PROMOTION OF RURAL INITIATIVES
AND DEVELOPMENT
ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
FINANCIAL STATEMENTS
For the year ended
31ST DECEMBER 2004
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
FINANCIAL STATEMENTS
For the year ended 31st December 2004
CONTENTS
Page
Directors’ report
1
Independent auditor’s report
3
Income statement
4
Statement of changes in equity
5
Balance sheet
6
Statement of cash flows
7
Accounting policies
8
Notes to the financial statements
11
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
DIRECTORS’ REPORT
For the year ended 31st December 2004
The directors have pleasure in submitting their report together with the audited annual financial statements of
Promotion of Rural Initiatives and Development Enterprises (Malawi) (a company Limited by guarantee) for the
year ended 31st December 2004.
Nature of business
The company is engaged in micro finance business providing a wide range of financial services to low income
earners in Malawi.
The physical address of the company’s registered office is:
122 Lower Sclatter Road
2nd Floor MASM Building
P.O. Box 2131
Blantyre
Financial performance
The results and state of affairs of the company are set out in the accompanying income statement, statement of
changes in equity, balance sheet, statement of cash flows, accounting policies and notes.
Inflation and exchange rates
The annual inflation is estimated at 11.5, 9.6% and 14.8% as at year end, for the three years ended 31 December
2004, 2003 and 2002 respectively.
The major trading currencies affecting the company are United States Dollar, Euro and South Arican Rand. The
exchange rates were K108.9, K108.4 and K87.1 for the United States Dollar, K148.5, K133.9 and K90.6 for the
Euro K19.9, K16.7 and K10.2 for South African Rand as at year end, for the past three years ended 31 December
2004, 2003 and 2002 respectively.
Directors and company secretary
Mr. G. Partridge
- Chairman - throughout the year
Dr. N. Ngwira (Mrs.)
- Director
- throughout the year
Mrs. T. Mbvundula
- Director
- throughout the year
Mr. C. Kapanga
- Director
- throughout the year
Mr. M. Kansichi
- Director
- throughout the year
Mr. S. Chikoti
- Director
- throughout the year
Mr. V. Kumwenda
- Director
- throughout the year
Mr. J. Nsomba
- Director
- from August 2004
Mr. M.Y Sawerengera
- Company Secretary - throughout the year
Directors’ responsibility for the financial statements
The Malawi Companies Act 1984 requires the directors to ensure that for each accounting period financial
statements are prepared which show a true and fair view of the state of affairs of the company and of its results
for that period, and which are properly prepared in accordance with the relevant provisions of the Companies
Act 1984.
The directors accept responsibility on behalf of the company for the maintenance of proper accounting records
sufficient for this purpose. Accordingly, the directors have: selected suitable accounting policies and applied them consistently; and
 made judgements and estimates that are reasonable and prudent; and
 stated that applicable accounting standards have been followed; and
 prepared the financial statements on a going concern basis having determined that the company has adequate
resources to continue in operational existence for the foreseeable future.
-1-
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
DIRECTORS’ REPORT
For the year ended 31st December 2004
The directors are responsible for establishing controls to prevent the falsification of entries in the books
of account and to facilitate the detection of inaccuracies therein.
Auditors
A resolution will be proposed at the forthcoming Annual General Meeting to re-appoint KPMG,
Certified Public Accountants (Malawi) as auditors in respect of company’s 31st December 2005
financial statements.
CHAIRMAN
DIRECTOR
2005
-2-
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
Scope
We have audited the financial statements of Promotion of Rural Initiatives and Development
Enterprises (Malawi) which are set out on pages 4 to 17 for the year ended 31st December 2004.
Respective responsibilities of directors and auditors
These financial statements are the responsibility of the directors of the company. Our
responsibility is to express an opinion on the financial statements based on our audit.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing as promulgated by the
International Federation of Accountants. Those standards require that we plan and perform the audit to
obtain reasonable assurance as to whether the accounts are free from material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and disclosures in the accounts.
An audit also involves assessing the accounting policies used and the significant estimates made by the
directors in the preparation of the accounts, as well as evaluating their overall presentation. We believe
that our audit provides a reasonable basis for our opinion.
Audit opinion
In our opinion, the financial statements, are properly drawn up in accordance with the provisions
of the Companies Act 1984 and International Financial Reporting Standards so as to give in all
material respects, a true and fair view of the financial position of the company at 31st December
2004 and of the results of its operations and cash flows for the year then ended.
KPMG
Certified Public Accountants
Blantyre (Malawi)
2005
-3-
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
INCOME STATEMENT
For the year ended 31st December 2004
(In Malawi Kwacha)
Note
2004
2003
94,673,644
48,181,029
Collateral deposit interest
(2,614,703)
(1,675,905)
Net interest income
92,058,941
46,505,124
(9,703,258)
(5,562,247)
82,355,683
40,942,877
4,772,341
3,895,263
87,128,024
44,838,140
39,577,121
33,325,387
3,338,214
3,014,402
46,225,007
30,757,703
4,231,881
15,365,010
1,505,682
79,255,124
98,085,283
7,872,900
(53,247,143)
REVENUE
Interest income
1
Provision for loan losses
2
Net interest after provision for loan losses
Other operating income
3
Net operating revenue
EXPENDITURE
Staff costs
Administrative expenses
Depreciation
Management fees
Other expenses
4
5
6
Total expenditure
Net operating profit/(loss)
Net financing costs
7
(9,609,096)
(1,580,808)
Loss for the year before grants and tax
Income tax
8
(1,736,196)
(200,000)
(54,827,951)
(400,000)
9
(1,936,196)
3,150,714
(55,227,951)
845,572
4,231,881
1,214,518
(50,150,498)
Operating grant
Amortisation of capital grant
Net profit/(loss) for the year
The financial statements are to be read in conjunction with the accounting policies on pages 8 to 10
and notes to the financial statements on pages 11 to 17.
The auditor’s report is on page 3.
-4-
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISE (MALAWI)
( A Company Limited By Guarantee)
STATEMENT OF CHANGES IN EQUITY
For the year ended 31st December 2004
(In Malawi Kwacha)
Operating
grant
Capital
grant
Loan
Fund
Accumulated
Losses
Total
Balance at 1st January 2003 –
restated
Grants received
Amortisation of capital grant
Transferred on disposal
Loss for the year
Balance at 31st December 2003
81,095,874
845,572
170,063
82,111,509
14,281,994
3,728,103
(4,231,881)
(170,063)
13,608,153
79,060,571
33,971,398
113,031,969
(127,939,825)
4,231,881
(55,227,951)
(178,935,895)
46,498,614
38,545,073
(55,227,951)
29,815,736
Balance at 1st January 2004
82,111,509
13,608,153
113,031,969
(178,935,895)
29,815,736
Grants received
Amortisation of capital grant
Loss for the year
Balance at 31st December 2004
82,111,509
(3,150,714)
10,457,439
8,623,528
121,655,497
3,150,714
(1,936,196)
177,721,377
8,623,528
(1,936,196)
36,503,068
Prior year adjustment relates to grants utilized in acquisition of capital items which were transferred from
operating grant to capital grant.
The loan fund is treated as part of equity. However, UNCDF, the donor of the fund has not formally
transferred ownership. The fund is currently the property of UNCDF and the formal transfer of ownership will
be decided upon after an appropriate ownership structure for the company has been established.
The financial statements are to be read in conjunction with the accounting policies on pages 8 to 10 and notes to
the financial statements on pages 11 to 17.
The auditor’s report is on page 3.
-5-
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
BALANCE SHEET
As at 31st December 2004
(In Malawi Kwacha)
Note
2004
2003
10
11
11,208,690
54,632,418
65,841,108
13,608,153
29,039,098
42,647,251
11
12
13
108,543,652
2,204,059
713,932
111,461,643
73,731,495
2,852,744
640,017
77,224,256
177,302,751
119,871,507
9
9
9
82,111,509
10,457,439
121,655,497
(177,721,377)
36,503,068
82,111,509
13,608,153
113,031,969
(178,935,895)
29,815,736
13
14
15
22,416,418
47,402,712
20,962,941
600,000
16,925,653
108,307,724
33,293,328
38,531,542
17,830,901
400,000
90,055,771
ASSETS
Non current assets
Motor vehicle and Equipment
Long term loans to customers
Current assets
Loans to customers
Other receivables
Bank and cash balances
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Operating grants
Capital grant
Loan fund
Accumulated losses
Total equity
Current liabilities
Bank overdraft
Cash collateral deposits
Other payables
Taxation payable
Short term loans
Total current liabilities
16
Long term loans
16
Total liabilities and equity
32,491,959
177,302,751
119,871,507
The financial statements were approved by the Board of Directors on…………………. 2005 and
signed on its behalf by:-
Chairman
Director
The financial statements are to be read in conjunction with the accounting policies on pages 8 to 10
and notes to the financial statements on pages 11 to 17.
The auditor’s report is on page 3.
-6PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Gaurantee)
STATEMENT OF CASHFLOW
For the year ended 31st December 2004
(In Malawi Kwacha)
Notes
Operating activities
Interest and fees received from customers
Cash paid to suppliers and employees
Interest paid
Interest received
2004
2003
100,094,670
(82,051,953)
(12,300,272)
84,813
5,827,258
51,544,691
(74,651,953)
(2,372,592)
1,113,679
(24,366,175)
(51,978,822)
(46,151,564)
(48,785,590)
(73,151,765)
Investing activities
Purchase of equipment
(938,751)
(3,728,103)
Net cash utilized in investing activities
(938,751)
(3,728,103)
7
Increase in net customer balance
Cash absorbed in operations
Cash flows from financing activities
Grants received
Loans received
Net cash flow from financing activities
8
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
13
8,623,528
49,417,612
58,041,140
38,545,073
38,545,073
10,950,825
(32,653,311)
(38,334,795)
5,681,484
(21,702,486)
(32,653,311)
15,985,434
(47,704,524)
Additional statutory information
Increase/(decrease) in net working capital
The financial statements are to be read in conjunction with the accounting policies on pages 8 to 10 and notes to
the financial statements on pages 11 to 17.
The auditor’s report is on page 3.
-7PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
ACCOUNTING POLICIES
The following accounting policies have been consistently applied in all material respects by Promotion of
Rural Initiatives and Development Enterprises (Malawi) (A company limited by guarantee).
(a)
Statement of compliance
The 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 Standing Interpretation Committee of the International Financial
reporting and Interpretations Committee (IFRIC).
(b)
Basis of preparation
The financial statements are presented in Malawi Kwacha. They are prepared on the historical cost
basis.
(c)
Revenue
Interest income is recognized on an accrual basis. Interest on non-performing loans are not
recognized as income from the date of non-performance.
(d)
Equipment
(i) Owned assets
Items of plant and equipment are stated at cost less accumulated depreciation and
impairment losses. Where an item of plant and equipment comprises major components
having different useful lives, they are accounted for as separate items of plant and
equipment.
(ii)
Depreciation
Plant and equipment are depreciated on reducing balance basis at annual rates estimated to
reduce them to their anticipated residual value over their expected useful lives as follows:
Motor vehicles
Furniture and equipment
Computer equipment
(e)
4 years
8 years
3 years
Foreign currencies
Transactions in foreign currencies are translated into Malawi Kwacha at the rate of exchange
ruling at the date of the transaction.
Monetary assets and liabilities dominated in foreign currencies are translated into Malawi Kwacha
at the rate of exchange ruling at the balance sheet date and the resulting gains or losses are taken
into account in arriving at the profit before taxation.
(f)
Receivables
Trade receivables are stated at their cost less impairment losses.
-8PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
ACCOUNTING POLICIES
(g)
Trade and other payables
Trade and other payables are stated at their cost.
(h)
Provisions
A provision is recognised in the balance sheet when the company has a legal or constructive
obligation as a result of a past event, and it is probable that an outflow of funds will be required to
settle the obligation.
(i)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are
payable on demand and form an integral part of cash management are included as a component of
cash and cash equivalents for the purpose of the statement of cash flows.
(j)
Impairment
The carrying amount of the assets, are reviewed at each balance sheet date to determine whether
there is any indication of impairment. If any such indication exists, the assets recoverable amount
is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the
income statement.
(k)
Net financing income/cost
Net financing income/costs comprise interest payable on borrowings calculated using the effective
interest rate, interest receivable on funds invested, foreign exchange gains and losses.
Interest income is recognised in the income statement as it accrues, taking into account the
effective yield on the assets.
(l)
Grants
Capital and revenue grants are disclosed in equity, on accumulative basis, against the related
accumulated costs.
Grants relating to operating expenditure are shown in the income statement as non-operating
income on memorandum basis.
(m)
Inventories
The company does not hold large volumes of stationery stocks and as such they are expensed as
and when purchased.
(n)
Cash collateral deposits
Registered borrowers pay weekly sums of K150 towards cash collateral deposit in case of
Solidarity Group Guarantee Loans and K2,000 per month in case of individual loans. Except for
first loans, cash collateral must be 20% of the loan for Group Guarantee loans and 10% for
individual loans. A 10% bonus is payable twice a year based on monthly minimum balances.
-9PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
ACCOUNTING POLICIES
(o)
Loan loss provisions
Loans are stated in the balance sheet after the deduction of provisions for losses. Provisions are
determined as follows:(i)
(ii)
(p)
Specific
Upto 4 weeks in arrears
Above 4 weeks in arrears
50%
100%
General
2% of loan balances after specific provisions.
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items recognized directly
to equity, in which case it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilized. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
- 10 -
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Gaurantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
1.
2.
3.
4.
5.
Interest on loans
Interest on group loans
Interest on premium/individual loans
Interest on consumer loans
Provision for loan losses
Provision for doubtful loans
Bad debts written off
Bad debts recovered
Other operating income
Sale of promotion materials
Client registration fees
Loan application fees
Other income
Interest on staff loans
Staff costs
Salaries and wages
Pension scheme contribution
Medical scheme expenses
Staff housing
Leave passages
Perseverance award
Disturbance allowances
Workmans compensation scheme
Life Assurance scheme
Staff utilities
Licenses/work permit
Condolence
Fringe benefit tax
Additional assessment of PAYE
Administrative expenses
Recruitment and training costs
Travel and transport expenses
Board meeting expenses
Conferences and seminars expenses
Rent, light and water expenses
Postage and telephone expenses
Printing and stationery expenses
Repairs and maintenance costs
Materials and supplies
Motor vehicle expenses
General insurance
- 11 -
2004
2003
75,820,337
13,299,659
5,553,648
94,673,644
47,430,654
412,278
338,097
48,181,029
(2,708,602)
12,712,568
(300,708)
9,703,258
5,090,380
605,485
(133,618)
5,562,247
1,500
1,246,850
3,211,528
245,080
67,383
4,772,341
34,279
1,137,470
2,103,133
497,322
123,059
3,895,263
28,191,227
1,518,931
631,386
6,563,000
352,000
10,000
395,065
362,538
561,520
575,230
79,590
336,634
39,577,121
27,768,825
1,222,037
1,303,800
6,078,474
724,785
2,998,273
373,751
80,001
35,553
185,834
60,000
112,712
5,280,962
46,225,007
2,171,416
5,484,480
1,022,345
1,642,859
11,245,878
2,392,507
960,961
1,260,104
2,301,900
4,164,212
678,725
33,325,387
3,554,778
5,203,001
859,000
846,345
11,384,803
2,488,869
1,468,623
1,047,782
1,217,391
2,291,483
395,628
30,757,703
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
6.
Other expenses
Audit fees - current year
- prior year surtax & disbursements
Legal and professional fees
Bank charges
Loss on disposal of fixed assets
Loan recovery commission
7.
2003
881,250
136,333
830,249
296,611
869,959
3,014,402
754,564
189,737
428,418
29,629
103,334
1,505,682
4,750,310
4,935,259
(84,813)
8,340
9,609,096
2,372,592
(216,901)
(896,778)
321,895
1,580,808
200,000
200,000
200,000
200,000
400,000
Net finance costs/(income)
Interest paid
Interest received
-
Bank overdraft
Loans
bank balances
Call accounts
Exchange losses
8.
2004
Income Tax
Current tax expenses
Minimum tax
Prior year underprovision
Minimum tax has been provided in view
of tax losses of approximately K100
Million subject to agreement with Malawi
Revenue Authority
There is no deferred tax liability due to tax losses.
9.
Accumulated grants
Operating
grant
Capital
grant
Loan
Fund
Total
Balance at 1st January 2003 restated
Receipts during the year
Amortisation of capital grant
Transferred on disposal
Balance at 31st December 2003
81,095,874
845,572
170,063
8,211,509
14,281,994
79,060,571 174,438,439
3,728,103
33,971,398
38,545,073
(4,231,881)
(4,231,881)
(170,063)
13,608,153 113,031,969 208,751,631
Balance at 1st January 2004
82,111,509
13,608,153
Amortisation of capital grant
Receipts during the year
Balance at 31st December 2004
82,111,509
(3,150,714)
(3,150,714)
8,623,528
8,623,528
10,457,439 121,655,497 214,224,445
- 12 -
113,031,969
208,751,631
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
10.
Motor Vehicle and Equipment
Motor
vehicles
11.
Computer
equipment
Furniture &
equipment
Total
Cost
At 1st January 2004
Additions
Disposals and adjustments
At 31st December 2004
6,672,050
750,000
7,422,050
11,493,878
188,751
11,682,629
8,512,404
8,512,404
26,678,332
938,751
27,617,083
Depreciation
At 1st January 2004
Charge for the year
Disposals and adjustments
At 31st December 2004
3,057,007
1,091,260
4,148,267
6,998,875
1,559,690
8,558,565
3,014,297
687,264
3,701,561
13,070,179
3,338,214
16,408,393
Carrying amount
At 31st December 2004
3,273,783
3,124,064
4,810,843
11,208,690
Cost
At 1st January 2003
Additions
Disposals and adjustments
At 31st December 2003
3,725,792
2,946,258
6,672,050
8,278,366
3,256,070
(40,558)
11,493,878
8,534,263
182,164
(204,023)
8,512,404
20,538,421
6,384,492
(244,581)
26,678,332
Depreciation
At 1st January 2003
Charge for the year
Disposals and adjustments
At 31st December 2003
1,851,993
1,205,014
3,057,007
4,777,258
2,244,131
(22,514)
6,998,875
2,283,565
782,736
(52,004)
3,014,297
8,912,816
4,231,881
(74,518)
13,070,179
Carrying amount
At 31st December 2003
3,615,043
4,495,003
5,498,107
13,608,153
Loans to customers
2004
(a) Outstanding loans
Provision for bad and doubtful loans
Interest in suspense
Repayable as follows:Repayable after 1 year (long term)
Within 1 year (included in current assets)
- 13 -
2003
181,960,682
(5,786,464)
(12,998,148)
163,176,070
112,721,118
(8,495,065)
(1,455,460)
102,770,593
54,632,418
108,543,652
163,176,070
29,039,098
73,731,495
102,770,593
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
2004
(b)
Balance at 1st January 2004
Loan disbursed during the year
Repayments during the year
Write offs
Accrued interest in suspense
Balance at 31st December
112,721,118
384,093,294
(313,683,851)
(12,712,567)
11,542,688
181,960,682
2003
62,480,069
268,479,024
(219,087,950)
(605,485)
1,455,460
112,721,118
Loans to customers include loans to staff whose outstanding amount at 31st December 2004 was
MK2,004,017 (2003: MK2,274,924). The interest rates are similar to the rate for third party
customers but the repayment period varies from one year to three years. Loans to third party
customers have repayment periods between 4 to 24 months.
12.
Other receivables
2004
2003
1,251,172
952,887
2,204,059
1,631,264
1,221,480
2,852,744
713,932
(22,416,418)
640,017
(33,293,328)
(21,702,486)
(32,653,311)
38,094,657
50,313,305
(41,005,250)
47,402,712
25,678,245
36,542,097
(23,688,800)
38,531,542
20,962,941
20,962,941
10,597,581
7,233,320
17,830,901
Staff loans and advances
Sundry debtors and prepayments
13.
Cash and cash equivalents
Bank and cash balances
Bank overdraft
Cash and cash equivalents as shown in the
statement of cash flows
The company’s bank overdraft facility amounting to
K20 million was unsecured and expired on 28th
February 2004.
14.
15.
Cash collateral deposits
Balance at 1st January
Net receipts during the year
Refunds and forfeits
Balance at 31st December
Other payables
Accrued expenses
Due to related parties
Amounts due to related party comprise mainly balances
due to Pride Management Services Limited, Kenya.
These arose from expenses incurred on behalf of the
company and outstanding management fees.
- 14 -
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
16.
Loans
2004
2003
Cordaid – Paprika Credit Project
This loan carries interest at 16.2% and is repayable on
31st July 2005. The loan is secured by a first lien of the
loan portfolio without any arrears with 100% of the loan
amount.
8,645,000
-
Cordaid – Loan fund
This loan carries interest at 16.2% and is repayable in
equal instalments of K8,280,653 (Euro 50,000) payable
biannually commencing August 2005. The loan is
secured by a first lien of the loan portfolio without any
arrears with 100% of the loan amount.
39,772,612
-
World Women in Need Malawi
This loan is interest free and expires after 36 months
effective September 2004
1,000,000
-
49,417,612
-
(16,925,653)
32,491,959
-
Repayable within one year included in current liabilities
Long term loan
The agreed loan amount with Cordaid was Euro 500,000. However as at 31st December 2004 only Euro
300,000 was disbursed.
17.
Related party transactions
(i)
Rents paid (Note 5) includes K1,484,422.56 (2003: K139,000) paid to The Medical Aid Society
of Malawi (MASM) for offices occupied by Promotion of Rural Initiatives and Development
Enterprises (Malawi) Limited. The General Manager of MASM is a Director of Promotion of
Rural Initiatives and Development Enterprises (Malawi) (a Company limited by guarantee).
Staff costs (note 4) include contributions to medical scheme of K636,810 (2003: K1,303,800)
with MASM, whose General Manager is a director.
(ii)
18.
The Company has an unsecured bank overdraft facility of K20,000,000 (2003: K30,000,000)
with National Bank of Malawi Limited whose Deputy Chief Executive is the Chairman of the
Board for Promotion of Rural Initiatives and Development Enterprises (Malawi) (a company
limited by guarantee). As at 31st December 2004, the overdraft balance was K22,416,418 (2003:
K33,293,328.00 (note 13).
Employees
The number of employees of the company at the end of the year was 53 (2003: 54).
- 15 -
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
19.
Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in
presentation in the current year.
20.
Pension fund
The company operates a defined contribution scheme. Contributions charged to the income
statement for the year were K1.5 million (2003: K1.2 million).
21.
Incorporation
Promotion of Rural Initiatives and Development Enterprises (Malawi), is a private company
limited by guarantee incorporated in Malawi.
22.
Exchange rates and inflation
The average of the year end buying and selling rates of the major foreign currencies affecting
the Promotion of Rural Initiatives and Development Enterprises (Malawi) (A Company
Limited by Guarantee) as stated below together with National Consumer Index which
represents the measure of inflation.
23.
Exchange rates as at 31st December
2004
K
2003
K
2002
K
Unnoted states Dollar (US$)
108.9
108.4
87.1
Euro
148.5
133.9
90.6
South African Rand
19.9
16.7
10.2
Inflation rates
11.5%
9.6%
14.8%
Subsequent events
There were no subsequent events that require disclosure in or adjustment to the financial
statements.
- 16 -
PROMOTION OF RURAL INITIATIVES AND
DEVELOPMENT ENTERPRISES (MALAWI)
(A Company Limited By Guarantee)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2004
(In Malawi Kwacha)
24.
Financial instruments
Exposure to credit, interest rate and currency risk arises in the normal course of the Company’s
business.
Credit Risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing
basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The
company requires collateral in respect of group loans.
At balance sheet date, there were no significant concentrations of credit risk. The maximum
exposure to credit risk is represented by the carrying amount of each financial asset in the balance
sheet.
Interest rate risk
The Company adopts a policy of ensuring that its exposure to changes in interest rates on loans is
on a fixed rate basis.
Foreign currency risk
The Company incurs foreign currency risk on bank balances and payables that are denominated in a
currency other than the Malawi Kwacha. The currency giving rise to this risk is primarily US
Dollars.
In respect of monetary assets and liabilities held in currencies other than the Malawi Kwacha, the
Company ensures that the net exposure is kept to an acceptable level, by buying or selling foreign
currencies at spot rates where necessary to address short term imbalances.
IAS 39 requires financial instruments to be stated at fair values. The directors are of the opinion that
the company’s existing policies on asset impairment loss provision adequately ensure that assets are
stated as far as possible, at fair values.
25.
Capital commitments
2004
2003
-
-
Amounts authorized but not yet contracted for
As at 31st December 2004 there were no capital commitments authorized.
26.
Contingent Assets/Contingent Liabilities
As at 31st December 2004 there were no contingencies requiring disclosure in the financial
statements.
- 17 -