MALAWI UNION OF SAVINGS
AND
CREDIT CO-OPERATIVES LIMITED
FINANCIAL STATEMENTS
For the year ended
31 December 2008
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
FINANCIAL STATEMENTS
for the year ended 31st December 2008
CONTENTS
Statement of directors’ responsibilities
1
Independent auditor’s report
2
Income statement
3
Statement of changes in equity
4
Balance sheet
5
Statement of cash flows
6
Significant accounting policies
Notes to the financial statements
7 to 14
15 to 27
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENT
for the year ended 31st December 2008
The Directors are required under the Co-operative Societies Act of 1998 and By-laws of Malawi Union of
Savings and Credit Co-operatives Limited, to prepare financial statements for each financial period that
give a true and fair view of the state of affairs of the Union as at the end of the financial period and of the
surplus or deficit of the Union for that period.
The Directors confirm that suitable accounting policies have been used and applied consistently, and
reasonable and prudent judgments and estimates have been made in the preparation of the financial
statements for the year to 31st December 2008. The Directors also confirm that applicable accounting
standards have been followed and that the financial statements have been prepared on a going concern
basis.
The Directors are responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Union and which enable them to ensure that the financial
statements comply with the Cooperative Societies Act 1998. They are responsible for safeguarding the
assets of the Union and, hence, for taking reasonable steps for the prevention and detection of fraud, error
and other irregularities.
No matters have come to the attention of the Directors to indicate that the Union will not remain a going
concern for at least the ensuing financial year.
The Directors are of the opinion that the financial statements give a true and fair view of the state of the
financial affairs of the Union and of its operating results.
Approval of financial statements
The financial statements of the Union were approved for issue by the Board of Directors on
2009 and were signed on its behalf by:
__________________________
DIRECTOR
__________________________
DIRECTOR
-1-
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
Report on the financial statements
We have audited the accompanying financial statements of Malawi Union of Savings and Credit Co-operatives
Limited, which comprise the balance sheet as at 31 December 2008, and the income statement, statement of changes
in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and
other explanatory notes as set out on pages 3 to 27.
Directors’ responsibility for the financial statements
Directors are responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards and with the provisions of Co-operatives Societies Act of 1998. This
responsibility includes: designing, implementing and maintaining internal control systems relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making these risk assessments, the
auditor considers internal control systems relevant to the entity’s preparation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control systems. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Malawi Union of Savings
and Credit Co-operatives Limited as at 31 December 2008, and of its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards and comply with the provisions of
the Cooperative Societies Act 1998.
______________________________________
Certified Public Accountants and Business Advisors
Lilongwe, Malawi
2009
-2MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
INCOME STATEMENT
for the year ended 31st December 2008
In Malawi Kwacha
Note
2008
2007
REVENUE
Interest received and similar income
Interest paid and similar charges
Net interest income
1
2
59,840,724
(4,776,899)
55,063,825
49,590,422
(3,417,167)
46,173,255
Other income
Revenue grants
Project expenses
3
4
5
34,752,823
76,235,427
(76,235,427)
_________
89,816,648
_________
23,278,949
78,356,680
(78,356,680)
_________
69,452,204
_________
6
7
8
48,883,630
21,797,886
13,211,245
_________
83,892,761
30,027,704
20,090,917
7,527,296
_________
57,645,917
5,923,887
11,806,287
Operating income
Personnel expenses
Administration expenses
Organisation expenses
Total expenses
Surplus before impairment losses on loans
Impairment on loans
Surplus before dividend
Dividends paid
Surplus for the year
3,573,383
__________
9,497,270
(4,599,072)
_________
4,898,198
_________
(2,525,340)
_________
9,280,947
(6,900,000)
_________
2,380,947
_________
The financial statements are to be read in conjunction with significant accounting policies on pages 7 to 14 and
notes on pages15 to 27.
The independent auditor’s report is on page 2.
-3-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2008
In Malawi Kwacha
Capital
fund
Capital
reserves
General Stabilisation
reserve
reserve
Revaluation
reserve
Balance as at 1 January 2007
855,452
Surplus for the year
Transfer to general reserve
Transfers to retained earnings
(600,000)
Current year revaluation surplus
Transfer of revaluation surplus to retained earnings
_________
Balance as at 31 December 2007
255,452
_________
3,897,651
_________
3,897,651
_________
12,626,246
595,237
_________
13,221,483
_________
125,148
________
125,148
________
23,111,582
6,820,176
(484,333)
_________
29,447,425
_________
Balance as at 1 January 2008
255,452
Additional capital fund
11,915,342
Surplus for the year
Transfer to general reserve
Transfer to retained earnings
(1,897,655)
Current year revaluation surplus
Transfer of revaluation surplus to retained earnings
_________
Balance as at 31 December 2008
10,273,139
_________
3,897,651
________
3,897,651
________
13,221,483
1,222,371
_________
14,443,854
_________
125,148
-
29,447,425
-
________
125,148
________
Retained
earnings
Total
23,377,044
2,380,947
(595,237)
600,000
484,333
_________
26,247,087
_________
63,993,126
2,380,947
6,820,176
_________
73,194,246
_________
26,247,087
4,898,198
(1,222,371)
1,897,655
77,770,667
(2,144,362)
2,144,362
__________
_________
105,073,730
33,964,931
__________ __________
73,194,246
11,915,342
4,898,198
77,770,667
__________
167,778,453
__________
The financial statements are to be read in conjunction with accounting policies on pages 7 to 14 and notes on pages 15 to 27.
The independent auditor’s report is on page 2.
-4-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
BALANCE SHEET
AS AT 31st DECEMBER 2008
In Malawi Kwacha
Note
ASSETS
Non-current assets
Property, plant and equipment
Investment property
Long – term receivables
2008
2007
9
10
14
136,170,390
21,768,160
1,284,078
__________
159,222,628
__________
53,426,190
21,400,000
1,731,668
__________
76,557,858
__________
11
12
13
14
15
16
1,486,122
432,146,404
7,300,920
21,668,764
15,260,265
2,505,293
__________
480,367,768
__________
2,248,049
160,850,508
100,628,767
11,030,853
29,041,706
__________
303,799,883
__________
639,590,396
380,357,741
167,778,453
34,969,399
43,605,373
__________
246,353,225
__________
73,194,246
34,969,399
43,605,373
__________
151,769,018
__________
19
20
21
75,818,962
40,211,017
17,654,000
__________
133,683,979
__________
71,444,857
36,360,370
13,867,750
_________
121,672,977
__________
15
22
23
58,218,976
127,111,865
74,222,351
__________
259,553,192
__________
2,675,775
77,122,784
27,117,187
__________
106,915,746
__________
639,590,396
380,357,741
Total non-current assets
Current assets
Inventories
Loans to SACCO
Investments
Receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
TOTAL ASSETS
RESERVES AND LIABILITIES
Reserves
Reserves
Trust funds
Capital contributions
17
18
Total reserves
Non-current liabilities
Member shares
SACCO Free Financial Protection Plan fund
Employee benefits
Total non-current liabilities
Current liabilities
Bank overdraft
Deposits
Payables
Total current liabilities
TOTAL RESERVES AND LIABILITIES
These financial statements were approved by the Board of Directors on_______________ 2009 and were signed on its behalf
by:
__________________________ Director
__________________________ Director
The financial statements are to be read in conjunction with significant accounting policies on pages 7 to 14 and notes
on pages 15 to 27.
The independent auditor’s report is on page 2.
-5-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
STATEMENT OF CASH FLOWS
for the year ended 31st December 2008
In Malawi Kwacha
Note
2008
2007
OPERATING ACTIVITIES
Cash flows applied to operations
Interest received
Interest paid
Other income received
Cash flows from operating activities
24
1
2
3
(35,246,985)
59,840,724
(4,785,614)
34,752,823
54,560,948
(65,746,462)
49,590,422
(3,417,167)
23,278,949
3,705,742
INVESTING ACTIVITIES
Payments to acquire non-current assets
SACCO loans issued
Decreased in investments
Increased in deposits
Cash used to investing activities
9
12
13
22
(13,992,867)
(271,295,896)
93,327,847
49,989,080
(141,971,836)
(2,287,785)
(88,845,904)
79,876,052
9,469,703
(1,827,933)
14,460,566
4,374,105
(4,599,072)
3,850,647
18,086,246
1,947,179
(6,900,000)
2,892,051
(2,060,770)
Decrease in cash and cash equivalents
(69,324,642)
(182,961)
Cash and cash equivalents brought forward
26,365,931
26,548,892
(42,958,711)
26,365,931
23,241,724
9,239,152
FINANCING ACTIVITIES
Donations for capital items
Increase in member shares
Dividend paid
SACCO free financial protection plan
Cash flows from/ used in financing activities
Cash and cash equivalents carried forward
19
20
15
ADDITIONAL INFORMATION
Increase in net working capital
The financial statements are to be read in conjunction with accounting policies on pages 7 to 14 and notes
on pages 15 to 27.
The independent auditors’ report is on page 2.
-6 -
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
The principal accounting policies of the Union, which are set out below, have been consistently followed in
all material respects.
(a)
Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations
issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB.
(b)
Basis of preparation
The Financial statements are presented in Malawi Kwacha. The financial statements have been
prepared on the historical basis except for the revaluation of assets. The accounting policies are
consistent with those used in the previous year and changes, where material are disclosed in the
notes.
(c)
Use of estimates and judgments
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected. In particular, information about significant areas of estimation uncertainty and critical
judgments in applying accounting policies that have the most significant effect on the amounts
recognised in the financial statements is included in the following notes:
Note 9 – determination of residual values and economic useful life for property, plant and
machinery
Note 21 – computation of severance allowance provision
Note 10 – valuation of investment property.
(d)
Revenue
Revenue arising from use by others of MUSCCO’s assets yielding interest is recognised when it is
probable that the economic benefits associated with the transaction will flow to the Union and the
amount of the revenue can be measured reliably. Grants received from the donors are treated as
revenue grant in the year they are utilised. Unutilised balances are treated as deferred income. Grants
received are recognised when the amounts are received and conditions attached to the grant
agreement are complied with.
(e)
Property, plant and equipment
Owned Assets
(i)
Cost
Items of property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses. Certain leasehold land and buildings are revalued at periodic intervals.
(ii)
Reclassification to investment property
When the use of property changes from owner-occupied to investment property, the property is
remeasured to fair value and reclassified as investment property. Any gain arising on
remeasurement is recognised directly in equity. Any loss is recognised immediately in income
statement.
-7-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(iii) Subsequent expenditure
The expenditure incurred to replace a component of an item of property, plant and equipment is
accounted for separately including the major inspections and overhaul costs. The subsequent
expenditure on property, plant and equipment is capitalised only when the expenditure
improves the condition of the asset resulting in increased future economic benefits. All other
expenditures are expensed in the income statement as they are incurred.
(iv)
Depreciation
Depreciation is charged to income statement on a straight line basis over the estimated useful
lives of each part of an item of property, plant and equipment. Land is not depreciated.
The estimated useful lives are as follows:
Buildings
50 years
Motor vehicles
5 years
Furniture and fittings
10 years
(f)
Investment property
Investment property is property held either to earn rental income, or for capital appreciation or for
both but not for sale in ordinary course of business, use in the production and supply of goods or
services or for administrative purposes. Investment property is measured at fair value with any
change therein recognised in the income statement.
(g)
Inventory
Inventories are valued at the lower of the cost and net realisable value. Cost is arrived at on a first in
first-out basis.
(h)
Receivables
Receivables are measured at amortised cost using the effective interest method, less any impairment
losses.
(i)
Short term investments
Treasury bills are generally held until maturity. The investments are recognised in the financial
statements at amortised cost. Fixed deposits are shown at cost plus interest receivable up to the yearend.
(j)
Capital contributions
Capital contributions represent the unamortised element of fixed assets and funds to be used for
giving loans to SACCO donated by WOCC, USAID (READI project), the Malawi Government and
DANIDA.
(k)
Capital reserve
The capital reserve comprises of surplus arising from assets and liabilities taken over at 1 January
1981 from the Promotion Education and Advisory Committee (PEAC) and the subsequent surplus on
revaluation of fixed assets. The reserve is non-distributable.
(l)
Capital fund
Capital grants are credited to capital fund and amortised over the estimated useful lives of the assets.
On disposal, the unamortised balance is transferred to accumulated surplus.
-8-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(m)
General reserve
The general reserve consists of funds set aside for the purpose of guaranteeing the deposits of
SACCO. 25% of surplus each year is transferred to this reserve as required by the Co-operatives
Societies Act. The corresponding asset is part of investments owned by MUSCCO.
(n)
Stabilisation reserve
The stabilisation reserve was initially established from capital contributions previously provided by
WOCCU, for purposes of guaranteeing the deposits of SACCO members. The corresponding asset is
part of investments owned by MUSCCO.
(o)
Trust funds
These funds represent amounts entrusted to MUSCCO by the specified bodies for the disbursement of
loans. MUSCCO charges a certain percentage as administration fees. Provisions for doubtful loans
are debited to the respective funds. Proportion of interest received on loans is credited to the fund per
respective agreements. Direct expenses are debited to the fund whenever the agreement permits. Fund
balances are represented by corresponding assets such as loans and bank balances. A separate bank
account is maintained for each fund.
(p)
SACCO Free Financial Protection Plan (SFFP) fund
This fund was established to cater for insurance needs of SACCO since the termination of CUNA
Mutual Insurance in the year to 31 March 1999. 85 % of premiums received are credited to the fund
and 15% taken to income. Any further transfers to income need prior approval from the Board.
Claims paid are debited directly to the fund. Overhead expenses incurred in running the fund are not
shown separately in the income statement; these are shown together with the entity's expenses. 15%
of premiums are taken to income to cover these expenses.
Premiums written comprise the premiums on insurance contracts entered into during the year,
irrespective of whether they relate in whole or in part to a later accounting period.
The provision for unearned premiums comprises the proportion of gross premiums written which is
estimated to be earned in the following or subsequent financial years, computed separately for each
insurance contract using the daily pro rata method, adjusted if necessary to reflect any variation in the
incidence of risk during the period covered by the contract.
Claims incurred in respect of insurance contracts consist of claims and claims handling expenses paid
during the financial year together with the movement in the provision for outstanding claims. Claims
outstanding comprise provisions for the estimated cost of settling all claims incurred but unpaid at the
balance sheet date whether reported or not, and related internal and external claims handling
expenses.
(q)
Employee service benefits
Employees are members of a defined contribution pension scheme. Employer's contributions are
charged to the income statement. Severance allowance is payable to employees on termination of
employment by mutual agreement, death, retirement, voluntary retirement, retrenchment or
redundancy and hence all provisions for severance allowances are charged to the income statement.
(r)
Member Shares
Member shares represent shares deposited with MUSCCO by each SACCO. Shares are held as
security on loans disbursed to respective SACCO. Member shares are refundable upon disaffiliation
of a SACCO and approval by the Registrar.
-9-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(s)
Provisions
A provision is recognised in the balance sheet when the Union has a legal or constructive obligation
as a result of a past event, and it is probable that an outflow of economic benefits will be required to
settle the obligation.
(t)
Payables
Payables are measured at amortised cost using the effective interest method.
(u)
Foreign currency
Foreign currency transaction
Transactions in foreign currencies are translated to Malawi Kwacha at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated to Malawi Kwacha at the foreign exchange rate ruling at that
date. Foreign exchange realised differences arising on translation are recognised in the income
statement.
(v)
Financial instruments
The Union recognises financial assets or financial liabilities on its balance sheet when, and only
when, it becomes a party to the contractual provisions of the instruments.
When financial assets or financial liabilities are recognised initially, MUSCCO measures them at
their value plus, in the case of financial assets or financial liabilities not at fair value through profit
and loss transactions costs that are attributable to the acquisition or issue of the financial assets or
financial liabilities. After initial recognition MUSCCO measures financial assets, including
derivatives that are assets, at their fair values, without any deduction for transaction costs it may incur
on the sale or other disposal, except for the following assets: loans and receivables which are
measured at amortised cost using the effective interest method; held to maturity investments which
are measured at amortised cost using the effective interest method.
All financial assets except those measured at fair value through profit or loss are subject to review for
impairment. The entity derecognises a financial asset when and only when the contractual rights to
the cash flows from the financial assets expires or it transfers the financial asset and the transfer
qualifies for derecognition. The Union transfers a financial asset if it either transfers the contractual
rights to receive the cash flows of the financial asset or retains the contractual rights to receive the
cash flows of the assets. When the Union transfers a financial asset it evaluates the extent to which it
retains the risks and rewards of ownership of the asset. If the Union transfers substantially all the risks
and rewards of ownership of the asset, it derecognises the financial asset and recognises separately as
assets or liabilities any rights and obligations created or retained in the transfer.
(w)
Determination of fair values
A number of the Union’s accounting policies and disclosures require the determination of fair value,
for both financial and non-financial assets and liabilities.
Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. Where applicable, further information about the assumptions made in determining fair
values is disclosed in the notes specific to that asset or liability.
-10-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(w)
Determination of fair values (continued)
(i) Property, plant and equipment
The buildings, property and equipment held for use in the administrative purposes, are stated in
the balance sheet at their depreciated replacement amounts, being the fair value at the revaluation
date, less any subsequent accumulated depreciation and subsequent impairment losses.
Revaluations are performed with sufficient regularity such that the carrying amount does not
differ materially from what would be determined using fair values at the balance sheet date.
Any revaluation increase arising on the revaluation is credited to the revaluation reserve and a
decrease in carrying amount arising on the revaluation is charged to income statement to the
extent that it exceeds the property’s revaluation reserve relating to previous revaluations.
Depreciation on the revalued properties is charged to the income statement. On the subsequent
sale or retirement of a revalued property, the attributable revaluation surplus remaining in the
property’s revaluation reserve is transferred directly to retained earnings.
Motor vehicles, fixtures and equipment are stated at cost less accumulated depreciation and any
accumulated impairment losses.
Properties in course of construction for administrative purposes are carried at cost, less any
recognised impairment loss. Depreciation of these assets commences when the assets are ready
for their intended purpose.
Depreciation is charged so as to write off the cost or revaluation of assets, other than land and
properties under construction, over their estimated useful lives, using the straight-line method.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment
is determined as the difference between the sale proceeds and the carrying amount of the asset
and is recognised in the income statement.
(ii) Investment property
An external, independent valuation company, having appropriate recognised professional
qualifications and recent experience in the location and category of property being valued, values
the Union’s investment property every year. The fair values are based on market values, being the
estimated amount for which a property could be exchanged on the date of the valuation between a
willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently, and without compulsion.
(iii) Inventories
The fair values of inventories are stated at the lower of cost and net realisable value on first-in
first-out basis. Cost comprises overheads incurred in bringing the inventories to their present
location and condition. Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs and selling expense, and a reasonable profit margin based on the
effort required to sell the inventories.
(iv) Receivables
The fair value of receivables is estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date.
-11-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(x)
Financial risk management
The Union’s financial instruments consist of cash and deposits with banks, treasury bills, short-term
loans and customer deposits. The union has exposure to the following risks from its use of financial
instruments:
(i) Credit risk
(ii) Liquidity risk
(iii) Market risk.
(i) Credit risk
Credit risk is the risk of financial loss to the Union if a SACCO or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from lending and
treasury. The carrying amounts of cash and deposits with banks, treasury bills, SFFP fund and
short-term loans to customers appearing on the balance sheet represent the maximum amount
exposed to credit risk.
(1) Loans to SACCOs
The union extends credit/loans to SACCO based on security from deposits and shares
portfolio. On agriculture loans, the union collects stop orders with Auction Holdings Ltd on
the farmers’ association to which credit has been extended in addition to the 10% collateral
deposits that it collects from these associations.
(2) Short-term deposits
The Union limits its exposure to credit risk by depositing its excess cash only with reputable
established commercial banks and discount houses accredited by the Reserve Bank of Malawi.
Considering their high credit ratings and Reserve Bank close monitoring of these financial
institutions, management does not expect any institution to fail to meet its obligations.
(ii) Liquidity risk
Liquidity risk is the risk that the Union will not be able to meet its financial obligations as they
fall due. The Union’s approach to managing liquidity is to ensure, as far as possible, that it will
always have liquid assets to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the union’s reputation.
The Union ensures that it has sufficient cash on demand to meet expected operational expenses
for a period of 90 days, including the servicing of financial obligations; this excludes the potential
impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In
addition, the Union maintains the following lines of credit:
(iii) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the union’s income or 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 the return.
(1) Foreign currency risk
The Union presently does not have any exposure on currency positions other than those
arising on the Malawi Kwacha. The Union does not hold foreign currency denominated
accounts (except for specific donor funded projects) and its assets and liabilities are
denominated in Malawi Kwacha.
-12-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(x)
Financial risk management (continued)
(2) Interest rate risk
Interest rate risk is the risk that fluctuating interest rates will unfavourably affect the union’s
earnings and the value of its assets, liabilities and capital.
Interest rate movement affects the Union’s profitability. Exposure to interest rate movement exist
because the Union has assets and liabilities on which interest rates change from time to time and
exposure to interest rate movement arises when there is a mismatch between the rate of sensitive
assets and liabilities. The Union closely monitors interest rate movements and seeks to limit
exposure by managing interest rate and maturity structure of assets and liabilities carried on the
balance sheet.
(y)
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not yet effective for the year
ended 31st December 2008, and have not been applied in preparing these financial statements.

Revised IAS 1 Presentation of Financial Statements introduces the term total comprehensive income,
which represents changes in equity during a period other than those changes resulting from
transactions with owners in their capacity as owners. Total comprehensive income may be presented
in either a single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an income statement and a
separate statement of comprehensive income. Revised IAS 1, which becomes mandatory for the
Union’s 2009 financial statements, is expected to have a significant impact on the presentation of the
financial statements. The Union plans to provide total comprehensive income in a single statement of
comprehensive income for its 2009 financial statements.

Amendment of IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
Statements – Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable
instruments and instruments that impose on the entity an obligation to deliver to another party a pro
rata share of the net assets of the entity only on liquidation, to be classified as equity if certain
conditions are met. The amendments which becomes mandatory for the Union’s 2009 financial
statements, with retrospective application required, are not expected to have any impact on the
financial statements.

Amendment to IFRS 2 Share Based Payment – Vesting Conditions and Cancellations clarifies the
definition of vesting conditions, introduces the concepts of non-vesting conditions, requires non
vesting conditions to be reflected in grant –date fair value and provides the accounting treatment for
non vesting conditions and cancellations. The amendment to IFRS 2 will become mandatory for the
Union’s 2009 financial statements, with retrospective application. The Union has not yet determined
the potential effect of the amendment.

IFRS 8 Operating segments introduces the management approach to segment reporting. IFRS 8,
which becomes mandatory for the Union’s 2009 financial statements, will require the disclosure of
segment information based on the internal reports regularly reviewed by the Union’s management. At
the moment, this standard is not expected to have any impact on the Union’s financial statements.

Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs and requires that an
entity capitalise borrowing costs directly attributable to the acquisition, construction or production of
a qualifying asset as part of the cost of that asset. The revised IAS 23 will become mandatory for the
Union’s 2009 financial statements and will constitute a change in accounting policy for the Union. In
accordance with the transitional provisions the Union will apply the revised IAS 23 to qualifying
assets for which capitalisation of borrowing costs commences on or after the effective date.
-13-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
SIGNIFICANT ACCOUNTING POLICIES
for the year ended 31st December 2008
(y)
New standards and interpretations not yet adopted (continued…)
 IFRIC 13 Customer Loyalty Prorammes addresses the accounting by entities that operate, otherwise
participate in, customer loyalty programmes for their customers. It relates to customer loyalty
programmes under which the customer can redeem credits for awards such as free or discounted
goods or services. IFRIC 13, which becomes mandatory for the Union’s 2009 financial statements, is
not expected to have any impact on the financial statements.
.
-14-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
2008
1.
2.
3.
4.
5.
INTEREST RECEIVED AND SIMILAR INCOME
Interest on investments
Change in fair value of equity instruments
Interest on loans
Bank interest
Net loan processing fees
INTEREST PAID AND SIMILAR CHARGES
Ordinary deposits
Fixed deposits
Liquidity deposits
Statutory deposits
Special deposits
Bank charges
Other charges
OTHER INCOME
MUSCCO dues received
MUSCCO audit fees
Net stationery sales
Consultancy and trust funds and administration fees
Rental income
SACCO computer sales and services
Government payroll administration fees
Insurance expense allowance
Interest on staff loans
Sundry income
REVENUE GRANT
Included in income are revenue grant from the
following donors:
Swedish Cooperative Center (SCC)
Canadian Cooperative Association (CCA)
DFID
HIVOS
2007
14,912,211
2,876,120
36,546,845
1,607,939
4,773,729
59,840,724
28,973,928
18,655,076
200,918
1,760,500
49,590,422
1,368,429
537,585
319,099
374,905
450,519
1,726,362
4,776,899
428,546
686,334
918,254
763,354
344,397
425,836
276,282
3,417,167
5,670,000
7,903,000
1,456,400
10,416,259
4,368,000
206,000
585,253
2,647,318
341,228
1,159,365
34,752,823
4,939,605
4,907,668
2,384,545
3,681,973
2,287,200
260,000
379,618
2,688,737
1,087,887
661,716
23,278,949
34,016,932
17,907,252
24,311,243
76,235,427
32,427,809
18,290,294
26,669,066
969,511
78,356,680
PROJECT EXPENSES
a) HIVOS
The HIVOS project's main purpose is to institutionalise risk management at the strategic level and
structuring risk management in the organisation by setting up a systematic approach, policy and
department to identify, measure, monitor and manage business risks in MUSCCO. The project
agreement is for 2 years (from 12 Nov 2007 to 31 Dec 2009).
b) DFID
The DFID project commenced in June 2003. The project's purpose is to provide financial services,
which include a variety of savings products and loans to low-income urban dwellers through the
establishment of a SACCO in the City of Lilongwe. The project started in the City of Lilongwe as a
pilot and expanded to the cities of Blantyre and Mzuzu during the second year.
-15-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
5.
PROJECT EXPENSES (continued)
c) CCA
The Canadian Co-operatives Association (CCA) support to MUSCCO commenced in March 2006 to
enhance MUSCCO's and participating SACCO's ability to provide accurate, timely and relevant
information through the provision of software and computerisation of the SACCO. The Project
agreement is for a period of 2 years.
d) SCC
The SCC project (Member Mobilisation and Capacity Building Project) commenced in June 2003
with the objective to ensure that members in the project implementation areas are aware of how their
SACCO should operate and support the progress of the SACCO and to ensure that members of the
SACCO Boards have the ability to guide and safeguard an efficient operation of their SACCO. The
Project is for the period June 2003 to 31 December 2007.
Swedish Cooperative Center (SCC)
Canadian Cooperative Association (CCA)
DFID
HIVOS
6.
PERSONNEL EXPENSES
Gratuity
House allowance
Leave grant
Medical
Pension
Recruitment
Relocation
Severance allowance
Salaries
Staff benefits
Fringe benefit tax
Staff bonus
-16-
2008
34,016,932
17,907,252
24,311,243
76,235,427
2007
32,427,809
18,290,294
26,669,066
969,511
78,356,680
3,124,150
4,972,995
132,500
674,650
1,274,775
342,650
3,786,250
30,463,325
3,186,241
266,094
660,000
48,883,630
1,080,000
4,360,000
85,000
444,270
998,086
80,308
210,338
1,509,702
21,260,000
30,027,704
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
7.
ADMINISTRATION EXPENSES
Audit fees
Building maintenance
City rates
Computers and copier expenses
Condolences
Depreciation charge
Equipment maintenance
Electricity
Entertainment allowance
Gifts and awards
General expenses
Foreign exchange loss
Internet expenses
Insurance - other
Legal expenses
Night guarding services
Office stationery
Office rent
Office cleaning
Postage and delivery
Subscription and levies
Telecommunications
Tea/coffee breaks
Uniforms
Vehicle maintenance & other
Water
8.
ORGANISATION EXPENSES
Board expenses
Publicity and advertising
Local travel
Subsistence allowance
International SACCO day
WOCCU/ACCOSCA
International travel
Vehicle fuel
Local training and seminars
FINCOOP support
-17-
2008
2,000,000
557,050
97,682
488,694
6,514,041
149,523
338,346
36,600
164,163
338,259
527,008
39,259
2,611,378
35,000
669,811
398,901
2,693,353
244,429
410,708
440,293
980,736
196,548
17,542
1,504,318
344,244
21,797,886
2007
2,500,000
404,419
128,883
26,800
6,771,727
79,777
477,367
3,250
473,920
166,646
2,067,514
211,000
896,725
182,812
1,666,638
105,389
269,667
723,896
1,071,858
155,335
63,319
814,072
404,067
20,090,917
1,603,293
220,980
529,362
2,396,696
22,000
354,729
4,199,772
1,153,545
2,613,538
117,330
13,211,245
2,296,948
202,645
539,781
1,063,020
269,724
1,254,844
1,373,871
526,463
7,527,296
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
9.
PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Motor
Vehicles
Furniture&
Equipment
TOTAL
1,714,000
________
As at 31 December 2007 1,714,000
35,015,666
_________
35,015,666
26,012,830
_________
26,012,830
9,921,575
2,287,785
_________
12,209,360
72,664,071
2,287,785
_________
74,951,856
________
As at 31 December 2007
-
2,666,549
774,566
_________
3,441,115
6,889,049
5,080,160
_________
11,969,209
5,198,341 14,753,939
917,001
6,771,727
_________ _________
6,115,342 21,525,666
Carrying amounts
As at 31 Dec 2007
1,714,000
31,574,551
14,043,621
6,094,018
Cost or revaluation
As at 1 January 2008
1,714,000
Additions
Revaluation adjustments
Transfer to assets held for sale
________
As at 31 December 2008 1,714,000
35,015,666
783,027
77,770,667
_________
113,569,360
26,012,830
10,837,342
(4,771,987)
_________
32,078,186
3,441,115
711,729
________
4,152,844
11,969,209
4,483,663
(2,266,694)
_________
14,186,179
6,115,342
1,318,649
________
7,433,991
17,892,007
7,147,867 136,170,390
Cost or revaluation
As at 1 January 2007
Additions
Depreciation
As at January 2007
Charge for the year
Depreciation
As at January 2008
Charge for the year
Transfer to assets held for sale
________
As at 31 December 2008
Carrying amounts
As at 31 Dec 2008
1,714,000
109,416,516
53,426,190
12,209,360 74,951,856
2,372,498 13,992,867
- 77,770,667
- (4,771,987)
_________ __________
14,581,858 161,943,404
21,525,666
6,514,041
(2,266,694)
_________
25,773,014
Land and buildings were revalued by Real Property and Development Consultants in December
2008 on market value basis. Under the method used, the revalued cost was treated as the new
gross amount and accumulated depreciation was restated. The resultant surplus was taken to
revaluation reserve.
-18-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
10.
INVESTMENT PROPERTY
2008
21,400,000
2007
14,579,824
368,160
________21,768,160
6,820,176
21,400,000
1,486,122
2,248,049
430,565,573
1,580,831
432,146,404
110,850,508
50,000,000
160,850,508
Cost – valuation
At 1 January 2008
Additions
Fair value adjustments
As at 31 December 2008
The residential houses were revalued in 2007 by T.G.
Msonda BSc.(L Admin). ARICS, IRRV, MSIM Chartered
valuation surveyor on an open market value basis on. The
values of investment property stated above a reasonable
approximates of their fair values as at 31 December 2008.
11.
12.
INVENTORIES
Stationery and equipment for sale
LOANS TO SACCO
MUSCCO loans
NORAD loans
Total loans
The loans are repayable within one year and represent
amounts advanced to affiliated SACCO and Associations
for their liquidity and institutional development and sublending to individual members and are subject to interest at
rates varying from 16% to 25% per annum.
The above balances are net of impairment loss on loans
as follows:
MUSCCO loans
16,433,679
NORAD loans
1,580,832
18,014,511
Impairment losses on the Project loans are debited to the
respective funds.
13.
INVESTMENTS
Malawi Government treasury bills
TNM Shares
7,300,920
7,300,920
Total interest earned on these investments is
MK16,948,675 (2007: MK 28,973,928). Interest rates
ranged from 8% to 13%. (2007: MK1,490,411). TNM shares
were purchased with an intention of disposing within 12
months. The share value gain recognized in the income
statement as at the year end is MK 2,876,120 (Year 2007:
Nil)
-19-
18,373,663
2,667,342
21,041,005
100,628,767
_________100,628,767
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
14.
RECEIVABLES
a) Short –term: receivable within 12 months
Staff loans and advances
Prepayments and sundry receivables
b) Long-term staff loans – receivable after 12 months
Total Receivables
2008
285,421
21,383,343
21,668,764
1,284,078
22,952,842
2007
677,867
10,352,986
11,030,853
1,731,668
12,762,521
The staff loans are repayable within the period of one year
to three years and represent amounts advanced to staff for
educational and personal loans and are subject to interest at
rates varying from 12% to 15% per annum Total interest
received on staff loans was MK341,228/(2007: MK
1,087,887).
15.
CASH AND CASH EQUIVALENT
Current accounts
7 Day call accounts
FCD accounts
Savings account
Cash in hand
Bank overdraft
Cash and cash equivalents
6,919,239
183,756
5,148,058
3,008,460
752
15,260,265
(58,218,976)
(42,958,711)
6,597,208
256,342
20,318,166
1,515,953
354,037
29,041,706
(2,675,775)
26,365,931
The union has a bank overdraft facility of MK60 million
which expires on 31st July 2009. The facility is secured by a
debenture over MUSCCO House building with a carrying
amount of MK78 million
16.
The carrying amount of cash and cash equivalent of
(MK42, 958,711) 2007: MK27, 365,831 is a reasonable
approximation of their fair values. Disclosure of fair values
is therefore not required.
ASSETS CLASSIFIED AS HELD FOR SALE
2008
Cost
4,771,987
Depreciation:
Accumulated depreciation
1,908,795
Depreciation for year
357,899
2,266,694
Carrying amount
The motor vehicle Peugeot 407 has been presented as held
for sale following the commitment of the Union’s
management on 1st April 2008, to a plan to sale the vehicle.
Efforts to sell the vehicle commenced in April 2008, and
the sale is expected by June 2009. Depreciation charge for
the asset has been recognised up to 30th March 2008.
-20-
2,505,293
2007
________
_______-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
17.
TRUST FUNDS
Father Roy
Women in Development
NORAD credit line
322,303
76,096
34,571,000
_________
34,969,399
322,303
76,096
34,571,000
_________
34,969,399
These funds represent amounts entrusted with MUSCCO by
the specified bodies for the disbursement of loans.
MUSCCO charges administration fees. Impairment on
loans is debited to the respective funds. Interest received
from investing in NORAD Credit Line funds is credited to
the income statement.
18.
19.
CAPITAL CONTRIBUTIONS
Capital contributions
43,605,373
The balance on capital contributions represents funds to be
used for giving loans to SACCO donated by WOCC,
USAID (READI project), the Malawi Government and
DANIDA.
MEMBER SHARES
As at 1 January 2007
Additions: shares issued at par
As at 31 December 2008
Share certificates are not issued to shareholders instead
share statements are sent to shareholders. Member shares
are refundable to the members upon disaffiliation of the
SACCO and approval by the Registrar. Members’ shares are
reclassified to non current liabilities. The Union does not
have unconditional right to refuse withdrawal of member
shares by its affiliates and as such they cannot be classified
as equity. The Cooperative Societies Act does not restrict
withdrawal of members’ shares.
20.
SACCO FREE FINANCIAL PROTECTION
PLAN (SFFP) FUND
Opening balance
Premiums received
Claims paid
Closing fund balance
71,444,857
4,374,105
_________
75,818,962
2008
36,360,370
14,838,149
(10,987,502)
40,211,017
-21-
43,605,373
69,497,678
1,947,179
_________
71,444,857
2007
33,468,319
17,832,054
(14,940,003)
36,360,370
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
20.
SACCO FREE FINANCIAL PROTECTION (continued)
The fund was previously called the Risk Management Fund. This fund was established to cater for
insurance needs of SACCO since the termination of CUNA Mutual Insurance in the year to 31 March
1999. SACCO pays monthly premiums of 0.4% of members’ savings and loans. Claims for loans are
up to a maximum of K225, 000 and for savings up to a maximum of MK100, 000 per SACCO
member. Premiums received represent 88% of total premiums received during the year. Claims are
debited directly to the fund and 15% of premiums are taken to the Income statement. SFFP has been
reclassified as a non current liability because by its very nature it cannot be part of equity. The
Directors of the Union are of the opinion that the fund balance is adequate to meet any future liability
arising from the SFFP Programme.
21.
EMPLOYEE BENEFITS
Pension Fund
The Union’s pension scheme is the NICO Pension and Death Benefits Fund. The Trustees of the fund
have effected a deposit administration contract with NICO Life Limited. The charge to the income
statement is MK 1,274,775 (2007: MK 998,086).
Severance Allowance
As mentioned above, severance allowance is payable to employees on termination of employment by
mutual agreement, death, retirement, voluntary retirement, retrenchment or redundancy. A full
provision payable has been included in the accounts as a long-term liability in accordance with
Employment Act Sections 35(1), 35 (6) and 59.
The severance computation has been based on each employee’s gross remuneration package inclusive
of all entitled benefits both in cash and in kind. The employees who have been in service for over 10
years, their severance allowance is computed based on a full monthly gross remuneration package
multiplied by the number of years in service. For employees with less than 10 years in service, the
computation is half the gross monthly remuneration package multiplied by number of years in service.
Balance at the beginning of the year
Provision made during the period
Provision used during the period
Balance at the end of the year
22.
DEPOSITS
Ordinary demand deposits
Fixed deposits
Special deposits
Liquidity deposits
Statutory deposits
-22-
2008
13,867,750
3,786,250
17,654,000
2007
15,722,500
1,509,702
(3,364,452)
13,867,750
51,538,116
11,399,165
18,505,772
21,825,110
23,843,702
127,111,865
32,550,184
6,907,994
8,525,430
15,346,400
13,792,777
77,122,785
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
23.
PAYABLES
Deferred income
Sundry payables
Disaffiliated SACCO shares
2008
4,948,911
66,808,635
2,464,805
_________
74,222,351
2007
13,481,728
10,870,654
2,764,805
_________
27,117,187
Disaffiliated SACCO shares represent member shares for
SACCO that were disaffiliated from MUSCCO. The amount
is refundable to the SACCO.
24.
RECONCILIATION OF SURPLUS TO
OPERATING CASH FLOWS
Surplus for the year
Depreciation
Change in inventory
Change in receivables
Change in payables
Interest received
Interest paid
Other income received
Severance provision
Staff bonus provision
Loans provision
Dividends paid
Cash flows applied to operations
4,898,198
6,514,041
761,927
(10,190,321)
47,105,164
(59,840,724)
4,785,614
(34,752,823)
3,786,250
660,000
(3,573,383)
4,599,072
(35,246,985)
2,380,947
6,771,727
(161,932)
(1,943,340)
(14,286,692)
(49,590,422)
3,417,167
(23,278,949)
1,509,702
2,535,340
6,900,000
(65,746,462)
25.
RELATED PARTY TRANSACTIONS
Majority of the transactions engaged by the Union are with its members (SACCOs). These
transactions which mostly relate deposits, loans and SACCO Free Financial Protection Plan are at
arms length.
26.
CAPITAL COMMITMENTS
The Union had no capital commitments at 31 December 2008 requiring disclosures in the financial
statements.
27.
TAXATION
MUSCCO is treated as being exempt from income taxes under the first schedule, subsection (ix) to
the Taxation Act as confirmed by the Principal Revenue Officer of the Malawi Revenue Authority.
28.
CONTINGENT LIABILITIES
There are no contingent liabilities as at the year end requiring disclosures in the financial statements.
-23-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
29.
FINANCIAL RISK MANAGEMENT
Interest rate risk
As at 31st December 2008 the table below summaries the exposure to interest rate risk of the union’s
interest-bearing financial instruments and the carrying amounts have been categorised by maturity dates:
Balance as at 31st December 2008
Assets
Loans to SACCOs
Short-term investments
Cash and cash equivalents
Totals assets
Up to 1
Month
7,300,920
15,260,265
22,561,185
1–3
3 – 12
Over 1
Months
Months
Year
4,433,793 416,032,491 11,680,120
- _________- ________4,433,793 416,032,491 11,680,120
Total
432,146,404
7,300,920
15,260,265
454,707,589
Up to 1
Month
100,628,767
29,041,706
129,670,473
1–3
3 – 12
Over 1
Months
Months
Year
138,892,044 3,948,830 18,900,634
_________- ________- ________138,892,044 3,948,830 18,900,634
Total
160,850,508
100,628,767
29,041,706
290,520,981
Balance as at 31st December 2007
Assets
Loans to SACCOs
Short-term investments
Cash and cash equivalents
Totals assets
The effective interest rate on these financial instruments is as follows:-
Loans to SACCOs
Short-term investments
Cash and cash equivalent
2008
2007
16%-25%
8%-13%
1% - 3%
20%-27.0%
9%-21%
5%-15%
Liquidity risk
The Union manages liquidity risk on the basis of expected maturity dates. The table below analyses assets
and liabilities into relevant maturity groupings based on the remaining period to the contractual maturity
date at 31 December 2008.
Carrying
1 Year or
More than
Balance as at 31 December 2008
Amount
less
1 year
Reserves and liabilities
Deposits
127,111,865
127,111,865
Bank overdraft
58,218,976
58,218,976
Payables
74,231,066
74,911,066
Member shares
75,818,962
75,818,962
SFFP fund
40,211,017
40,211,017
Employee benefits
17,654,000
17,654,000
Reserves
246,344,510
__________
246,344,510
Total liabilities & shareholders funds
639,590,396
259,561,907
380,028,489
-24-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008.
In Malawi Kwacha
29.
FINANCIAL RISK MANAGEMENT (continued)
Liquidity Gap (continued)
Carrying
Balance as at 31 December 2008
Amount
Assets
Property, plant and equipment
136,170,390
Investment property
21,768,160
Long term receivables
1,284,078
Assets classified as held for sale
2,505,293
Inventories
1,486,122
Receivables
21,668,764
Loans to SACCOs
432,146,404
Short term investments
7,300,920
Cash and cash equivalents
15,260,265
Total assets
639,590,396
1 Year or
less
More than
1 year
2,505,293
1,486,122
21,668,764
432,146,404
7,300,920
15,260,265
480,367,768
136,170,390
21,768,160
1,284,078
_________159,222,628
Net liquid gap
__________-
220,805,861
(220,805,861)
Carrying
Amount
1 Year or
less
More than
1 year
Total liabilities & shareholders funds
2,675,775
77,122,785
27,117,187
71,444,857
36,360,370
13,867,750
151,769,017
__________
380,357,741
2,675,775
77,122,785
27,117,187
__________
106,915,747
71,444,857
36,360,370
13,867,750
151,769,017
__________
273,441,994
Assets
Property, plant and equipment
Investment property
Long term receivables
Inventories
Receivables
Loans to SACCOs
Short term investments
Cash and cash equivalents
Total assets
53,426,190
21,400,000
1,731,668
2,248,049
11,030,853
160,850,508
100,628,767
29,041,706
380,357,741
2,248,049
11,030,853
160,850,509
100,628,766
26,365,931
303,779,883
53,426,190
21,400,000
1,731,668
________76,557,858
Net liquid gap
_________-
196,864,136
(196,864,136)
Balance as at 31 December 2007
Reserves and liabilities
Bank overdraft
Deposits
Payables
Member shares
SFFP fund
Employee benefits
Reserves
-25-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
29.
FINANCIAL RISK MANAGEMENT (continued)
Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk as at 31 December 2008 was:
Balance as at 31 December
Receivables
Loans to SACCOs
Short-term investments
2008
2007
21,668,764
432,146,404
7,300,920
461,116,088
12,762,521
187,645,984
100,628,767
301,037,272
The union collects 10% collateral on agriculture loans disbursed and obtains a stop order arrangement
for those associations with Auction Holdings. Furthermore, Liquidity loans are disbursed based on
security from shares and deposits portfolio. On short-term investments, the union collects deal
confirmation certificates which are secured under lock and key.
Impairment losses
The aging of loans to SACCOs as at 31 December 2008 was:
Gross Impairment
2008
2008
Past due 0-30 days
427,192,531
Past due 31-120 days
5,567,123
613,250
More than one year
17,401,262
17,401,262
Total
450,160,916
18,014,512
Gross
2007
159,933,049
3,948,830
18,009,634
181,891,513
Impairment
2007
3,031,370
18,009,635
21,041,005
The movement in the allowance for impairment in respect of loans to SACCOs during the year was as
follows:
2007
2008
Balance at 1 January
18,276,497
21,041,005
Impairment recognised
2,764,508
(3,026,493)
21,041,005
Balance as at 31 December 2008
18,014,512
Based on historic default rates, the union believes that no impairment allowance is necessary in
respect of loans not past due or past due by up to 30 days representing 95 percent of the balance.
Exchange rate and inflation rate
The annual average foreign exchange rates of the major foreign currencies and National Consumer
Index which represents the measure of inflation rate affecting the Union are stated below.
Exchange rates as at 31st December 2008
2008
2007
United States Dollar (US$)
139.2
140.3
Pound sterling (£)
216.0
285.4
Euro (€)
203.9
208.4
South African Rand
15.6
21.2
Inflation rate
9.9%
7.5%
-26-
MALAWI UNION OF SAVINGS AND CREDIT CO-OPERATIVES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2008
In Malawi Kwacha
30.
FINANCIAL INSTRUMENTS
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
balance sheet, are as follows:
Balances as at 31 December 2008
Loans to SACCOs
Short-term investments
Receivables
Cash and cash equivalents
Payables
Deposits
31 December 2008
Carrying
Amount
Fair Value
432,146,404
432,146,404
7,300,920
7,300,920
21,668,764
21,668,764
15,260,265
15,260,265
(76,181,562) (76,181,562)
(127,111,865) (127,111,865)
__________
__________
273,082,926
273,082,926
___________
__________
31 December 2007
Carrying
Amount
Fair Value
160,850,509
160,850,509
100,628,767
100,628,767
12,762,521
12,762,251
26,041,706
26,365,931
(27,117,187)
(27,117,187)
(77,122,785) (77,122,785)
_________
_________
196,043,531
196,043,531
__________
__________
The basis for determining fair values is disclosed in accounting policy number (w).
31.
NATURE OF BUSINESS
The principal activities of the Union are the promotion of Savings and Credit Co-operatives Societies
(SACCO's) in Malawi by providing technical, financial and banking facilities support. The Union is
domiciled in Malawi and its registered office is MUSCCO House, Mandala Road, and P.O. Box 651,
Lilongwe.
32.
SUBSQUENT EVENTS
There are no events that have occurred after year end which necessitate adjustments to/or disclosure in
the financial statements. However, as at date of audit report the exchange and inflation rates had
moved to:2008
2007
United States Dollar (US$)
139.2
140.5
Euro (€)
216.9
206.8
Pound sterling (£)
234.3
280.7
South African Rand
17.6
18.8
Inflation rate
9.9%
-27-
9.5%