S T R Ø M M E
M I C R O F I N A N C E
A S
ANNUAL REPORT 2009
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Strømme Microfinance AS Highlights from 2009 Strømme Microfinance AS (from now on called SMF AS) has successfully ended the first year of active existence. The company has been kept dormant since 2007 and the official transfer of assets was done March 31st 2009. Strømme Micro-finance AS is from hereafter responsible for all Microfinance (MF) activities in Stromme Foundation. The vision of SMF AS is to eradicate poverty. In 2009 274 696 women and 46 034 men, totally 320 731, took part in the MF programs initiated by SMF AS and it’s subsidiaries. 254 256 was reached by the institutional micro finance and the remaining 66 515 by Community Managed Microfinance (CMMF). By the end of the year, in total 91 partners were working with SMF AS in the four regions. When entering 2009, the financial crisis in 2008 was still a reality and on top of the memories. Cost of capital increased. The awareness towards risk and volatility in the financial markets made both private and public investors risk averse.
The cost of funds increased and some of the opportunities for funding closed. The financial crisis also heavily impacted on the fluctuations between the different currencies. Since SMF AS has taken the strategic decision of giving loans to its borrowers in their local currencies, the company took on severe currency losses in 2009. When closing the year, fortunately it seems as if things have stabilized again. The shock has calmed and slowly the optimism is growing again, opportunities for funding are shown. Despite the challenges in the financial market, the companies in East Africa, SMF EA Ltd, Sri Lanka, SMAGL and the activities in Bangladesh grew even more solid and for the first time all of them are operational self-sufficient (OSS). SMF EA Ltd increased the OSS to 119 %. SMAGL ended on 149 % and in Bangladesh, 104%.
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
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Countries of activity 2009 Total outreach Total 320 731
Institut. MF 254 216
CMMF 66 515
No.of partners 90
Total No.of outreach partners Bangladesh 135 693 9 Sri Lanka 46 969 29 Cambodia 40 1 Asia 182 702 39
Mali Burkina Faso West Africa
Total No.of outreach partners 42 033 12 3 778 3 45 811 15 BANGLADESH MALI
SUDAN SRI LANKA
BURKINA FASO UGANDA RWANDA PERU
TANZANIA Peru
South America
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KENYA
Total No.of outreach partners 1 139
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1 139
2
Uganda Tanzania Sudan Kenya Rwanda East Africa
STRĂ˜MME MICROFINANCE AS \\ ANNUAL REPORT 2009
Total No.of outreach partners 45 091 17 9 384 7 4 507 3 27 251 5 4 845 2 91 079 34
CAMBODIA
Governance Structure Strømme Microfinance AS is a company limited by shares owned 100 % by Strømme Foundation. The Board of Directors (BoD) is an independent board, but consists of the same members as for Strømme Foundation. The BoD has delegated some of the supervision to the Finance and Credit Committee (FCC). The FCC is authorized by the BoD.
called an Apex which is also the general terms used in SMF AS.
SMF AS has two subsidiaries doing wholesale lending MF. The shareholding company Strømme Microfinance East Africa Ltd (SMF EA Ltd) is located in Kampala, Uganda and covering interventions in Uganda, Rwanda, Kenya, Tanzania and Sudan. SMF AS holds, together with the SF regional office in East Africa, 90 % of the shares. The remaining 10 % is owned by SIDI , Strømme Microfinance Asia Guarantee Ltd is a company limited by guarantee located in Colombo, Sri Lanka covering Sri Lanka only. A wholesale company in the MF sector are usually
The wholesale lending institution in Bangladesh is yet to be approved by the local government and remains for now in the books of SMF AS. In the accounts of SMF AS are also the activities in South America and West Africa. SMF AS is working through the regional offices in the respective regions. SMF AS is considered as the Finance Committee for the activities in the regions without legal wholesale lending institutions.
The two independent institutions have their own boards consisting of representatives from SMF AS, local independent directors and other shareholders in East Africa. The boards are chaired by the respective Regional Director.
The organisational chart illustrates SMF AS and the subsidiaries.
SF COUNCIL SMF AS BOARD Finance & Credit committee SMF AS
BOARD OF DIRECTORS
BOARD OF DIRECTORS
SMF EA LTD
SMAGL
BANGLADESH (MF)
RO (MF) WEST AFRICA
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
RO (MF) SOUTH AMERICA
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Microfinance in SMF AS As the MF activities differ in size and complexity in the four southern regions of SF, the microfinance work has been contextualized to meet needs of partners and clients. In general the MF approach of SMF AS can be divided in two main categories of intervention: I) Institutional MF with provision of a) financial and b) non-financial services as well as c) networking with relevant institutions and II) Community Managed MF (CMMF) with the promotion of savingsand lending groups.
I) Financial and non-financial services
Financial Services The main means of financial intervention have so far been: • Loans • Guarantees • Equity holdings As such, SMF AS conducts wholesale lending as one of its main interventions. (Promotion of clients’ savings, however, is of essential importance for the funding and security of the MFIs) The lending activities have increased significantly over the last years. SMF AS aims at offering competitive facilities for our partner MFIs, yet without compromising the local financial markets. SMF AS thus should not subsidize the interest rate, as we believe one of our missions is to promote inclusive, financial markets. Having that said, SMF AS also aims at promoting business between local banks and national MFIs. Guarantees have become more common over the years. It is of great importance for the MFIs to have access to local capital. A guarantee is needed when there is too much asymmetry between
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the lender (Bank) and the borrower. This is frequently the case when MFIs want to access the commercial financial markets. The conventional financing institutions have very limited knowledge of the MF sector. Hence a guarantee from an accepted institution can help the MFI access commercial capital. In this process it is essential that the guarantee should decrease over time (or the loan amount increase) so that the guarantee amount may be leveraged. Thus a certain amount in guarantee will leverage a higher amount in loans. An Apex institution could play a key role in this context. That is what SMF AS wants to do. As a way of supporting the MF sector and build external relationships, SMF AS has chosen to make some few direct investments. These equity instruments, when invested in stakeholder companies in the North, open doors of collaboration with international players in the field, give access to information and new networks and let SMF AS become an international, recognised MF player. When investing in partner MFIs in the South, the rationale could be a need for closer monitoring by having a seat on the Board, a symbolic support to an interesting, growing partner or a financial investment in a strong MFI. SMF AS also aims at exploring various quasi equity instruments, such as subordinated loans when involved in this sector. Acknowledging the inadequate capital structure of most NGOs / MF players, the latter is a challenge calling for innovations. Non-financial services By non-financial services and technical assistance, SMF AS is promoting a number of different services. To SMF AS this is part of the holistic approach and integrated in MF. Capacity building and non-financial services can be funding of product development, developing manuals and
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
plans for the institutions, institutional capacity building, market development support, applied research, provision of equipment for the MFI etc. Where applicable and functional, SMF AS offers grants to cover deficits and one-time investments in the MFIs. By building up a strong structure for the MF entities in the regions, concentrating on conducting MF services to MFIs with good governance, strong management, transparency and accountability. The grants are increasingly directed at the emerging MFIs in the early part of their life cycle. Since all parties should strive to reach at least operational sustainability, the grant element should be limited accordingly and reducing. Networking The involvement in Networking can be further divided according to two categories: Networks for capacity building SMF AS acknowledges the importance of strong, national networks within MF, be it on MFI level, Apex and wholesale lending level, between different donor agencies or collaboration with governmental bodies, both in the Global South as well as in Norway. These networks vary in quality, functionality and in some countries they are nonexistent. Uganda and Association of Microfinance Institutions in Uganda (AMFIU), is an example of how the structure of networks can be built and what an important role such networks play in securing a sound, vital development of the MF field. SMF AS believes, through financial and managerial support, one should support these structures in the chosen countries of intervention.
other, strong entities involved in our playfield. Reasons for partnering is both co-funding, sharing of recourses and responsibility in a project as well as strategic co-operation and knowledge sharing. Partners are both traditional donor communities, such as Norad as well as other actors like Oikocredit from The Netherlands, SIDI in France etc. II) Community Managed Microfinance Community Managed Microfinance (CMMF), savings led microfinance, is microfinance based on groups where the members save together and by their own savings build the loan fund where the members of the group can ask for loans. This way of micro finance is based on savings and meeting in groups. Everyone needs a safe convenient place to save and access to the small loans the group can provide. Every villager needs a lump of cash usually around the planting season. There is no question that it is better to use your own money than go into debt when meeting a crisis or for putting food on the table. So far, this has been a successful way of mobilizing women and the intervention is globally considered a women’s initiative. However, men are coming in and seeing the value of the small money being saved regularly. In the partnerships and methods where SMF AS is involved, there is no external capital entering the groups and the loan fund. SMF AS only support partners with capacity building and funds for training new groups and expansion of the model. CMMF is primarily used in Africa. The largest model in terms of outreach is the Saving for Change model developed by Oxfam America, Freedom From Hunger and Strømme Foundation. Saving For Change is used in West Africa.
Networks for funding and co-operation In line with the increasing professionalism and commercialisation of the MF industry, SMF AS sees an ever growing need to partner up with
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Measuring results Microfinance used to be characterized as financial services with a social purpose and goal; to eradicate poverty. After years of rapid growth, maturing industry and all of a sudden the short and simple success stories were not enough neither for donors nor practitioners. The search for results and the attempts to measure the social results have led to the vast and extensive focus on Social Performance in the micro finance industry. In the middle of the debate are those who would say that MF never was a silver bullet and that poverty alleviation is too much to ask for. They would claim that financial access and banking the unbanked is enough of a goal. Developing the financial sector should extend people’s access to financial services and thereby reducing the uncertainty and vulnerability of the poor. For a social investor, this discussion often ends in the choosing of none of the goals, but the focus on both developing the sector as well as the need for measuring the social results with the end beneficiary, the poor client. SMF AS is supporting the work done by the Social Performance Task1 force and is taking part in working groups. In addition to securing good financial management for the partners and working towards the goal of a long term sustainable financial sector and supply for the poor, there is need for more knowledge about the change in the lives of the target group – the poor. SMF AS is therefore strengthening the focus on the social indicators.
Outcome means measuring the change the project or program has had on the initial situation. The effect should not be mistaken by the effectiveness and to be effective. A project may be effective in the way it has organized the inputs and activities. However by effect the meaning is the more immediate tangible and observable change, in relation to the initial situation and established objectives. Appropriate indicators will be needed to measure the change in the lives of the target group. Such indicators need to be part of a full monitoring system. SF has together with SMF AS developed a tool for assessing the crosscutting issues; Gender Equality, Environmental Sustainability and Cultural Freedom. Raising awareness on these key issues are looked upon as important and even conditions for sustainable and long-term change. Though it is important for SMF AS to show its effects and results of the interventions, the measurement should at all times be motivated by the desire to provide the service desired and to meet the needs of the poor. Measuring results should aim at improving the work and never just to prove the effects.
The standard output indicators, such as outreach, are implemented to be measured on a quarterly basis. Outreach has been the most common indicator for measuring the social result of the organization. However the work to develop a full monitoring plan continues on the measurement of outcome – the change in the life of the poor. Outcome can be defined as the change measured with the target group, the beneficiaries, after participating in the project. 1 The Social Performance Task Force was established in 2007 and consists most of the leading microfinance networks, financial service providers, rating agencies, donors and social investors.
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Global statistics When consolidating the numbers in SMF, SMF AS including all the regions and daughters, correcting for internal transactions, we may present the following information as per December 31st 2009 . The formation of the group occurred on 31.3.2009, so that the result which appears in the accounts only displays the period from 31.03.2009. In order to more easily overview the accounts in their entirety for 2009, the proforma accounts of income and balance, together with the most relevant notes, are presented. These figures show the company and corporation’s operations as they would have appeared if it had been a company for the entire year. 1 The numbers for institutional MF are calculated on the basis of outstanding portfolio with the partner as of 31.12.2009. The numbers are to be seen as an estimate where SF takes part in a larger context with other funders. 2 Operational income / operational cost and loan loss provision
Clients outreach by SMF partners 0
25
50
East Africa
Numbers of partners 75
100
West Africa
Asia
Asia
East Africa West Africa Asia South America
20
30
40
South America
% female clients Female 237 097 14 673 1 613 936 10 633 1 865 706
Total 533 877 20 903 1 748 114 11 783 2 302 894
44 % 70 % 92 % 90 % 81 %
MFI CMMF
East Africa West Africa Asia South America
943 556 58 085 259
Average loan NOK ASIA 751 Bangladesh 499 East Africa 2 268
East Africa West Africa Asia South America
MFI CMMF Total 23 11 34 6 9 15 40 0 40 2 0 2 71 20 91 MFI CMMF
Clients outreach by SMF funding 0
Outstanding balance Institutional MF
52 501 573
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East Africa
West Africa
South America Female Male
0
50 000
100 000
150 000
200 000
East Africa West Africa Asia South America
East Africa West Africa Asia South America
MFI 69 197 1 178 182 702 1 139 254 216
CMMF 21 882 44 633 - - 66 515
Total 91 079 45 811 182 702 1 139 320 731
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Proforma Financial Statements 2009 The formation of the group occurred on 31.3.2009, so that the result which appears in the accounts only displays the period from 31.03.2009 to 31.12.2009. In order to more easily overview the accounts in their entirety for 2009, the proforma accounts of income and balance, together with the most relevant notes, are presented. These figures show the company´s and corporation’s operations as they would have appeared if it had been a company for the entire year.
Income & expense statement Parent company Group 2009 2009 Innvestment income 515 389 1 696 950 Other income from interest 4 800 693 10 269 995 Other income from interest Other investment income 12 273 173 373 299 Sum interest and similar income 17 589 255 12 340 244 Financial expenses Other interest costs Sum interest and similar costs
-45 822 -246 379 -292 201
-397 550 -449 353 -846 904
Sum interest and similar costs
17 297 054
11 493 340
Contributions from SF and others Contributions to loans Sum contributions
1 150 747 4 564 423 5 715 170
4 486 209 4 564 423 9 050 632
Sum contribution and interest income 23 012 224
20 543 972
Foreign exchange loss
-24 698 358
-25 311 948
Labour costs Other personnel costs sum cost of labour
-2 360 035 - -2 360 035
-3 222 522 -240 884 -3 463 406
Other operating cost -598 372 Depreciation cost - Provision for losses on account reveivable -1 000 000 Sum Labour costs -1 598 372 Sum operating costs -28 656 766
-5 816 408 -129 192 -1 000 001 -6 945 601 -35 720 955
All numbers are in NOK.
Operating result
-5 644 542
-15 176 983
-5 644 542 -71 260
-15 176 983 -443 805
-5 715 801
15 620 788
Minority share To Other Equity -5 715 801 -5 715 801
46 497 -15 667 285 -15 620 788
Result of ordinary activities Tax expenses Annual result
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Balanse Sheet
Parent company 31-12-08
Group ASSETS 31-12-09 31-12-08 31-12-09 Fixed assets Fixed assets 2 948 702 2 917 987 3 118 742 3 156 753 Financial assets (shares) 24 693 727 19 343 603 3 579 967 4 251 715 Loan Portfolio 41 075 031 59 439 406 - Sum fixed assets 68 717 460 81 700 996 6 698 709 7 408 468 Short term assets Accounts receivable 1 268 585 1 145 332 1 219 945 1 676 342 Other liquid assets 1 240 922 947 081 5 697 922 7 064 995 Loan portfolio 46 372 083 31 432 220 116 642 389 106 429 142 Bank deposits, cash and similar 15 761 622 11 057 542 28 571 484 15 682 482 Sum liquid assets 64 643 213 44 582 175 152 131 740 130 852 961 TOTAL ASSESTS 133 360 673 126 283 171 158 830 449 138 261 428 EQUITY AND LIABILITIES Equity Company capital 500 000 10 500 000 10 500 000 10 500 000 Share premium - 40 000 000 40 000 000 40 000 000 Other paid-in capital 92 784 264 2 297 886 22 403 073 19 398 198 Other equity 2 488 680 1 708 368 3 096 581 77 902 Annual result 29 217 467 -5 715 801 -15 620 788 Total equity 124 990 411 48 790 452 75 999 655 54 355 312 Liabilities Long-term debt Liabilities to credit institutions Other long-term debt Current liabilities Other current liabilities Total liabilities
4 466 603 3 000 000
3 353 771 73 441 944
7 600 256 73 052 665
7 569 221 73 052 665
903 660 8 370 262
697 004 77 492 718
2 177 874 82 830 794
3 284 231 83 906 116
133 360 673
126 283 171
158 830 449
138 261 428
Of this, minority share
1 676 074
1 398 091
TOTAL EQUITY AND LIABILITIES
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
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Proforma interest and similar income
Proforma pensions
Parent company Group 2009 2009 Geographical distribution Bangladesh 2 899 046 2 848 269 Sri Lanka 1 582 547 2 682 889 Uganda 12 560 093 3 088 552 Kenya 141 588 1 496 418 Tanzania - 1 617 888 Rwanda - 135 056 Norge 107 663 18 604 Peru 81 440 154 695 Mali 126 562 163 934 Burkina Faso 35 697 57 872 Cambodia 24 261 41 780 Burma 30 359 34 288 Total 17 589 255 12 340 244t
The company is obliged to provide an occupational pension scheme under the Act for mandatory pensions. The company has entered into an agreement concerning the pension scheme which meets the requirements of the mandatory pension scheme. Parent company Group 2009 2009 Recorded pension cost 20116 20116
Proforma compensation of employees, number of employees, remuneration, loans to employees etc Labour expenses Payroll Social Tax Pension Costs Other benefits Sum
Parent company 2009
Group 2009
2 017 357 81 493 18 513 242 672 2 360 035
3 120 728 81 493 18 513 242 672 3 463 406
Proforma remuneration to the auditor Expensed fee to the auditor distributed as follows: Parent company Group 2009 2009 Statutory audit (including technical assistance with the financial statements) 35 014 124 386 Other attestation services 25 505 25 505 Legal aid 15 925 15 925 Sum 76 444 165 816
Proforma tax The company is not liable for tax in Norway, but there are tax costs in the foreign companies. Company tax cost: Parent company Group 2009 2009 Income tax 203 539 Tax on interest 71 260 240 265 71 260 443 804 Proforma foreign exchange loss by currency type Currency Kenyan shilling CFA Franc BCEAO American dollar Danish kroner Uganda Shilling EURO Sri Lanka Rupee Swedish kroner Bangladeshi Taka adjustment/transfers
Amounts given are without VAT.
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Parent company Group 2009 2009 -1 347 089 -1 585 320 -17 504 636 449 -6 535 831 -113 518 -5 942 848 -40 920 -9 900 907 149 129 -24 698 358
-1 347 089 -1 585 320 -631 094 636 449 -6 535 831 -113 518 -5 942 848 -40 920 -9 900 907 149 129 -25 311 948
Interventions by geographical involvement SMF AS The MF involvement in West Africa, South America, Bangladesh, Cambodia and Kenya are part of the accounts and balance sheet of SMF AS. The Regional Director in the relevant region is responsible for the management and supervision of these interventions. The regional office is doing the due diligence and all assessments whereas the SMF AS serves as credit committee and whole-sale lender. The intervention in West Africa is both institutional MF and CMMF. In the other countries only institutional MF is used for now. In the Asian region, SMF AS has set up two different legal entities, SMAGL and Bangladesh. The enitity in Bangladesh is yet to be approved legally. The accounts are therefore still part of SMF AS. The key performance indicators for Bangladesh will be presented after SMF AS since the institution is ready and is expected to become a legal entity soon. Due to different historical and practical reasons, some partners and countries are handled directily from SMF AS and not part of the Apex institutions. Loans to partners in Kenya and Cambodia are therefore included in SMF AS in Norway. SMF AS has for various reasons decided to acquire ownership parts in external companies abroad. The loans and equity holdings, including the ones in the Apexes will appear in the balance of SMF AS.
I now give my children three meals a day STRĂ˜MME MICROFINANCE AS \\ ANNUAL REPORT 2009
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Bangladesh The Apex in Bangladesh is still to be legally approved as a separate legal entity. The virtual Apex is at the time functioning as an Apex governed as a division within the Regional Office in Sri Lanka. The Apex in Bangladesh is involved in institutional MF.
BALANCE SHEET (all numbers in NOK): 31-12-09 Total current assets: 37 724 665 Total non-current assets: TOTAL ASSETS 37 724 665
47 589 783
Total current liabilities: Total non-current liabilities: Total equity: TOTAL LIABILITIES AND EQUITY
142 574 47 949 272 -502 063 47 589 783
INCOME AND EXPENSES STATEMENT Total operating income Total financing expenses Provision for loan losses+write-offs Total operating expenses Net income from operations Income tax Currency loss /gain Total grants received Net income after grants for the period
92 134 38 048 365 -415 834 37 724 665
2 009 2 854 223 1 277 785 1 074 652 498 738 3 048 - - - 3 048
31-12-08 47 589 783
2 008 3 010 818 1 281 258 1 107 643 767 102 -145 185 -145 185
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Sri Lanka - Strømme Microfinance Asia Guarantee Limited (SMAGL) SMAGL is incorporated under the Companies’ Act no 17 at the Registrar of Companies on January 6th 2006 with SF as the Founding Member. The company has taken over all MF activities in Sri Lanka and has its seat in Colombo. A professional board with local resource persons in addition to two members form SMF is governing the processes. The SF Regional Director is chairing the board. SMAGL is involved in institutional MF.
BALANCE SHEET (all numbers in NOK): 31-12-09 31-12-08 Total current assets: 25 730 247 29 023 872 Total non-current assets: 137 252 47 211 TOTAL ASSETS 25 867 498 29 071 083 Total current liabilities: 31 577 569 541 Total non-current liabilities: 15 638 145 28 311 015 Total equity: 10 197 776 190 527 TOTAL LIABILITIES AND EQUITY 25 867 498 29 071 083 INCOME AND EXPENSES STATEMENT 2 009 2 008 Total operating income 2 650 204 2 063 516 Total financing expenses 289 936 268 076 Provision for loan losses+write-offs 855 494 1 503 216 Total operating expenses 1 113 541 1 263 777 Net income from operations 391 233 -971 553 Income tax 372 545 202 982 Currency loss /gain - - Total grants received 6 501 Net income after grants for the period 25 188 -1 174 535
I now believe in myself STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
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East Africa - Strømme Microfinance East Africa Ltd (SMF EA Ltd) SMF EA Ltd is a company limited by shares, incorporated in 2004. The company is located in Kampala, Uganda and including the activities of MF for the East African region (Uganda, Kenya, Tanzania, Rwanda and Sudan). SMF EA is a complete Apex organisation with a local Board of directors, a full set of manuals covering including a Business Plan, and policies for the Board, Accounting, Human Resources management and Operational & Financial issues. SMF AS holds the majority of shares in the company and the regional director serves as chairperson of the Board. SMF EA Ltd has interventions in both Institutional MF and CMMF.
BALANCE SHEET (all numbers in NOK): 31-12-09 31-12-08 Total current assets: 58 866 695 55 022 390 Total non-current assets: 481 380 152 118 TOTAL ASSETS 59 348 075 55 174 508 Total current liabilities: 2 899 059 1 098 358 Total non-current liabilities: 38 297 570 32 026 060 Total equity: 18 151 446 22 050 090 TOTAL LIABILITIES AND EQUITY 59 348 075 55 174 508 INCOME AND EXPENSES STATEMENT 2 009 2 008 Total operating income 6 081 469 5 566 643 Total financing expenses 1 835 627 1 335 835 Provision for loan losses+write-offs 1 024 106 1 510 671 Total operating expenses 5 535 001 2 194 052 Net income from operations -2 313 265 526 085 Income tax - Currency loss /gain -613 589 -287 737 Total grants received 3 328 961 Net income after grants for the period 402 106 238 348
I now send my grand daughter to school
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STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Report from the Strømme MicroFinance AS Board 2009 Eradicating poverty Strømme Foundation’s fully owned company Strømme MicroFinance AS (SMF AS) is a central Norwegian actor in microfinance. The company undertakes lending operations, training and capacity building of personnel within the microfinance sector. SMF AS’s leadership and headquarters is based in Norway, while activities are carried out in Peru, Mali, Burkina Faso, Bangladesh, Sri Lanka, Cambodia, Myanmar, Tanzania, Kenya, Rwanda and Uganda. Fiscal year 2009 In its first year of operation, the company took over and furthered the lending operations previously directly owned by Strømme Foundation. The company’s activities were impacted both by the necessary establishment phase and the financial crisis. On the 31st of March all of Strømme Foundation’s microfinance activities were transferred to SMF AS. In so doing, SMF AS became the parent company, with subsidiaries Strømme MicroFinance East Africa Ltd (SMF EA Ltd) and Strømme MicroFinance Asia Guarantee Limited (SMAGL),
based in Kampala, Uganda and Colombo, Sri Lanka respectively. In addition, the company has an office in Dhaka, Bangladesh. As a natural part of the establishment phase, the company necessarily used time to establish a well-functioning internal infrastructure with reporting and budget procedures, accounting structures, financial procedures, and instructions for daily governance and management. 2009 was the first year of Strømme Foundation’s five year Master Plan. As the company is a part of SF’s operations, it too is included in the plan. Therefore, the company’s 2009 activities also consisted of establishing plans of action and a methodology to support the overarching directions given in the Master Plan. The global financial crisis led to currency fluctuations throughout the year. As the company gives loans to its partners in developing countries in local currencies, the financial statements show large currency losses. This is largely because the Norwegian Kroner has become much stronger in relation to the currencies in developing countries, such as, for example, the Ugandan Shilling.
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
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Results from activities The company’s primary goal is to provide appropriate microfinance products to as many poor persons as possible. During the year the company and its subsidiaries further-developed loan offers to the poor in developing countries. At the same time, oversight was also strengthened. As such, the company’s non-financial results for 2009 are as anticipated and in line with the company’s plan of action and to the Board’s expectations. As a natural part of the company’s primary goal, the company operates under a clear investment philosophy that expenses tied to currency loss shall be borne by the company. This prevents our poor loan customers from being exposed to currency losses. This has given the company deficit in 2009. Operating profits, before adjusting for currency losses, are nonetheless positive and in accordance with the budget. The company reached an expected level of activities and reflects a cost-effective organisation. During the year the company’s activities were strengthened by Strømme Foundation transferring all property belonging to its micro-
finance activities to SMF AS. This transfer was financed by transferring SF’s capital and through a responsible loan from Strømme Foundation. The company’s portfolio is deemed to be solid. The Board considers the conditions necessary for continued operations to be in place. Work environment and personnel The company has a very low level of sick leave. There were no injuries or accidents at work in 2009. The work environment is viewed as good. The company has as a goal to achieve full equality between men and women. SMF AS works with new guidelines and methods to ensure equality in all areas of the organisation. In 2009, four of the seven Board members were women. 27% of employees in the parent company and its subsidiaries are women. Operations strive to minimise polluting the environment. SMS AS also works continuously with guidelines and methods for follow-up to ensure that the company’s microfinance activities in developing countries have the smallest possible negative impact on the environment.
Kristiansand, 12.05. 2010
Inge Lønning
Geir Magnus Nyborg Chairman of the Board
Liv Næss
Anna Minj
Olaf Gundersen
Trond Randøy Øyvind Aadland Secretary General
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Svein Ove Faksvåg
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Strømme MicroFinance AS
Parent Company 2009
Income expense statement Investment income Other interest income Other investment income Sum interest and similar income Financial expenses Other interest costs Sum interest and similar costs Net interest and similar income
Group 2009
Parent Company 2008
Note
334 546 3 658 163 6 626 3 999 335
1 363 313 7 909 488 348 005 9 620 806 1
-39 600 -203 931 -243 532
-480 162 -353 899 -834 061
1 407 1 407 -178 995 -178 995
3 755 803
8 786 745
596 996 3 879 622 4 476 618
3 932 458 3 879 622 7 812 080
Sum contributions and interest income
8 232 421
16 598 825
Foreign exchange loss
-9 671 993
-10 285 582
Labour costs Other personnel costs Sum labour costs
-1 484 675 - -1 804 060
-2 347 330 -202 493 -2 549 823 3
Other operating costs Depreciation costs Provision for losses on accounts receivable Sum other operating costs
-784 675 -30 715 -751 000 -1 247 117
-5 385 182 -111 432 -751 000 -6 247 615 4,5
-56 664 -30 715
Sum operating costs
-12 723 170
-19 083 020
-87 379
OPERATING RESULT
-4 490 749
-2 484 195
-264 967
Result of ordinary activities Tax expenses
-4 490 749 -18 083
-2 484 195 -244 712 6
-264 967
ANNUAL RESULT
-4 508 832
-2 728 907
-264 967
Contribution from the Strømme Foundation and others Contributions for loan portfolio Sum contributions
Of this minority share To other equity
- -4 508 832 -4 508 832
-177 588
2
-87 379
33 951 -2 762 858 -2 728 907
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Balance Sheet
Parent Group Assets 31-12-08 31-12-09 31-12-08 31-12-09 Fixed assets Fixed assets 2 948 702 2 917 987 7 2 948 702 3 156 753 Financial assets (shares) 20 400 32 481 748 8 20 400 3 342 207 Loan Portfolio 43 801 261 - 0 Total fixed assets 2 969 102 81 700 996 2 969 102 6 498 960
Short term assets Accounts receivable Other liquid assets Loan Portfolio Bank deposits, cash and similar Total short term assets SUM ASSETS
0 0 0 25 006 25 006
1 145 332 947 081 33 932 220 9 11 057 542 10 44 582 175
2 994 108
126 283 171
Equity and liabiliteis Equity Share capital 500 000 Share premium account - Acquired equity - Other equity -833 605 Annual result Total equity -333 605
10 500 000 40 000 000 2 297 886 501 400 -4 508 833 48 790 452 11,-15
- - - 25 006 25 006 2 994 108
500 000 - - -833 605 - -333 605
1 676 342 7 974 503 105 871 584 15 682 482 131 204 910 137 703 870
10 500 000 40 000 000 19 398 197 -13 371 537 -2 728 907 53 797 753
Of this minority share 1 398 091 Liabilities Other long-term liabilities Liabilities to credit institutions - 3 353 771 - 7 569 221 Other long-term debt 3 000 000 73 441 944 3 000 000 73 052 665 Current liabilities Other current liabilities 327 713 697 004 327 713 3 284 232 Sum liabilities 3 327 713 77 492 718 16,17 3 327 713 83 906 117 TOTAL EQUITY AND LIABILITIES
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2 994 108
126 283 171
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
2 994 108
137 703 87
Accounting Principles The annual accounts are established in accordance with the Norwegian Accounting Act and generally accepted accounting principles. Accounting principles for subsidiary and associated companies, and consolidation basis.
The consolidated accounts comprise: Owner share Parent company/subsidiaries Strømme Micro Finance AS (parent company) incl. Strømme Micro Finance Bangladesh Stromme Micro Finance East Africa 90,2 % Stromme Microfinance Asia Guaratee Limited 100 % The Group was established on 31/3/2009. With this, Strømme Micro Finance AS undertakes the responsibility and ownership of the subsidiaries Stromme Microfinance Asia Guaratee Limited and Stromme Micro Finance East Africa. Strømme Micro Finance in Bangladesh is part of SMF AS. Turnover which results therefore applies to the period from 31/3/2009 to 31/12/2009. Accounting principles for shares in subsidiaries and associated companies Shares in subsidiaries and stakes in associated companies are assessed in accordance with the cost method in the company accounts. Consolidation Principles Subsidiaries will be consolidated from the point at which the majority ownership obtained by the company (date of acquisition). Acquisition of subsidiary Accounting for acquired subsidiary is undertaken in the corporation accounting, based upon the parent company’s acquisition cost. The acquisition cost is assigned the actual value of identifiable assets and debt in the subsidiary, which is entered into the accounts according to the actual value of the acquisition date. Elimination of internal account items In the group accounts, the item “shares in the subsidiary” is replaced by
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the subsidiary’s assets and debts. The corporation accounts are drawn up as if the corporation were a single economic entity. Transactions, unrealised profits and claims between companies in the corporation are to be eliminated. Conversion of foreign subsidiaries The subsidiaries’ functional currency is the country’s local currency. Conversion of the accounts is undertaken by using the current rate of exchange in such a way that the balance is converted into the end balance-day rate of exchange, and the profit and loss accounting is converted into the average rate of exchange. All conversion differences are accounted for directly against the equity. Income The company’s income is mainly connected to interest income and contribution. Classification of balance sheet items Assets intended for permanent possession or use are classified as fixed assets. Assets which are connected to the value chain are classified as short term assets. Accounts receivable are classified as short term assets if they are to be repaid in the course of one year. For debt, analogue criteria will be used. The first years’ repayments on long-term debt and claims are nevertheless not classified as a short term asset and shortterm debt. Acquisition Cost In the case of purchase in foreign currency, the asset is recognised in the balance sheets according to the rate of exchange at the time of the transaction. Fixed Assets Property is not depreciated. Other assets are depreciated on a linear basis to the remaining value of the fixed asset’s expected available lifetime if they have a cost which is in excess of 15,000NOK. The fixed assets’ useful lifetime, together with their residual values, are evaluated each accounting day and amended should this be necessary. Maintenance of assets is recorded continuously under operating expenses. Renewals
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or improvements are added to the asset cost price and depreciated along with the asset. The distinction between maintenance and renewal/improvements is calculated in relation to the asset’s condition at the time of purchase. Accounts receivable Accounts receivable are recorded in the balance after deduction of loan loss provisions. The provision has been made on the basis of an individual assessment of accounts receivable and an additional provision to cover other foreseeable loss risk. Other accounts receivable, both short term assets and fixed assets, are stated at the lowest end of nominal value and market value. The provision is assessed in the same way as it is for accounts receivable. Debt Debt is recognised in the balance sheets as a nominal debt sum. Foreign Currency Accounts receiveable and debt in foreign currency are assessed according to the exchange rate at the end of the fiscal year. Tax The company is not liable to pay taxes in Norway. In respect of foreign legislation, a tax cost in relation to income tax and tax on interest will nevertheless occur. Cash Flow Statement The cash flow statement is prepared using the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term assets can be immediately and at insignificant exchange risk converted to known cash amounts and with a due date less than three months from the date of acquisition.
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Notes Strømme MicroFinance AS Note 2 Foreign exchange losses distributed by currency
Note 1 Interest and similar income Geographical distribution Bangladesh Sri Lanka Uganda Kenya Tanzania Rwanda Norge Peru Mali Burkina Faso Cambodia Burma Totalt
Parent company 2009
Group 2009
2 171 383 1 204 824 217 019 141 588 0 0 110 270 73 256 37 372 22 175 17 519 3 929 3 999 335
2 171 122 2 005 115 2 891 990 1 131 582 1 043 924 66 980 155 843 73 256 37 372 22 175 17 519 3 929 9 620 806
Currency type Kenyan shilling CFA Franc BCEAO American dollar Danish kroner Ugandan Shilling EURO Sri Lankan Rupee Swedish kroner Bangladeshi Taka Other
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Parent company 2009
Group 2009
-702 793 -702 793 -720 378 -720 378 54 357 -420 309 210 655 210 655 818 343 818 343 -40 895 -40 895 -2 650 174 -2 650 174 -7 488 -7 488 -6 563 575 -6 563 575 -70 046 -70 046 -9 671 993 -10 146 659
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Note 3 Labour costs, total employees, remuneration, loans to employees etc
Note 5 Pensions The company is obliged to provide an occupational pension scheme under the Act for mandatory pensions. The company has entered into Parent company Group Parent company an agreement concerning the pension scheme which meets the Labour costs 2009 2009 2008 requirements of the mandatory pension scheme. Parent company Group Payroll 1 384 669 2 247 324 0 2009 2009 Social tax 81 493 81 493 0 20 116 20 116 Pension costs 18 513 18 513 0 Recorded pension cost Other payments 0 202 493 0 Sum 1 484 675 2 549 823 0 Note 6 Tax Company tax: Parent company Group Employed full-time positions in the financial year was 4 (4.5 from 2009 2009 October 2009) to parent company and 16 (16.5 from October 2009) Income tax 0 57 623 in the group. Tax on interest 18 083 187 089 18 083 244 712 Payment to leaders General Manager Administration Note 7 Fixed assets Salary 280 920 0 Sum fixed Buildings and Pension expenses 5 580 0 Parent company assets Vehicles Fixtures land/plots Other remuneration 140 0 Fixed assets Acquisition cost 01.01. 3 076 690 0 0 3 076 690 Aquisition 2009 0 0 0 0 The Manager has not received a salary from the company. Sales 2009 0 0 0 0 The operational manager was employed in the compahy for 6 months Acquisition cost 31.12. 3 076 690 0 0 3 076 690 in 2009. No loans or collateral for loans granted to senior employees Accumulated were given. depreciation 31.12.-158 703 0 0 -158 703 Book value 31.12. 2 917 987 0 0 2 917 987 Note 4 Payment to the auditor Expensed payment to the auditor distributed as follows: 30 715 0 0 30 715 Parent company Group Parent company Annual depreciation Depreciation % 1 % 2009 2009 2008 Sum fixed Buildings and Group Statutory audit assets land/plots Fixed assets Cars Fixtures (inc. technical assistance with 0 0 3 076 690 financial statements) 35 014 104 733 8000 Acquisition cost 01.01. 3 076 690 Aquisition 2009 0 290 674 262 449 553 123 Other authorisation Sales 2009 0 0 0 0 services 25 505 25 505 Acquisition cost 31.12. 3 076 690 290 674 262 449 3 629 813 Legal aid 15 925 15 925 Accumulated depreciation 31.12. -158 703 -163 689 -150 668 -473 060 Sum 76 444 146 163 8 000 Book value 31.12. 2 917 987 126 985 111 781 3 156 753 Amounts are given without VAT. Annual depreciation 30 715 42 906 37 811 111 432
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Note 8 Financial assets Parent company 31-12-08 Shares in Kolibri Kapital 20 400 Shares Stromme Microfinance Ltd Shares Stromme Microfinance Guarantee Ltd Shares Jami Bora Shares Jami Bora Scandinavia Shares SIDI France Shares Oikocredit Owner share OIKOS 20 400 Group Shares Mbinga bank Shares in Alterfin, Belgia Shares in Tujijenge Africa Shares in Kolibri Kapital Shares Jami Bora Shares Jami Bora Scandinavia Shares SIDI France Shares Oikocredit Owner share OIKOS
31-12-09 20 400 16 360 699 15 658 708 1 869 150 323 080 547 813 90 078 111 820 34 981 748
Note 11 Equity Annual changes in equity
Parent company 31-12-08 31-12-09 Share capital 500 000 10 500 000 Share premium account - 40 000 000 Other paid in capital (SIDI) - 0 Other capital (donated equity) 2 297 885 Accumulated profit -833 605 501 400 Annual result -4 508 833 Equity 01.01.09 -333 605 48 790 452 31-12-08 31-12-09 Group 31-12-08 31-12-09 Share capital 500 000 10 500 000 0 22 124 Share premium account - 40 000 000 0 2 026 Other paid in capital (SIDI) - 442 440 0 355 716 Other capital (donated equity) - 18 955 758 20 400 20 400 Accumulated profit -833 605 -13 302 485 0 1 869 150 Annual result - -2 737 747 0 323 080 Calculation differences - -60 213 0 547 813 Equity 01.01.09 -333 605 53 797 753 0 90 078 0 111 820 20 400 3 342 207
Note 12 Share capital and shareholder information Note 9 Loan Portfolio Summary of the largest shareholders as of 31.12.2009 Accounts Receivable Parent Company Corporation /Outstanding Portfolio Owner share 2009 2009 Total portfolio 39 197 222 113 636 584 Strømme Foundation 100 % Provision for losses on receivables 5 265 000 7 765 000 Net loan portfolio 33 932 222 105 871 584 Note 10 Restricted bank deposits, overdrafts Restricted bank deposits Parent Company 2009 Restriced Cash 88 645 Overdraft facility Unused overdraft 633 772
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Note 13 Long-term debt Parent Company Interest Parent Company Interest 2009 rate 2008 rate Nordea NOK 4 366 228 6,25 % OIKOS DKK 3 000 000 3-5% Strømme Foundation NOK 3 000 000 1,8 % 3 000 000 1,8% Strømme Foundation (subordinated loan) NOK 70 052 665 0 % Strømme Foundation (subordinated loan) of NOK 70,052,665 is due later than in 5 years. Group Interest Group Interest 2009 rate 2008 rate SIDI UGS 850 150 000 8 % Alterfin USD 300 000 5 % Nordea NOK 4 366 228 6,25 % OIKOS DKK 3 000 000 3-5% Strømme Foundation NOK 3 000 000 1,8 % 3 000 000 1,8 % Strømme Foundation (subordinated loan) NOK 70 052 665 0 % Strømme Foundation (subordinated loan) of NOK 70,052,665 is due later than in 5 years.
Note 15 Balance with the Strømme Foundation Parent company 2009 2008 Other current liabilities - -327 713 Short-term receivables 648 742 - 648 742 -327 713 Long-term debt -3 000 000 -3 000 000 Long-term subordinated loans -70 052 665 -73 052 665 -3 000 000 The group accounts are consolidated with the Strømme Foundation, and the consolidated accounts may be disclosed by contacting Strømmestiftelsen, Postboks 414, 4664 Kristiansand, Norway.
Note 14 Inter Company loans Group 2009 Loan to Stromme Microfinance East Africa Ltd 34 638 722 Loan Stromme Microfinance Asia Guarantee Limited 9 895 226 Sum 44 533 948 Of this, long-term receivables due >5 years 38 517 346 All inter group loans are issued in local currencies
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Note 16 Subsidiaries, associate companies and joint ventures Subsidiaries
Registered Owner Equity last Result last Book office share year (100 %) year (100 %) value Stromme Microfinance East Africa Ltd Kampala, Uganda 90,2 % 18 413 893 416 312 16 360 699 Stromme Microfinance Asia Guarantee Limited Colombo, Sri Lanka 100 % 10 197 776 1 016 757 13 158 708 Book value 31.12. 28 611 669 1 433 069 29 519 407 Stromme Microfinance East Africa Ltd is owned 9,8% by the French development organisation SIDI. Note 17 Loans to employees There are no loans to leading employees. 2009 Total employee loan 125 081 The issued loans are for 2 employees in Bangladesh. The loans are charged at 5% interest and shall be repaid over 4-5 years. Note 18 Single transactions On March 31, 2009 AS SMF took over total responsibility and ownership of the Strømme Foundation’s microfinance activities, including owner shares of the subsidiaries Stromme Microfinance Asia Guarantee Ltd (SMAGL) and Stromme Microfinance East Africa Ltd (SMFEA). The following recorded owner shares were thus transferred to SMF AS: NOK Bank deposits 11 992 733 Loan Portfolio 36 759 744 Other short term assets 4 486 184 Financial assets 71 200 455 Debt -4 386 450 Total transferred net assets 120 052 665 The transfer took place through a contribution in kind of 50,000,000 NOK and the issue of a subordinated loan of 70,052,665 NOK from the Strømme Foundation.
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Cash flow
Strømme Micro Finance AS Parent company Corporation Parent company 2009 2009 2008 Cash-flow from operational activities Annual result -4 508 833 -2 728 907 -264 927 Ordinaty depreciation 30 715 111 432 30 715 Change in accounts receivable 2 199 713 2 396 920 Change in accounts payable -302 867 2 139 525 Changes in other accruals 1 309 108 -4 009 178 235 619 Net cash-flow from operational activities -1 272 163 -2 090 207 1 407 Cash-flow from investment activities Purchase of other investments -379 282 Net cash-flow from investment activities 0 -379 282 0
Cash-flow from financing activities Payments from the issuance of new, short-term debts 311 831 Net cash-flow from financing activities 311 831 0 0 Net change in cash and cash equivalents -960 332 -2 469 490 1 407 Cash and cash equivalents at the beginning of the period 12 017 874 18 151 972 23 599 Cash and cash equivalents at the end of the period 11 057 542 15 682 482 25 006 Breakdown of cash at the end of the period Cash and cash equivalents 11 057 542 15 682 482 25 006 The company also has the following overdraft facilities Unused overdraft 633 772 633 772 0
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APPENDIX
ABBREVIATIONS:
BOD:
Board of Directors
CGAP:
Consultative Group to Assist the Poorest
CMMF:
Community Managed Microfinance
MF:
Microfinance
MIS :
Management Information Systems
MFI :
Microfinance Institutions
NGO:
Non Governmental Organisation
RD:
Regional Director (in SF)
RO :
Regional Office (in SF)
SF:
Strømme Foundation
SIDI :
Solidarité Internationale pour le Développement et l’Investissement
SMAGL :
Strømme Microfinance Asia Guarantee Ltd
SMF AS.:
Strømme Microfinance AS
SMF EA Ltd :
Strømme Microfinance East Africa Ltd
TA:
Technical Assistance
STRØMME MICROFINANCE AS \\ ANNUAL REPORT 2009
Strømme Microfinance AS Strømme Foundation, June 2010 Lay-out and graphic design: Strømme Foundation All photos: Strømme Foundation The Strømme Foundation is member of The Norwegian Control Comittee for Fundraising
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Skippergaten 3 • Box 414 • N-4664 Kristiansand Norway Tel +47 38 12 75 00 • Fax +47 38 02 57 10 • Org. no 952 002 139 E-mail: post@stromme.org • www.stromme.org