Professional Documents
Culture Documents
MYANMAR
MYANMAR
ANNUAL
REPORT
ANNUAL REPORT 2017 BRAC IN MYANMAR
If you were to describe this world, which one of the following would you pick?
It is home to magic, art, beauty, and tens of thousands of years of human talent.
Or would you say, even though it may be true, that our world is where we live,
but it is a place that doesn’t work for everyone? Our world is our playground,
a platform for the creativity of all seven billion of us.
Sometimes it’s hard to believe that a world that works for all of us can
be possible. But the opportunities are all around us.
While we all hope for a better future for our world, many of us
are building it. If you are a builder, we are betting on you.
The changemaker
The activist
The hero
The mentor
We act as a catalyst, creating opportunities for people living in poverty to realise their potential. We
specialise in piloting, perfecting and scaling innovations to impact the lives of millions. We were born in
Bangladesh, are almost completely self-sustainable through our own network of social enterprises and
investments, and operate in 11 countries across Asia and Africa. INVESTMENTS
Socially responsible companies that assist us
in our mission. Our network of investments
help us strive towards the goal of
self-sustainability.
VISION, MISSION AND VALUES
A world free from all forms of exploitation
and discrimination where everyone has the
opportunity to realise their potential.
Empower people and communities in situations
of poverty, illiteracy, disease and social injustice. BRAC UNIVERSITY
Our interventions aim to achieve large scale,
An educational institution's goal is not only to
positive changes through economic and social
provide the highest quality teaching, but also to
programmes that enable women and men to
inculcate the values essential for tomorrow's
realise their potential.
leaders. The journey starts by building a high
Integrity Innovation Inclusiveness Effectiveness calibre and supportive faculty and
administration team who are capable of
teaching the most challenging and up-to-date
educational programmes, and empowering
SOCIAL DEVELOPMENT them with knowledge and life skills so that they
can take on the challenges of building
Eliminating extreme poverty, Expanding themselves and a better nation.
financial choices, Employable skills for
decent work, Climate change and
emergencies, Gender equality, Universal
healthcare, Pro-poor urban development,
Investing in the next generation.
Country offices: Afghanistan, Bangladesh, STICHTING BRAC INTERNATIONAL
Liberia, Myanmar, Nepal, Pakistan,
Philippines, Sierra Leone, South Sudan,
Tanzania, Uganda
HUMANITARIAN RESPONSE
We have been providing life-saving services to forcibly
displaced Myanmar nationals through a multi-sector
AFFILIATES
response since the influx began in September 2018. We
are working closely with the government, local and BRAC USA
international NGOs and other stakeholders through the BRAC UK
Inter Sector Coordination Group.
There are more young people today than at any other time and 15 million girls of primary-school age will never The year 2017 has been an exciting year for BRAC We also continued the implementation of our
in human history. Children and young people make up enter school. We are building schools only for girls in team in Myanmar! disaster risk reduction and resilience building
almost 40% of the world’s population, with specific needs Afghanistan and Pakistan, places where it is extremely programme to strengthen our organisational
and aspirations for the future, which poses both immense difficult for them to go to school. I am enthusiastic of the great work done so far capacity for humanitarian response by building
opportunities and challenges. While we as a global and for the new challenges ahead. safer and more resilient communities in Myanmar.
In Sub-Saharan Africa alone, 14.2% of the youth
community have made significant progress in ensuring The project will be followed by further phases
population is unemployed, representing massive
a better life for all, there is always more work to be done. 2017 was a great year for our microfinance in 2018 to implement a local model of building
untapped potential for growth. Everyone should be
One in five children, adolescents and youth is out of programme. We reached almost 63,000 women disaster preparedness and emergency response
able to contribute and reap development dividends
school. That is 263 million children and youth across the in 5 regions of Myanmar and our outstanding capabilities of local actors, institutions, vulnerable
and our ELA programme ensures just that for our out-
world. loan portfolio grew by 154% since 2016, reaching communities.
of-school adolescent girls. With specialised skills and
around USD 8.9 million. We are proud of the great
Today’s young people will be tomorrow’s leaders - in our entrepreneurial lessons, our programme enables them to
results achieved and we are confident that our We designed a new strategy to expand our
families, in our workplaces, in our communities. Over a unlock their potential and contribute to society. We give
programme will continue to expand, serving an programmes to include agriculture, health,
third of the Sustainable Development Goal (SDG) targets our girls access to microloans so they can start their own
increasing number of women in need and offering nutrition and youth.
highlight the role of young people and the importance enterprises.
credit to those left out from the formal financial
of their empowerment, participation, and wellbeing. The
Our newly-launched Skills Development Programme in sector. I look forward to continuing this incredible journey
SDGs highlight that young people are a driving force for
Nepal connects children and youth to apprenticeships for realising, in Myanmar and all over the world,
development – however they need to be provided with the
and equips them with the skills needed to not only affect We are highly committed in promoting inclusive the dream that animates all of us, part of BRAC
skills and opportunities needed to reach their potential.
change in their own lives but also in the communities they finance that could reach the most excluded family: a world free from all forms of exploitation
Therefore we at BRAC International have shifted our
are a part of. segments of the society. For this reason, we and discrimination where everyone has the
strategy to focus on ensuring children and youth have
launched two new initiatives aimed at including opportunity to realize their potential.
better opportunities.
Our extraordinary strides in the field of development mean vulnerable groups.
We have invested in Early Childhood Development that we are ready to provide a better, more equitable
programmes in Tanzania, Uganda and Liberia. A dollar life for our children. As our future change-makers, First, we started a project using financial diaries
invested in early childhood development yields a seven- children hold incredible potential for innovation. It is our to collect data from rural women with the aim
fold return in the future. Having a strong foundation from responsibility to give them what they deserve. We cannot of gathering insights of their financial needs and
an early age leads to more productive citizens in the let their potential go unrealised. thus adapt our financial services. Second, we
future. initiated a pilot project with customised credit to ATM Tariqul Islam, Ph.D.
people with disabilities. We are poised to become Country Representative
We believe education is a universal right and no one, the pioneer in targeting people with disabilities BRAC in Myanmar
no matter the circumstance, should be left behind. 130 through truly inclusive microloans.
Faruque Ahmed
million girls between the age of 6 and 17 are out of school
Executive Director
BRAC International
THE WORLD
05
EMERGENCY PREPAREDNESS WHAT WE DO HIGHLIGHTS
AND RESPONSE Our main approach is to build local
capacity. In partnership with the Bill Monitored monthly country safety and security
& Melinda Gates Foundation, BRAC situations and developed 46 weekly safety and
International and BRAC Myanmar are security reports
piloting a model for developing local
emergency preparedness and response Updated Country Risk Assessment and Multi
capacities. Through a participatory, Hazard Risk Assessment on quarterly basis
community-based inclusive approach,
our project will work with schools, Organized the thematic workshop on “Myanmar
communities and regional governments Action Plan on DRR (MAPDRR) and People Most at
in Bago and Yangon to strengthen Risk” together with UNICEF and five other INGOs.
humanitarian localization.
Conducted a Safety and Security Risk
Management training to 40 branch managers of
BRAC Myanmar Microfinance Company Limited.
We have provided basic first aid training to all
branch managers with support from external first
aid trainers.
the country are exposed to landslides and droughts. Cyclone Participated in key national workshops and
provided technical inputs to:
Nargis in 2008 claimed 140,000 lives.
National Earthquake Preparedness and Response
We established an emergency preparedness and response Plan, National WASH strategy, 4th Regional
programme in 2016 to strengthen our organisational capacity on Moonson Forum, Calculating Costs and Benefits
of Community Driven Resilience Programmes in
emergency response in order to build safer and more resilient
Myanmar, Urban Disaster Risk Reduction (DRR).
communitie
MANAGEMENT
ATM Tariqul Islam Ph.D- Country Representative
Sharmin sultana - Head of Finance
Md. Sazaduzzaman - General manager, Microfinance
Lian Huai - Head of Human Resource and Training
Md. Shariful Islam - Head of Internal Audit
Aung Koko - Emergency Response Coordinator
DEVELOPMENT PARTNERS
BRAC IN MYANMAR
22 | Annual Report 2017 Annual Report 2017 | 23
FINANCIALS FINANCIAL HIGHLIGHTS
Net Income
BRAC Myanmar Microfinance Company Limited completed its fourth years of operation in 2017. Net profit before tax was
USD 35,094 as against net loss before tax USD 206,702 in 2016.
Interest income earned during the year is USD 2,151,248 as against USD 1,358,897 in 2016.
Operating expenses
Total operating expenses for the year was USD 2,071,585 as against USD 1,636,738 in 2016 showing an increase 27%.
In 2017 an additional 7 branches were opened resulting the total number of branches to 41.
Provisions for Impairment losses
This year amount charged for impairment of loans is USD 66,450 as against 83,906 in 2016 showing an decrease of
21%. Total reserve as against impairment in 2017 was USD 161,508 and USD 109,831 in 2016 representing 1.78% of
gross portfolio. Portfolio at Risk (PAR>30) is 0.79%.
Financial Position
In 2017 the company’s total assets increased by 45% to USD 10,003,967. Loans and advances to customers increased
by 59% and is now 89% of total assets.
PERFORMANCE REVIEW
2017 2016 2015 2014 2013
Income Statement USD USD USD USD USD
Operating Income 2,173,129 1,513,942 536,058 29,824 -
Net profit/(loss) before tax 35,094 (206,702) (432,010) (363,346) (134,775)
The directors have pleasure in submitting their report and the audited financial statements of the company for the year ended 31 December 2017, g) Results from operation
which disclose the state of affairs of BRAC Myanmar Microfinance Company Limited.
The results for the Company's operation for the year ended 31 December 2017 are set out on Page 36.
a) Registration
h) Composition of Directors
BRAC Myanmar Microfinance Company Limited is a wholly owned subsidiary company of BRAC International Holdings B.V., a limited
liability company registered under the laws of the Netherlands, with its registered office in The Hague. The directors who served during the year and up to the date of this report are set out on Page 28 .
BRAC Myanmar Microfinance Company Limited was incorporated as a limited liability company under the company Act on 15 October i) Directors' benefits
2013 with its registration number 559 FC/13-14 and registered office in Yangon, Myanmar.
No director has received or entitled to receive any benefits during the financial year.
The objective of the company is to operate microfinance programme in Myanmar with a mandate to contribute towards alleviating poverty
and attaining Sustainable Development Goals (SDGs) through promoting employment and income generating activities for the poor
j) Corporate governance
women.
The directors are committed to the principles of good corporate governance and recognize the need to conduct the business in accordance
b) Vision
with generally accepted best practice. In so doing the directors therefore confirm that:
A world free from all forms of exploitation and discrimination where everyone has the opportunity to realise their potential.
• The Board of Directors met regularly throughout the year;
c) Mission • They retain full and effective control over the Company;
• The Board accepts and exercises responsibility for strategic and policy decisions, the approval of budgets and the monitoring of
The Company’s mission is to empower people and communities in situations of poverty, illiteracy, disease and social injustice. The performance; and
interventions aim to achieve large scale, positive changes through economic and social programmes that enable men and women to • They bring skills and experience from their own spheres of business to complement the professional experience and skills of the
realize their potential. management team.
d) Our values In 2017 the company had three directors. The Board continued to carry out its role of formulating policies and strategies of the Company,
reviewing the business plan, ensure that the accounting system is maintained in accordance with acceptable standards, the books of
Innovation- the Company has been an innovator in the creation of opportunities for the poor to lift themselves out of poverty. We the Company are kept properly, and that accounts are checked by authorized auditors, as well as recruitment and development of key
value creativity in programme design and strive to display global leadership in groundbreaking development initiatives. personnel.
Integrity- the Company values transparency and accountability in all our professional work, with clear policies and procedures, while k) Risk management
displaying the utmost level of honesty in our financial dealings. The Company holds these to be the most essential elements of our work
ethic. The board accepts the final responsibility for the risk management and internal control system of the Company. The management ensures
that adequate internal financial and operational control systems are developed and maintained on an ongoing basis in order to provide
Inclusiveness- the Company is committed to engaging, supporting and recognizing the value of all members of society, regardless of reasonable assurance regarding:
race, religion, gender, nationality, ethnicity, age, physical or mental ability, socioeconomic status and geography.
· The effectiveness and efficiency of operations;
Effectiveness- the Company values efficiency and excellence in all our work, constantly challenging ourselves to perform better, to · The safeguarding of the Company’s assets;
meet and exceed programme targets, and to improve and deepen the impact of our interventions. · Compliance with applicable laws and regulations;
· The reliability of accounting records;
e) Principal activities · Business sustainability under normal as well as adverse conditions; and
· Responsible behaviours towards all stakeholders.
The Company provides Microfinance services to improve the livelihood of poor people in over 37 townships in Myanmar including extending
loan facilities. The company started a new product called Small Enterprise Programme (SEP) giving individual loans to clients. The efficiency of any internal control system is dependent on the strict observance of prescribed measures. There is always a risk of non-
compliance of such measures by staff. Whilst no system of internal control can provide absolute assurance against misstatement or
f) Financial performance losses, the Company’s system is designed to provide the Board with reasonable assurance that the procedures in place are operating
effectively.
The Company's performance during the year ended 31 December 2017 is as follows:
l) Management structure
- Interest income on loans increased by around 74% from MMK 1,686 million in 2016 to MMK 2,927 million in 2017.
- Loans and advances to customers increased by 58% from MMK 7,704 million in 2016 to MMK 12,192 million in 2017. Loan disbursement The Company is under the supervision of the Board of Directors and the day to day management is entrusted to the Country Representative
increased by 70% from MMK 15,938 million in 2016 to MMK 27,021 million in 2017. Loan realisation increased by 103% from MMK 11,026 who is assisted by the heads of divisions, departments and units. The organization structure of the Company comprises of the following
million in 2016 to MMK 22,478 million in 2017. divisions:
- Operating expenses increased by 39% from MMK 2,031 million in 2016 to MMK 2,819 million in 2017.
- Total asset increased by 44% from MMK 9,430 million in 2016 to MMK 13,625 million in 2017.
- During the year, the company had a net profit of MMK 49.5 million ( 2016-loss of MMK 287.5 million).
The Board of directors confirms that applicable accounting standards have been followed and that the financial statements have been
prepared on a going concern basis. The Board of directors has reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Director Director
q) Gender parity BRAC Myanmar Microfinance BRAC Myanmar Microfinance
Company Limited Company Limited
In 2017, the company had a total staff of 389. The female staff are 327 and male 62.
r) Employees' welfare
Management/employee relationship
There were continued good relation between employees and management for the year 2017. There were no unresolved complaints
received by management from the employees during the year. New performance incentive schemes which were introduced in 2016
continued in 2017.
The Company is an equal opportunity employer. It gives equal access to employment opportunities and ensures that the best available
person is appointed to any given position free from discrimination of any kind and without regard to factors like gender, marital status,
tribes, religion and disability which does not impair ability to discharge duties.
The company's directors are responsible for the preparation and fair presentation of the financial statements, comprising the statement INDEPENDENT AUDITOR'S REPORT
of financial position at 31 December 2017, the statement of comprehensive income, the statement of changes in equity and statement of
To the members of BRAC Myanmar Microfinance Company Limited
cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies
and other explanatory notes, in accordance with International Financial Reporting Standards and in the manner required by the Companies Opinion
Act of Myanmar and for such internal controls as the directors determine are necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error. We have audited the financial statements of BRAC Myanmar Microfinance Company Limited ("BRAC" or also referred as "the Company"),
which comprise the statement of financial position of the Company as at 31 December 2017, the statement of comprehensive income,
The directors' responsibilities include: designing, implementing and maintaining internal controls relevant to the preparation and fair statement of changes in equity and statement of cash flows of the Company for the year then ended and a summary of significant
presentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying accounting policies and other explanatory notes.
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. They are also responsible for
safe guarding the assets of the company. In our opinion, the financial statements of the Company are properly drawn up in accordance with International Financial Reporting
Standards so as to give a true and fair view of the state of affairs of the Company as at 31 December 2017 and the results, changes in
Under the Companies Act of Myanmar, the directors are required to prepare financial statements for each year that give a true and fair equity and cash flows of the Company for the year then ended. The accounting records required by the Company have been properly kept.
view of the state of affairs of the company as at the end of the financial year and of the operating results of the company for that year. It
also requires the directors to ensure the company keeps proper accounting records that disclose with reasonable accuracy the financial Basis for opinion
position of the company.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are
The directors accept responsibility for the financial statements which have been prepared using appropriate accounting policies supported further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the
by reasonable and prudent judgment and estimates, in conformity with International Financial Reporting Standards and the Companies Act Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Myanmar, and we have
of Myanmar. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs and fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
the profit and cash flow for the year ended 31 December 2017. The directors further accept responsibility for the maintenance of accounting sufficient and appropriate to provide a basis for our opinion.
records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
Responsibilities of Management of the Financial Statements
The directors have made an assessment of the company's ability to continue as a going concern and have no reason to believe the
company will not be a going concern for the next twelve months from the date of this statement. Management is responsible for the preparation and fair presentation of these financial statements in accordance with International
Financial Reporting Standard (IFRSs) and for such internal control as management determines is necessary to enable the preparation of
The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with the International financial statements that are free from material misstatement, whether due to fraud or error.
Financial Reporting Standards and Companies Act of Myanmar.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern,
Approval of the financial statements disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The financial statements, as indicated above, were approved by the board of directors on 09 March 2018 and were signed on its behalf by:
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Director Director Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
BRAC Myanmar Microfinance BRAC Myanmar Microfinance expected to influence the economic decisions of users taken on the basis of these financial statements.
Company Limited Company Limited
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,design and
perform audit procedures responsive to those risks,and obtain audit evidence that issufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraudis higher than forone resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company's internal control.
Director Director
BRAC Myanmar Microfinance BRAC Myanmar Microfinance
Company Limited Company Limited
STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2017
USD
2,645,109
-
Total equity
2,732,268
(231,733)
138,681
(87,480)
5,196,844
5,196,844
5,568,553
36,401
323,888
11,420
Notes 2017 2016 2017 2016
Kyats Kyats USD USD
Total equity
Kyats
3,462,447,152
7,093,692,424
-
3,729,545,345
(287,599,073)
189,299,000
-
7,093,692,424
49,541,387
7,584,369,130
441,135,320
-
Interest expense 18 407,092,619 113,875,325 299,113 91,755
Net income from service charge 2,520,756,325 1,572,624,545 1,852,135 1,267,142
Membership and other fees 19 353,914,000 223,101,400 260,040 179,764
Other income 20 57,789,213 83,197,115 42,461 67,036
Grant income 21 25,169,021 - 18,493 -
436,872,234 306,298,515 320,994 246,800
Donor grant
Kyats
238,313,436
-
-
189,299,000
-
427,612,436
427,612,436
-
-
868,747,756
441,135,320
-
Total operating income 2,957,628,559 1,878,923,060 2,173,129 1,513,942
Impairment loss on loan 7 90,438,716 104,134,679 66,450 83,906
Operating income after impairment charge 2,867,189,843 1,774,788,381 2,106,679 1,430,035
Kyats
(1,063,746,284)
-
(1,351,345,357)
(287,599,073)
-
(1,351,345,357)
-
49,541,387
-
-
(1,301,803,971)
Staff costs 22 1,715,574,171 1,233,659,818 1,260,525 994,021
Other operating expenses 23 1,045,919,742 751,329,361 768,494 605,384
Depreciation and amortization 24 57,933,079 46,333,254 42,567 37,333
Total operating cost 2,819,426,992 2,031,322,433 2,071,585 1,636,738
Profit/ (Loss) before tax 47,762,851 (256,534,052) 35,094 (206,702)
Income tax expenses - - - -
1,320,765,345
Kyats
(635,880,000)
1,320,765,345
-
-
1,320,765,345
-
-
-
684,885,345
deposit
Net Profit/ (Loss) after tax 47,762,851 (256,534,052) 35,094 (206,702)
Share capital
Kyats
4,287,880,000
2,408,780,000
-
-
-
6,696,660,000
635,880,000
6,696,660,000
-
-
-
7,332,540,000
The accompanying notes form an integral part of these financial statements.
At 31 December 2017
At 1 January 2016
At 1 January 2017
Director Director
Donor grants
Donor grants
Share capital
Share capital
BRAC Myanmar Microfinance BRAC Myanmar Microfinance
Company Limited Company Limited
Acquisition of property & equipment (46,655,587) (51,913,907) (34,280) (41,830) These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)..
Acquisition of intangible asset (65,463,294) (34,132,680) (48,099) (27,502)
The financial statements were issued by the Board of Directors on 09 March 2018.
Net cash used in operating activities (112,118,881) (86,046,587) (82,380) (69,332)
b. Basis of measurement
Cash flows from financing activities
The financial statements are prepared under the historical cost convention except for the financial instruments at fair value through profit
Members savings 201,609,894 867,797,635 148,025 635,749 and loss which are measured at fair value when required.
Proceeds from issue of share capital 635,880,000 2,408,780,000 466,872 1,764,674
Grant received in advance 441,135,320 189,299,000 323,888 138,681 c. Functional and presentation currency
Term loan 3,261,228,785 - 2,394,441 -
Share money deposit (635,880,000) 1,320,765,345 (466,872) 967,594 The financial statements are presented in Myanmar Kyats, which is the Company's functional currency.
Net cash from financing activities 3,903,973,999 4,786,641,980 2,866,354 3,506,697 Memorandum figures
Net increase/(decrease) The memorandum column representing the results in United States Dollars (USD) are for presentation purposes only, and do not form part
in cash and cash equivalents (401,275,417) (50,849,255) (296,945) (391,110) of the audited financial statements.
Cash and cash equivalents at 1 January 1,431,432,280 1,482,281,535 1,048,668 1,132,377 The exchange rates used to translate the MMK figures to USD memorandum were as follows:
Effect of exchange rate fluctuation on cash - - 4,632 307,402
• Assets and liabilities were translated at the closing rate at 31 December 2017 which of MMK 1,362 (2016:MMK 1,365);
Cash and cash equivalents at 31 December 8 1,030,156,863 1,431,432,280 756,356 1,048,668 • Income and expenses were translated using an average exchange rate for the period of MMK 1,361 (2016: MMK 1,241.08);
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods affected.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency Loans and receivables
at the spot exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised
in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments which is recognised directly in equity. Loans originated by the company by providing finance directly to borrowers is categorized as loans to group members and is carried at
amortized cost. All loans and advances are recognized when cash is advanced to borrowers.
b. Interest income and other income
Other receivables
Interest income and expenses are recognized on a accrual basis taking into account the effective interest rate of the interest earning asset
Other assets comprise prepayments other recoverable which arise during the normal course of business; they are carried at original
or the interest bearing liability.
invoice amount less provision made for impairment losses. A provision for impairment of other receivables is established when there is
objective evidence that the fund will not be able to collect all amounts due according to the original terms of receivables. The amount of
(i) Interest income on loans and advances
the provisions is the difference between the carrying amount and the recoverable amount.
Interest income on Loans and advances (service charges) on regular loans that is, loans where no amounts are overdue as at the end of
the reporting period are recognized on an accrual basis as income. Other financial liabilities
(ii) Membership fees and other charges Other financial liabilities comprises members savings, related party payables and other liabilities. These liabilities are carried at cost, which
Membership fees and other charges are recognized on an accrual basis when the service has been provided. is the fair value of the consideration to be paid in the future for goods and services received.
(iii) Other Income (iii) De-recognition
Other income comprises of house rent received from local stafff or using the office residence and gain on foreign currency translation.
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it
c. Income Tax transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the
Income tax expense is recognised in the profit or loss except to the extent that it relates to items recognised directly in equity, in which Company is recognised as a separate asset or liability.
case it is recognised in equity.
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
statement of financial position date, and any adjustment to tax payable in respect of previous years. The Company enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all
or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to
retained, then the transferred assets are not derecognised from the statement of financial position.
interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. During the year
2017 the Company earned profits but not liable for tax in accordance with the Myanmar Tax Law becasue of its tax losses in prior years.
In transactions in which the Company neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset,
it derecognises the asset if it does not retain control over the asset. The rights and obligations retained in the transfer are recognised
d. Financial assets and liabilities
separately as assets and liabilities as appropriate. In transfers in which control over the asset is retained, Company continues to recognise
the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the
(i) Recognition
transferred asset.
The Company initially recognises loans and advances, deposits, and other liabilities on the date at which they are originated. All other financial
The Company writes off certain loans when they are determined to be uncollectible.
assets and liabilities (including assets and liabilities designated at fair value through profit or loss) are initially recognised on the trade date at
which the Company becomes a party to the contractual provisions of the instrument. The Company did not have any financial assets and
(iv) Off-setting
liabilities designated at fair value through profit or loss.
Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only when, the
A financial asset or financial liability is initially measured at fair value (for an item not subsequently measured at fair value through profit or loss).
organisation has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability
The transaction costs that are directly attributable to its acquisition or issue is directly charged to comprehensive income.
simultaneously.
(ii) Classification
Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from
a group of similar transactions such as currency exchange gain and losses.
The company classifies non-derivative financial assets into loans and receivables which includes cash and cash equivalents, loans and
advances and any other receivables and the Company classifies its non derivative financial liabilities as other financial liabilities.
(v) Fair value measurement
Cash and cash equivalents
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s
length transaction on the measurement date.
Cash and cash equivalents comprise cash in hand and cash at bank with maturity of less than 3 months, which are highly liquid
assets and are subject to insignificant risk of changes in fair value, and are used by the Company in the management of its short term
When available, Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market
commitments.
is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions
on an arm’s length basis.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
If a market for a financial instrument is not active, the company establishes fair value using a valuation technique. Valuation techniques The estimated useful lives for the current and comparative years are as follows:
include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of
other instruments that are substantially the same, discounted cash flow analyses and option pricing models (if required). Furniture & Fixtures 10%
Computer/Laptop 20%
(vi) Impairment of financial assets Equipments 33.33%
Vehicles 20%
At each statement of financial position date the Company assesses whether there is objective evidence that financial assets not carried
at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has Management reviews the depreciation methods, residual value and useful life of an asset at the year end and any change considered to
occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be be appropriate in accounting estimate is recorded through the statement of comprehensive income.
estimated reliably.
f. Intangible asset
Objective evidence that financial assets are impaired can include default or delinquency by a borrower, indications that a borrower or issuer Intangible assets acquired separately are measured initially at cost. Following initial acquisition, intangible assets are carried at cost less
will enter bankruptcy, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers any accumulated amortization and any impairment losses.
or issuers in the group, or economic conditions that correlate with defaults in the group.
The Company has accounting software Sbi Cloud acquired during the year and it is amortised on a straight line basis over its finite useful
Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset life of 4 years.
and the present value of estimated future cash flows discounted at the asset's original effective interest rate.
g. Operating lease
Losses are recognised in profit or loss and reflected in an allowance account against loans and advances. Interest on the impaired asset
BRAC is involved in operating leases as the lessee for rental property serving as office space. The total payments made under operating
continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to
leases are charged to the income statement on a straight-line basis over the period of the lease, which is typically twelve (12) months.
decrease, the decrease in impairment loss is reversed through profit or loss.
h. Provisions
e. Property and equipment A provision is recognised if, as a result of a past event, BRAC Myanmar Microfinance Company Limited has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle
i. Recognition and measurement the obligation.
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The loan loss provision is calculated based on the ageing of default loans in the portfolio on the following basis:
Costs comprises its purchase price and any cost directly attributable in bringing the asset to the location and condition necessary for it to Name Period of default Provision % on default loans*
be capable of operating in the manner intended by the management.
Current Performing loans 1%
Subsequent to initial recognition, property and equipment are stated at cost less accumulated depreciation and impairment losses. The Sub-standard 30 days past due 10%
gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal Watch 31- 60 days past due 50%
and the carrying amount of the item) is recognised in profit or loss. Major improvements that increase the life of the asset are Doubtful 61-90 days past due 75%
capitalized. Loan loss over 90 days past due 100%
ii. Subsequent cost
i. Related party transactions
The cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable
Related parties comprise directors, subsidiaries of BRAC International and key management personnel of the company and companies
that the future economic benefits embodied within the component will flow to the Company, and its cost can be measured reliably. The
with common ownership and/or directors.
costs of the day-to-day servicing and maintenance of property and equipment are recognised in the statement of comprehensive income
as incurred. j. Classes of financial instruments
iii. Depreciation The Company classifies the financial instruments into classes that reflects nature of information and take into account the characteristics
of those financial instruments:
All property and equipment are depreciated on a straight line basis to write off the costs of the assets over the expected useful lives.
Depreciation is recognised as an expense in profit or loss of each component of an item of property and equipment unless it is included Items on the statement of financial position Class
in the carrying amount of another asset.
Loans to customer Loans and receivables
Other assets Loans and receivables
Depreciation is recognised from the date that the property and equipment are installed and are ready for use, or in respect of internally
Related party payables Other liabilities
constructed assets, from the date that the asset is completed and ready for use.
Member savings payable Other liabilities
Other liabilities Other liabilities
Carrying amounts
Total
128,198
-
(9,825)
369
(3,845)
82
USD
146,922
41,830
178,927
178,927
36,530
(2,250)
213,576
18,724
48,774
48,774
36,231
(1,122)
83,964
130,153
129,612
33,895
2017 2016 2017 2016
Kyats Kyats USD USD
5. Intangible assets
Cost
Total
-
-
-
Kyats
192,321,306
51,913,907
244,235,213
244,235,213
49,717,637
(3,062,050)
290,890,800
24,509,684
66,576,353
66,576,353
49,310,227
(1,526,940)
114,359,640
167,811,622
177,658,860
176,531,160
42,066,669
At 1 January 34,132,680 - 25,006 -
Additions 65,463,294 34,132,680 48,099 27,502
Disposal adjustment - - - -
Currency translation adjustment - - 20 (2,497)
At 31 December 99,595,974 34,132,680 73,125 25,006
vehicles
-
Kyats
88,734,000
-
-
3,988,000
92,722,000
99,692,000
92,722,000
6,970,000
-
8,809,824
27,176,070
27,176,070
19,401,172
-
46,577,242
79,924,176
65,545,930
53,114,758
18,366,246
Motor
Accumulated amortization
28,013,660
-
19,298,500
-
-
8,715,160
28,013,660
8,140,100
(1,150,350)
35,003,410
5,207,848
13,300,206
13,300,206
9,722,806
(843,102)
22,179,910
14,090,652
14,713,454
12,823,500
8,092,358
-
Carrying amount
At 31 December 86,706,537 29,866,095 63,661 21,880
6. Other assets
Computer
Kyats
35,783,856
-
16,417,747
-
52,201,603
-
70,557,390
6,369,569
29,414,287
42,457,128
52,201,603
18,727,787
(372,000)
9,471,372
-
15,840,941
15,840,941
12,487,626
(228,305)
-
28,100,262
36,360,662
Advance to third parties 129,720,000 86,959,998 95,242 63,707
Advance to staff - 350,000 - 256
Receivable from BRAC Myanmar 2,564,893 - 1,883 -
Receivable from Donor 7,192,821 - 5,281 -
48,504,950
-
22,793,000
-
71,297,950
71,297,950
-
85,638,000
4,122,443
-
15,879,750
(1,539,700)
6,136,693
10,259,136
10,259,136
7,698,623
(455,533)
-
17,502,226
44,382,507
68,135,774
-
61,038,814
7. Loan to customers
BRAC MYANMAR MICROFINANCE COMPANY LIMITED
At 31 December 2016
At 31 December 2016
At 31 December 2017
At 31 December 2017
At 31 December 2017
At 1 January 2016
At 1 January 2016
At 1 January 2017
At 1 January 2017
Additions
Additions
Additions
Write-off
Write-off
Write-off
2017 2016 2017 2016 Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported
Kyats Kyats USD USD to the BRAC International Group Audit Committee.
23.4 Audit and professional fee a) Credit Risk
Professional & consultancy fee 49,215,823 3,086,140 36,162 2,487 Credit risk is the risk of financial loss to Company if a customer or counterparty to a financial instrument fails to meet its contractual
Audit fee 8,868,501 4,033,600 6,516 3,250 obligations, and arises principally from the Company’s loans and advances to customers.
26. Financial risk management policies and objectives • Reviewing compliance of business units with agreed exposure limits including those for selected industries’ country risk and product
types. Regular reports are provided to BRAC’s Program department on the credit quality of local portfolios and appropriate corrective
The Company has exposure to the following risks arising from financial instruments: actions to be taken.
• credit risk
• liquidity risk • Providing advice, guidance and specialist skills to business units to promote best practice throughout BRAC in the management of
• market risk credit risk.
This note represents information about the Company's exposure to each of the above risk, its objectives, policies and processes for Each branch is required to implement BRAC’s credit policies and procedures with credit approval authorities delegated from management.
measuring and managing risk and the Company's management of capital. Each branch has a Branch Manager who reports on all credit related matters to senior management. Each branch is responsible for the
quality and performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolios including those subject to
Risk management framework central approval.
The Board of Directors has overall responsibility for the establishment and oversight of BRAC’s risk management framework. BRAC does not hold collateral against loans. The lending portfolio consists of non-securitized microfinance loans mutually guaranteed
by group members. Customers are clustered into solidarity groups which collectively secure the loans. Regular audits of branches and
Risk management policies are established to identify and analyse the risks faced by BRAC, to set appropriate risk limits and controls, credit processes are undertaken by Internal Audit.
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and BRAC’s activities. Impaired loans
BRAC, through its training and management standards and procedures, aims to develop a disciplined and constructive control Impaired loans are loans for which BRAC determines that it is probable that it will be unable to collect the principal and interest due
environment in which all employees understand their roles and obligations. according to the contractual terms of the loan.
Past due but not impaired loans Country office receives information from regional units regarding the liquidity profile of their financial assets and liabilities and details of other
projected cash flows arising from projected future business.
Loans where contractual interest or principal payments are past due but BRAC believes that impairment is not appropriate on the basis of
the stage of collection of amounts owed to BRAC. The table below summarises the maturity profile of the Company's financial asset and liabilities based on contractual undiscounted receipts
and payments.
Allowance for impairment
2017 2016 2017 2016
BRAC establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main Kyats Kyats USD USD
components of this allowance are a specific loss component that relates to individually significant exposures and a collective loan loss Financial assets
allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans
subject to individual assessment for impairment. Loans to customer 12,192,530,997 7,704,075,269 8,951,932 5,644,011
Cash and cash equivalents 1,030,156,863 1,431,432,280 756,356 1,048,668
The ageing of loan to customers and rhe company's expoure to credit risk were: Other assets 139,477,714 87,309,998 102,407 63,963
2017 2016
Total undiscounted financial assets 13,362,165,574 9,222,817,547 9,810,694 6,756,643
Kyats Kyats
Financial liabilities
Current (performing loans) 12,023,185,889 7,017,207,412
Term loan 3,261,228,785 - 2,394,441 -
Sub-standard (30 days past due) 206,116,936 786,636,036
Related party payables 1,144,603,245 811,094,907 840,384 594,209
Watch (31-60 days past due) 27,449,368 665,394
Member savings payable 1,536,774,107 1,335,164,213 1,128,322 978,142
Doubtful (61-90 days past due) 20,082,993 735,135
Other liabilities 98,428,003 190,390,958 72,267 139,481
Loan loss (over 90 days past due) 50,343,815 199,520
Total loan to customer 12,327,179,001 7,805,443,497 Total undiscounted financial liabilities 6,041,034,140 2,336,650,078 4,435,414 1,711,832
Allowance for impairment (219,974,296) (149,919,246)
Net undiscounted financial assets 7,321,131,433 6,886,167,469 5,375,280 5,044,811
Net loans to customer 12,107,204,705 7,655,524,251
Balance as at January 1 149,919,246 58,114,462 (c) Market risk
Impairment charge for the year 90,438,716 104,134,679
Loan write off (20,383,666) (12,296,118) Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the income or
Interest receivable write off - (33,777) the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising return.
Balance as at December 31 219,974,296 149,919,246
Currency Risk
BRAC reports loans at their outstanding balance net of allowance made from loan loss provisions. Adjustments in respect of surplus or
deficit in the loan loss reserve are made in the income statement. Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign currency exchange rates. The
Company is exposed to currency risk on payments that are denominated in a currency other than the functional currency which is MMK. The
Write-off policy Company's Strategy of managing the currency risk is using functional currency in transaction as much as possible.
BRAC writes off a loan balance (and any related allowances for impairment losses) when BRAC’s Program department determines that Capital Management
the loans are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in
the borrower’s financial position such that the borrower can no longer pay the obligation, or the amount is not collectible due to death, BRAC’s policy is to maintain a strong capital base so as to maintain client, creditor and market confidence and to sustain future development of
dislocation of the borrower or any other natural or humanitarian disaster that affects the livelihood of the borrowers. the business. Capital consists of ordinary share capital, share money deposit, and donor grant. The primary objective of capital management
is to maintain a sufficient liquidity.
(b) Liquidity risk
27. Related parties
Liquidity Risk is the risk that BRAC will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset. The objective of liquidity management is to ensure that BRAC has the ability to generate sufficient Parent and ultimate controlling party
funds to meet all cash flow obligations as they become due, both under normal and stressed conditions without incurring unacceptable
losses or risking damage to the company's reputation. The Company's majority shares were acquired by BRAC International Holdings B.V. which is a subsidiary of Stichting BRAC International.
Management of liquidity risk
BRAC monitors its risk to a shortage of funds by reviewing the cash payment plan. BRAC’s approach to managing liquidity is to ensure, as
far as possible, that it will always have sufficient liquidity to meet its liabilities when due under both normal and stressed conditions without
incurring unacceptable losses or risking damage to BRAC’s reputation.
LIABILITIES
ASSETS
BRAC MYANMAR MICROFINANCE COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31 December 2017
31 December 2016
YEAR ENDED 31 DECEMBER 2017
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value
measurement is categorised:
Fair value
139,477,714
13,362,165,574
Kyats
1,030,156,863
12,192,530,997
3,261,228,785
1,144,603,245
1,536,774,107
87,309,998
98,428,003
9,222,817,547
6,041,034,140
1,431,432,280
7,704,075,269
811,094,907
1,335,164,213
190,390,958
2,336,650,078
LIABILITIES
Transactions with key management personnel
Key management personnel compensation and transactions
The directors do not get any financial or nonfinancial benefits from the Company. Only one director of the Company controls 1 of the voting
shares of the Company.
13,362,165,574
9,222,817,547
Carrying value
139,477,714
Kyats
1,030,156,863
12,192,530,997
3,261,228,785
1,144,603,245
1,536,774,107
98,428,003
6,041,034,140
1,431,432,280
7,704,075,269
87,309,998
811,094,907
190,390,958
2,336,650,078
1,335,164,213
Other related party transactions
Transaction value Outstanding balance
12,332,008,711
7,791,385,267
Level 3
Kyats
-
12,192,530,997
139,477,714
3,261,228,785
1,144,603,245
1,536,774,107
98,428,003
6,041,034,140
-
7,704,075,269
87,309,998
811,094,907
190,390,958
2,336,650,078
1,335,164,213
All outstanding balances with these related parties are priced on an arm's length basis and are to be settled in cash. None of the balances
are secured.
28. Use of estimates and judgements
-
Management discussed the development, selection and disclosure of the Organisation’s critical accounting policies and estimates, and
1,030,156,863
1,431,432,280
Level 2
Kyats
1,030,156,863
-
-
-
-
-
-
1,431,432,280
-
-
-
-
-
the application of these policies and estimates.
Key sources of estimation uncertainty
Fair values of financial instruments
-
Level 1: Quoted prices (unadjusted) in active markets for identical instruments.
Level 1
Kyats
-
-
-
-
-
-
-
-
-
-
-
-
-
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset and liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
Level 3: Inputs for the asset and liability that are not based on observable market data. This category includes instruments that are valued
based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect
differences between the instruments.
Loans to customer
Total liabilities
Total liabilities
Other liabilities
Other liabilities
Total assets
Total assets
Other assets
Other assets
Term loan
Annual Report 2017 54 Annual Report 2017 55
BRAC MYANMAR MICROFINANCE COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2017
29. Contingencies
Contingent liabilities are not recognised but disclosed in the financial statements unless the possibility of an outflow of resources
embodying economic benefits is reliably estimated.
Contingent assets are not recognised in the financial statements as this may results in the recognition of income which may never be
realised.
The financial statements of the financial year ended 31 December 2017 were authorised for issue in accordance with a resolution of
directors and authorise for issue on 9 March 2018.
COVER PHOTO:
BRAC/ALISON WRIGHT