING ACTIVITY: (168 670) (125 675)

Proceeds from sale of treasury shares

Redemption of shares - 3 333 000

Paid dividends

Net financing activity cash flow - 3 333 000

Net changes in cash and cash equivalents (19 520) 1 900 516

Cash and cash equivalents as at year beginning 5.1; 5.2; 2 312 089 411 573

Cash and cash equivalents as at year end 5.1; 5.2; 2 292 569 2 312 089


__________________ ____________________





9

STATEMENT OF CHANGES IN EQUITY For the year ended December 31, 2016

Retained earnings General

provision

Total equity

Balance as of December 31, 2013 20 811 694 33 080 088 53 891 782 Profit and loss of previous years 15 315 245 33 080 088 48 395 333 Comprehensive income of year 2014 1 799 024 - 1 799 024 Profit last year 6 787 538 - 6 787 538



Balance as of December 31, 2016 34 433 009 46 653 510 81 086 519


__________________ ____________________





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NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. GENERAL INFORMATION

1. The main activities

MICRO-CREDIT FUND “IMON” (hereafter “MCF”), is a legal entity registered in accordance

with the legislation of the Republic of Tajikistan and carries out its activity according to the

Charter.

The MCF was registered as an International Micro Credit Fund of “Imon” in the Republic of

Tajikistan under No. 001-1442 dated on November 23, 2004. Further the International Micro

Credit Fund of “Imon” under the legislation of the Republic of Tajikistan “On the Micro Credit

Organizations” and by the decision of the Fund’s Shareholders’ Meeting (Minutes recorded on

July 17th

, 2012) was re-registered on State Tax Committee of the Khujand city of the Republic of

Tajikistan as Micro Credit Fund of “Imon” and was given Identification Number №5110002526

dated on July 23, 2012.

In accordance with changes and additions to relevant documents, the Micro Credit Fund has a

license obtained on December 14, 2012 given by the National Bank of Tajikistan on implementing

the following operations:

1. Issuing micro loans;

2. Conclusion of forward and SWAP operations;

The MCF doesn’t have any registered branches, however MCF has jointly controlled subsidiary –

LLC Microcredit Deposit-Taking Organization “Imon International”.

The MCF is located at the following address: township 17, house #2, Khujand, Tajikistan.

The Founders of the MCF are “National Association of Business Woman of Tajikistan Inc.” and

International Non-Commercial Organization Mercy Corps in the Republic of Tajikistan.

NOTE 2. BASIS OF FINANCIAL STATEMENTS PREPARATION

The financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

The financial statements have been prepared on the historical cost basis.

2.1 Composition of financial statements

The financial statements of comprises of the following:

- Statement of financial position

- Statement of comprehensive income

- Statement of cash flows

- Statement of changes in equity

- Notes to the financial statements

The reporting period for the MCF is the calendar year. Significant items in the financial statements

are presented in detail; less significant items are aggregated.


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2.2 Reporting currency

The functional and presentation currency of the financial statements of the MCF is the national

currency - Tajik Somoni.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Recognition and estimating of financial instruments Financial assets and financial liabilities are recognized to be in balance in case when the MCF is a

Party to a contract regarding a financial instrument. Financial assets and financial liabilities are

reflected using the accounting principles on the date of transaction. At first recognition the

financial instruments are reflected on the basis of fair value of the bargain including or excluding

their costs.

The MCF classifies its financial assets into categories: investments held to maturity, loans and

receivables. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial instruments with fixed or determinable

payments not quoted in an active market.

Borrowings are non-derivative financial liabilities with fixed or determinable payments that are not

quoted in an active market. They are initially recognized at fair value, net of operating costs

incurred and subsequently stated at amortized cost.

3.2 Cash and cash equivalents

Cash and cash equivalents comprise the available cash-on-hand and the balances in bank accounts.

3.3 Loan portfolio and provision for impairment

Initial recognition of issued loans, valued at actual cost, i.e. the fair value of given funds. Accounts

receivable is recognized as an asset at the moment of issuance of funds to customers.

Subsequently, loans are recorded in the amount of principal outstanding under the loan contract,

net of provision for impairment. If there is objective evidence of impairment of loans issued in the

result of events that occurred after the initial recognition of an asset, the MCF generates provision

for impairment, to cover losses on an individual basis. Calculation of the provision for impairment

is conducted on the basis of assets analysis exposed to credit risk. Provision for impairment

recognized in the financial statements only for losses that were incurred at the reporting date based

on objective evidence confirming that fact of impairment has occurred in the period after the initial

recognition. Recover a previously generated provision for impairment is recognized in the

statement of comprehensive income of the MCF.

The MCF practices issuing indexed loans – for those loans, the issuance and repayment is tied to

the currency exchange rate specified in the contract on the date of the transaction. Repayment

schedules for indexed loans are drawn in foreign currency. Payments on the principal amount,

interest and penalties on these loans are calculated in foreign currency at the exchange rate at the

date of issuance / repayment of principal, accrual of interest / penalties, and are reflected in the

national currency. The difference between the exchange rates at the time of issuance and at


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maturity is recognized as other income (expense) at the moment of actual extinction of obligation

by borrowers.

In accordance with the loan policy, loans, impossible to repayment are written off against

provision for impairment losses generated. Loans are written off only after taking all measures to

collect the debt and the necessary procedures to determine the amount of loss, as well as after

receipt of collateral.

In order to generate a provision for impairment the MCF uses the following classification of the

loan portfolio:

Arrears period Risk percentage for loans in national

currency

Loan classification

< 30 days 5% Substandard

30 to 60 days 30% Doubtful

60 to 180 days 75% Problem

> 180 days 100% Bad

3.4 Operating lease

Lease is classified as an operating lease if the significant part of risks and ownership rights are

reserved by the lessor. The MCF recognizes payments under the operating lease in the statement of

comprehensive income of the reporting period using the accrual method.

3.5 Property, Plant and Equipment (PPE)

The PPE are recognized as asset at cost of acquisition. After initial recognition, PPE are accounted

for less depreciation. For all PPE is used straight line method of depreciation. Subsequent costs are

capitalized in the carrying value of an asset, if there is an objective probability of obtaining

economic benefits associated with the run of the asset. All other costs are recognized in the

statement of comprehensive income in the corresponding period.

All PPE and Intangible assets depreciation is calculated using the Straight Line Depreciation

Method. The MCF has established the following rates used for depreciation calculation:

PPE category Depreciation rate (%)

Furniture and equipment 15-20

Transport 15

Office equipment 20

Intangible assets 10

3.6 Intangible assets

Intangible assets are identifiable non-monetary assets without physical form. Intangible assets

acquired separately are initially recognized at cost. After initial recognition, intangible assets are

carried at cost less accumulated depreciation and accumulated impairment losses.

3.7 Provisions

The MCF creates the reserve funds to cover losses related to the implementation of core activities,

and for other purposes covered by law.


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3.8 Pension obligations

In accordance with the laws of the Republic of Tajikistan pension contributions are withheld from

the MCF employees, and are transferred on the identification number of each employee in the

State Agency for Insurance and Pensions. There are no additional obligations on pensions of

employees.

3.9 Financial obligations

Borrowings are recognized initially at cost, which is the amount received less the costs incurred to

perform the operation. Subsequently, borrowings are stated at amortized cost and any difference

between received funds and the redemption value is recognized in the statement of comprehensive

income over the period of the borrowings as interest expense. Interest on received credits, loans,

are accrued on a monthly basis at a nominal rate of interest on the outstanding principal amount.

Current liabilities are recognized in the statement of financial position of the MCF as they occur -

staff salaries, the amount of accrued tax liabilities, accrued liabilities on the payment of operating

expenses, etc.

3.10 Grant funds

Grants are recognized in the financial statement of the MCF in case of reasonable certainty that the

MCF will comply with all conditions relating to the grant and that grant will be received. Grant

receipt as itself is not a decisive proof that the conditions associated with it are followed or will be

followed.

For grant funds accounting, the MCF uses the approach from the standpoint of revenue, according

to this approach the grant is recognized as income over one or more periods. In line with this

approach grants are recognized in statement of comprehensive income on a systematic basis over

the periods in which the MCF recognizes the costs of these grants that should be compensated as

expenses. Recognition of revenues and expenditures for grant funds is made after the approval of

the expenditure report by donor.

3.11 Recognition of income and expense

During its operating activity the MCF recognizes incomes and expenses based on the accrual basis

of accounting. The accrual basis of accounting assumes that incomes are recognized in the

accounting period in which they are earned, even if funds have not yet been received into the

MCF’s account. Also, expenses are reflected in that accounting period in which they have occurred

irrespective of, whether they are paid by the MCF in the given reporting period.

3.12 Taxation

The amount of income tax expense reflected in the statement of comprehensive income presents

the amount of current income tax calculated in accordance with tax legislation of the Republic of

Tajikistan and deferred income tax.


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Profit before income tax differs from a taxable income shown in the statement of comprehensive

income because taxable basis of income tax does not include non-deductible expenses. Current

income tax is calculated at tax rate of 24% for the 2016 and 24% for the 2015.

Deferred income tax is calculated by the method of balance between assets and liabilities in respect

of temporary differences between the tax bases of assets and liabilities and their carrying amounts

in accordance with financial reports. Deferred tax assets and liabilities are determined using tax

rates that are expected to be applied in the period when the asset is realized or the liability is

settled, based on tax rates set in this period or actually set as at reporting date.

Deferred tax assets are recognized to the extent that there is a probability of taxable income gain

and temporary differences can be used against it.

3.13 Foreign currency transactions

The MCF prepares and presents its financial reports in national currency.

Transactions in foreign currencies are initially recorded in the national currency at the official

exchange rate of National Bank of Tajikistan on the date of transaction. Exchange rate differences

between the contractual exchange rate of operations and the official rate of NBT on the date of

such transactions are included to the statement of comprehensive income as net gains from foreign

exchange.

Monetary assets and liabilities denominated in foreign currency are converted into national

currency at the official exchange rate of NBT set on the reporting date. Exchange differences

arising on the revaluation of assets and liabilities are recognized in the statement of comprehensive

income as net gains from foreign currency translation.

The exchange rates used in the preparation the MCF annual financial statements were as follows:

31.12.2016 31.12.2015

1 US Dollar 7,8762 6,9902

3.14 Equity

Equity of the MCF consists of share capital, retained earnings and provisions created in accordance

with applicable law.

4. NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME

4.1 Income and expense

Interest and other income December 31,

2016

December 31,

2015

Interest income on loans 2 182 575 1 823 251

Interest income on term

placements 1 430 828 1 089 811

Other interest income 23 220 3 906

Total: 3 636 623 2 891 472


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Interest expense

December 31,

2016

December 31,

2015

Interest expense on borrowings - 25 496

Total: - 25 496

Net Interest Income 3 636 623 2 891 472

4.2 Gain (loss) from foreign currency transactions

December 31,

2016

December 31,

2015

Gain from foreign currency transactions 4 091 672 7 732 723

Loss from foreign currency transactions (1 581 542) (2 333 247)

Net gain (loss) from foreign currency

transactions: 2 510 130 5 399 476

4.3 Other operating income

December 31,

2016

December 31,

2015

Income from recovery of the cost of credit 707 206 318 526

Other income 14 834 4 007 836

Other income from adjustments of previous

year -

Total other Income: 722 040 4 326 362

4.4 Operating expenses

December 31, 2016 December 31, 2015

Amount Share (%) Amount Share (%)

Personnel expenses 504 715 39 458 789 34,02

Professional services fee 79 151 6,12 102 853 8,12

Training costs 50 600 3,91 - -

Taxes (except for income tax) 212 576 16,4 216 705 17,12

Вank service 9 499 0,73 19 191 1,52

Depreciation of assets 47 283 3,66 16 232 1,28

Rent 204 933 15,85 228 225 18,03

Fuel and vehicle maintenance expenses 25 470 1,97 11 152 0,88

Public utilities service 7 833 0,61 9 468 0,75

Travel and transportation expenses 2 156 0,17 86 745 6,85

Communication services 8 108 0,63 11 949 0,94

Stationary and other office supplies 5 798 0,45 6 052 0,48

Advertising 42 627 3,30 14 583 1,15

Entertainment expenses 65 460 5,06 46 858 3,70

Other expenses 26 341 2,04 37 132 5,15

Total: 1 292 549 100,00 1 265 932 100,00


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Personnel expenses

December 31,

2016

December 31,

2015

Staff salaries 493 469 387 169

Additional benefits 63 970 71 620

Social contributions 25% 126 176 114 697

Total: 683 617 573 486

4.5 Income tax

Income tax for the current period is calculated based on tax accounting in accordance with tax

legislation of the Republic of Tajikistan. As certain expenses are not deductible for tax purposes

and not considered as taxable deductions and due to the presence of non-taxable income, there are

permanent differences. Deferred tax reflects the net tax effects of temporary differences between

the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used

for taxation purposes.

The MCF may recognize deferred tax asset resulting from unused tax losses (or credits), if there is

a high probability of future taxable profits and unused losses (and credits) can be set off against it.

December 31,

2016

December 31,

2015

Income before taxation 2 662 762 10 789 408 Tax at the rate for taxable income -24% 639 063 2 589 458

Tax effect from permanent differences 437 220 148 135

Income tax expenses 1 076 283 2 737 593

The tax effect of temporary differences 1 557 1 748

Current income tax 1 077 840 2 739 341

5. NOTES TO THE STATEMENT OF FINANCIAL POSITION

5.1 Cash and cash equivalents

December 31,

2016

December 31,

2015

Cash - national currency - 7 807 Cash in bank - national currency 1 559 740 1 058 044 Cash in bank - foreign currency 732 829 1 246 238

Total: 2 292 569 2 312 089

5.2 Funds in local banks

December 31, December 31,

2016 2015

CJSC MDO “Imon International”-

national currency 5 060 000 6 360 000 CJSC MDO “Imon International”-

foreign currency 3 150 480 2 796 080 CJSC “ The First Microfinance

Bank” -foreign currency - 2 097 060


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CJSC “Tojprombank”- foreign

currency 393 810 349 510 OJSC “Eskhata Bank”- foreign

currency 8 663 820 5 592 160

Total foreign currency 12 208 110 10 834 810

Total: 17 268 110 17 194 810

5.3 Loan portfolio

As of December 31, 2016 the active loan portfolio of The MCF includes 166 loans, compared to

179 active loans at the beginning of the year.

December

31, 2016

December

31, 2015

Loan portfolio 11 860 038 12 302 007

Accrued interest 458 807 351 316 Provision for impairment (1 790 317) (721 352)

Total: 10 528 528 11 931 971

Loan portfolio by types:

December 31,

2016 Percentage

December 31,

2015 Percentage

Mortgages loans

3 672 833 30,97% 4 520 818 36,75%

Financial

lease (leasing) 3 194 144 26,93% 1 236 094 10,05%

Consumer loans

16 692 0,14% 264 994 2,15%

Productions 0 0% 1 173 475 9,54%

Agricultural

loans 0 0% 176 403 1,43%

Business 104 505 0,88% 513 191 4,17%

Construction 4 871 862 41,08% 4 417 032 35,90%

Total: 11 860 037 100% 12 302 007 100%

Accrued

interest 458 807

351 316

Provision for

impairment (1 790 317)

(721 352)

Total: 10 528 528 11 931 971


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The annual percentage rate of the loan portfolio, we can see in the below table:

Annual percentage rate December 31,

2016

Annual percentage rate December 31,

2015

from 18% to 20% 3 194 147 from 12% to 18% 1 338 819

16% 121 199 from 20% to 28% 2 092 058

from 20% to 24% 8 544 691 from 32% to 36% 3 515 978

from 38% to 40% 5 355 153

Total: 11 860 037 12 302 007

Accrued interest 458 807 351 316 Provision for impairment (1 790 317) (721 352)

Total: 10 528 528 11 931 971

Loan portfolio classification comprises for 31 December 2016 as follows:

Loan portfolio classification Quantity Total

amount

Provision for

impairment Total (%)

Standard loans 106 6 353 355 - 6 353 355 46,54%

Loans in proceedings 4 657 604 (657604) 1 315 208 9,63%

Overdue loans 7 1 356 899 (1 132 712) 2 489 611 18,24%

Restructured loans 49 3 492 179 - 3 492 179 25,58%

Total: 166 11860037 (1790316) 13 650 353 100%

According to the above table, the ratio of standard loans to total loan portfolio is 46,54% the ratio

of loans in proceedings to total loan portfolio is 9,63% compared to 18,24 % of overdue loans,

comparing to Substandard loans are in amount of 18,24% and comparing to overdue loans 25,58 %.

Loan portfolio classification for 31 December 2015 comprises as follows:

Loan portfolio classification Quan

tity

Total

amount

Inter

est

Provision

for

impairme

nt

Total (%)

Standard loans 188 11 040 340 - (220 807) 10819 533 89,74%

Loans in proceedings 4 766 896 - (462 006) 304 890 6, 23%

Overdue loans 7 494 771 - (38 539) 456 232 4,03%

Total: 199 12 302 007 - (721 352) 11 580 655 100%

According to the above table, the ratio of standard loans to total loan portfolio is 89,74% the ratio

of loans in proceedings to total loan portfolio is 6,23% compared to 4,03 % of overdue loans.


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Loan portfolio classification by risk groups is as follows:

December 31, 2016

Percent Amount

Provision for

impairment

Standard 53,57% 6 353 355 Substandard 5,54% 657 604 657 604 Doubtful 11,44% 1 356 899 1 356 899 Problem 29,44% 3 492 179

Total: 11 860 037 1 790 316

December 31, 2015

Percent Amount

Provision for

impairment

Standard 11 040 340 220 807 Substandard 5% 124379 6219 Doubtful 30% 22255 6676 Problem 75% - - Bad 100% 1 115 033 487 650

Total: 12 302 007 721 352

Collateral, generally accepted by the MCF are assets in the form of real estate (private houses,

apartments and houses), household goods, jewelry, equipment and vehicles. As of December 31,

2016, the total amount of secured loans in the active loan portfolio was 71,38% and unsecured

loans – 28,62%.

December 31, 2016

Amount Quantity Value of

collateral

Loans secured by real estate 8 465 152 92 15 961 596

Loans secured by financial lease (leasing) - - -

Loans secured by transport vehicles - - -

Loans secured by household equipment - - -

Loans secured by guarantees - - -

Loans secured by goods in turnover - - -

Unsecured loans 3 394 885 74

Total: 11 860 037 166 15 961 596

Accrued interest 458 807 Loan loss provision fund (1 790 317)

Total: 10 528 528

Collateral, generally accepted by the MCF are assets in the form of real estate (private houses,

apartments and houses), household goods, jewelry, equipment and vehicles. As of December 31,

2015, the total amount of secured loans in the active loan portfolio was 63,67% and unsecured

loans – 36,33%.


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December 31, 2015

Amount Quantity Value of

collateral

Loans secured by real estate 5 439 947 88 17 697 336

Loans secured by financial lease (leasing) 2 392 783 15 2 392 783

Loans secured by transport vehicles - - -

Loans secured by household equipment - - -

Loans secured by guarantees - - -

Loans secured by goods in turnover - - -

Unsecured loans 4 469 277 96 -

Total: 12 302 007 199 20 090 119

Accrued interest 351 316 Loan loss provision fund (721 352)

Total: 11 931 971

Provision for impairment losses on loans is as follows:

Balance as of December 31, 2013 78 969

Expenses for provision for impairment losses 383 443

Recovery of the provision for impairment losses (58 33)


Expenses for provision for impairment losses 583 299



Expenses for provision for impairment losses 1 776 181


Balance as of December 31, 2016 1 790 317

Comparative table of the portfolio at risk is as follows:

Indicator Calculating formula

Calculated

rate in 2016

Calculated

rate in 2015

Riskiness of loan portfolio

Loan loss provision

fund/Total loan

portfolio 15,10% 5,86%

Level of loans repayment doubtfulness

Amount of bad

loans/Total loan

portfolio 16,99% 9,06%

5.4 Investments

MCF “Imon” is the main shareholder of LLC MDO “Imon International”. Its share in the capital of

MCF IMON is 48,38%, which equal to 48 384 985 Somoni for December 31 2016 and 48,38%,

which equal to 48 384 985 somoni for December 31 2015.

5.5 Property, Plant and Equipment (PPE)


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PPE Furniture Vehicle Office equipment Total

Carrying amount as at December 31, 2013 26 336 67 964 94 300

Additions 10 219 10 219

Disposals 0

Carrying amount as at December 31, 2014 26 336 78 183 0 104 519

Additions 9 872 9 302 106 500 125 674

Disposals 865 460 1 325

Carrying amount as at December 31, 2015 35 343 87 025 106 500 228 868

Additions 51 257 117 413 168 670

Disposals 0

Carrying amount as at December 31, 2016 86 600 204 438 106 500 397 538

Accumulated depreciation as at December 31, 2013 1 367 11 103 12 470

Depreciation 3 950 9 998 13 948

Disposals of accumulated depreciation 0

Accumulated depreciation as at December 31, 2014 5 317 21 101 0 26 418

Depreciation 4 833 11 397 16 230

Disposals of accumulated depreciation 227 230 457

Accumulated depreciation as at December 31, 2015 9 923 32 268 0 42 191

Depreciation 7 594 23 715 15 975 47 284

Disposals of accumulated depreciation 0

Accumulated depreciation as at December 31, 2016 17 517 55 983 15 975 89 475

Net book value as at December 31, 2013 24 969 56 861 0 81 830

Net book value as at December 31, 2014 21 019 57 082 0 78 101

Net book value as at December 31, 2015 25 420 54 757 106 500 186 677

Net book value as at December 31, 2016 69 083 148 455 90 525 308 063


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5.6 Other assets

Other assets Amount for

December 31,

2016

Amount for

December 31,

2015

Staff accounts receivables 28 280 9 066 Advances paid tax 2 295 031 1 946 827 Other assets 1 053 727 949 194

Total: 3 377 038 2 905 087

Other assets of MCF includes an amount receivable from Staff for 28 280 Somoni. The amount of

2 295 031 somoni is prepayment of taxes, and other assets in the amount of 1 053 727 somoni.

5.7 Other liabilities

December 31,

2016

December 31,

2015

Tax liabilities 1 071 397 2 781 021

Accounts payable – national currency 2 934 3 239

Total: 1 074 331 2 784 260

5.8 Retained earnings

Retained earnings as at December 31, 2013 15 315 245

Profit of 2014 year 1 799 024

Profit (loss) of previous years 6 787 538

Retained earnings as at December 31, 2014 23 901 807

Profit (loss) of previous years 15 315 245 Profit of 2015 year 8 019 480 Profit last year 8 586 562

Retained earnings as of December 31, 2015 31 921 287

Profit (loss) of previous years 15 315 245

Profit of 2016 year 2 770 758

Profit last year 16 347 006

Retained earnings as of December 31, 2016 34 433 009

5.9 General provision

MCF “Imon” has established general provision for it is future operations and for the end of the

Financial year 2016 it increased for the amount of 48 210 072 Somoni, in 31 December 2015 it

was 48 210 072 Somoni.


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NOTE 6. RELATED PARTY TRANSACTIONS

The MCF had several related party transactions.

According to definition in IAS 24 “Related Party Disclosures” a party is related to an entity if:

(a) directly, or indirectly through one or more intermediaries, the party:

(i) controls, is controlled by, or is under common control with, the entity (this includes

parents,

subsidiaries and fellow subsidiaries);

(ii) has an interest in the entity that gives it significant influence over the entity; or

(iii)has joint control over the entity;

(b) the party is an associate (as defined in IAS 28 Investments in Associates) of the entity;

(c) the party is a joint venture in which the entity is a venture (see IAS 31 Interests in Joint

Ventures);

(d) the party is a member of the key management personnel of the entity or its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for

which

significant voting power in such entity resides with, directly or indirectly, any individual referred

to in (d)

or (e); or

(g) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any

entity that

is a related party of the entity.

The information about the MCF related party transactions is as follows:


Amount % Amount %

Key management personnel compensation 3 521 0,92% 34856 53,02%

Balance of outstanding loans 191 575 1,62% 176 668 1,44%

Interest income 38 151 1,75% 11 810 0,40%

NOTE 7. EQUITY MANAGEMENT

Equity management of the MCF has the following objectives: compliance with capital

requirements established by the National Bank of Tajikistan, ensuring the going concern of the

MCF. In line with current practice, the legislation established capital adequacy normative.

Normative K1-1 is defined as the ratio of regulatory capital of a financial institution to risk-

weighted assets. This normative is set not less than 12%. The normative K1-2 is defined as the

ratio of regulatory capital of a financial institution to total assets. This normative is set not less

than 10%. Formats for reporting to the National Bank have not been established for MCF. The

table below shows the amount of capital based on the MCF reports. The share capital consists of

paid up capital, reserves generated from net profit and retained earnings, decreased by net

intangible assets.


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Regulatory capital NBT

standard

December 31,

2016

December

31, 2015

Fixed capital 81 086 519 80 131 359

Supplementary capital - - Total regulatory capital 81 086 519 80 131 359

Normative К1-1 12% 38,76% 40,79 %

Normative К1-2 10% 37,54% 38,29 %

NOTE 8. EVENTS AFTER THE REPORTING PERIOD

The MCF Management considers that there are no significant liabilities that could have negative

material influence at the financial position and activity results of the MCF in foreseeable future.

NOTE 9. RISK MANAGEMENT

Risk management has a fundamental mean to the banking business and is a significant element of

the MCF’s activity.

The activity result of the MCF mostly depends on the quality of credit risk assessment methods

and their management. Risk is an estimation of potential losses that may be incurred by the MCF.

Bank Risk Management requires the existence of methodology of quantitative assessment, i.e. the

likelihood of undesired events occurrence and the value of associated losses.

Exposure to risks and their origins

The main risks inherent to the MCF are credit risk, liquidity risk, currency risk, interest rate risk

and operational risk.

The origins of risks are:

- Adverse conditions for contractors to perform obligations assumed;

- Adverse changes in market conditions;

- Inefficient of the MCF activity as a result of adverse external events.

Concentration of risk

Concentration of risk occurs when a number of counterparties are engaged in similar activities, or

their activities conducted in the same geographic region, or counterparties have similar economic

characteristics, and as a result of changes in economic, political and other conditions have similar

effects on the ability of these counterparties to fulfill contractual obligations.

Concentration of risk reflects the relative sensitivity of the MCF to changes in conditions that

affect a particular industry or geographic region.

Credit risk

Credit risk is the risk of financial loss occurring as a result of default on an obligation by the

borrower.


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According to the Loan policy of the MCF there is a thorough analysis of the level of

creditworthiness of borrowers before deciding on a loan issuance for minimizing credit risk. For

loans of more than 12 000 TJS a member of the management team of the MCF is involved in this

analysis. In addition the MCF’s loan policy covers existence of collateral in the amount of 150% of

the loan amount in order to minimize credit risk. As collateral the MCF takes real estate, jewelry,

household goods, vehicles and goods in turnover, depending on the loan amount. According to

Loan policy the Loan committee of the MCF is a supreme authority to decide on a loan issuance,

review the conditions of the loan agreement, collateral, etc. and controlling unit for the loan

portfolio.

The MCF assesses the credit risk on an individual basis, that is, the risk of non-payment by the

borrower of principal and interest within the prescribed terms of the contract period. The MCF

does not evaluate credit risk on an aggregate loan portfolio basis that are not individually impaired.

Provision for impairment recognized in the financial statements only for losses that were incurred

at the reporting date based on objective evidence confirming that fact of impairment has occurred

in the period after the initial recognition. Because of differences in methodologies used amount of

incurred credit losses calculated for financial reporting, is usually less than the amount determined

on the basis of the expected loss model.

Despite the existence of approved policies and procedures for lending, the MCF does not always

follow the procedures prescribed in the ordinary course of business. It should be noted that there is

a weak monitoring of borrowers at the stage of loan issuance, as well as inappropriate control over

the active loans.

National Bank of Tajikistan established standards for credit risk management of micro loan

organizations. The volume of one micro loan to an individual shall not exceed the amount to

250 000 Somoni, and 350 000 Somoni for entities. The size of micro loans or micro loan limits

apply to the sum of all loans to an individuals or persons acting together in order to get a microloan

for sharing. In group lending limits on the size of micro loans applicable to the individual micro

loans of each member of the group, not to the entire group.

Maximal credit risk

In the following table there is a maximal value of credit risk on the financial assets and off-balance contingent liabilities. For the financial assets reflected in the balance accounts, the maximal value of credit risk equals to balance cost of these assets without setoff assets and liabilities and security.

December 31,

2016

December 31,

2015

Funds from other banks 2 292 596 19 499 092

Loans to customers 11 860 037 12 302 007 Investment 48 384 985 48 384 985

Accounts receivable 458 807 351 316

Concentration of credit risk

MCF doesn’t have any assets and liabilities outside of the Republic of Tajikistan.


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Liquidity risk and interest rate risk

Liquidity risk is a risk of facing difficulties with receiving cash assets to pay off deposits and

liabilities relevant to financial instruments at the time of their payment period.

The MCF daily feels the need in free funds for settlement of current liabilities, loans payable and

other requirements on financial instruments paid in cash. The MCF performs liquidity management

in order to ensure the presence of cash in any time for making payments on liabilities relevant to

cash flows when the payment period comes.

The main tool the MCF uses to control liquidity is analysis of cash flows forecasts. Interest rate

risk management is done by means of balancing of maturity period of liabilities and assets of the

MCF. Perspective evaluation of interest rate risk for every instrument gives the opportunity to take

measures to minimize its influence on the MCF profit as reduction in income or direct losses can

lead to deterioration in capital adequacy ratio.

The table below shows the analysis of interest rate risk and liquidity risk of the MCF by maturity

date according to the contracts where the specified groups are divided on the basis of the paying

off period at the date of statement of financial position.

Up to 1

month

1-3

mo

nth

3month-

1year

1 year -

5 years

Overdue Undefined December

31, 2016

ASSETS

Loans to customers - - - - 11 860 037 (1 790 316) 10 069 721

Total interest bearing

assets - - - - 11 860 037 (1 790 316) 10 069 721

Cash - - - - - - -

Balance in other banks - - - 19 560 679 - - 19 560 679

Long term investments - - - - - 48 384 985 48 384 985

Fixed assets - - - 308 064 - - 308 064

Other assets - - 480 864 180 999 - 3 173 984 3 835 846

Total assets - - 480 864 20 049 741 11 860 037 49 768 653 82 159 295

LIABILITIES

Funds from financial

institutions - - - - - - -


liabilities - - - - - - -

Other borrowings - - - - - - -

Other liabilities - - - - - 1 180 771 1 180 771

Total liabilities - - - - - 1 180 771 1 180 771

Difference between assets

and liabilities - - 480 864 20 049 741 11 860 037 Difference between interest

bearing assets and

liabilities - - - - 11 860 037 Difference between interest

bearing assets and

liabilities, progressive total - - - - 11 860 037 Difference between interest

bearing assets and

liabilities, in percentage to

the total assets,

progressive total 0% 0% 0% 0% 14%


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Up to 1

month

1-3

mo

nth

3month-

1year

1 year -

5 years

Overdue Undefined December

31, 2015

ASSETS

Loans to customers

8 196 993 4 105 014 (721 352) 11 580 655


assets 8 196 993 4 105 014 (721 352) 11 580 655

Cash 7807 7 807

Balance in other banks 19 449 092 19 449 092

Long term investments 48384985 48384985

Fixed assets 186677 186677

Other assets 351 316 2 905 087 3 256 403

Total assets 7807 351 316 27 832 762 4105 014 50 568 720 82 865 619

LIABILITIES

Funds from financial

institutions - - - - - - -


liabilities

Other borrowings 2 784 260 2784 260

Other liabilities - - - - - - 2784 260

Total liabilities 7807 - 351 316 27 832 762 4105 014 Difference between assets

and liabilities - - - 8 196 993 4 105 014 Difference between interest

bearing assets and

liabilities - - - 8 196 993 1 2302007 Difference between interest

bearing assets and

liabilities, progressive total - - - 9,89% 14,84% Difference between interest

bearing assets and

liabilities, in percentage to

the total assets,

progressive total - - - 15% 15,78%

Currency risk

The MCF assumes the risk associated with the effects of fluctuations in foreign exchange rates on

its financial position and cash flows. Since the MCF is not licensed for foreign operations and has

only for forward operations and SWAP, and borrowed funds denominated in foreign currency, the

MCF issues indexed loans, tied to the rate of US Dollar at the time of repayment of interest and

principal.

The below table states the analysis of currency risk level as of December 31, 2016:


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Assets TJS USD Total

Cash

Balance in other banks 6 619 740 12 940 939 19 560 679

Loans to customers, net 10 069 721 - 10 069 721

Long term investments 48 384 985 - 48 384 985

Fixed assets 308 064 - 308 064

Other assets 3 835 846 - 3 835 846

Total assets 69 218 356 12 940 939 82 159 295

Liabilities

Balance in other banks - - - Other liabilities 1 180 771 - 1 180 771

Total liabilities 1 180 771 - 1 180 771

Currency position 68 037 585 12 940 939

The below table states the analysis of currency risk level as of December 31, 2015:

Assets TJS USD Total

Cash 7 807 7 807

Balance in other banks 7 418 044 12 081 048 19 499 092

Loans to customers, net 11 931 971 - 11 931 971

Long term investments 48 384 985 - 48384985

Fixed assets 186 677 - 186677

Other assets 2 905 087 - 3 256 403

Total assets 70 834 571 12 081 048 82 915 619

Liabilities

Balance in other banks Other liabilities 2 784 260 - 2 784 260

Total liabilities 2784 260 - 2784 260

Currency position 68 050 311 12 081 048

The sensitivity analysis to currency risk

The table below presents the sensitivity of the MCF to increase and decrease of exchange rate of

US Dollar / Euro at 5% to TJS.

The sensitivity analysis includes only foreign currency amounts available at the end of the period

and the rates used for their conversion as at the end of the period have been modified by 5%

compared with the current.


Strengthen/weakness of US Dollar at 5% (647 047)\ 647 047 (604 052)\ 604 052

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