GetBucks Microfinance Bank : 2023 FY Results & Audit Report

GETBUCKS MICROfiNANCE BANK LIMITED

Incorporated in Zimbabwe on 17 January 2012 and converted to a public company limited by shares on 4 November 2015

(Registration number 322/2012)

Audited financial results for the year ended 31 December 2022

Financial highlights

Interest revenue	Headline earnings per share	Microfinance Bank's
DECREASED 33%	DECREASED 140%	assets
ZWL 1,092 million from ZWL 1,630 million	8.94 cents per share from 56.71 cents per share	INCREASED 19%
		ZWL 4.145 billion from
		ZWL 3.5 billion
Profit before tax	Earnings per share
INCREASED 186%	DECREASED 140%
ZWL 136.2 million from ZWL 47.6 million	24.53 cents per share from 61.64 cents per share

The board of directors of GetBucks Microfinance Bank Limited (the "Bank") present the audited financial results of the Microfinance Bank for the year ended 31 December 2022.

Financial highlights of the Microfinance Bank

The inflation adjusted audited full year financial results (the "financial results") when compared to the prior year ended 31 December

2021 ("comparative period"), are set out below:

• Interest revenue for the year decreased by 33% to ZWL1,092 million compared to ZWL1,630 million for the comparative period;
• Profit before tax for the year increased by 186% to ZWL136.2 million compared to a profit of ZWL47.6 million for the comparative period;
• Headline earnings per share decreased by 140% to a loss of 8.94 cents per share compared to the headline loss per share of 56.71 cents for the comparative period;
• Earnings per share decreased by 140% to a loss of 24.53 cents per share compared to the earnings per share of 61.64 cents per share for the comparative period; and
• The Microfinance Bank's assets increased by 19% to ZWL 4.145 billion compared to ZWL 3.5 billion for the comparative period.

No dividends were declared or paid during the period under review.

This short announcement should be read in conjunction with the complete set of financial statements for the year ended 31 December 2022 which have been audited by Grant Thornton Chartered Accountants (Zimbabwe) in accordance with International Standards on Auditing (ISAs). The auditors have issued a qualified opinion on the audited inflation adjusted financial statements of the Microfinance Bank, for the year then ended. The qualified opinion was issued regarding non-compliance with International Accounting Standard (IAS) 21 - 'The Effect of Changes in Foreign Exchange Rates' in the prior financial years and International Accounting Standard (IAS) 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors' and an inability to obtain sufficient appropriate audit evidence on other receivables account balance. There is an emphasis of matter regarding material uncertainty related to going concern.

The auditor's report includes a section on key audit matters outlining matters that in the auditor's professional judgement, were of most significance in the audit of the inflation adjusted financial statements. The key audit matters were with respect to recognition of revenue and loans and advances.

The auditor's report on the inflation adjusted financial statements and the audited inflation adjusted financial statements, is available for inspection at the company's registered office and the auditor's report has been lodged with the Zimbabwe Stock Exchange.

This short form announcement is the responsibility of the Board and does not contain full or complete details. Any investment decisions by investors and/or shareholders should be based as a whole on consideration of the audited financial results for the full year ended 31 December 2022 which may be downloaded from the Company's website at: http://www.getbucksbank.com and may also be viewed, at no cost, at the Zimbabwe Stock Exchange website.

By Order of the Board of Directors,

Wimbayi Chigumbu

Chief Finance Officer

28 April 2023

Directors:

Dr. R. Mbire (Board Chairman), E. Chavora* (Managing Director), W. Chigumbu* (Chief Finance Officer),

M. Madamombe* (Chief Operating Officer),J. Machiva, P. Soko, T. Munowenyu, S. Chibaya. *Executive

Registered Office: 24 Princess Drive, Newlands, Harare, Zimbabwe.

GETBUCKS MICROFINANCE BANK LIMITED

For the year ended 31 December 2022

Incorporated in Zimbabwe on 17 January 2012 and converted to a public company limited by shares on 4 November 2015 (Registration number 322/2012)

GetBucks is a member of the

Deposit Protection Corporation

Registered deposit taking microfinance institution

Abridged

Financial Statements

For the year ended 31 December 2022

CHAIRMAN'S STATEMENT

AUDITOR'S STATEMENT

Dear Stakeholders,

I am pleased to present the results for the year ended 31 December 2022, which again showed that GetBucks Microfinance Bank Limited ('the Microfinance Bank'') has been very resilient, in the face of inflationary pressures and market disruptions in the operating environment.

The operating environment continued to be characterised by significant challenges in the year 2022, The central bank adopted an aggressive tight monetary policy beginning of the third quarter first by stopping all lending activities by banks and microfinance institutions and the uplifting the ban and then hiking the bank policy rate to 200% per annum in an effort to tame inflation. Annual inflation rate closed at 243.8% in December 2022 up from 60.74% in December 2021, the operating environment continued to experience significant increases in prices of goods and services. The market continued to suffer from inadequate foreign currency inflows and limited inflows into financial institutions due to the liquidation thresholds set by the regulators. Despite these challenges, the Microfinance Bank showed resilience.

Operational Results

The Microfinance Bank recorded a profit before tax of ZWL 136.2 million representing a 186% increase from prior year inflation adjusted profit of ZWL 47.6 million. Operating expenses increased by 19% during the year under review from ZWL 1.372 billion in 2021 to ZWL 1.64 billion in 2022. The increase was lower than the average inflation for the year under review as the Microfinance Bank embarked on a cost cutting drive while operating in an inflationary environment. Borrowings increased from ZWL976 million to ZWL 1.404 billion as the Microfinance Bank managed to mobilise new lines of credit. Customer deposits increased 132% to close at ZWL631 million from ZWL272 million in 2021. The increase is attributable to the increased use of the USD in the economy. The Microfinance Bank is now issuing loans in USD and deposits in this currency tend to stick a bit longer. There, however, still exists a general market's reluctance to hold on to monetary assets especially in ZWL considering the inflationary pressure and fear of real monetary loss due to currency depreciation. The loan book increased by 147%, growing from ZWL617 million in 2021 to close at ZWL 1.526 billion in 2022.

Financial Position

The Microfinance Bank grew its total assets by 19%, from ZWL 3.482 billion to ZWL 4.145 billion, the growth in the assets is main attributed to the increase in the loan book. The Microfinance Bank was able to access USD credit lines and extend these to its customer base. As at 31 December 2022, the Microfinance Bank had foreign currency denominated commitments of ZWL 1.330 billion.

Capital

The Microfinance Bank's net equity position was ZWL 1.534 billion as at 31 December 2022. To ensure compliance with the regulatory minimum capital requirement extended deadline of 31 December 2023, the Microfinance Bank is working on a recapitalisation plan as detailed in the Outlook section below.

Dividend

No dividend has been declared for the period under review.

Directorate

During the reporting period, Mr. Patrick Matute, and George Nheweyembwa resigned as directors of the board. Mr. Edwin Chavora, Mrs. Thembi Munowenyu and Ms. Sibusisiwe Chibaya were appointed to the board. Edwin Chavora was appointed as the substantive managing director on the 1st of July 2022. The Board of Directors wishes to extend its gratitude to the outgoing directors and wish Edwin every success in the new role.

Outlook

The Microfinance Bank is in the process of negotiating transactions as part of its capital raise initiative. The anticipated capital raise will help the Microfinance Bank address the regulatory minimum capital requirement of USD 5 million equivalent. The raised capital will reduce the Microfinance Bank's cost of funding, as well as capacitating the Microfinance Bank's expansion drive.

These abridged audited financial statements derived from the audited inflation adjusted financial statements of Getbucks Microfinance Bank Limited for the financial year ended 31 December 2022, should be read together with the complete set of audited inflation adjusted financial statements of the Microfinance Bank , for the year ended 31 December 2022, which have been audited by Grant Thornton Chartered Accountants (Zimbabwe) and the auditor's report signed by Edmore Chimhowa, Registered Public Auditor 0470.

A qualified opinion has been issued on the audited inflation adjusted financial statements of the Microfinance Bank, for the year then ended. The qualified opinion was issued regarding non-compliance with International Accounting Standard (IAS) 21 - 'The Effect of Changes in Foreign Exchange Rates' in the prior financial years and International Accounting Standard (IAS) 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors' and an inability to obtain sufficient appropriate audit evidence on other receivables account balance. There is an emphasis of matter regarding material uncertainty related to going concern.

The auditor's report includes a section on key audit matters outlining matters that in the auditor's professional judgement, were of most significance in the audit of the inflation adjusted financial statements. The key audit matters were with respect to recognition of revenue and loans and advances. The auditor's report on the inflation adjusted financial statements and the audited inflation adjusted financial statements, is available for inspection at the company's registered office and the auditor's report has been lodged with the Zimbabwe Stock Exchange.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2022

		INFLATION ADJUSTED	HISTORICAL COST
All figures in ZWL	Notes	2022	2021	2022	2021
ASSETS
Cash and cash equivalents	4	549 415 056	711 862 892	549 415 056	207 083 544
Loans and advances to customers	5.1	1 526 655 858	617 194 904	1 526 655 858	179 544 277
Other assets	6	144 500 370	164 341 282	90 076 157	38 151 136
Tax receivable	7	23 081 190	26 629 084	-	1 122 554
Investment properties	9	517 000 000	475 896 332	517 000 000	138 440 000
Right of use asset	10	52 887 768	30 343 273	15 612 468	445 185
Property and equipment	11	1 311 248 561	1 437 137 601	1 151 149 830	322 979 205
Intangible assets	12	20 313 402	19 035 465	3 736 865	804 850
Total assets		4 145 102 205	3 482 440 833	3 853 646 234	888 570 751
EQUITY AND LIABILITIES
Equity attributable to the owners of
the Company
Share capital	13.1	25 307	25 307	116	116
Share premium	13.2	1 483 650 138	1 483 650 138	8 562 235	8 562 235
Revaluation reserves		476 386 657	549 788 816	793 886 312	158 927 372
(Accumulated loss)/retained earnings		(433 642 340)	(403 048 545)	472 980 506	227 661 885
Total equity		1 526 419 762	1 630 415 716	1 275 429 169	395 151 608
LIABILITIES

Trading in USD ensures a significant degree of certainty in planning and operations; however the local currency continues to be pummeled by both inflation and exchange loss against all the major currencies. These vices necessitate the Microfinance Bank continues to implement capital preservation initiatives to preserve shareholder value.

Appreciation

I would like to thank all our valued stakeholders, my fellow directors, management and staff for their hard work and contribution during the year and the achievement of these results in a tough operating environment.

DR. R. MBIRE

CHAIRMAN

28 April 2023

MANAGING DIRECTOR'S STATEMENT

It gives me great pleasure to present to you the Getbucks Microfinance Bank's financial performance for the year ended 31 December 2022.

Introduction

The period under review was challenging. The local currency continued to devalue against the United States Dollar causing sustained high levels of inflation. Disruptions plagued the market as monetary and fiscal authorities crafted a raft of measures to contain inflation. The measures included effecting a moratorium on lending, hiking bank policy interest rates to 200% and the withholding of payments to government suppliers.

Operating Environment

The institution battled rising operational cost because of the high levels of Inflation during the period under review. The moratorium on lending also disrupted the revenue generation side of the business. High interest rates discouraged borrowers from borrowing the local currency unit and focus shifted to United States dollar lending.

Our Products and Service Commitments

Despite the tough economic environment that institution held on to it's market share in the microlending space showing high the levels of goodwill in the brand. United States denominated loans were rolled out and the uptake has been encouraging.

Outlook

We are optimistic about the business prospects for the Microfinance Bank in 2023. The recapitalization of the institution that was expected to be concluded in 2022 will happen in 2023 which should see us being able to underwrite more business.

The increased use of the United States dollar in the economy will boost the institutions lending capacity and also help preserve earnings.

Headwinds will continue to come from inflationary pressures being experienced due to currency volatility. Elections will also slow down growth as businesses tend to adopt a wait and see approach in an election year.

Appreciation

My heartfelt appreciation goes out to all our valued customers and stakeholders who have shown unwavering support to GetBucks Microfinance Bank. I am very grateful to my fellow directors for the steering arms that held strong during the year, and I am equally grateful to the Microfinance

Bank's employees for their resilience and dedication. Thank you all.

Edwin Chavora

MANAGING DIRECTOR

Deposits from customers	14	631 521 352	272 410 215	631 521 352	79 245 137
Other financial liabilities	15	274 228 275	356 958 647	274 228 275	103 840 590
Borrowings	16	1 404 219 345	976 142 281	1 404 219 345	283 963 393
Deferred tax liability	8	308 713 471	246 513 974	265 822 753	26 370 023
Tax payable	7	-	-	2 425 340	-
Total liabilities		2 618 682 443	1 852 025 117	2 578 217 065	493 419 143
Total equity and liabilities		4 145 102 205	3 482 440 833	3 853 646 234	888 570 751

The above statement of financial position should be read in conjunction with the accompanying notes.

The financial statements were approved by the Board of Directors on 28 April 2023 and signed on its behalf by:

Dr. R. Mbire		Mr. E. Chavora
CHAIRMAN		MANAGING DIRECTOR
28 April 2023		28 April 2023
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2022
		INFLATION ADJUSTED	HISTORICAL COST
All figures in ZWL	Notes	2022	2021	2022	2021
Interest income	17	1 092 439 379	1 630 101 026	727 138 889	375 556 964
Interest expense	18	(693 490 776)	(668 779 326)	(482 340 426)	(156 343 236)
Net interest income		398 948 603	961 321 700	244 798 463	219 213 728
Fee and commission income	19	403 135 554	392 599 132	265 864 602	93 279 222
Other income		89 911 644	21 066 783	72 168 353	4 740 600
Gain on foreign exchange		295 154 786	26 205 955	202 420 663	6 631 582
Fair value adjustment	9	292 171 607	352 742	547 471 240	70 190 350
Total net income		1 479 322 194	1 401 546 313	1 332 723 321	394 055 482
Allowance for expected credit losses		(48 033 923)	(77 579 160)	(31 028 845)	(18 944 343)
Operating expenses	20	(1 635 635 410) (1 372 006 310) (1 025 427 177)	(322 325 585)
Net monetary adjustment		340 578 700	95 681 103	-	-
Profit before taxation		136 231 561	47 641 946	276 267 299	52 785 554
Income tax (expense) / credit	21	(166 825 356)	62 119 621	(30 948 678)	54 236 605
(Loss) / profit for the year		(30 593 795)	109 761 567	245 318 621	107 022 159
Revaluation (loss) / gains on property
and equipment	11	(97 505 525)	730 325 207	843 462 992	211 667 422
Tax on revaluation of property and
equipment	8	24 103 366	(180 536 391)	(208 504 052)	(52 740 050)
Total comprehensive (loss)/income
for the year, net of tax		(103 995 954)	659 550 383	880 277 561	265 949 531
Basic and diluted (loss)/earnings per
share (cents)	13	(8.94)	56.71	75.68	22.87
Headline (loss)/earnings per share
(cents)	13	(24.53)	61.64	42.71	19.59

The above statement of comprehensive income should be read in conjunction with the accompanying

28 April 2023	notes.
Registered deposit taking microfinance institution	Directors: Dr. R. Mbire (Board Chairman), E. Chavora* (Managing Director), W. Chigumbu* (Chief Finance Officer), M. Madamombe* (Chief Operating Officer),
w w w. ge t b u ck s . c o m	J. Machiva, P. Soko, T. Munowenyu, S. Chibaya. *Executive | Registered Office: 24 Princess Drive, Newlands, Harare, Zimbabwe.

Abridged

Financial Statements

For the year ended 31 December 2022

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2022

			INFLATION ADJUSTED
	Share		Share	Revaluation (Accumulated	Total
All figures in ZWL	capital		premium	reserves	loss)	equity
YEAR ENDED 31 DECEMBER 2021
Balance at 1 January 2021	25 307	1 483 650 138	-	(512 810 112)	970 865 333
Total comprehensive income for the year	-		-	549 788 816	109 761 567	659 550 383
Balance at 31 December 2021	25 307	1 483 650 138	549 788 816	(403 048 545)	1 630 415 716
Balance at 1 January 2022	25 307	1 483 650 138	549 788 816	(403 048 545)	1 630 415 716
Total comprehensive (loss) for the year	-		-	(73 402 159)	(30 593 795)	(103 995 954)
Balance at 31 December 2022	25 307	1 483 650 138	476 386 657	(433 642 340)	1 526 419 762
				HISTORICAL COST
	Share	Share	Revaluation	Retained	Total
All figures in ZWL	capital	premium	reserves	earnings	equity
YEAR ENDED 31 DECEMBER 2021
Balance at 1 January 2021	116	8 562 235	-	120 639 726	129 202 077
Total comprehensive income for the year		-	-	158 927 372	107 022 159	265 949 531
Balance at 31 December 2021	116	8 562 235	158 927 372	227 661 885	395 151 608
YEAR ENDED 31 DECEMBER 2022
Balance at 1 January 2022	116	8 562 235	158 927 372	227 661 885	395 151 608
Total comprehensive
income for the year		-	-	634 958 940	245 318 621	880 277 561

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2022

• GENERAL INFORMATION
  GetBucks Microfinance Bank Limited ("Getbucks" or "the Microfinance Bank") is registered as a Deposit Taking Microfinance Bank by the Reserve Bank of Zimbabwe, under the MicroFinance Act (Chapter 24:29), and is a subsidiary of GetBucks Limited which holds 53.7%, (December 2021 :53.7%) of the Microfinance Bank's ordinary shares. The Microfinance Bank was listed on the Zimbabwe Stock Exchange on 15 January 2016 and obtained its deposit taking licence in the same month.
  The Microfinance Bank is a limited liability Company incorporated and domiciled in Zimbabwe. The Microfinance Bank's business is conducted in Zimbabwe.
  The address of its registered office is 24 Princess Drive, Newlands, Harare, Zimbabwe.

On 21 June 2017 shareholders approved the change of name to Getbucks Microfinance Bank to better reflect the nature of the operations being undertaken.

• SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and in the manner required by the Companies and other Business Entities Act (Chapter 24:31), except for non-compliance with International Accounting Standard ("IAS") 21, The Effects of Changes in Foreign Exchange Rates described in note 2.2 and International Accounting Standard ("IAS") 29 Financial Reporting in Hyperinflationary Economies, and interpretations issued by the IFRS Interpretations Committee ("IFRS IC") as issued by the International Accounting Standards Board ("IASB").

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

The financial statements have been prepared based on the statutory records that are maintained under the historical cost basis and adjusted for the effects of applying IAS29. The financial statements are presented in Zimbabwean dollars and all values are rounded to the nearest dollar.

2.1.1 Changes in accounting policy and disclosures Amended standards and interpretations

Balance at 31 December 2022	116	8 562 235	793 886 312	472 980 506	1 275 429 169

The above statement of changes in equity should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS

For the year ended 31 December 2022
		INFLATION ADJUSTED	HISTORICAL COST
All figures in ZWL	Notes	2022	2021	2022	2021
Cash flows from operating activities
Cash (utilised) in operations	23	(1 407 742 810)	(680 651 336) (1 714 931 004)	(398 902 967)
Interest received		1 535 298 873	1 977 028 249	1 032 904 629	453 336 053
Interest paid		(236 688 817)	(295 299 088)	(159 237 383)	(67 712 600)
Net cash flows (utilised in) / generated from
operating activities		(109 132 754)	1 001 077 825	(841 263 758)	(13 279 514)
Cash flows from investing activities
Proceeds from disposal of property,
plant and equipment		803 002 444	4 597 898	233 596 376	1 054 306
Purchase of property, plant and
equipment	11	(21 812 007)	(137 585 252)	(17 115 409)	(10 826 802)
Additions to intangible assets	12	(3 410 558)	(3 624 901)	(3 370 510)	( 806 704)
Purchase of investment property	9	(43 237 235)	(87 917 555)	(29 088 760)	(20 159 650)
Net cash flows generated from/
(utilised in) investing activities		734 542 644	(224 529 810)	184 021 697	(30 738 850)
Cash flows from financing activities
New borrowings		2 775 241 303	27 509 271 050	1 867 101 995	6 307 924 212
Repayments		(1 590 361 374) (27 093 978 696) (1 069 949 085) (6 212 696 945)
Net cash flows generated from financing
activities		1 184 879 929	415 292 354	797 152 910	95 227 267
Net increase in cash and cash
equivalents		1 810 289 819	1 191 840 369	139 910 849	51 208 903
Cash and cash equivalents at the
beginning of the year		711 862 892	824 642 617	207 083 544	149 243 059
Net foreign exchange differences on
cash and cash equivalents		26 205 954	174 222 230	202 420 663	6 631 582
Inflation effect on cash and cash equivalents	(1 998 943 609)	(1 478 842 324)	-	-
Cash and cash equivalents at the
end of the year	4	549 415 056	711 862 892	549 415 056	207 083 544

At the date of authorisation of these consolidated financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company.

Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group's financial statements.

Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The pronouncement amended IFRS 16 Leases to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. On issuance, the practical expedient was limited to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021. Since lessors continue to grant COVID-19-related rent concessions to lessees and since the effects of the COVID-19 pandemic are ongoing and significant, the IASB decided to look into whether to extend the time period over which the practical expedient is available for use.

The Changes in Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS

1. amend IFRS 16 to permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021); and specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.

New and revised IFRS Standards in issue but not yet effective

1. Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction
   In specific circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. There had been some diversity in practice as to whether the exemption applied to transactions such as leases and decommissioning obligations. These are transactions where entities recognise both an asset and a liability. The amendments require an entity to recognise deferred tax on certain transactions (eg leases and decommissioning liabilities) that give rise to equal amounts of taxable and deductible temporary differences on initial recognition. The amendments clarify that the initial recognition exemption set out in IAS 12 'Income Taxes' does not apply and entities are required to recognise deferred tax on these transactions. The aim of the amendments is to reduce diversity in the reporting of deferred tax on leases and decommissioning obligations.
   Effective date January 1, 2023
2. Amendments to IAS 1 - Disclosure of Accounting Policies
   The amendments include a definition of 'accounting estimates' as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.
   Effective date January 1, 2023

Registered deposit taking microfinance institution	Directors: Dr. R. Mbire (Board Chairman), E. Chavora* (Managing Director), W. Chigumbu* (Chief Finance Officer), M. Madamombe* (Chief Operating Officer),
w w w. ge t b u ck s . c o m	J. Machiva, P. Soko, T. Munowenyu, S. Chibaya. *Executive | Registered Office: 24 Princess Drive, Newlands, Harare, Zimbabwe.

Abridged

Financial Statements

For the year ended 31 December 2022

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 31 December 2022

• SIGNIFICANT ACCOUNTING POLICIES (continued)

1. Amendments to IAS 8 - Definition of Accounting Estimates
   The amendment clarifies that in applying the '10 percent' test to assess whether to derecognise a financial liability, an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other's behalf. The amendment is applied prospectively to modifications and exchanges that occur on or after the date the entity first applies the amendment. The amendment is effective for annual periods beginning on or after 1 January 2022, with early application permitted.
   Effective date January 1, 2022
2. Foreign currency translation
3. 1. Functional and presentation currency
      Items included in the financial statements of the Microfinance Bank are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The financial statements are presented in Zimbabwe dollar ("ZWL"), which is the Microfinance Bank's functional and presentation currency.
      The country pronounced the Zimbabwe Dollar as the sole legal tender on 24 June 2019, moving from a multi currency system that used a basket of foreign currencies as legal tender. The currency has a limited range of local bond notes, coins and various forms of electronic payment platforms. The pronouncement, however, did not affect the opening or operation of foreign currency designated accounts, otherwise known as 'Nostro FCA accounts' which continued to be designated in foreign currencies with which they were opened and were operated.
      From an IAS 21 perspective, the separation of the ZWL FCA and Nostro FCA accounts on 1 October 2018 by the RBZ was a strong indicator of a change in functional currency. However, the Microfinance Bank maintained the 1:1 parity between the US$ and the ZWL for accounting purposes for the period to 22 February 2019 in order to comply with laws of Zimbabwe that did not recognise ZWL FCA as currency until 22 February 2019 when SI 33 of 2019 was promulgated. An alternative way of accounting for these changes that complies with IFRS was to use the Old Mutual Implied Rate ("OMIR") for conversion of ZWL FCA denominated numbers to the US$. Though this approach would be IFRS compliant, this would result in non compliance with the laws and regulations of Zimbabwe, prior to the introduction of local currency on 22 February 2019. The above means that prior year comparative figures are not compliant with IAS 21.
   2. Transactions and balances
      Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange translation gains or losses are presented on the face of the statement of comprehensive income.

1. Cash and cash equivalents
   Cash and cash equivalents includes cash on hand, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. There were no overdrafts as at the reporting date.
2. Intangible assets
   Software licenses
   Separately acquired software licences are shown at historical cost, less accumulated amortisation. The acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years. Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
3. Equipment
4. 1. Recognition and measurement
      The cost of an item of equipment is recognised as an asset if, and only if; it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. Equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing working condition for its intended use, the cost of dismantling the asset and removing items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Where parts of equipment have different useful lives, they are accounted for (major components) as separate equipment.
   2. Subsequent measurement
      The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Microfinance Bank and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit or loss within 'administrative expenses' during the financial period in which they are incurred. Subsequent costs can also be recognised as separate assets.

Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Items	Average useful life
Furniture and fixtures	6 years
Motor vehicles	5 years
Office equipment	5 years
IT equipment	3 years
Leasehold improvements	Shorter of useful life or duration of the lease
	agreement

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

Gains or losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income within other income.

The carrying amounts of the Microfinance Bank's items of equipment are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment allowance is recognised whenever the carrying amount exceeds its recoverable amount.

An assets' carrying amount is written down immediately to its recoverable amount if the assets' carrying amount is greater than the estimated recoverable amount.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 31 December 2022

• SIGNIFICANT ACCOUNTING POLICIES (continued)

1. Equipment (continued)
2. 1. Revaluation
      Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. If an item is revalued, the entire class of assets to which that asset belongs should be revalued. Revalued assets are depreciated in the same way as under the cost model. If a revaluation results in an increase in value, it should be credited to other comprehensive income and accumulated in equity under the heading ""revaluation surplus"" unless it represents the reversal of a revaluation decrease of the same asset previously recognised as an expense, in which case it should be recognised in profit or loss. A decrease arising as a result of a revaluation should be recognised as an expense to the extent that it exceeds any amount previously credited to the revaluation surplus relating to the same asset.
      When a revalued asset is disposed of, any revaluation surplus may be transferred directly to retained earnings, or it may be left in equity under the heading revaluation surplus. The transfer to retained earnings should not be made through profit or loss. The Microfinance Bank revalued the Land and Buildings as at 30 June 2022 and 31 December 2022. The revalution exercise was done by an independent valuer on both dates.
   2. Derecognition
      The carrying amount of an item of equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal.
3. Investment properties
4. 1. Recognition criteria
      Investment properties are those properties held for earning rental income and/or for capital appreciation. None of these properties are occupied by the Microfinance Bank for its business activities. In the case where property will be partly used for business and partly leased out under an operating lease, the property will be split according to its use if the properties can be sold separately. If the properties cannot be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.
      Investment property is initially measured at cost. The cost includes purchase price and any directly related cost such as (professional or legal charges, property transfer taxes & any other transaction costs).
      Subsequent to initial recognition, investment properties are stated at fair value, based on valuations performed by independent professional valuers. Valuations should be carried out at least at each reporting date. Fair value gain or losses are recorded through profit or loss . Where the fair value of the investment property cannot be measured reliably, it is then measured at cost until the fair value becomes determinable.
   2. Transfers to and from investment properties
      Transfers are made to or from investment property only when there is a change in use and a revaluation is done first before the transfer. If a significant portion of investment property becomes owner occupied where split is not possible, it is reclassified as property and equipment in accordance with IAS 16 (Property, plant and equipment) and its fair value at the date of its classification becomes its cost for subsequent accounting as property and equipment under IAS 16.
   3. Derecognition
      Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
5. Current income and deferred tax
   Current income tax assets and liabilities
   The income tax expense for the year comprises current income and deferred tax. Income tax is recognised in the statement of profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
   The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in Zimbabwe. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes liabilities where appropriate on the basis of amounts expected to be paid to the tax authorities.
   Deferred tax is recognised, using the liability method, on temporary differences arising between assets and liabilities and their carrying amounts in the financial statements. However, the deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
   Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Microfinance Bank and it is probable that the temporary difference will not reverse in the foreseeable future.
   Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
6. Share capital
   Ordinary shares and Share Premium
   Ordinary shares are classified as equity. Share premium is the difference between the nominal value and issue price paid for shares on subscription by shareholders.

Registered deposit taking microfinance institution	Directors: Dr. R. Mbire (Board Chairman), E. Chavora* (Managing Director), W. Chigumbu* (Chief Finance Officer), M. Madamombe* (Chief Operating Officer),
w w w. ge t b u ck s . c o m	J. Machiva, P. Soko, T. Munowenyu, S. Chibaya. *Executive | Registered Office: 24 Princess Drive, Newlands, Harare, Zimbabwe.