Reliance Annual Report 2008 by SPRESSO design studio

R elia nce Fina ncia l Serv ices Compa n y Limited

Annual Report

2008

report based on

PUBLIC RECOGNITION

Voted by the private Sector and Business Community under the umbrella of the Gambia Chamber of Commerce and Industry for best Business Performance, Good Governance and Leadership, as well as Entrepreneurship in Year 2007 in the following categories:

SME of the year 2007 ‘The Vision has Fully Crystallized’ GCCI

Young Entrepreneur of the year 2007 ‘You All had a Choice’ GCCI

Business Person of the year 2007 ‘The drive to Strive & Succeed with You’ GCCI

In 2008 nominated yet again in three categories out of eight as follows: • • •

Businessman of the Year (Leadership) Small and Medium size Enterprise of the Year; and Service Provider of the Year.

Contents

General Information Vision & Mission statements Key Performance Indicators Chairperson’s Statement Chief Executive Officer’s Statement Organisation chart Corporate Governance Statement Directors’ Report Independent Auditors’ Report Income Statement Balance Sheet Statement of changes in equity Statement of cash flows Notes to the Financial Statements Global Reporting Initiative and Triple Bottom Line Performance index Network of Branches, Kiosks and agencies

5 6 7 8 12 22 23 30 32 33 34 35 35 36 42 45

â&#x20AC;&#x153; Only in growth, reform, and change, is true security to be found.â&#x20AC;? Anne Morrow Lindbergh

annual report 2008

GENERAL INFORMATION Directors

Mrs. Amie N. D. Bensouda (Chairperson) Mr. Baboucarr Khan Mr. Ebenezer Olufowose Mr. Jacco Minnaar Mr. Kenny Nwosu Mr. Alpha Barry (Resigned 16th March 2008) Mr. Alieu Secka (Appointed 21st July 2008)

Representing International Shareholders Representing International Shareholders

Secretary

Mr. Seedy A.B. Njie

Representing Local Shareholders Chief Executive Officer Representing Founding Shareholders Representing Stichting Triodos Doen Representing ShoreCap International

Bankers

Trust Bank Limited 3/4 Ecowas Avenue, Banjul Standard Chartered Bank (Gambia) Limited Ecowas Avenue, Banjul Guaranty Trust Bank Limited 56 Kairaba Avenue, KMC Access Bank Limited 47 Kairaba Avenue, KMC First International Bank Limited Kairaba Avenue, KMC EcoBank Limited Kairaba Avenue, KMC

Auditors

PKF Accountants and business advisers 3/4 Ecowas Avenue P.O. Box 431 Banjul, The Gambia

Solicitors

Amie Bensouda & Co.

78 Hagan Street Banjul, The Gambia

Registered office

Reliance Plaza

46A Kairaba Avenue KSMD The Gambia

Vision and Mission Statements

The vision of Reliance is “to be the leading and preferred financial services provider for the mass individuals, small and medium sized businesses (SMEs) and micro enterprises in West Africa”.

Mission Our mission is to deliver innovative, value added products and unrivalled services to our customers using state of the art technology in an environment conducive to promoting strong organizational culture and values which enable us to attract, nurture and retain talented staff. We will uphold the principles of good corporate governance and implement effective risk management systems with a firm commitment to delivering sustainable and competitive returns to our shareholders while changing lives in the communities we serve.

Values The manner in which we conduct our business with our customers, regulators, and other stakeholders will be governed by our corporate values namely:

• • • • •

Creativity Approachability Reliability Professionalism Ethics & Teamwork

The above translate into the mnemonic CARPET which is fundamental to our service philosophy of delivering the RED CARPET treatment to all our customers regardless of their status, tribal affiliations, race or creed.

annual report 2008

Key Performance Indicators 2008 D’000

2007 D’000

2006 D’000

Increase/ (decrease) 2008 vs 2007

15%

55%

Financial Structure Capital to Asset Ratio

0.01

5.49

0.82

5.48

187%

143%

547%

(44%)

Deposits to Total Assets

81%

68%

(13%)

Gross Loans Portfolio to Total Assets

43%

47%

(4%)

Total Number of Borrowers

2,895

624

2,271

Number of active borrowers

2,595

574

2,021

104,800

89,500

350

15,300

Debt/Equity Ratio (Times) Deposits to loans

Outreach Indicators

Total Value of Loans Disbursed (GMD’000) Average Size of Loans Disbursed (GMD’000) Gross Loan Portfolio outstanding (GMD’000)

143

175

123

63,081

58,627

350

4,454

102

175

115,057

82,560

1,900

32,497

23,575

8,825

371

14,750

4.8

9.36

5.12

(4.56)

1.5 - 2,000

2 - 1,500

50 - 300

Operational Self-sufficiency

63%

61%

22%

Average loan balance per borrower (GMD’000) Voluntary Savings (GMD’000) Number of voluntary savings accounts Average savings balance per saver (GMD’000) Number of Branches, Agencies and Kiosks Range of Loan Sizes (GMD’000) Financial Performance Financial Revenue Ratio

23%

13%

10%

Yield on gross Portfolio (Nominal)

23%

33%

(10%)

Loan Loss Provision Expense Ratio

1.04%

0.59%

0.02%

0.45%

17%

(11%)

Operating Expense/Loan Portfolio

69%

80%

2525%

11%

Personnel expense/Loan Portfolio

30%

31%

569%

(1%)

4,369

Administrative Expense Ratio Efficiency & Productivity

Cost per borrower (GMD’000)

0.09

Borrowers per loan officer

118

0.25

Voluntary savers per staff member

198

123

Borrowers per staff member

Risk and liquidity Portfolio at Risk > 30 Days

15%

5.60%

Nil

(9.40%)

Portfolio at Risk > 90 Days

5.30%

2.34%

Nil

(2.96%)

14.79%

7.92%

Nil

(6.87%)

8.75%

3.89%

29.86%

(4.86%)

Inflation Rate

6.6%

6.02%

5.20%

0.58%

Exchange Rate (Customs Valuation) GMD/USD

26.88

22.66

N/A

(4.22)

6.1%

6.90%

7.70%

(0.80)

300

330

320

(30)

Risk coverage Non-earning liquid assets as % Total Assets Macro Economic Indicators

GDP Growth Rate GDP Per Capita (USD)

Chairperson’s statement “I am delighted to present to you the annual report and audited financial statements of Reliance Financial Services for the year ended 31st December 2008. This year marks Reliance’s second full year of operations and I am proud to share the outcome of the strategies developed by the board and implemented by management based on our business activities. The thrust of our strategy for 2008 was one of building the infrastructure for growth of the Company which covered: geographic expansion; improving our lending methodology; improving the robustness of our Information technology as well as productivity and effectiveness of our operations; building the future leaders of the Company; and increasing our marketing positioning, brand awareness and community partnerships.”

During 2008, Reliance set the record by completing and operationalising seventeen agencies thus taking the number of customer touch points to twenty six; the largest service delivery network by a private financial services company in The Gambia. This unprecedented expansion took the Reliance brand to communities in the two municipalities - Banjul City and Kanifing Municipal Councils and two administrative regions - Western and Northern regions which were largely unbanked. The Company also strengthened and improved the network infrastructure by ensuring that all the outlets were connected to the head office central server to deliver on-line real time transaction processing. In the last quarter of the year the Company developed an express loan product in response to the voice of customers, targeted at meeting the needs of the micro entrepreneurs in particular market vendors to offer access to loans within 24 hours. The above strategies have propelled Reliance as the premier Non-Bank Financial Institution by deposit size, loan portfolio outstanding and total assets.

The operating environment According to the Central Bank of the Gambia Monetary Policy Committee press release of December 2008, The Gambia’s financial system is not directly affected by the global financial crisis, but it is evident that the economy may be impacted upon by the global slowdown. The volume of exports, travel income, remittances and foreign direct investment has started declining. All these have been reflected in the projected decline in the growth of the economy. To mitigate the impact of the crisis on the economy, the fiscal authorities have embarked upon more prudent fiscal management while the Central Bank will continue to be proactive in the conduct of monetary policy. Interest rates as measured by the yield on the 91-day Treasury bills rose to 11% in October 2008 from 9% in September 2008, while the Dalasi depreciated against the major internationally traded currencies in the interbank foreign exchange market reflecting in the main reduced inflows from remittances, foreign direct investment (FDI), and tourism. The Dalasi depreciated against the US dollar, CFA and Euro by 23.0 percent, 9.7 percent and 9.9 percent respectively but strengthened against the Pound Sterling by 7.0 percent between November 2007 and November 2008. The rapid changes in the banking sector following the financial crisis of 2002 dovetailing into 2003 and the

annual report 2008

The Company reported an operating loss of GMD14.9 million in 2008, explained largely by the heavy investment in infrastructural development, capacity building and human resource development in preparation for the growth of the Company in the years to come. Total assets grew by 16% from 2007 while deposits registered an increase of 38% compared to 2007. The Company experienced a shift in its liability structure, reducing its concentration risk, with an expanding small depositor base and declining average size of deposits, following the contraction from the corporate segment under our Deposit for Development. relative stability achieved in the economy make the Gambian financial sector an attractive market for the regional foreign banks particularly from Nigeria. Since 2006, six new commercial banks entered the sector, four through organic growth and two through acquisitions (one of which is an Islamic Bank) thus taking the number of banks to eleven by end of the year. Another four commercial banks have been approved licences in principle and slated to commence operations before the end of the second quarter of 2009. The supervisory and regulatory framework of financial institutions has been strengthened. The primary capital for commercial banks has been increased from GMD60 million to GMD150 million, effective by 2010 and will increase further to GMD200 million by 2012. In the near term moderate economic growth is expected, largely due to developments in the global economy as exports, remittances, foreign direct investment and tourism are expected to contract in both 2008 and 2009. End-period inflation is expected to exceed the December 2008 target of 6.0%. The risks to the outlook relates to the volatility in the international commodity markets and the uncertainties in the financial markets.

In September 2008, the shareholders agreed to re-capitalize the Company with an injection of additional GMD15 million through a rights issue to strengthen the capital structure of Reliance following the impairment from start-up operating losses and investments. The capital raise was funded mainly by conversion of the long term debts by the two International shareholders ShoreCap International and Stichting Triodos Doen. This was a strategic decision as the Company was already very liquid and a further injection of cash would not provide any significant returns when matched against the cost of maintaining the current loans.

Corporate Governance Reliance continues to adhere to the principles of best corporate governance in line with international best practices. In the last two years, a series of measures has been taken to improve the various control functions, increase transparency in the reporting of financial and non-financial information - being the first Company to

Financial Performance During the period under review Reliance continued to offer existing and new clients a one-stop shop for all their financial services requirements including a broadening credit and savings product range, remittances, retail foreign exchange, business development and advisory services. Reliance has once again been able to provide access to finance to the majority of entrepreneurs cutting across all the real sector of the economy, particularly women entrepreneurs.

Chairpersonâ&#x20AC;&#x2122;s statement adopt the Global Reporting Initiatives (GRI) standards as well as the Consultative Group to Assist the Poor (CGAP) Social Performance Taskforce Indicators. This is further reflection of our commitment to corporate social responsibility as we seek to develop relations with communities and civil society. To support the Companyâ&#x20AC;&#x2122;s continued growth, we recognised the importance of best corporate governance practices and consistency throughout the organisation. In that regard, we created the position of Chief Credit Officer, promoting from within in early 2008 to reflect the importance of our microfinance business. Separate statements on Corporate Governance and Social Responsibility are contained elsewhere in this report.

Outlook The current financial crisis and the global credit crunch will continue to cast a shadow over the global economic performances, particularly for developing countries. The outlook for The Gambia is re-assuring as the Government and the Central Bank of The Gambia are committed to ensuring sound fiscal and monetary policies that continue to position the country as a preferred destination for Foreign Direct Investment. Economic growth will no doubt slow down and the declining prices of fuel and other basic commodities will most likely stem the inflationary pressures. Interest rates will remain relatively stable as the Government continues to enjoy the fruits of the Highly Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiative (MDRI) debt relief approved by the International Monetary Fund in December 2007. At the Company level we would focus on further re-capitalising the Company in lieu of the new capital adequacy requirements of the Central Bank as well as for financing the growth of our business and strengthening our basic infrastructure. This will position us to invest in latest smart technologies that will enable us to extend outreach to the remote communities of The Gambia that need financial services the most. 2009 will be a year of consolidation for the Company as we seek to leverage on our extensive network and improve the productivity of our people. This will 10

enable us to deliver exceptional services to our customers with the objective of increasing the footprint in our outlets for all products and service offerings. With increasing competition within the financial services sector, evidenced by the increasing number of new commercial banks slated to open during the first half of the year, we would focus on our core microfinance business, which traditionally is more resilient during economic downturns anchored on our Blue Ocean Strategy in which we seek to create an uncontested market space, break the cost leadership and differentiation trade off, and through the voice of our customers create new demand for our products and services.

Acknowledgments I want to personally recognise the services of Mr. Alpha Barry who had to step down from the board early in the year as a representative of the international shareholders. Mr. Barry was quite pivotal not only as board director but provided valuable advice and encouragement to the founders during the formative stage of the Company and we pray for his continued well being and success with Deloitte. Mr. Barry was replaced by Mr. Alieu Secka on 24th July 2008 and I extend our warmest welcome to him. I would like to register our sincere gratitude to all our Deposit for Development customers for their support to the good causes of Reliance as part of their corporate social responsibility.

Conclusion I wish to conclude by placing on record my Boardâ&#x20AC;&#x2122;s gratitude to all stakeholders who helped us make 2008 a remarkable year, you the Shareholders, the Government and the Central Bank. We express particular gratitude to our development and business partners, our esteemed customers as well as our dedicated and professional staff at Reliance. I trust all of you will continue supporting our endeavour to use financial services as a platform to change lives of our people and communities.

Mrs.Amie N.D.Bensouda Chairperson of the Board of Directors Dated 25th March 2009

“Change always comes bearing gifts.” Price Pritchett

Chief Executive Officer’s Statement “It gives me great pleasure to report to you the performance of your company for the period ended 31st December 2008, the plans and aspirations for the year and beyond.2008 marked a milestone for Reliance Financial Services. It was a year of investment in our infrastructural network, our people and systems in laying the foundations for the future growth of our company in the years to come. The groundwork laid during the last year is a reflection of the wisdom and commitment of the Shareholders, Board of Directors and employees to the long term development of the Company to deliver our mission of changing lives in the communities in which we do business. ”

Financial and Operational Overview It gives me great pleasure to report to you the performance of your company’s for the period ended 31st December 2008, the plans and aspirations for the year and beyond. 2008 marked a milestone for Reliance Financial Services. It was a year of investment in our infrastructural network, our people and systems in laying the foundations for the future growth of our company in the years to come. The groundwork laid during the last year is a reflection of the wisdom and commitment of the Shareholders, Board of Directors and employees to the long term development of the Company to deliver our mission of changing lives in the communities in which we do business. The total assets of the financial services industry stood at GMD12.5 billion as at end of December 2008 representing an increase of 19.5% year on year according to the Central Bank Monetary Policy Committee Press release of 27th February 2009. Of this total private sector credit accounted for GMD3.8 billion an increase of 41.3% from the previous year. The supervisory and regulatory framework of financial 12

institutions has been strengthened in the period by the Central Bank of the Gambia, particularly with Non-Bank Financial Institutions (NBFI’s). NBFI’s are now required to be incorporated companies. Capital requirements have been increased significantly and the minimum Capital Adequacy Ratio (CAR) has been raised from 8% to 16%, with more stringent weightings for the various asset categories. The financial performance during the year showed modest growth, the highlights of which are: • Gross revenue from operations increased by 88% from GMD19.6 million to GMD36.9 million; with total operating expenses before provision for credit losses and tax registering similar increases at 87% from GMD23 million the previous year to GMD43 million despite the significant investments in infrastructure; • 64% of other revenue is income from our retail foreign exchange business anchored on our international remittances business through the principal agency agreement with Western Union Money Transfer; while the GMD2.8 million represented the final tranche of the Operating Grant from Stichting-Triodos Doen; • Provided access to savings to an additional 14,750

annual report 2008

from Stichting Triodos Doen of Euro 0.09 million was also received in the first quarter of the year.

Branch, Agency and Kiosk Network During the year under review the Company grew its number of outlets from seven in 2007 to twenty six by December 2008; an addition of nineteen new locations. This geographic expansion was mainly driven by the following factors: depositors, anecdotal evidence shows us that the majority of these previously did not keep their savings with financial institutions; and in the process mobilized deposits of over GMD115 million as at end of the year; • Disbursed loans totaling GMD104.8 million to 2,895 borrowers cutting across all sectors of the economy with active borrowers at year end standing 2,595 with a portfolio outstanding of GMD63.1 million. During the year the average loan balance reduced significantly by 86% from GMD0.143 million in 2007 to GMD0.02 million in 2008 reflecting our reach to the unbanked and underserved particularly women folks; • Recorded a loan to deposit ratio of 53% which is still above the industry average and a reflection of our commitment to lending to the productive sector in continued support of the micro, small and medium enterprises of the economy; and • Raised capital of GMD15 million through a rights issue funded largely through the conversion of the longterm debt by the two international shareholders.

• The lack of access (unbanked) for major towns surrounded by satellite villages such as Sukuta, Lamin, Sanyang (following the liquidation of the Village Savings and Credit Association (VISACA); Old Yundum, Amdalaye, Brusubi; • Communities with a large concentration of micro and small businesses in cosmopolitan neighbourhoods such as Bundung, Old Jeshwang, Banjul Gamtel and Tobacco Road, Manjai Kunda and Churchill’s Town as well as Westfield; and • Markets wherein our target segments are present but are under-served by the current providers such as Farrafenni. Traditionally, microfinance was supply led with all the emphasis and focus being on the provision of loans. The business philosophy at Reliance is different. The organisation whilst receptive to the idea of external loans to fund loan growth is also aware of the enormous potential for increasing savings from the majority of Gambian where the national savings averages only 6%. Additionally, the lack of appropriate hedging mechanisms to manage foreign exchange risks make

Technical Assistance The donor committee of ShoreCap Exchange approved a follow on technical assistance program for Reliance in March 2008 amounting to USD0.491 million earmarked for funding credit, operations, human resources, savings mobilization, supplementary MIS support, and training and development. The first half of the plan was co-paid at rate of 15% and the second half will be at a rate of 25% for a period of eighteen months. The third and final tranche of operating grant 13

Chief Executive Officerâ&#x20AC;&#x2122;s Statement this option too risky due to the market volatilities. While local currency loans from the Companyâ&#x20AC;&#x2122;s correspondent banks offer an alternative, this comes at a high price averaging 23%; thus having a significant impact on margins. It is against this background that we have chosen to invest in our own network to mobilise stable low cost deposits thereby supporting our mission of financial inclusion for mass individuals, micro-enterprises and small businesses.

Graph 1.1 shows that of the total number of deposit accounts, 22,066 were savings with a value of GMD72.7 Million, and the remainder comprises term deposits. The majority (51%) of the despositors were small with balances of GMD1,000 or less accounting for 66% of accounts(equivalent to 15,523) representing only 5% of the value of the portfolio (equivalent to GMD5.4 Million*) 1.2 Number of desposit accounts by gender

Deposit Mobilisation It is very gratifying to report that Reliance has exceeded the GMD100 million (USD4.1Million) deposit liability threshold and closing the year with GMD115 million and hence commanding the largest market share in the informal sector. The network of locations coupled with the low entry barrier of GMD100 (USD4) to open an account has helped to significantly increase the number of new voluntary active savers from 8,825 in 2007 to 23,575 in 2008. The average account balance during the year was GMD4,880 (USD195) reducing from GMD9,360 (USD374) the previous year. This is in line with Relianceâ&#x20AC;&#x2122;s mission of financial inclusion.

1.1 Total deposits, number of accounts, per category

'FNBMF

.BMF

&G T[ J

Graph 1.2 show that the number of male depositors overall (63% of the active depositors compared to 58% as at end December 2007) is greater than that of women (35%**), as is the case for even the small deposits (64% of 15,523 for men compared to 36% for women). This factor is partly explained by the fact that early lending program which was a major catalyst for new accounts was skewed mainly towards SMEs which are predominantly owned by men and tend to apply for larger loan amounts. This however will change following the development and successful pilot of the Reliance Express Loan Product specially targeting women micro-enterprises.

"CPWF

*96% of deposit accounts are below GMD10,000 ** The remaining 2% represents â&#x20AC;&#x153;otherâ&#x20AC;? which is not classified by gender.

annual report 2008

1.3 Deposit portfolio by product

the raffle receiving a total of GMD600,000 to support educational expenses. Foreign exchange income from remittances contributed to over 30% of total income of the institution. The Company as part of its channels of distribution developed dedicated Western Union Kiosks in strategic locations in Tallinding, Bakoteh (Tipper Garage) with Bakau and Bundung Borehole to follow in 2009.

Borrowers and Portfolio Structure

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Graph 1.3 shows that 51% of Relianceâ&#x20AC;&#x2122;s deposits come from the Regular Savings Account. The major attraction for this product is the low entry barriers, the relatively unrestrictive nature of the account and the accessibility of branches to the communities.

Remittances During the period under review, Reliance developed remittance as a strategic business unit to further diversify the revenue generation base particularly nonfunded income by leveraging on our extensive network. This was marked with an official launching ceremony of our Western Union principal agency partnership at the Head Office following the soft launch in the last quarter of 2007. This business also had positive synergies in terms of the shared client base that predominantly form the majority of the recipients of remittances. Reliance was appointed to lead the annual countrywide Back to School marketing campaign with our initial investment fund of USD50,000 which was matched equally by the other direct agents giving a budget of USD100,000. The highlight of the campaign being the awarding of prizes to 60 winners of

During 2008, Reliance disbursed a total of 2,271 loans with a total value of GMD 104.8Million an increase of 264% and 17% respectively from the previous year. The average loan size has declined from D143, 000 to D20,000 which signals a change in our strategic focus away from medium segment on to smaller micro loans. An Express Loan product was designed and piloted to address the credit needs of micro business owners previously not qualified for the typical Reliance business loans and to increase the quantity of small depositors. The Express Loan product, along with other strategic initiatives, has gradually shifted the focus from servicing the larger small and medium size business owners to the typical market seller with a limited amount of inventory. MAIN INDICATORS

DECEMBER 2008

Number of loans disbursed to date

2,895

Loans disbursement (GMD million)

104.8

Number of Outstanding loans as at year end

2,595

Loan portfolio outstanding (GMD million)

63.0

Average loan size of outstanding loans (GMDâ&#x20AC;&#x2122;000)

20.0

Range of loans disbursed (GMDâ&#x20AC;&#x2122;000)

1,5 - 2,000

Chief Executive Officerâ&#x20AC;&#x2122;s Statement The loan portfolio grew modestly to D63 Million compared to GMD58.6 Million the previous year, representing a 7% growth. This modest portfolio growth was in part due to a decline in large loans as a result of a strategic shift to concentrate on smaller sized loans during the third quarter coupled with a change in our lending methodology which required a significant amount of investment in building the capacity of our loan officers.

1.5 Number of loans disbursed by gender

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1.4 Number of loans disbursed, per category

&G 4Y MJ T[ WX J

Graph 1.5 shows the number of loans disbursed by gender, in the different loan amount categories.

"CPWF

In line with our financial inclusion objectives, 95% of the loans disbursed were less than GMD300,000 in support of the Micro, Small and Medium sized enterprises (MSMEs) an increase of 5% from the previous year. As shown in Graph 1.4, 75% of the borrowers received loans of GMD50,000 or less. 44% of our borrowing clients were women, and together there received 26% of the total loans disbursed. Of those who received loans of GMD50,000 or less, 37% were women, down by 12% from the previous year.

1.6 Loan disbursement by economic sector

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annual report 2008

Graph 1.6 shows the loans disbursed to the real sectors of the economy by number of borrowers. loan portfolio Loan portfolio of 20 largest borrowers

29%

Largest single borrowerâ&#x20AC;&#x2122;s exposure

9.6%

Loan portfolio to related parties

Prohibited under our Shareholders Agreements

Credit Management The Credit Policy and other relevant manuals were revised and updated by the Board and continue to serve as guiding documents for the Credit Department. Credit approval is vested in Board and Management Credit Committees. The credit approval limit for the Management Credit Committee is set at GMD1 million with loans above GMD500, 000 to be tabled to the following Board Credit and Risk Committee meeting for noting and ratification. In late 2007, the board resolved that our lending business was too important to be combined under the responsibility of the Chief Operating Officer amongst other duties such as deposit mobilization, branch expansion and product development. Hence in late January 2008, Mr. Craig Feinberg was appointed as a follow on credit consultant under our technical assistance program with ShoreCap Exchange to help with the setting up of the lending department following its separation from the ambit of the Chief Operating Officer. In April 2008 a full time Chief Credit Officer was also appointed to provide the leadership and drive the strategic agenda of our lending business. During the year Mr. Feinberg supported by the Chief Credit Officer successfully implemented the individual lending methodology developed, tried and tested by ProCredit to replace the previous one through both classroom-based learning and practical application at site visits and client interviewing. He also developed and introduced a financial incentive to incentivise loan officers as well as a credit scoring system to assist in profiling the credit worthiness of loan customers. Mr.

Bosco Sambou was also seconded to assist in setting up the delinquency management unit and developing recovery processes and procedures to guide in the recovery process also funded by through the technical assistance program.

Loan Portfolio Quality During the year, the portfolio quality as measured by the PaR (adjusted for cash contribution) increased to 13.7% as at end of the year. The relatively high PaR was attributed to many factors, some of which include inadequate MIS, inexperienced staff, challenges in monitoring, concentration of SME borrowers (contributing to 62% of PaR), and inadequate methodology prior to April 2008. To improve quality, management has embarked on portfolio quality management through product redesign, refocusing on lower loan sizes, embarking on loan officer incentives, engaging in more responsive recovery activities including continuous monitoring of clients, and working to improve the MIS to allow better monitoring with more detailed reporting. The incentive scheme was revitalized through a new tracking system put in place to encourage loan officers to monitor loans and engage preemptively with clients. A team incentive was also introduced for team leaders to encourage more disciplined supervision of their team and to encourage the microfinance officer to closely scrutinize the credit analyses, as well as to encourage recovery officers to focus on better collection efforts. Also, the introduction of a credit rating system as well as forging relationships to share information about borrowers with other service providers like MFIâ&#x20AC;&#x2122;s and banks remain to be very helpful. There continues to be training of the relatively young and inexperienced credit team on the more reliable individual cash flow based methodology with emphasis on effective screening and monitoring.

Chief Executive Officer’s Statement Business Development and Advisory Services (BDAS) After the successful partnership with the International Finance Corporation (IFC), the local Chamber of Commerce and Sahel Investment Consultants, we have now resolved to translate our classroom based training to individual one on one sessions with our borrowing clients in particular in the areas of book keeping and financial management. To promote book keeping, we have based on discussions with our clients developed a Reliance branded four columnar cashbook to enable our clients to record on a daily basis their opening cash balance, receipts, payments and closing balance which we sell for a fee of GMD150.00 (USD6). In addition our credit appraisal document summarised in a Facility Approval Memorandum provides proxy financial information in the form of Balance Sheet and Profit and Loss Statements preferably based on actual performance over a three month period. Our clients found these to be very useful in terms of how their businesses’ are performing and hence does provide a good knowledge and input to our loan officers on the credit decision. Inventory management and collection of receivables including overall credit controls is always a source of good discussion with our clients.

Risk Management framework Our risk management statement is “to be the most effectively risk managed financial company in The Gambia through active board and senior management oversight, adequate policies and procedures, robust risk measurement and reporting systems, and comprehensive internal controls.” In this regard, we need to foster a very strong risk management culture and has since embarked on effective risk management activities which are embedded in all aspects of the Company’s business line. The risk management philosophy of Reliance is to ensure that risks associated with the Company’s business operations are managed on an Enterprise Risk Management (ERM) system. Effective risk management is integral to Reliance’s success. As such, the Company’s risk management is guided by sound principles. These principles encompass: 18

• active management and board oversight; • articulating the objectives of the organization; • determining the risk appetite of the organization; • creating an appropriate risk management framework; • identifying potential risks and the likelihood and impact of their occurrence; • identifying appropriate responses and controls to the risks; and • monitoring and communicating the risk management processes and outcomes.

Risk Management Systems The risk management system comprises of the Board Risk and Credit committee, a Risk, Compliance and Internal Audit department staffed adequately to proactively respond to systemic risk and risk that may arise as a result of strategic options of the Company. During the year we created the Business Inspection and Control Unit; an amalgamation of the risk management, internal audit and compliance units. The objective was to further strengthen the ERM focusing on all the risk and compliance issues across the organisation. The outcome of the risk evaluations and assessments were used as input by the internal audit department to verify probability as well as impact on the organisation and more importantly whether the action plans were being implemented. The compliance unit was charged with the responsibility of ensuring full adherence to the recommendations of the risk committees at the board and management levels including legal, statutory, internal policies and procedures. To strengthen the control further it was ensured that the risk and compliance reports are discussed at the Board Risk and Credit Committee while internal audit report is tabled at the Board Finance and Audit Committee. Reliance has been in compliance with the legal, statutory and ALCO recommended limits throughout the year except in the last quarter with the new capital adequacy requirements. An augmentation plan has been put in place which seeks to redress the non-compliance no later than the end of the first half of 2009.

Information Technology We upgraded our operating software to version 4 which has enhanced features designed to improve the overall management information system and the lending module. With the upgrade comes a lot of possibilities in terms of integrating various solutions that can be deployed seamlessly and enhance communication amongst users, suppliers and customers. A diagnostics review of the operating software Bankers Realm was commissioned with the view to strengthen and leverage the management information system to better support the operations of the business as well as evaluate the adequacy and capacity of the system to establish whether it can support our growth and expansion plans. While we are pleased with the outcome of the adequacy of the system to support the future growth of the Company, we have contracted the same IT consulting firm to conduct data cleaning up, training of our staff, enhance system performance through a review of the various data transmission options as well as the development of a robust user manual for the system which will roll over into next year.

Human resources Reliance is committed to being an employer of choice underscored by its mission of ‘Changing Lives’ which existing and prospective staff are encouraged to embrace. The red carpet service promised to our customers can only be delivered by people who are passionate about the mission.

and the Officer assisting. The first step has been to align the priorities of the department to the strategic direction of Reliance, and then to define the roadmap for the Human Resource function to support the business in achieving its goals. Since Reliance is a young and growing organization, the first operational area to receive attention was recruiting, and the department has upgraded its procedures and methods. Close behind was the need to focus on performance management - how Reliance’s managers define strong performance, monitor it, give feedback, reward it, and cope with under-performance. Job descriptions, employee performance targets, individual Personal Development Plans, and a “Fair & Firm” program have been created or improved. To ensure that employees are properly prepared to meet their performance targets and their supervisors are able to manage effectively, attention is being given to training and development. The core training plan for the employees of the Company for the year ahead has been completed. An assessment of additional training needs and a review of the induction process are under way. In the area of talent management, the Reliance Human Resources Committee has conducted a Succession Planning session and initiated an informal program for high potential managers. Finally, the HR department has outlined a strategy for promoting retention.

Early in 2008, Prinny Anderson was appointed as Human Resources consultant to support the development of the Human Resources function by working closely with the Head of Human Resources 19

Chief Executive Officer’s Statement Through the technical assistance program, the Group Head of Human Resources and the HR officer participated in a peer learning forum in Luxemburg where the theme was “Leveraging Human Capital for Performance and Growth. A program for executive coaching was developed to focus on leadership and strategy for ShoreCap investee institutions and Reliance was selected to be one of the first beneficiaries. The CEO also attended a workshop at Insead in France on Blue Ocean Strategy which Reliance initially adopted as its strategic management framework. The technical assistance program also facilitated the training of junior managers in micro lending management in Ghana organized by the Applied Microfinance Institute. Internally the Human Resources Unit along with the departmental Heads and Managers conducted the following training programs: • Sales and marketing training for all sales and marketing officers; • Credit/loan officers classroom and field related training on the lending methodology introduced in the period; and • A selection of middle and senior management received leadership training and coaching in conjunction with a managerial team form Beiersdorf, Belgium facilitated by the Dutch based Leadership Consultancy firm, Better Future. We also hosted the Rotterdam School of Management Eramus University and Better Future under a new collaboration on executive education which, gave birth to the development of the ‘Leading Reliance 2009’, bespoke management training and leadership development targeted at the top thirty employees of the Company. In the period to December 2008, 70 staff were recruited from managerial to junior officer levels. In addition, 20 interns were taken on at the junior level as part of a program of assisting young Gambians exposed to financial services delivery. The number of staff at the end of the year stood at 122 distributed evenly between males and females. Staff turnover of 17% was recorded in the period. Some left voluntarily mainly to pursue further education locally and abroad while some were managed-out through the ‘fair and firm initiative’.

Corporate Social Responsibility In every community, there is work to be done. For us we are more than just a financial services provider. We are a community partner focused on the socio-economic development of the neighbourhoods we operate in. We help where was can as we firmly believe that the communities we serve - and the people and micro entrepreneurs that breathe life into them- should prosper. In 2008 we contributed over GMD0.3 million in support of worthy causes ranging from education, sports, science, cultural groups and other civil society organisations. Reliance is for profit, but its objectives go beyond profit to truly ‘changing lives’ in the communities we serve. This was amply demonstrated by our commitment of taking financial services to the communities that are lagging behind in the business infrastructural development such as electricity. For example in our Old Yundum agency where we use renewable energies such as solar panels to supply the energy requirements to deliver our services. In addition we have continued to research other ways of providing back up power supply that are friendly to the environment using AC Back up batteries as opposed to generators where feasible. We have achieved good success in using this alternative for our kiosks and agencies that suffer infrequent power outages and where the energy consumption is manageable by the capacity of the batteries available in the market.

annual report 2008

In furtherance of our commitment to sustainability management, we have also resolved at the management level not to print credit proposals but rather to have these circulated via the intranet and to get members of the credit committee to bring along their laptops to credit committee meetings for their review and discussion. The same principle is applicable to our monthly standing management meetings including the strategic review, performance review, risk management, Assets and Liability Committee review and Human Resources.

• Enhance the capacity and functionality of the operating system including the Management Information System as well as explore the potentials of introducing technology enabled banking solutions that suit the needs of our target clientele;

Aspirations for the Years Ahead

•

The first full two years of operation for Reliance has seen us through the start up phase of the Company. The second business cycle of the Company (2009 - 2011) will herald the implementation of Reliance’s newly developed ‘Blue Ocean Strategy’. In this period, Reliance aspires to achieve the following key objectives: • To get additional investors to increase the Company’s capital with a view to comply with capital adequacy requirements and support implementation of strategic activities; • Breakeven in 2009; while building the infrastructure of the Company from an organizational structure review, improving portfolio quality, promoting an Enterprise Wide Risk Culture, continued development of the middle and senior management cadres, strengthening the internal controls, policies, processes and procedures and improving the overall branding and visibility of the Company;

• Continue to expose Management to external leadership and strategic management and development courses and programs that are relevant to the growth and strategic development of the Company; and Continue to improve our Triple Bottom Line and sustainability management systems.

Conclusions I would like to thank the shareholders, management and staff for their confidence and faith in Reliance. The Government in particular the Central Bank deserves our special thanks for their continued cooperation and support. Finally, we register our sincere gratitude to our valued customers for their support and patronage. Reliance is well positioned to change lives through financial inclusion and empowering the entrepreneur.

Mr. Baboucarr Khan Chief Executive Officer Dated 25th March 2009

• C onsolidate on the momentum achieved in the start up phase in 2009 with an optimal network size of 40 (branches and agencies and kiosks) and continue in our drive to reach 100 in the second business cycle;

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annual report 2008

Corporate Governance statement The following bodies govern Reliance: The Annual General Meeting of Shareholders The shareholders’ meeting is the highest decision-making body and the forum where the shareholders can directly exercise their power. Shareholders meet at least once a year to approve the Company’s annual report and decide on the appropriation of profits for the previous financial year. The AGM also elects directors and, when required, auditors for the coming term. Board of directors The board of directors is appointed by the shareholders’ meeting to supervise the Company’s affairs on behalf of the shareholders. The board has broad powers to manage the Company without the involvement of the shareholders. Governance takes place in a broad context. The board of directors is the pivotal point through which all the key stakeholders connect to governance. Management The CEO/managing director is appointed by the board and is responsible for the day-to-day management of the Company according to the (strategic) instructions issued by the board of directors. The division of responsibilities between the board and the managing director is stipulated in a set of policies that are approved by the board of directors. The CEO/managing director is a member of the board.

BOARD OF DIRECTORS

Amie Bensouda (Chairperson) Head of Law Firm Amie Bensouda & Co. Firm of 4 Lawyers specialising in Corporate, Property, Banking and Finance, among other things, and human rights. She is the President of The Gambia Bar Association and also the Chairperson of the Institute for Human Rights Development in Africa and Takaful Insurance Company Limited. Amie was Solicitor General and Legal Secretary, Attorney General’s Chambers and Ministry of Justice from 1990 -1995 and also acted as Attorney General and Minister of Justice July/August, in 1994. She is Founder member of the Gambia Women Finance Association GAWFA (an N.G.O set up to improve women’s access to credit). The clientele portfolio includes the multilateral agencies, multi-national corporations, public enterprises, private companies etc. Amie graduated from the University of Lagos with a Bachelor of Laws (LLB Honours) and was admitted to the Nigeria Law School where she obtained her Barrister-at-law degree. She also attended Kenya School of Law to pursue a post graduate diploma in legislative drafting. Amie also trained at Royal Institute of Public Administration U.K; the International Development Law Institute, Rome, International Law Institute in Washington D.C. on, among other subjects, advance training on legislative drafting, privatisation of public enterprises, public enterprise reform, petroleum law, human rights.

Baboucarr Khan Before joining Reliance, Baboucarr was the Head of Consumer Banking at Standard Chartered Bank (SCB) in The Gambia and a member of the bank’s management team. Baboucarr managed a revenue budget of $7 million (about 60% of SCB’s budget) and a team of 70 people with overall responsibility for strategy, budget, product innovation, staff motivation and training, risk management and service delivery. In 2004, Baboucarr and his team won the bank’s coveted Cowbell award for achieving the highest year on year revenue growth in the entire SCB group, 53%, a feat that was repeated in 2005 with another group award with the highest year on year growth in deposits. Additionally, in line with the consumer banking division’s asset led growth strategy, Baboucarr relaunched the personal installment loan product with the introduction of direct sales representatives, which resulted in the portfolio increasing from $1.6 million to $3.8 million in six months representing an increase in market share from 10% to 50%. Baboucarr was also instrumental in developing and launching the first ever-residential mortgage product in the Gambia. Before working at Standard Chartered, Baboucarr was Head of Audit at KPMG. The clientele portfolio included Banking, Insurance, Telecommunications, Groundnut processing, Development Organizations, Multi-lateral Organizations, Port and Harbour and Pensions. Baboucarr is a Fellow of the Association of Chartered and Certified Accountants (ACCA) in the UK. He has attended several Management and Leadership training programmes at distinguished institutions such as INSEAD, France and HENLEY, England.

annual report 2008

Ebenezer Olufowose Ebenezer Olufowose is an Executive Director at Access Bank Plc, Nigeria. Prior to joining Access Bank in June 2007, he was a Director with Citigroup, and an Executive Director and Head of Corporate Finance at Nigeria International Bank Limited, a subsidiary of Citigroup in Nigeria. Prior to joining Citigroup in 2002, he was pioneer Managing Director of Guaranty Trust Bank (Gambia) Limited, on secondment from Guaranty Trust Bank plc Nigeria, where he was General Manager and Head of Corporate Finance & Investment Banking. Ebenezer is a first class honours Economics graduate of the University of Lagos, Nigeria. He also holds a masters degree in International Economics from the University of Sussex, Brighton, England, where he studied as a Sir Adams Thompson Scholar. Ebenezer also attended the International Law Institute, Washington DC, Lagos Business School, Nigeria on Advanced Management Program as well as the Institute of Management Development, Lausanne, Switzerland.

Jacco Minnaar Jacco currently works as Senior Investment Officer at Triodos Bank, responsible for investments in financial institutions in Africa. He has over 10 years of experience working with the financial sector in the Netherlands, Cambodia, Lao PDR and Vietnam. Before joining Triodos Bank in October 2006, Jacco worked as manager of the Financial Markets Development Program of the International Finance Corporation in the Mekong region. Prior to that he worked with a Dutch consultancy firm and did most of his assignments with ING Bank and Postbank NV. Jacco holds a Master of Science degree in Industrial Engineering and Management Science and he is a candidate for the Chartered Financial Analyst (CFA) designation. He is a Dutch citizen. Jacco was nominated as a director to the Reliance board by Triodos-Doen foundation, a microfinance investment fund managed by Triodos Bank. Since 1994 Triodos Bank has contributed its unique expertise as a socially responsible bank to the microfinance sector. Triodos Bank strongly believes that professional provision of financial services in developing countries, in particular to micro entrepreneurs, is crucial for the development of a local economy. It enables businesses to grow, to generate income and to create jobs. Professional microfinance, therefore, has significant impact on the reduction of poverty.

BOARD OF DIRECTORS

Kenny Nwosu Kenny is an Investment Officer with ShoreCap and responsible for the African Portfolio. Prior to joining ShoreCap in 2006, Kenny worked at Whitehall Capital; an emerging markets focused investment and advisory firm. From 1998 to 2002, he was an Associate at Deutsche Bank and previously served as a Financial Advisor to SMEs and private clients for a financial advisory group. Kenny received his MBA from the London Business School and his MSc in Artificial Intelligence from the University of Aberdeen. He also holds a BA Honors in Economics from the University of Nottingham. Kenny was nominated as a director to the Reliance board by ShoreCap International Limited, an international private equity company that invests in small business banks and regulated microfinance institutions. ShoreCap was created by ShoreBank Corporation, a $2 billion asset U.S. community development bank holding company with over 30 years experience in building sustainable development financial institutions. In addition to its own regulated banking operations, ShoreBank has been a leading provider of technical assistance and capacity building services to the financial institutions in developing economies around the world.

Alieu Secka Alieu Secka is the General Manager of Golden Beach Hotel, and Chairman of Gambia Hotel Association since 2006. He is also the Resident Director of FJP Management Engineering The Gambia. Alieu started his professional career with KPMG Banjul as Audit Senior in 1991, moved to Senegambia Beach Hotel in 1992 as Chief Accountant and rose to Financial Controller & Company Secretary and Deputy Managing Director before starting his own hotel in 2005. He was an executive member of Gambia Chamber of Commerce & Industry for several years, and has chaired or served in various task forces in the tourism & services industry. His professional & consulting experience include audit & review of several financial & private institutions, the privatisation of Gambiaâ&#x20AC;&#x2122;s largest hotel, Executive Search, tourism linkages with agriculture, commercial strategy of Sierra Leoneâ&#x20AC;&#x2122;s National Tourist Board, institutional setting up of the National Planning Commission, amongst others. He is an active Rotarian & past President of the Rotary Club of Fajara, as well as President of Fajara Golf & Sports Club. Alieu studied Business & Finance, is a Fellow of the Chartered Institute of Secretaries (FCIS), Member of the Chartered Management Institute (MCMI) and FMAAT of UK, in addition to Certification in Hospitality General Management from the prestigious Cornell University.

annual report 2008

In line with the Combined Code and Sarbanes Oxley we have during this year under review formed three board committees comprising of non-executive directors as follows:

Risk and Credit Board Committee Chairman: Members:

Mr. Ebenezer Olufowose Mr. Jacobus Minnaar Mr. Baboucarr Khan Mr. Ismaila Faal Mr. Seedy Njie Mr. Assan Jallow (Secretary)

Finance and Audit committee Chairman: Members:

Mr. Alieu Secka Mr. Kenny Nwosu Mr. Jacobus Minnaar Mr. Assan Jallow (Secretary)

Human Resources and Compensation Committee Chairman: Mr. Kenny Nwosu Members: Mr. Ebenezer Olufowose Mr. Alieu Secka Ms. Fatou Lowe (Secretary)

EXECUTIVE MANAGEMENT

Baboucarr Khan Chief Executive Officer

Baboucarr Khan is a Fellow of the Association of Chartered Certified Accountants (FCCA). He has seven years experience as a practicing accountant during which time he was Head of Audit at KPMG and four years experience in the banking industry. Prior to joining Reliance, Baboucarr served as Head of Consumer Banking with Standard Chartered Bank (Gambia) Limited for three years.

Ismaila Faal Chief Operating Officer

Ismaila Faal was most recently the head of SME Banking at Standard Chartered Bank ( Gambia ) Limited. He has nearly 15 years experience in the financial services industry and has worked both in The Gambia and the United Kingdom, where he worked with Norwich Union Insurance Plc. Ismaila was part of the team that set up Guaranty Trust Bank (GTB) in The Gambia, he held the role of Deputy Manager in GTBâ&#x20AC;&#x2122;s consumer banking division. Ismaila is a graduate of London Metropolitan University.

Seedy A.B. Njie Chief Financial Officer

Seedy is a fellow of the Association of Chartered and Certified Accountants (ACCA) in UK. He has a wide range of experience, from auditing to providing fiduciary advisory services to multilateral agency funded programs. Seedy has significant experience auditing financial institutions and development related programs. Prior to assuming the role of Chief Financial Officer, Seedy was the Head of the Financial Advisory Services (FAS) unit of Deloitte, The Gambia.

Assan O. Jallow Chief Risk Officer

Assan worked as a Bank Examiner for the Federal Reserve Bank, Atlanta, Georgia for eight years and as a Statistical Reports Analyst for one year. During his tenure as a Bank Examiner, Assan audited banks to ensure that they were operating in accordance with sound banking principles and in compliance with U.S. central banking laws and regulations. Assan received his undergraduate degree in Economics from Morehouse College, Atlanta, Georgia in 1995 and a Master of Arts degree in Economics in 1997 and a Master of Science degree in Finance in 2001, both from Georgia State University. 28

annual report 2008

â&#x20AC;&#x153; When we are no longer able to change a situation, we are challenged to change ourselves.â&#x20AC;? Victor Frankl

Directors’ REPORT

Principal activities

The directors present their report and financial statements for the year ended 31 December 2008.

The Company’s principal activity is that of non-bank financial intermediation.

Statement of Directors’ responsibilities Company law requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1955 and the Financial Institutions Act 2003. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

MAIN INDICATORS Mr. Baboucarr Khan Mrs. Amie Bensouda Mr. Ebenezer Olufowose

Results for the year The results for the year are as presented in the accompanying financial statements.

Significant changes in fixed assets Changes in fixed assets are shown in note 12 to the financial statements.

Directors and directors’ interest The directors who held office during the year are shown on page 5. In accordance with the Company’s Articles of Association, the term of office for board membership is three years and board members can serve two consecutive terms on a rotational basis. Initial rotation should be at least one-third of the outgoing board members. Accordingly all the directors remain in office. The directors’ beneficial interest in the ordinary shares of the Company is shown below. No other changes have occurred between 31 December 2008 and the date of this report.

NUMBER OF SHARES HELD

2008

2007

2,117,067

1,210,800

2,275,000

1,000,000

450,000

300,000

4,842,067

2,960,800

annual report 2008

Auditors The auditors, PKF have indicated their willingness to continue in office pursuant to Section 155 (2) of the Companies Act 1955.

By order of the board of directors

Mr. Seedy A.B. Njie - Secretary Dated 25th March 2009

Independent Auditorsâ&#x20AC;&#x2122; REPORT

To the Members of Reliance Financial Services Company Limited We have audited the accompanying balance sheet of Reliance Financial Services Company Limited as of 31st December 2008 and the related statements of income, changes in equity and cash flows for the year then ended. These financial statements are the responsibility of the directors. Our responsibility is to express an opinion on the financial statements based on our audit. 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 about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31st December 2008 and of the result of its operations and its cash flows for the year then ended and have been properly prepared in accordance with the requirements of the Companies Act 1955 and the Financial Institutions Act 2003.

Accountants and business advisers Registered Auditors Banjul The Gambia

Dated 25th March 2009

annual report 2008

Income Statement

for the year ended 31st December 2008

Notes

31 December 2008 Dâ&#x20AC;&#x2DC;000

31 December 2007 Dâ&#x20AC;&#x2DC;000

Interest income

14,571

7,039

Interest expense

(8,288)

(2,790)

Net interest income

6,283

4,249

Interest income from investments

5,707

3,391

Fees and commission income

4,886

2,901

11,784

6,275

28,660

16,816

(18,804)

(9,067)

(13,684)

(9,333)

(4,303)

(1,855)

(6,250)

(2,954)

Total operating expenses

(43,041)

(23,209)

Operating loss

(14,381)

(6,393)

(606)

(866)

Other revenue

Total operating revenue Operating expenses Personnel cost

General and administration cost Premise and equipment Depreciation

Provision for credit losses Loss before taxation

(14,987)

(7,259)

Income tax expense

(14,987)

(7,259)

Loss for the year after taxation

The attached notes form part of these financial statements.

Balance Sheet as at 31st December 2008

Notes

31 December 2008 Dâ&#x20AC;&#x2DC;000

31 December 2007 Dâ&#x20AC;&#x2DC;000

Cash and cash equivalents

12,428

4,756

Treasury bills and other investments

24,282

31,846

Loans and advances

61,598

57,750

Other assets

9,832

1,637

Property, Plant & Equipment

33,920

26,289

142,060

122,278

Assets

Total assets Liabilities Deposits

115,057

82,565

Payables

9,192

9,159

124,249

91,724

218

11,702

124,467

103,426

43,238

29,510

(25,645)

(10,658)

17,593

18,852

142,060

122,278

Total liabilities Non current liability Medium term loan

Total liabilities Equity and reserves Share capital

Accumulated deficit Total equity and reserves Total equity and liabilities The attached notes form part of these financial statements.

These financial statements were approved by the board of directors on the 25th of March 2009 and were signed on its behalf by:

Mrs. Amie N. D. Bensouda Chairperson - Director 34

Mr. Baboucarr Khan Chief Executive - Director

Mr. Alieu Secka Director

annual report 2008

Statement of changes in equity for the year ended 31st December 2008

Share Capital D’000

Accumulated Deficit D’000

Total D’000

29,510

(3,399)

26,111

(7,259)

Balance as at 31 December 2007

29,510

(10,658)

18,852

Balance as at 1st January 2008

29,510

(10,658)

18,852

(14,987)

Shares issued and fully paid for

13,728

Balance as at 31st December 2008

43,235

(25,645)

17,593

Notes

31 December 2008 D‘000

31 December 2007 D‘000

(14,987)

(7,259)

6,250

2,989

Balance as at 1st January 2007 Loss for the year st

Loss for the year

Statement of cash flows

for the year ended 31st December 2008

Operating activities Operating loss Depreciation Increase in operating assets

(12,043)

(58,054)

Increase in operating liabilities

32,525

84,233

11,747

21,909

11,747

21,909

Acquisition of property, plant and equipment

(13,883)

(15,831)

Cash flows from investing activities

(13,883)

(15,831)

13,728

(11,484)

Loans received

371

Exchange income

(2,669)

2,244

(2,298)

108

3,780

Cash and cash equivalent at 1st January

36,602

32,822

Cash and cash equivalent at 31st December

36,710

36,602

Loss on disposal of fixed asset Cash generated from operations Company tax paid Cash flows from operating activities Investing activities

Financing activities Proceeds from issue of shares Loan repayment

Cash flows from financing activities Net increase in cash and cash equivalent

The attached notes form part of these financial statements.

NOTES to the financial statements 1.

Principal Accounting Policies

The following accounting policies have been applied consistently in dealing with items, which are considered material to the Company’s financial statements. (a) Statement of compliance T he financial statements have been prepared in accordance with Accounting Standards issued by the International Accounting Standards Board (IASB), requirements of the Companies Act 1955 and also the Financial Institutions Act 2003. b) Basis of preparation T he financial statements have been prepared under the historical cost convention. c) Interest income Interest earned comprises interest on loans, treasury bills and bonds and is accounted for on an accruals basis. In respect of loans, recognition of interest income ceases when payment of interest or principal is in doubt and any interest already recognised during that accounting period is reversed. Interest is thereafter included in income only when received. d) Fee income L oan fees are credited to income when the loan is granted. e) Loans and advances L oans are stated after deduction of applicable unearned income and provisions for possible credit losses. Provision for bad and doubtful debts are held in respect of loans taking into consideration both specific and general risks.

P rovisions against loans are based on an appraisal of the loan portfolio. Specific provisions are made where the repayment of identified loans is in doubt and reflect an estimate of the amount of loss expected. P rovisions made during the year less amounts released and recoveries of advances previously written off are charged as a separate amount in the profit and loss account.

Advances are written off when the extent of any loss has been confirmed. Property, equipment and others Owned assets Items of property, plant, equipment and others are stated at cost less accumulated depreciation. Freehold and leasehold premises are included in the accounts at their historical costs and the amount of any subsequent valuation.

Depreciation Depreciation of fixed assets is calculated and charged to the income statement on a straight-line basis by reference to the expected useful lives of the assets at the following rates:

Land is not depreciated. It is the Company’s policy to maintain freehold and long leasehold premises in a good state of repair and it is considered that the residual values, based on price prevailing at the time of acquisition or subsequent valuation, are such that any depreciation will not be significant. Accordingly, depreciation for freehold buildings is over the estimated useful economic life to a maximum of 50 years. Short leasehold premises are depreciated over the unexpired period of the lease.

Premises - leasehold

Shorter of the remaining period of the lease or 50 years

Fixtures and fittings

10 years

Furniture and equipment 5 years Motor vehicles

5 years

Other fixed assets

5 years

Computer hardware

3 years

Computer software (banking software)

4 years

Computer consumables

Written off in year of purchase

annual report 2008

g) h)

Subsequent expenditure Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. Treasury bills Treasury bills are stated at cost. Credit is taken for related income in the period when it accrues. Foreign currencies Transactions in foreign currencies are translated to Dalasi at the 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 Dalasi at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are historical cost, are translated to Dalasi at the foreign exchange rate ruling at the date of the transaction. Employee benefits Obligations for contributions to the government administered retirement benefit plan are recognised as expense in the income statement as incurred. 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, it is probable that an outflow of economic benefits will be required to settle the obligation. Income tax Income tax on the profit for the year comprises current tax and is recognised in the income statement.

2. Interest income

31 December 2008 D‘000

31 December 2007 D‘000

14,571

7,039

31 December 2008 D‘000

31 December 2007 D‘000

Savings

1,818

613

Time deposits

5,579

1,031

Shorecap International

334

559

Triodos

341

572

168

8,288

2,790

31 December 2008 D‘000

31 December 2007 D‘000

Grant income

2,870

3,285

Exchange gain

2,669

Exchange income

6,842

165

Sundry income

1,324

156

Western union income

743

11,784

6,275

Loans

3. Interest expense

Social Development Fund Bank Overdraft Interest

4. Other Income

5. Staff numbers and cost

7. Income tax expense

The average number of staff employed during the year (including directors) analysed by category, is as follows: 31 December 2008

31 December 2007

Executive directors

Management staff

112

122

General staff

The aggregate payroll costs of these persons were as follows: 31 December 2008 D‘000

31 December 2007 D‘000

Wages and salaries

7,022

3,485

Allowances including bonuses

9,121

4,158

Other staff costs

2,661

1,424

18,804

9,067

6. Loss before taxation

31 December 2008 D‘000

31 December 2007 D‘000

267

307

Directors’ remuneration Audit fees

8. Cash and local bank balances 31 December 2008 D‘000

31 December 2007 D‘000

Cash

5,846

957

Balances with banks

6,582

3,799

12,428

4,756

31 December 2008 D‘000

31 December 2007 D‘000

1,125

14,145

23,157

17,701

24,282

31,846

9. Investments

Treasury bills

The loss before taxation is stated after:

Charging:

The company is in possession of a GIPFZA Special Investment Certificate which exempts it from corporation tax calculated on the basis of turnover, which basis of taxation applies when a company records a taxable loss. Therefore, having met all the conditions in the Investment Certificate and having a taxable loss for purpose of corporation tax, the Company has a nil tax liability for the year. (2007: Nil)

Placements with banks

annual report 2008

10. Loans and advances

11. Other assets

31 December 2008 D‘000

31 December 2007 D‘000

SME Loan

14,357

10,615

Micro Enterprises

30,637

45,496

Others

18,087

2,516

63,081

58,627

(1,483)

(877)

61,598

57,750

Less: Provision for bad debts

31 December 2008 D‘000

31 December 2007 D‘000

Receivables

3,816

173

Prepayments

6,008

1,456

9,832

1,637

Tax deposit

12. Property, Plant and Equipment Work In Progress D’000

Equipment Furniture & Fittings D’000

Motor Vehicle D’000

Other Fixed Assets D’000

Land & Building D’000

Total D’000

695

15,539

5,846

1,670

5,695

29,445

1,930

10,513

1,440

13,883

(37)

2,625

26,052

5,846

1,670

7,135

43,291

At 1 January

2,163

628

206

159

3,156

Charge for the year

4,051

1,461

289

449

6,250

Disposal

(35)

At 31 Dec. 2008

6,214

2,089

460

608

9,371

At 31 December 2008

2,625

19,838

3,757

1,173

6,527

33,920

At 31 December 2007

695

13,376

5,218

1,464

5,536

26,289

Cost At 1 January Additions Disposal At 31 Dec. 2008 Depreciation

Net book value

Work in progress represents the cost so far spent on Signages and Kiosks, the construction of which was not completed at the year end. 39

13. Customer deposits 31 December 2008 D‘000

31 December 2007 D‘000

Savings

82,188

54,452

Deposit accounts

32,869

28,113

115,057

82,565

31 December 2008 D‘000

31 December 2007 D‘000

7,210

7,098

Interest earned - investment

766

1,920

Social Security Contribution

105

Income Tax

152

Other Accruals

959

14. Other payables

Accruals

9,192

9,159

15. Medium term loan 31 December 2008 D‘000

31 December 2007 D‘000

ShoreCap International (i)

5,665

Stichting Triodos Doen (ii)

5,665

218

372

218

11,702

Social Development Fund

(i) This is the Dalasi equivalent of US$ 250,000 secured from ShoreCap International Limited for the purpose of financing the growth of the Company’s loan portfolio to Small and Medium Enterprises. Repayment is in equal semi-annual installments of US$ 31,250, the first due after a fifteen months moratorium period from 15th October 2006, the date on which the loan was disbursed. Interest is fixed throughout the period of the loan and it is at the rate of 9% per annum accruing on the basis of a 360 day year. The loan is unsecured. The outstanding balance as at 30th September was converted to equity following a rights issue during the year. (ii) This is the Dalasi equivalent of US$ 250,000 secured from Stichting Triodos Doen for the purpose of financing the growth of the Company’s loan portfolio to Small and Medium Enterprises. Repayment is in equal semi-annual installments of US$ 31,250, the first due on 1st April 2008. Interest is fixed throughout the period of the loan and it is at the rate of 9% per annum but charged quarterly in arrears over the outstanding loan amount and is payable quarterly. The loan is unsecured. The outstanding balance as at 30th September was converted to equity following a rights issue during the year. (iii) These are funds contracted from Social Development Funds (SDF) for lending to the fisheries sector. Interest is payable quarterly at a rate of 15% per annum. Repayments are in equal quarterly installments of principal and interest. The loan is unsecured.

annual report 2008

16. Share Capital

19. Contingent liabilities

The total number of authorised ordinary shares at year end was 45 million with a par value of D1.00 per share (2007: 30 million ordinary shares with a par value of D 1 each). During the year, there was a rights issue of 15,275,000 shares to existing shareholders. Out of this, D13,728,000 was fully paid for, increasing the total number of issued and fully paid shares at the end of the year to D43,238,000 ( 2007: D29,510,000).

Acceptances, endorsements and other obligations

31 December 2008 D‘000

31 December 2007 D‘000

20. Capital commitments 17. Increase in operating assets 31 December 2008 D‘000

31 December 2007 D‘000

Funds advanced to customers

(3,848)

(57,404)

Other assets

(8,195)

(650)

(12,043)

(58,054)

18. Increase in operating liabilities

Deposits from customers Other payables

31 December 2008 D‘000

31 December 2007 D‘000

32,492

80,674

3,559

32,525

84,233

31 December 2008 D‘000

31 December 2007 D‘000

Authorised by the Board and contracted for

Authorised by the Board but not contracted for

21. Related Party Transactions There were related party transactions during the year in the form of loans received from and interest paid to international shareholders. All these transactions were at arms length.

Global Reporting Initiative and Triple Bottom Line Performance index Some indicators mentioned in the Global Reporting Initiative (GRI) Reporting Guidelines are available in Relianceâ&#x20AC;&#x2122;s Management Information System. Efforts are being made simplify capture and presentation of information in a comprehensive way. Other indicators are considered relevant for our activities, but these are not -yet- captured in the GRI list of indicators. The overview below relates the content of this Annual Report to the Global Reporting Initiative reporting guidelines (version 3.0) where applicable. In addition, it refers to reporting standards and guidelines, currently under development by the CGAP Social Performance Taskforce.

Indicator Vision and Strategy

page

Indicator

page

Governance

1.1 Statement of sustainable development

6 4.1 Governance structure

1.2 Statement of key elements

6 4.2 Management structure

Corporate Profile 2.1 Name

10, 12, 23 23 30

4.3 Independence 9 4.4 Shareholders recommendations

2.2 Principal Activities

31 4.5 Compensation

2.3 Structure

23 4.6 Conflicts of interest

2.4 Location of Head Quarters

45 4.7 Qualifications

2.5 Country

45 4.8 Mission statement

2.6 Ownership and Legal form

31 4.9 Oversight

24-28 6 23

14-17 4.10 Performance evaluation

2.8 Key figures

7 4.11 Precautionary principle

2.9 Shareholders

30 4.12 Professional memberships

2.7 Markets served

2.10 Awards received Reporting Parameters

2 Performance Indicators

Economic Performance 2

3.1 Reporting Period

8 EC1 Direct economic value added

3.2 Date of most recent report

8 EC2 Implication of climate change

3.3 Reporting cycle

8 EC3 Defined benefit plans

3.4 Contact point

45 EC7 Local hiring

3.5 Re-statements

8 EC9 Indirect economic impacts

3.6 Significant changes

8 Environmental Performance

3.7 GRI content index

42 EN 1 Paper consumption

3.8 External assurance

32 EN 4 Energy consumption

EN 7 Energy reduction initiatives

Social Performance 4

LA 10 Staff Training

LA 11 Support of life-long training

LA 12 Career development

annual report 2008

CGAP Social Performance Taskforce indicators 5

Description / reference

Social Objectives about outreach (to poor, low income, SME, women)

Described in the vision and mission statement, elaborated under ‘target group identification’

Social Objectives about observing change (in the lives of clients, in communities)

Described in the vision and mission statement

Board, Management use of social performance information

In progress

Staff incentives

Described in the HR chapter

Training on Social Mission

Described in the HR chapter

Entering client poverty level measurement systems

In progress

Services geared toward women’s empowerment and gender issues

Described under ‘target group identification’

Client satisfaction Surveys

In progress

Dropout rate reviews and exit surveys

In progress

Social responsibility to clients

Described in Business Development and Advisory paragraph

Social responsibility to staff

Described in the HR chapter

Social responsibility to community

Described in the Triple Bottom Line paragraph

Social responsibility to the environment

Described in the Triple Bottom Line paragraph

Outreach depth and width information

Described in the Products and Services paragraph

Achievement of change (3-5 yr clients)

In progress

Reference to the indicators that are being covered in this report, either qualitative or quantitative. Other (GRI) indicators are either considered not relevant or information is not available 2 Economic indicators that are not included, but are being considered for future reports are: local suppliers, local hiring 3 Environmental indicators that are not included, but are being considered for future reports are: water consumption 4 Social indicators that are not included, but are being considered for future reports are: health and safety, child labour, security practices 5 See www.microfinancegateway.org/ 1

â&#x20AC;&#x153; Nowadays change is around every corner; in my day it was only around the expected ones. V.L. Allineare

Network of Branches, Kiosks and agencies

Branches Head Office Reliance Plaza, 46A Kairaba Avenue K.S.M.D. The Gambia Telephone: 00 (220) 4390526 Barra Branch Opposite the Ferry Terminal Barra, North Bank Region The Gambia Telephone: 00 (220) 5710644

Kiosks Banjul Terminal Kiosk Banjul Ferry Terminal Banjul, The Gambia Telephone: 00 (220) 8860456 Albert Market Kiosk Banjul, The Gambia Telephone: 00 (220) 8860459 Serrekunda Car Park Kiosk Serrekunda Market Serrekunda, The Gambia Telephone: 00 (220) 4390618

Bundung Borehole Dedicated Western Union Kanifing Municipal Council Telephone: 00 (220) 4390070 Bakau Dedicated Western Union Kanifing Municipal Council Telephone: 00 (220) 4390070

Agencies

Banjul Agency Clarkson Street (Gamtel Roundabout), Banjul Telephone: 00 (220) 6777669 Tobacco Road Agency Box Bar Road, Banjul Telephone: 00 (220) 6777647 Manjai Agency Kololi Highway, K.S.M.D. Telephone: 00 (220) 6777646 Serrekunda Agency Churchillâ&#x20AC;&#x2122;s Town, K.S.M.D. Telephone: 00 (220) 6777641 Sukuta Agency Imres Building, Western Region Telephone: 00 (220) 6777642

Tanji Fishing Community Centre Kombo South Western Region, The Gambia Telephone: 00 (220) 8866542

Old Jeswang Agency Opp. community Market, K.S.M.D. Telephone: 00 (220) 6777644

Tallinding Dedicated Western Union Kanifing Municipal Council Telephone: 00 (220) 6777679

Bundung Agency Bundung Highway, K.S.M.D. Telephone: 00 (220) 6777643

Tippa Garage Dedicated Western Union Bakoteh, Kanifing Municipal Council Telephone: 00 (220) 6777681

Old Yundum Agency Old Yundum Community Market Western Region Telephone: 00 (220) 6777645 45

Network of Branches, Kiosks and agencies continued

Lamin Market Agency Kombo North Western Region, The Gambia Telephone: 00 (220) 4390070/1 Latrikunda Sabiji Agency Latrikunda Sabiji, KMC, The Gambia Telephone: 00 (220) 8860457 Sanyang Agency Opposite Sanyang Car Park Western Region Telephone: 00 (220) 6777638 Farafenni Agency Ferry Crossing Highway North Bank Region Telephone: 00 (220) 6777631 Westfield Agency Mamadi Manjang Highway, K.S.M.D. Telephone: 00 (220) 6777623 Brikama Agency Gamtel House Western Region, The Gambia Telephone: 00 (220) 6777653

Basse Agency Upper River Region Telephone: 00 (220) 6777619 Brikamaba Agency Central River Region Telephone: 00 (220) 4390078 Soma Agency Lower River Region Telephone: 00 (220) 6777691 Bansang Agency Central River Region Telephone: 00 (220) 4390070 Brusubi Agency Brusubi Housing Estate K.S.M.D. Telephone: 00 (220) 6777672 Amdalaye Agency Amdalaye North Bank Region Telephone: 00 (220) 6777622

“ If nothing ever changed, there’d be no butterflies.” Author Unknown

Reliance 46 Kairaba Avenue K.S.M.D. The Gambia