0 | p a g e...4 | p a g ejaiz bank plc. kano house, 73 ralph shodeinde, central business district...

0 | P a g e

Jaiz Bank Plc. Kano House, 73 Ralph Shodeinde, Central Business District P.M.B. 31 Garki Abuja, Nigeria.

1 | P a g e


content pageTABLE OF CONTENTS 1

VISION AND MISSION STATEMENTS 2

DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS 3

OUR STORY 4

OUR LOCATIONS 5

THE BOARD OF DIRECTORS 7

SHARIAH ADVISORY COMMITTEE OF EXPERTS(ACE) 11

NOTICE OF ANNUAL GENERAL MEETING 14

CHAIRMAN'S STATEMENT 17

CEO STATEMENT 20

SUSTAINABILITY REPORT 22

CORPORATE SOCIAL RESPONSIBILITY (CSR) 24

REPORT OF THE DIRECTORS 28

CORPORATE GOVERNANCE REPORT 35

STATEMENT OF DIRECTORS� RESPONSIBILITIES REPORT 52

ADVISORY COMMITTEE OF EXPERTS REPORT 53

STATUTORY AUDIT COMMITTEE REPORT 55

INDEPENDENT AUDITOR'S REPORT 56

THE ACCOUNTS

STATEMENT OF FINANCIAL POSITION 62

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 63

STATEMENT OF CHANGE IN EQUITY 64

STATEMENT OF CASH FLOW 65

STATEMENT OF SOURCES AND USES OF QARD FUND 66

STATEMENT OF SOURCES AND USES OF CHARITY FUND 67

NOTES TO THE FINANCIAL STATEMENTS 68

OTHER NATIONAL DISCLOSURES 132

2 | P a g e


Our Vision

To be the clear leader in Ethical Banking in subs Saharan Africa.

Mission Statement

Making life better through ethical finance

Core Values

Quality Service � Customer First Team Spirit Respect for the Individual Ethics Trust Partnership Entrepreneurship

Business Philosophy:

Our philosophy is to deliver world class sharia compliant financial services to our clientele irrespective of class, creed, race or religious belief and to contribute to the socio-economic development of the society.

For Enquiries: Kindly contact us at:

Jaiz Bank Plc. Kano House, 73 Ralph Shodeinde, Central Business District P.M.B. 31 Garki Abuja, Nigeria. Tel: +234-9-460(JAIZ) 5125 Email: [email protected] OR: Visit our website on: www.jaizbankplc.com

3 | P a g e


DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS

Alh. (Dr.) Umar Abdul Mutallab - Chairman Prof. Tajudeen Adepemi Adebiyi - Non-Executive/Independent Director Nafiu Baba-Ahmad - Non-Executive/Independent Director Alh. (Dr.) Aminu Alhassan Dantata - Non-Executive Director Alh. (Dr.) Musbahu Mohammed Bashir - Non-Executive Director Alh. Mukhtar Danladi Hanga Sani - Non-Executive Director Alh. (Dr.) Umaru Kwairanga - Non-Executive Director Mall. Falalu Bello - Non-Executive DirectorDr. Mohamed Ali Chatti - Non-Executive Director H.R.H, Engr. Bello Muhammad Sani - Non-Executive Director Alh. (Dr.) Muhammadu Indimi - Non-Executive Director Hassan Usman - Managing Director Mahe Abubakar Mahmud - Deputy Managing Director AbdulFattah Olanrewaju Amoo - Executive Director

COMPANY SECRETARY Rukayat O. Salaudeen

REGISTERED OFFICE Jaiz Bank Plc Kano House

No. 73 Ralph Shodeinde Street Central Business District Abuja

AUDITORS Ahmed Zakari & Co. 222B Oladipo Diya Crescent

2nd Avenue, Dolphin Estate Ikoyi - Lagos

REGISTRAR AND TRANSFER OFFICE Africa Prudential Plc (Formerly UBA Registrars Plc)

220B Ikorodu Road Palmgrove, Lagos

TAX ADVISORS Abdulazeez & Co. No.26 Cotonou Crescent, Zone 6 Wuse � Abuja

Aligasim Achor & Co. Suite2.25 First Floor, ICC Plot 900 Herbert Macaulay Way, Area10 Garki - Abuja

FINANCIAL HIGHLIGHTSJAIZ BANK PLC - YEAR ENDED 31 DECEMBER , 2018

31 December 2018

31 December 2017 Changes

N'000 N'000 (%)

STATEMENT OF FINANCIAL POSITIONTotal Assets 108,462,458 87,312,609 24%Financing & Investment 69,361,414 50,786,010 37%Deposits 85,032,992 68,115,257 25%Share Capital 14,732,125 14,732,125 0%Total Equity* 13,109,162 13,679,148 -4%

INCOME STATEMENTGross Earnings 8,744,322 7,855,369 11%Profit Before Taxation 897,702 894,006 0%Taxation (63,336) (356,891) -82%Profit After Taxation 834,366 537,117 55%

RATIOS 2018 2017Cost to Income 87.28% 85.84% 2%Return on Assets 0.8% 0.6% 25%Return on Equity 6.85% 6.54% 5%Capital Adequacy 21.13% 27.00% -22%Liquidity 27.94% 18.64% 50%

OTHERS Number NumberNumber of Branches/Offices 33 31 6%Number of Staff 808 699 16%Number of Shares in Issue ('000) 29,464,250 29,464,250 0%

* The drop is due to the transitional impact of IFRS 9.

4

OKENNY

4 | P a g e


Our Story

Jaiz Bank PLC � the premier Non-Interest Bank in Nigeria was established on the 11th of November 2011 on a foundation of trust, professionalism and excellence to deliver innovative financial solutions and exceptional customer experiences. This started with a Regional License obtained from the Central Bank of Nigeria to operate in the Northern part of the country and its transformation to a National Bank on the 12th of May 2016 with key presence in all the geopolitical zones of the country.

The Bank�s core values are built on 7 principles with the acronym RESPECT; Responsibility, Entrepreneurship, Simplicity, Excellence, Customer Focus and Trust. These core values are the guiding force that empowers the Bank to project towards its vision to be the clear leader in ethical Banking in Sub-Saharan Africa.

Jaiz Bank is a quoted public company trading on the floor of the Nigerian Stock Exchange (NSE) with a balance sheet size of N108.46 billion (as at December 31st 2018) from N12 billion in 2012. Financing asset also grew from of over N30 billion in 2012 to N69.36 billion (as at December 31st 2018). Other critical parameters such as customer deposit, network and profitability have all been growing year � on � year since inception to date.

About Islamic Banking

Non-Interest Banking is a profitable growing global phenomenon practiced in nearly 70 countries across the world including the United Kingdom, Canada, the United States of America, the United Arab Emirate, Malaysia, China, Singapore, South Africa, Kenya etc. Global Banks like HSBC, Citibank, Barclays Bank etc. are also offering non-interest banking products and service. It is an alternative financial service offering which is open to all irrespective of race or religion. It is based on the ethical principles of fairness, transparency and objectivity. Non-Interest Banking offers almost all the services of conventional banks. The difference is that Islamic Banks do not give or receive interest, nor finance anything that is harmful to society like alcohol, tobacco, gambling etc. They also avoid gharar- speculation, extreme uncertainty and deception.

Currently, 50% of Nigeria's total population of 183 million are craving for such Non-Interest banking services. These people are desirous of ethical banking services which provide for socially responsible investment outlets. In a nutshell, Non-Interest Banking is real-economy oriented and profit and loss sharing arrangement where the mode of financing is mostly on mark-up, leasing and partnership basis.

The Potential for Non- Interest Bank In Nigeria

The business potential for a Non-Interest Bank in Nigeria is enormous as such an institution has long been awaited by a large population of Nigerians from all parts of the country. Jaiz Bank's strategic business focus is mainly on retail banking, the Bank nevertheless offers corporate and commercial banking services. The Bank's retail focus will enable it to service the majority of Nigerians who wish to do away with Riba (Usury) in their daily activities. The Bank is being positioned to be a national bank offering its services to all regardless of religious beliefs, ethnicity or creed.

5 | P a g e


Our Locations

ABUJA REGION S/N BRANCH ADDRESS

1 ABUJA Ground Floor Kano House 73 Ralph Shodeinde Street Central Business District, Abuja

2 WUSE No 36 Douala Street Off Herbert Macaulay Way, Erisco Bompet Plaza, Zone 5 Abuja

3 NNPC Ground Floor, Block B Room 16, NNPC Towers, Abuja

4 BANEX Bannex Plaza, Wuse II, Abuja

5 NATIONAL ASSEMBLY National Assembly Complex, 3 Arms Zone Abuja

6 GWARIMPA BRANCH 1st Avenue, DBB Plaza, Gwarimpa, Fct- Abuja

NORTH CENTRAL

S/N BRANCH ADDRESS

1 LOKOJA No. 4 John Holt Road, along Paparanda Square, Lokoja, Kogi State

2 JOS No 25, Ahmadu Bello Way, Jos, Plateau State

3 MARARABA Plot 664 Cadastral Zone A11, Mararaba Gurku, Karu, Nasarawa State

NORTH WEST

S/N BRANCH ADDRESS

1 KANO 1 No 55 Tafawa Balewa Way, Off Murtala Muhammad Way, Kano

2 KADUNA 11a Ali Akilu Road Kaduna

3 KASTINA No 109b Ibb Way, Kofar Kaura Katsina

4 GUSAU No 21 Canteen Road, Opposite CBN Gusau

5 SOKOTO No 5 Ahmadu Bello Way, Former Finbank Building, Sokoto

6 KANO 2 No. 13E Bello Road Kano

7 KABUGA Kabuga Shopping Complex, Along Buk / Gwarzo Road, Kano

8 ZOO ROAD Opposite Trade Fair Complex, Zoo Road, Kano State

9 SAMARU Ahmadu Bello University Road, Opposite Main Gate, Samaru, Zaria,Kaduna State

10 HOTORO Plot 140, Opposite NNPC Depot, Maiduguri Road, Hotoro Kano

6 | P a g e


11 KEBBI Plot 20 Ahmadu Bello Way, Birnin-Kebbi, Kebbi State

12 KADUNA 2 Farida Ventures Building, Kano Road, Kaduna

13 PZ, ZARIA N0. 2 Crescent Road, Sabon Gari, Zaria � Kaduna

14 FUNTUA No 69, Sokoto Road, Funtua, Katsina state

NORTH EAST

S/N BRANCH ADDRESS

1 GOMBE No 8 New Market Road, Commercial Area Gombe

2 MAIDUGURI No 18 Shehu Laminu Way, Maiduguri

3 ATBU Abubakar Tafawa Balewa University, Bauchi

4 YOLA No 14, Aliyu Mustapha Way Opposite New Modern Market Yola, Adamawa State

5 BAUCHI No 2 Mohammed Bello Kirfi Road, Off Ahmadu Bello Way, Bauchi

SOUTH

S/N BRANCH ADDRESS

1 IBADAN No.3 Fajuyi Road, Dugbe Ibadan

2 ILORIN No.11 Unity Road, (Beside Kasmag Transport) Ilorin, Kwara State

3 IKEJA De Plazaville Shopping Complex, 119 Awolowo Way, (Allen Round About) Ikeja, Lagos State

4 APAPA No. 17 Wharf Road, Opposite Eleganza Plaza, Beside Unity Bank, Apapa, Lagos

5 IKOYI 39, Awolowo Road, Ikoyi, Lagos

6 MARINA No. 2/4 Davies Street, Kingsway Building, Beside Eco Bank, Marina, Lagos

7 UNILORIN Main Campus University of Ilorin, Kwara State

8 PORT HARCOURT 186 Abba Road, (Opposite Water Line) Port Harcourt, River State

9 Saki Oke- Dio Junction, Secretariat Road, Saki � Oyo State

10 Osogbo N0. 4, Gbongan Road, Oshogbo � Osun State

11 Iwo Road S7/264, Iwo Road, Ibadan � Oyo State

7 | P a g e


BOARD OF DIRECTORS

ALHAJI (DR.) UMARU ABDUL MUTALLAB, CON � CHAIRMAN BOARD OF DIRECTOR Prominent business leader and former minister of the Federal Republic of Nigeria, chartered accountant and banker; former Executive Vice Chairman and Managing Director of United Bank for Africa (UBA) � the third largest bank in Nigeria and an affiliate of BNP Paribas. Also former Chairman of First Bank of Nigeria Plc, the oldest and biggest bank in Nigeria. He is a holder of one of the highest national awards in Nigeria � Commander of the Order of the Niger (CON). Abdul Mutallab has also been conferred with the Fellowship of both the Association of Chartered Certified Accountants (ACCA) of UK and the Institute of International Bankers Association (FIBA) of the United States of America.

HASSAN USMAN FCA. � MANAGING DIRECTOR/CEOA trained accountant, Mr. Hassan Usman graduated with a first class degree in Accounting in 1985 from Ahmadu Bello University, Zaria, Nigeria and became an associate Member of ICAN in 1989. He obtained a Post Graduate Diploma in Management in 1995 from Maastricht School of Management. Mr. Hassan also attended the Oxford University Advanced Management Programme in 2002. He worked as the Financial Controller of Nigerian Development Company Limited, Kaduna until he joined NAL Merchant Bank PLC where he served as the Financial Controller and Treasurer respectively between1996-2001. Mr. Hassan had a brief stint with Inland Bank where he served as General Manager, Banking Services before re-joining NAL Bank as Deputy General Manager and Head, Business and Financial Advisory Group. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN). He was appointed as the Managing Director of Jaiz Bank Plc by the Board of Director in May 2016.

MAHE ABUBAKAR � DEPUTY MANAGING DIRECTOR A seasoned banker of standing repute with over 20 years cognate banking experience, Abubakar Mahe is steering the business development drive of Jaiz Bank Plc. He is also a qualified dealing clerk of the Nigerian Stock Exchange. Prior to joining Jaiz Bank; Mahe was the Group Zonal Head of Zenith Bank Plc in charge of the Northwest region. Before joining the banking sector in 1994, Mahe worked with the Nigerian International Securities Limited (NISEL), a member of Nigerian Stock Exchange and a subsidiary of Continental Merchant Bank Plc from 1991 to 1994.Between 1990 and 1991, he worked as the dealing clerk/ head of the Lagos office of the Gidauniya Investment & Securities Limited. Born in the ancient city of Kano, Mahe obtained a Bachelor of Science Degree in Business Administration from Ahmadu Bello University in 1984. In 1987, he completed his Master Degree in Business Administration from the same institution. He attended several trainings in and outside Nigeria including High Potential Leader: Accelerating Your Performance at Wharton School, Pennsylvania, USA; High Performance People Skills, London Business School; and Senior Management Programmes, Lagos Business School. He was appointed as the Deputy Managing Director of Jaiz Bank Plc by the Board of Director in May 2016.

8 | P a g e


ABDULFATTAH OLANREWAJU AMOO � Executive Director, Operations/CFO AbdulFattah Amoo is a shrewd professional banker, astute strategic planner and executor. He is well versed in both Islamic and Conventional banking business models. He possesses almost 3 decades cognate experience which cuts across professional Accounting practice, Banking and Finance, out of which almost 16 years has been spent at senior management positions. In the Banking & Finance sector, AbdulFattah had set up Financial Control function of CSL Group, managed the Operations, South-South/South-East regions, e-Business Group, Retail Banking and Non-interest Banking (Sales) business of Sterling Bank Plc. He is skilled in Talent Management, Strategic Networking and Excellent Peoples� Management, among others. AbdulFattah is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and an Associate member of the Chartered Institute of Taxation (CITN), among others. He also holds a B.Sc. in Economics and Masters in Business Administration from Edo State University (now Ambrose Alli University) and has attended several local and international courses in strategic management, leadership, etc. AbdulFattah effectively joined the Board of Jaiz Bank on 6th November 2017.

DR. AMINU ALHASSAN DANTATA, CON, MEMBER, BOARD OF DIRECTORS A renowned business man, he began his career as produce buyer in 1949 in the family business of Alhassan Dantata and Sons Limited. He became the Chairman and Managing Director of the Company, in 1960, a position he holds till date. Dr. Dantata was a member of the Steering Committee of the Nigerian Industrial Development Bank (now Bank of Industry, BOI), and served as a Director of the Bank between 1962 and 1966. He has led several trade missions to several countries across the world.

PROFESSOR TAJUDEEN ADEBIYI, MEMBER, BOARD OF DIRECTORS He was between 2003 and 2005, the Treasurer and Investment Consultant to OPEC Fund (Vienna, Austria), where he managed an approximately US $5 billion investment portfolio. He is a holder of an MBA (Finance, Accounting and Quantitative Analysis) and, a Ph.D. in Banking & Finance from the University of Maryland, USA. Prof. Adebiyi spent 20 years (1983-2003) at the Islamic Development Bank, Jeddah, serving at different levels in project management, treasury, financial analysis and portfolio management. He is a visiting Professor of portfolio investment management and quantitative analysis to the Bowie State University, Maryland, USA.

ALHAJI (DR.) MUHAMMADU INDIMI, OFR, MEMBER, BOARD OF DIRECTORS He is a distinguished and highly successful businessman. Dr. Indimi is the sole Founder and Chairman of Oriental Energy Resources, Limited. He has over 20 years� experience in the Nigerian Upstream Oil and Gas sector. Dr. Indimi is an astute business man with a notable presence in the international business arena. He also serves as the Chairman of M & W Pump Nigeria Limited; which has partnered with MWI Corp of Deerfield Beach, Florida. He is a founder of many successful indigenous companies and sits on the board of several privately owned companies encompassing all sectors of the economy. Dr. Indimi is a humanitarian and a philanthropist and

9 | P a g e


has received numerous awards as well as honorary doctorate degrees from notable Universities in Nigeria, Ireland and the United States.

MALLAM FALALU BELLO, OFR, MEMBER, BOARD OF DIRECTORS A1978 law graduate from Ahmadu Bello University, Zaria. Nigeria. He started his legal career with the Kaduna State Government as Magistrate II and subsequently moved to Northern Nigeria Investment Company Limited as Senior Executive/Acting Company Secretary. He was later appointed Kaduna State Government Commissioner for Trade and Industry. He was appointed Managing Director /CEO of Habib Nigeria Bank Limited in 1994 until 1998 when he was appointed Managing Director/CEO of Intercity Bank Plc. He resigned as Vice Chairman/Managing Director in 2001. In 2001, he was appointed Managing Director of Nigerian Agricultural Development Bank Limited. Mallam Bello holds the National honour of the Officer of the Federal Republic (OFR). He recently resigned from Unity Bank as the Managing Director/CEO.

MALLAM NAFIU BABA-AHMED, MNI, MEMBER, BOARD OF DIRECTORS He is a 1978 law graduate from Ahmadu Bello University, Zaria, Nigeria. He started his banking career as a legal officer with United Bank for Africa Plc in 1980 from where he proceeded to Nigeria Merchant Bank in 1982. He was an Assistant General Manager/Company Secretary & Legal Adviser with First Interstate Merchant Bank Limited and subsequently, became a Director/Legal Adviser & Board Secretary at Nigerian Deposit Insurance Corporation (NDIC). He was also, a Director representing CBN/NDIC on several banks that were taken by both the Central Bank of Nigeria/NDIC for turnaround. He has attended several professional courses abroad including those of Queens Mary College, University of London, in International Commercial Law, Institute of Management Development (IMD), Switzerland, as well as Senior Executive Development Program in Kuala Lumpur, Malaysia.

DR. MOHAMED ALI CHATTI, MEMBER, BOARD OF DIRECTORS He is a representative of the Islamic Development Bank. He is an investment specialist and currently works in the Investment Department of IDB. Between 2010 and 2012, he was in the Young Professional Programme of IDB. He also led a team of 15 - 20 on the French Council of Islamic Finance as Chief of the Research and translation to translate the AAOIFI standards and the CIBAFI modules. A PhD holder in Management Sciences, Dr. Chatti attended many seminars and presented different papers on Islamic Finance. He has also contributed to some published books on Islamic Finance. He is fluent in Arabic, French and English Languages.

HRH, (ENGR.) BELLO MOHAMMED SANNI, OON, MEMBER, BOARD OF DIRECTORS HRH, is a holder of Bachelor�s Degree in Engineering from Ahmadu Bello University, Zaria, Nigeria in 1973 and a Master�s Degree in Civil Engineering from University of Dundee, Scotland in 1977. He is currently the

10 | P a g e


Emir of Bakura, Zamfara State, Nigeria. Prior to becoming the Emir, HRH held several notable positions in some of the most prestigious corporate private and public organizations in Nigeria, including Director, Building and Engineering Services, Central Bank of Nigeria (CBN) between 1989-1996, Senior Assistant General Manager, Union Bank of Nigeria (formerly Barclays Bank).

ALHAJI (DR.) MUSBAHU MOHAMMAD BASHIR, MEMBER, BOARD OF DIRECTORS He is s the Chairman of Althani Group of Companies, and Cobalt International Services Limited since 2004. He is also a director in the following companies, Bento Drill Nigeria Limited 1995, Offshore Technologies International Limited 1995, and Resource capital group 1995. Cobalt International Services Limited is a pre-shipment inspection agent for dry goods and bulk liquid cargos. They are currently inspection agents for oil and gas exports in the country. Alhaji Bashir also worked with Hammad development facilities in 1987 and Jadai Diversified Services in 1989. He obtained a BBA in Business Management from the American University in 2002 London, an advanced diploma in business management 1998 from Tafawa Balewa University, Abuja campus, and a National Diploma in Irrigation Engineering from the Kaduna Polytechnic 1987.

ALHAJI (DR.) UMARU KWAIRANGA, MEMBER, BOARD OF DIRECTORS He is an experienced investment expert with over nineteen years� experience in Capital Market, Banking and the Real Sector. He possesses a first Degree in Business Administration from University of Maiduguri, an MBA from Edo State University in addition to an M.Sc. Finance and Corporate Governance from Liverpool John Moores University, United Kingdom. Alhaji Kwairanga has attended several courses and training programs in fields relating to finance, investment and money market in reputable institutions including the Harvard Business School, New York, Institute of Finance and Euro Money. He is a professional certificate holder of the Chartered Institute of Stock brokers, Certified Pension Institution of Nigeria and the Abuja Commodities & Securities Exchange. He has been Managing Director of a top notch stock broking firm for over a decade and a director in several blue chip organizations including Chairman of Ashaka Cement Company. He was a member of the Nigerian Vision20:2020, National Technical Working Group (NTWG) on Public Sector Thematic Area. He is a well-travelled executive with extensive senior level management experience and unimpeachable ethics and integrity.

ALHAJI MUKTHAR SANI HANGA, MEMBER, BOARD OF DIRECTORS He is a renowned business man and an administrator. He was one time Managing Director of Hanga Line Limited, Special Adviser to Governor Kabiru Gaya of Kano State on Sport and Youth Development, Member Board of Directors NISER Ibadan, Chairman NYSC Committee, Kano, Chairman Kano State Export Actualization Committee and Director, Northern Nigeria Investment Limited, Kaduna.

11 | P a g e


MEMBERS OF JAIZ ADVISORY COMMITTEE OF EXPERTS (SHARI'AH BOARD)

PROFESSOR DR. MONZER KAHF Prof. Monzer Kahf is the Chairman, Advisory Committee of Expert (ACE). He is a leading scholar, Professor and a consultant in Islamic banking and finance. He has been drafting and reviewing Shari�ah contents of finance agreements, by-laws and operational systems for Islamic financial institutions in many countries around the world including USA, Canada, Switzerland, Saudi Arabia and Trinidad. Since the middle of 2008 He has been professor of Islamic Finance and Economics at Qatar the Faculty of Islamic Studies, Hamad University, in Doha, Qatar. He served as a visiting Professor of Islamic Finance at the International Centre for Education in Islamic Finance (INCEIF) based in Malaysia, summer 2010. In the year 2004/2005, he was a Professor of Islamic Economics, Finance and Banking at Graduate program of Yarmouk University, Jordan and he served as a senior research economist at the Islamic Research And Training Institute if the Islamic Development Bank, IDB, in Jedda from 1985 to 1999. He has written 38 books and published over 91 articles in English and Arabic on Trusts, Awqaf, Zakah, Islamic Finance and Banking and other areas of Islamic economics. Since 1973 till today he has been contributing to conferences, seminars and training programs across North America, Europe, Africa, Asia, Far East and the Middle East. He holds PhD in Economics from the University of Utah, Salt Lake City, Utah, March, 1975, High Diploma in Social and Economic Planning, UN Institute of Planning, Damascus, Syria, 1967, B.A. in Business from the University of Damascus, Damascus, Syria, and 1962 which earned him the President�s Award for best University Graduating Student, July, 1962. Prof. Kahf was awarded the Islamic Development Bank (IDB) Prize for Islamic Economics in 2001. He speaks English, Arabic and a little of French.

PROFESSOR MUHAMMAD LAWAL BASHAR Prof. Dr. Muhammed L. Bashar is a member of the ACE. , Advisory Committee of Expert � Professor Muhammed Bashar is the Head of the Department of Economics, Usman Dan Fodio university, Sokoto, Nigeria. He is a well-published, prolific writer. He has a B.A. (Hons.) Economics from Jamia Milla Islamia, New Delhi, an M.A. (Economics) from Jawaharlal Nehru University, New Delhi, a Ph.D (Economics) from Usman Dan Fodio University, Sokoto. He studied the following courses at graduate level; Advanced Macroeconomics, Fiqh (Islamic Jurisprudence) for Economics, Development Economics, Islamic Banking and Finance and Public Finance. He is proficient in Hausa, English, Hindi and Arabic.

DR. MUHAMMAD ALHAJI ABUBAKAR Dr. Muhammad Alhaji Abubakar, Member, Advisory Committee of Expert - Dr. Muhammad Alhaji Abubakar has over 20 years' experience in Islamic Scholarship. He obtained his degree, M.A and Ph.d (in Islamic jurisprudence) from Islamic University of Madinah, Saudi Arabia. From 2002 to 2008, Dr. Muhammad was a Reviewer of academic research at the Deanship of Academic Research, Islamic University of Madinah, Saudi Arabia. He was also an Assistant Supervisor, Department of Student Supervision of the same University. Dr. Muhammad had also at various times rendered support services to the General Court of Medinah in area of translation. He has Published articles on Islamic

12 | P a g e


commercial jurisprudence and other areas of Islamic law in refereed academic journals (local and international). He also published articles in some local dailies in Hausa language. He attended learned conferences within and outside Nigeria. He is actively engaged in propagating Islam. Dr Muhammad speaks Arabic, English, Kanuri and Hausa. He is currently a lecturer at the Department of Sharia, Faculty of Law, University of Maiduguri, Chairman, Da�awah Committee of Imam Malik Islamic Center, Maiduguri, Chairman Shura Council, Indimi Islamic Trust, Maiduguri and member, Union of African Scholars.

SHAIKH ABDULWAHAB ABDALLAH MUHAMMAD Shaikh Abdulwahab is a renowned Islamic Scholar and preacher who has spent major part of his life in teaching and preaching of Islam. Together with Late Shaikh Ja�afar Mahmud Adam, they have contributed immensely in creating Islamic awareness within and outside the country. He is a graduate of Darul Hadith in Makkah and Islamic University of Madinah, Kulliyatul Hadith Wa Darasat al Islamiyya (Faculty of Hadith and Islamic Knowledge). He is the Chairman of Bin Baz Foundation, Member, Shari'ah Commission of Zamfara State and member, National Supreme Council for Islamic Affairs (NSCIA). As part of his efforts towards propagation and development of Islam, Sheik Abdulwahab has written several books on various topics including but not limited to Fatwa on Marriage and Divorce, Fatwa on Bid�a (innovation), issues of Hisba, Fatwa on Hajj (pilgrimage), Fatwa on Fasting among others. Some of his activities include weekly preaching at Usman Bin Affan Mosque Gadon Kaya, Weekly preaching for women and Sahihul Bukhari at Sharada, Fatwa with Radio Kano and a weekly program with the popular Sunnah TV. The Shaikh is married with children.

DR. AHMAD BELLO DOGARAWA Dr. Ahmad Bello Dogarawa is a Senior Lecturer with the Department of Accounting, Ahmadu Bello University, Zaria, Nigeria. He received his B.Sc. in Business Administration from Ahmadu Bello University, Zaria, Nigeria; Master of Banking and Finance (MBF) from Bayero University, Kano, Nigeria; and M.Sc. Accounting and Finance; and Ph.D. Accounting and Finance from Ahmadu Bello University, Zaria, Nigeria. In addition, he obtained Professional Diploma in Education (PDE) from Institute of Education, Ahmadu Bello University, Zaria, Nigeria and belong to several professional bodies. His area of interest is Banking, Islamic finance, Entrepreneurship and Human resource management. Dr. Dogarawa has travelled throughout Nigeria and some neighbouring countries to present papers and give sensitisation lectures on various topical issues particularly Islamic banking and finance, and Islamic perspective of economic empowerment, investment and poverty eradication, and has participated in training of staff of various public and private sector organisations, as well as members of professional bodies and business communities in Nigeria. He has published more than 25 articles in refereed academic journals (local and international), presented over 50 papers at local and international conferences and published 6 Islamic books in Hausa and English Languages. He is currently the Head, Department of Accounting; Member, ABUTH Health Research Ethics Committee; and Member, Capacity Building and Certification Committee of the Chartered Institute of Bankers of Nigeria.

13 | P a g e


SHAIKH (DR). ISA ALI IBRAHIM PANTAMI Dr. Isa Ali Ibrahim Pantami is a Jumu�ah chief Imam, university professor and a writer. He was educated in Nigeria, United Kingdom and Saudi Arabia.Dr Isa Ali Ibrahim Pantami holds a BTech, MSc (Computing & IT) and also MBA in (Technology Management). In addition, he also holds a PgCert in research methods, PgCert in teaching and also a PhD from the best modern university in the UK. Prior to that, he memorized the Qur�an by heart at the age of 13 or 14. Furthermore, Dr Ibrahim Pantami has published 15 Islamic books and 9 international journal articles in reputable journals and many conference papers. He has been leading Jumu�ah prayer for over 20 years in both Nigeria and the United Kingdom. He has been invited to present lectures in many countries, such as the UK, Malaysia, Germany, France, etc. He is also a Shurah member of the Supreme Council for Shari�ah in Nigeria and a member of many other national and international council. In addition, he learnt Islamic knowledge from many prominent international scholars in various Majaalis. These scholars include, Shaykh Muhammad Umar Fallatah, Shaykh Muhammad Saleh Al-Uthaymeen and recently Shaykh Abdulmuhsin bn Abbad among othersDr Ibrahim Pantami has been a lecturer in a university for almost 15 years. He is currently a professor at the Islamic University of Madinah, Saudi Arabia (al-Jamiatul- Islamiyya). He teaches at the new Faculty of Computing and Information Systems of the university. He also serves in various university committees, such as Accreditation Committee, Staff Training Committee, etc.

During the period under review, DR. Isa Ali Ibrahim Pantami has put on hold his membership of Advisory Committee of Expert due to national official engagements.

14 | P a g e


JAIZ BANK PLC.

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 7th Annual General Meeting of Jaiz Bank Plc. will be held at Shehu Musa Yar�Adua Center, Central Business District, Abuja on ��.., June ��., 2019 at 11.00am to transact the following business:

ORDINARY BUSINESS:

1. To lay before Members for approval, the Audited Financial Statements of the Bank for the period ended December 31, 2018, together with the Reports of the Directors, Auditors, and Audit Committee thereon.

2. To re-elect Directors. 3. To authorize the Directors to fix the remuneration of the Auditors. 4. To elect members of the Audit Committee.

SPECIAL BUSINESS

5. To approve the remuneration of the Non-Executive Directors:

NOTES:

1. PROXYA member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his stead. A proxy need not be a member of the Company. A form of proxy is enclosed in the Annual Report and can also be downloaded from the Bank�s website at http://www.jaizbankplc.com.

For the purpose of this meeting, a proxy form must be completed, stamped, and deposited at the office of the Registrar, Africa Prudential Plc. (Formerly UBA Registrars Limited) 220B Ikorodu Road, Palmgrove, Lagos, Nigeria, not later than 48 hours before the time fixed for the meeting.

2. NOMINATION TO THE AUDIT COMMITTEE

In accordance with Section 359(5) of the Companies & Allied Matters Act, any member may nominate a shareholder as a member of the Audit Committee by giving notice in writing of such nomination to the Company Secretary at least 21 days before the Annual General Meeting. A member of the Audit Committee is required to be financially literate and be knowledgeable in internal control processes. Consequently, a detailed resume should be submitted along with each nomination.

1. ELECTION AND RE-ELECTION OF DIRECTORS

a. Pursuant to Section 259 of the Companies and Allied Matters Act, the following Directors shall retire by rotation and being eligible, have offered themselves for re-election: 1. Alhaji (Dr.) Aminu Alhassan Dantata, CON

15 | P a g e


2. Alhaji (Dr.) Umaru Kwairanga 3. Mallam Falalu Bello, OFR

b. Special Notice is hereby given pursuant to Section 256 of the Companies and Allied Matters Act that Alhaji (Dr.) Umaru Abdul Mutallab, CON, HRH. Engr. Bello Muhammad Sani, Alhaji (Dr.) Muhammadu Indimi, Alhaji (Dr.) Aminu Alhassan Dantata, CON and Prof. Tajudeen Adebiyi are over 70 years of age and have indicated their willingness to continue in office.

The Biographical details of Directors standing for election/re-election are provided in the Annual Report as well as the Bank�s Website stated above.

2. CLOSURE OF REGISTERThe Register of Members and Transfer Books of the Bank will be closed from �. May to �..June, 2019 (both days inclusive) to enable the Registrars prepare the Register of Shareholders for the meeting.

3. RIGHTS OF SECURITIES� HOLDERS TO ASK QUESTIONS Securities� Holders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and such questions must be submitted to the Company on or before Thursday �. June, 2019.

4. UNCLAIMED SHARE CERTIFICATES The Bank notes that some share certificates were returned through the post and marked �Unclaimed�, therefore, any Shareholders with �unclaimed share certificates� are advised to contact the Company�s Registrars at the address stated above, or the Company Secretary at the Bank�s Registered address stated below, or any of the Bank�s es. Shareholders are also encouraged to update their contact information as such information change. Change of Address Form can be downloaded from the Bank�s Website stated above. All requests should be addressed to the Registrars of the Bank or the Company Secretary at the Bank�s registered address stated below.

A copy of this Notice, Biographical details of Directors standing for election, re-election, and other information relating to the meeting, as well as the full version of the Annual Reports and Financial Statements can be downloaded from the Bank�s website stated above.

5. E-REPORT In order to improve delivery of our Annual Reports, we hereby request that shareholders who wish to receive Annual Reports and other statutory reports of Jaiz Bank Plc in electronic format should download the E-Report Request Form from the Bank�s Website stated above, complete and return the form to the Bank�s Registrars or Company Secretary for further processing.

16 | P a g e


By Order of the Board

RUKAYAT O. SALAUDEEN Company Secretary Jaiz Bank Plc. Kano House No. 73 Ralph Shodeinde Street Central Business District Abuja Federal Capital Territory

5 March, 2019

17 | P a g e


CHAIRMAN�S STATEMENT

Dear Shareholders and Invited Guests,

All Glory be to Allah, the Cherisher and Sustainer of the Universe. May His peace and mercy

be upon the Noble Prophet.

It is indeed my great pleasure welcoming you this morning to our 7th Annual General Meeting

and it is further an honour presenting to you the Annual Report and Accounts of our Bank

for the year ended 31st December 2018.

Results

I am highly delighted to report that 2018 has marked the fifth consecutive year (after break-

even) of income growth and profitability. Notwithstanding slow global economic recovery

and despite the dearth of non-interest (Islamic) banking liquidity management instruments,

the Bank continued to perform strongly. The Bank�s performance in 2018 once again

demonstrates our ability to deliver sustainable value for our shareholders.

Our performance in 2018 further reflects the viability of our business model. Once again,

we have established our determination to stand by our customers, using our capital and

deposit base to support them in way that matters all the time. Our total financing to

customers increased by nearly N6.34billion, about 14.7% per cent growth. We continued to

offer more financing to key sectors of the economy while addressing their critical needs such

as home mortgage to households and working capital to the micro, small and medium-sized

enterprises (SMEs).

My Fellow Shareholders, from our performance trajectory over the years, you can see that

our Bank is taking those sustainable and steady �baby steps� that will lead to �giant strides�.

And above all, the �giant strides� are bound to happen very soon.

18 | P a g e


INTRODUCTION OF IFRS 9

The International Accounting Standards Board (IASB) in 2014, issued a new accounting

standard on financial instruments called IFRS 9, which replaced the existing standard, namely

International Accounting Standard (IAS) 39, and which has a mandatory effective date of 1

January 2018. IFRS 9 inter alia specifies how an entity should classify and measure financial

assets and liabilities. One of the fundamental changes that IFRS 9 introduces is the concept

of Expected Credit Loss (ECL) provisioning. This new principle replaces the current incurred

losses model and will materially change the way in which banks, are required to approach

and account for impairments for credit losses.

IFRS 9 is not just local to Nigerian banks, it has come to stay a global standing. According to

the Bank for International Settlements (BIS), the great financial crisis of 2007-09 highlighted

the systemic costs of a delayed recognition of credit losses on the part of banks and other

lenders, and the application of the prevailing standards at the time was seen as having

prevented banks from provisioning appropriately for credit losses likely to arise from

emerging risks. These delays resulted in the recognition of credit losses that were widely

regarded as �too little, too late�, and gave rise to questions of procyclicality by spurring

excessive lending during the boom and forcing a sharp reduction in the subsequent bust.

This is the first Annual Account prepared under IFRS 9 by Jaiz Bank. The adoption of the

new standard gave rise to higher levels of credit impairments with attendant pressure on

economic capital of the Bank.

My dear shareholders, we need to chew the implication of this standards in relation to our

commitment to keep a well-capitalised bank. The Board of this Bank shall take adequate

measure and propose to shareholders how the Bank should respond to this regulatory

challenge.

19 | P a g e


Board Developments

Strong management and governance are key components of our sustainable growth. In the last

two years, following an extensive review, we have changed our board committee composition

to reinforce the highest standards of governance. These changes take into account internal

governance trends and those arising from emerging regulation by the Financial Reporting

Council of Nigeria.

Our people

Like I always like to reiterate, the success of our business derives from our values, our unique

business model and above all, the depth of talented young people we have across the Bank. The

results we are reviewing today is the summation of their individual efforts.

2018 was another year of wonderful performance. We have demonstrated that we pursuing the

right strategy in the right market segments. We shall continue to focus on achieving consistent

and sustained value for our shareholders as we dwell into 2019 with strong optimism.

Thank you

Alhaji (Dr) Umaru Abdul Mutallab, CON Chairman

CHIEF EXECUTIVE�S STATEMENT

Overview

All praises due to Almighty who spared our lives throughout 2018 and placed us among those that witnessed yet another year - 2019. I pray that the current year brings in greater rewards for our economy and institution.

The global economy in 2018 was still in a recovery mode, it only grew at an average of 1.75% which was lower than the International Monetary Fund�s (IMF) projection of 1.9%. Nigeria that freshly came out of a recession also witnessed slower growth with an average GDP growth of 1.75% during the year. The Banking sector hard its fair share of the slow growth which systemically affected banks in the form of shrinking margins, high non-performing loans, liquidity squeeze and capital adequacy constraint. The year proved challenging but indeed we persevered, not only did we maintained prior year�s bottom-line performance but we surpassed it at last by a quarter.

20 | P a g e


Performance Review Amidst couple of challenges that were encountered in year 2018, major accomplishments were still recorded nonetheless. Some of these achievements are:

A stellar increment of 25% was recorded for Balance Sheet size in 2018 to N109 billion. In the past few years, it has been growing steadily at a double-digit rate of 20% which is encouraging

It is worthy to note that Income After-Tax rose favourably by 55% from N537 million (2017) to N834 million in the focus period (2018).

Total Customer Deposits surged by 25% from N68billion in 2017 to N85billion in year 2018 due to improved customer service delivery and customer confidence.

Increase in Income-Generating Assets by 37% from N50.64billion in December 2017 to N69.18billion by December 2018.

Return to Investment Account Holders The calculation and distribution of profit between Mudaraba Investment Account Holders (IAH) and a bank is one of the central performance metrics in Non-interest (Islamic) Banks. The profit sharing, risk bearing nature of this kind of investment deposit makes it somewhat a quasi-equity. But unlike equity holders they share not in the bottom-line (Profit after Tax) but rather in the top-line (Gross Income). For this reason, they can get a share of profit even when a bank is yet to attain break-even. For an Islamic Bank to be profitable, a minimum critical mass must be achieved in terms of deposit volume as well as appropriate participation factor (the proportion of investment deposit that qualifies to partake in profit sharing). In the case of Jaiz Bank, break-even was attained in 2014 after the attainment of critical deposit size couple with the right participation factor.

During the reporting period, the Bank paid out more return to IAH (37% higher than what was paid out in 2017). The material increase in this expense partly supressed the attainment of the targeted bottom line for the year. A material change in the deposit mix or the IAH�s participation factor can drastically affect the profitability of an Islamic Bank. Up till October 2017, the participation factor of IAH in the Bank has been 67.5% of every Naira they deposited. But thereafter, the factor was changed to 90% as a result of a Central Bank regulation that approves the exemption of Mudaraba Deposits from Cash Reserve Requirement. This change in participation factor brought about an increase in profit paid to IAH from N1,397 million in 2017 to N1,917 million by 2018. Consequently, profit share paid to them as % of Gross Income from Financing and Investment grew from 20% in 2017 to 26% in 2018 (a growth of about 30%).

Outlook We are poised to creating a responsible business that better meets our customers� needs and a culture where our employees put customers first. This is key to our long-term success and to the fulfilment of our aim to become the clear �Leader of Ethical Banking in Sub-Saharan Africa� which means being the best financial service provider for customers to bank, for employees to pursuit careers and for shareholders to invest. Being an exceptional institution with a humble beginning and optimistic outlook, the Bank seeks to continuously redefine standards in all it does. As we toil towards the actualisation of our current strategic plan, we shall remain ever committed to the development of Micro, Small and Medium enterprises. Our engagement with the financially excluded is going to be boldly innovative as well as transformative.

21 | P a g e


I will like to me use this opportunity to appreciate the Board of Directors for their contributions, Shareholders for their patience, Customers for their confidence and Employees for their commitment to the bank. On this note, I look forward to many more remarkable achievements in 2019.

Thank you

Hassan Usman, FCA Managing Director/Chief Executive

JAIZ BANK SUSTAINABILITY REPORT 2018

Jaiz Bank Plc is committed to providing financial inclusion to a large segment of the society that is currently financially excluded, we would ensure that there is deep penetration of financial services to the ordinary citizenry especially at the rural communities.

Our business model is such that our definition of a profitable venture does not necessarily stop at monetary profits alone but also include social sustainability based on non-destructive activities that are not only be economically viable, but socially relevant and environmentally responsible.

We seek to lead by example, by considering the direct impacts on the environment and society arising from our own business operations. We are working to be a driving force for good in the communities and natural environment in which we operate by finding ways to avoid or mitigate negative impacts whilst innovating new means to achieve positive gains.

22 | P a g e


As a NIFI (Non Interest Financial Institution) operating under Islamic financial principles, sustainability is not a choice but rather a must, because our accountability in respects of inter-human/environmental transactions is ultimately to Allah. We are 100% committed to doing what is right- that extends from how we run our business and how we relate to customers to how we treat the environment. From employing skilled ethical staff to delivering product innovations and helping the community, we are absolutely focused on providing a better future for our stakeholders. The adoption and implementation of NSBP has helped us to achieve our targets.

In our bid to continuously cogitate the impact of our business operations to our environment we implemented the following during the year:

Providing financial inclusion to a huge section of the society that is currently financially excluded, especially women, through agency banking and also the use technology to reach the unbanked.

Sustainability reporting with focus on the call to action for business contribution towards SDGs (Sustainable Development Goals), to end poverty, protect the planet, ensure peace and prosperity.

Women empowerment and gender equality towards achieving the 2013 SDGs. More investment in sustainable development.

All non-permissible income classified through shariáh screening is donated to charity for the benefit of the less privileged.

As part of efforts to reduce travel mileage and our CO2 foot print, the bank connects with its other location via teleconferencing for performance review meetings, investment committee meetings etc.

The Bank is providing access to banking services and opening new es that are friendly to physically challenged customers.

POCs being carried out to move and run some of our es and offices on solar power, plans are also underway to deploying ATMs that are powered using alternative sources of energy (Solar).

The bank employee�s participation in voluntary community activities.

Monitor the E&S reports after rendering same, thus, to entrench sustainability into the practices beyond just reporting.

Diving beyond transaction level, to further ensure that customers are implementing the sustainable principles.

GRI Standard training for NSBP Team for better understanding of the GRI reporting standard with emphasis on 3 universal areas: GRI 101, GRI 102, GRI 103.

Plan to enter for the NSBP annual awards and projects and participate in the 3 categories currently applicable for the Sustainable Banking achievements.

23 | P a g e


The Bank integrates environmental and social considerations into decision making processes relating to our Business Activities to avoid, minimise or offset negative impacts.

In addition to the shariáh compliance screening, the investment credit appraisal process also include consideration for environmental and social risks to ensure that sustainability principles are better imbibed into our operations.

Attendance of all International Finance Corporation training and workshop by NSBP Team members.

Vendors and suppliers screening for environmental and social risks, child labour, human rights violation.

Actively involved in all CBN/NSBP trainings, seminars, workshops and meetings.

At Jaiz Bank, we recognize that our success is not only measured in terms of profits and growth, it is also how we engage with and support our customers, our communities, our employees, and how we monitor our impact on the environment.

For us Sustainability means operating our business in a way that meets the needs of our stakeholders, preserving our environment and ensuring social well-being today, and in the future.

CORPORATE SOCIAL RESPONSIBILITY (CSR) REPORT

CSR is an integral part of our Banks culture. As a responsible Bank, we respect the interests of our stakeholders�our shareholders, employees, customers, suppliers, teaming partners, and the wider community�and we actively seek opportunities both to improve the environment and to contribute to the well-being of the communities in which we operate.

Jaiz Bank recognizes society�s increasing expectations of our industry and our company. We are committed to living up to stakeholder expectations as we endeavor to increase the positive social impact we have on our stakeholders. Our purpose is to improve and extend people�s lives thus our Mission � Making life better through ethical finance. We aim to develop an interest-free banking and deliver it to as many people as possible.

24 | P a g e


Building trust with our stakeholders is critical to our ability to deliver on our purpose, as well as our long-term financial performance. We have a clear strategic path that we believe will further accelerate our journey to build trust with key stakeholders and society.

As a full-fledged Non-Interest (Islamic) Bank established to bridge the identified gaps in the society, we have been able to establish a robust approach that ensures that the Bank gives back to the society through effective social economic initiatives in terms of reaching their need through the basic provision of needs in clear cut areas. As one of the core principles of sustainability, we have provided corporate and otherwise donation to individuals as a blueprint in our value creation agenda.

CSR FOCUS AREAS Because CSR is also rooted in the concept that the impacts of our business operations and services fall into and affect different stakeholders, Jaiz Bank has developed a multidimensional approach to achieve our vision. The categories shown below represent our four areas of CSR and the key activities associated with them:

Environment - The effects our Bank and our employees have on our surroundings.

Workplace - How our Bank provides a work environment that promotes health, safety, security, inclusion and diversity, and professional development opportunities.

Marketplace - How our Bank interacts with our external stakeholders - our customers, business partners, and suppliers�by demonstrating our responsibility through leadership in quality, ethics, and transparency.

Society - The positive impacts our Bank and our employees have on the communities in which we live and work.

Some of our significant activities in 2018 are highlighted in the table below.

Environment Workplace Marketplace Society

Our Drive to Clean environment was further projected by the beautification and renovation of Gidan Dare Roundabout, Western Bye-Pass, Sokoto.

The BSI group recertified the Bank with the Business Continuity Management system which complies with the requirement of ISO 22301: 2012

In October, the Business Day honored Jaiz Bank with its Non-Interest Bank of the Year Award for our contributions to the development of Non-

1. We partnered with International Institute of Islamic Banking and Finance, Bayero University, Kano in organizing 2018 Global Money Week with focus on:

Training 100 women in SME�s Panel Discussions- on Theme

�Money Matters Matter� with 250

25 | P a g e


Interest Banking in Nigeria.

Students from 25 Secondary Schools.

2. Children�s Day Celebration � Education Materials (Exercise Books, Biro, Ruler and Pencil) for School Kids.

We are committed to taking real, measurable and reportable action in these key areas, and making sure that we communicate about them clearly and transparently. We are also determined to learn from and share our experience identifying our key issues.

CSR GOVERNANCE Jaiz Bank Corporate Communications team champions our bank-wide commitment to CSR performance and transparency. This team engages with internal and external stakeholders to assess, prioritize, and monitor CSR issues. The team establishes corporate CSR strategy, drives processes for CSR governance, and provides guidance and coordination across business functions. CSR priorities are owned by the business functions, including Corporate Communications, and are integrated into ongoing business strategy and planning. Business functions set CSR goals, implement plans, and measure performance. Where a CSR priority requires multiple functions to engage, we establish cross-functional teams to implement our strategy and plans.

26 | P a g e


RESPECTING HUMAN RIGHTS IN A DIGITAL AGEAs we enable our customers to embrace and capture new opportunities driven by digital transformation, we also recognize our responsibility to ensure that transformation does not come at a societal cost. For this reason, we believe innovation must advance hand-in-hand with thoughtful policies and practices that respect the human rights of all people.

STAKEHOLDER ENGAGEMENT AND MANAGEMENTBridging what is possible means building connections and trust with our key stakeholders through regular dialogue. Outside views help us identify and prioritize emerging issues, better align our business to the society�s needs, share the findings of our research, and evolve our CSR strategy and programs. We also encourage our stakeholders to provide feedback on our performance and transparency. We partner with a wide range of organizations to shape and extend the reach of our CSR programs, including governments, nonprofits, multilateral organizations, and peers.

WELLNESS BENEFITSCreating a safe, supportive, and healthy work environment is part of Our People Deal. This includes giving employees the resources they need to stay well and care for others at home. We do this through a focus on safety in the workplace; health benefits that address physical, social and emotional needs; and flexible hours and technology that enable people to integrate work and home life.

At Jaiz Bank, we care deeply for one another and the world around us. We look out for each other as part of our day-to-day, even�and especially�amid the buzz of business. We know balancing life�s responsibilities and joys are personal to every individual. Our approach is not �one size fits all,� but rather �one size fits one.� We want to support our employees and their loved ones during life�s triumphs and challenges, and we design our global benefits to do just that. Comprehensive benefits, including medical, dental, and vision plans; disability coverage; and life insurance help employees stay healthy and secure their families� well-being.

However, we do not stop there� we meet employees where they are. Our Life-Connections health and fitness centers make it convenient for people to prioritize health and wellness. The centers feature health clinics, fitness areas, and personal coaches to assist employees and their families deal with stress, weight management, and more.

27 | P a g e


Report of the Directors for the year ended 31 December 2018

The Directors present their report together with the audited financial statements and auditors� report for the year ended 31 December 2018.

1. LEGAL FORM AND PRINCIPAL ACTIVITY

Jaiz Bank Plc was incorporated as a public limited liability company in 2003 and obtained a regional licence to operate as a non-interest commercial bank on 10th November, 2011. The Bank commenced operation on January 6, 2012. The Bank was issued a National Banking licence by the Central Bank of Nigeria in May 2016.

2. FINANCIAL SUMMARY To be populated by FINCON

31st December, 2018 31st December, 2017

N�000 N�000 Paid-up Share Capital 14,732,125 14,732,125 Risk Regulatory Reserve 1,461,316 2,267,029 Retained Earnings (4,595,25I) (4,244,308) Share Premium 627,365 627,365 Shareholders� Funds 12,814,519 13,679,148

3. BUSINESS REVIEW AND FUTURE DEVELOPMENT The Company carried on as a non-interest commercial bank in the year under review in accordance with its Memorandum and Articles of Association. A comprehensive review of the business for the year and prospects for the ensuing year is contained in the Managing Director�s Report.

a. Changes on the Board There were no changes on the Board in the course of the financial year.

b. Directors Retiring by Rotation

In accordance with the provisions of the Companies & Allied Matters Act, Alhaji (Dr.) Aminu Alhassan Dantata, Alh. (Dr.) Umaru Kwairanga and Mallam Falalu Bello hereby retire by rotation. However being eligible, the said Directors hereby present themselves for re-election. The profile of the directors retiring by rotation is contained at page 9 of this Report.

In the course of the period under review, the Directors attended all Board and Board Committee meetings where applicable. A record of their attendance is contained in the Corporate Governance section of this Report.

c. Notification of Attainment of Seventy (70) Years of Age

28 | P a g e


In accordance with the provisions of the Companies & Allied Matters Act, the Directors hereby announce that Alhaji (Dr.) Umaru Abdul Mutallab, CON; HRH. Engr. Bello Muhammad Sani; Alhaji (Dr.) Muhammadu Indimi; Alhaji (Dr.) Aminu Alhassan Dantata, CON and Prof. Tajudeen Adebiyi have attained the age of seventy (70) years and the approval of members for the five Directors to continue in office is hereby sought.

d. Directors Fees

The Board of Directors hereby retain their fees as approved at the last General Meeting.

e. Directors� Interest The direct and indirect interests of directors in the issued share capital of the Bank as recorded in the register of directors� shareholding and/or as notified by the directors for the purposes of sections 275 and 276 of the Companies and Allied Matters Act and the listing requirements of the Nigerian Stock Exchange are stated below:

Number of Shareholding

31 December, 2018 31 December, 2017

S/N Directors Direct Indirect Direct Indirect

1Alh. Dr. Umaru Abdul Mutallab, CON

4,000,000,000 N/A4,000,000,000 N/A

2Alh. (Dr.) Aminu Alhassan Dantata, CON

1,567,310,516

3,904,369,327(Dantata Invest. & Sec.

Co. Ltd)1,565,210,516

3,904,369,327(Dantata Invest. & Sec. Co. Ltd)

3Alhaji (Dr.) Muhammadu Indimi, OFR

2,733,813,044 N/A2,733,813,044 N/A

29 | P a g e


4 Prof. Tajudeen A. Adebiyi 3,083,686 N/A

3,083,686 N/A

5Mallam Falalu Bello, mni, OFR

12,496,75040,000,000 (MBS

Merchants Ltd)5,496,750

40,000,000 (MBS Merchants

Ltd)

6HRH (Engr.) Bello Mohammed Sani, OON,

12,500,000 N/A12,500,000 N/A

7 Nafiu Baba-Ahmed, mni 2,300,000 N/A

2,300,000 N/A

8Alh. (Dr.) Umaru Kwairanga

34,770,000629,420,413 (Finmal

Finance Services Ltd)34,770,000

662,845,413 (Finmal Finance

Services Ltd)

9 Alh. Muktar Sani Hanga N/A

2,500,000,000 (Dangote Industries

Ltd)N/A

2,500,000,000(Dangote

Industries Ltd)

10Alh.(Dr.) Musbahu Muhammad Bashir

N/A2,200,000,000 (Althani

Invest. Ltd)N/A

2,200,000,000 (Althani Invest.

Ltd)

11 Dr. Mohamed Ali Chatti N/A

2,506,666,588 (Islamic Development Bank)

N/A

2,506,666,588(Islamic

Development Bank)

12Mallam Hassan Usman, FCA

1,250,000 N/A1,250,000 N/A

13 Mahe Mahmud Abubakar 200,000 N/A

200,000.0 N/A

14AbdulFattah O. Amoo, FCA

Nil N/ANil N/A

4. EMPLOYMENT AND EMPLOYEES

a. Employee Involvement and Training

Management, professional and technical expertise are the Bank�s major assets and investment in their training, both locally and overseas, continued during the period under review. Formal and informal channels of communication are employed in keeping staff abreast of various factors affecting the Bank as a going concern.

b. Employment Policy

The Company�s recruitment policy, which is based solely on merit, does not discriminate against any person on the grounds of Religion, Tribe, or Physical Disability.

c. Health Safety and Welfare at Work

30 | P a g e


Health and safety regulations are in force within the Bank�s premises and employees are aware of existing regulations. The Bank provides subsidy to all levels of employees for medical, transportation, lunch, as well as access to recreational facilities to enhance their welfare and improve productivity.

The Bank operates a crèche facility at its Head Office for its staff with plans to extend to other locations in due course. We actively promote wellness of our employees and have provided a gymnasium at our Head Office for use by all staff. Fire prevention and fire-fighting equipment are installed in strategic locations within the Bank� premises. The Bank operates a contributory pension plan in line with the Pension Reform Act for its employees.

d. Gender Analysis The average number and percentage of male and female employees during the year ended 31st December 2018 vis-à-vis total workforce is provided below. The Board is however committed to gender balance and has thus mandated Management to take the issue of gender balance into cognizance in filling future vacancies. :

Male Female Total Male Female

Number Percentage

Employees 366 119 485 75.5% 25.5%

Gender analysis of the Board and Top Management for the year ended 31st December, 2018 is as follows:

Male Female Total Male Female

Number Percentage

Board 14 0 14 100% 0

Top Management 4 2 6 66.7% 33.3%

Total 18 2 20 90% 10%

5. POST BALANCE SHEET EVENTS

There were no post balance sheet events which could have a material effect on the state of affairs of the Company as at 31 December 2018 or the profit for the year ended on that date that have not been adequately provided for or disclosed.

6. EQUITY RANGE ANALYSIS

JAIZ BANK PLC

RANGE ANALYSIS AS AT DECEMBER 31, 2018

Range No of Holders Holder % Holders

Cum Units Units % Units Cum

31 | P a g e


1 - 1,000 277 1% 277 132,319 0% 132,319

1,001 - 5,000 11,111 40% 11388 30,538,363 0% 30,670,682

5,001 - 10,000 5,294 19% 16682 47,966,969 0% 78,637,651

10,001 - 50,000 4,771 17% 21453 120,913,418 0% 199,551,069

50,001 - 100,000 2,611 9% 24064 246,777,050 1% 446,328,119

100,001 - 500,000 2,720 10% 26784 688,977,135 2% 1,135,305,254

500,001 - 1,000,000 525 2% 27309 432,168,573 1% 1,567,473,827

1,000,000 - 9,999,999,999 625 2% 27934 27,896,775,473 95% 29,464,249,300

27,934 100% 29,464,249,300 100%

7. SHAREHOLDERS WITH 5% UNITS AND ABOVE

32 | P a g e


SHAREHOLDING HISTORY

* Share Split from N1.00 per Share to N0. 50k per Share.

10. DONATIONS AND SPONSORSHIP

Year Opening Closing Closing Opening Closing Closing

N'000 N'000 Units

('000) N'000 N'000

Units

('000)

2003 0 2,500,000 2,500,000 0 2,500,000 2,500,000 Cash

2004 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

2005 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

2006 2,500,000 13,000,000 13,000,000 2,500,000 2,500,000 2,500,000 Cash

2007 13,000,000 13,000,000 13,000,000 2,500,000 2,500,000 2,500,000

2008 13,000,000 13,000,000 13,000,000 2,500,000 4,014,430 4,014,430 Cash

2012 13,000,000 13,000,000 13,000,000 4,014,430 11,829,700 11,829,700 Cash

2014 13,000,000 15,000,000 15,000,000 11,829,700 11,829,700 11,829,700

2016 15,000,000 15,000,000 15,000,000 11,829,700 14,732,125 14,732,125 Cash

2017 15,000,000 25,000,000 50,000,000 14,732,125 14,732,125 29,464,249 Share Split

2018 25,000,000 25,000,000 50,000,000 14,732,125 14,732,125 29,464,249

Authorized Share Capital Issued & Fully Paid Capital

Consideration

33 | P a g e


The non-Shariah income of the Bank was donated to Charity as required.

11. Asset Values

Information relating to the Company�s Assets is detailed in the Notes to the Financial Statements.

12. AUDIT COMMITTEE

Pursuant to Section 359(3) of the Companies and Allied Matters Act, Cap C20 LFN 2004, the Company has in place an Audit Committee comprising three shareholders and three directors as follows:

Alh. Shehu Mohammed, FCA Shareholder Representative -Chairman Alhaji Muhammad Rabiu El-Yakub Shareholder Representative Alhaji Mohammed Gulani Shuaibu Shareholder Representative Alhaji (Dr.) Umaru Kwairanga Non-Executive Director Alhaji (Dr.) Aminu Alhassan Dantata Non-Executive Director Alhaji (Dr.) Musbahu Mohammed Bashir Non-Executive Director

The functions of the Audit Committee are as laid down in Section 359(6) of the Companies and Allied Matters Act, Cap C20 LFN 2004.

13. AUDITORS

Messrs Ahmed Zakari & Co. having indicated their willingness to continue in office will do so in accordance with Section 357(2) of the Companies and Allied Matters Act, CAP C20 LFN 2004.

A resolution will be proposed at the Annual General Meeting to Authorize the Directors to determine their remuneration.

BY ORDER OF THE BOARD

RUKAYAT O. SALAUDEEN FRC/2014/NBA/00000009649 Company Secretary /Legal Adviser Jaiz Bank Plc. Kano House No. 73 Ralph Shodeinde Street Central Business District Abuja Federal Capital Territory

5th March, 2019

CORPORATE GOVERNANCE

34 | P a g e


Introduction At Jaiz Bank Plc, we believe that good Corporate Governance goes beyond complying with rules and regulations. It also includes compliance with the core values of the Bank � Quality Customer Service; Team Spirit; Respect for the Individual; Ethics; Trust; Partnership; and Entrepreneurship. The Board ensures that the Bank adheres to applicable Corporate Governance regulations, and imbibes international best practices. The Bank remains dedicated in its commitment to safeguard and increase investor value through transparent practices. We ensure on-going compliance with the requirements of the revised Code of Corporate Governance for Banks and Discount Houses in Nigeria issued by the Central Bank of Nigeria (�the CBN Code�), the Securities and Exchange Commission�s Code of Corporate Governance for Public Companies as well as the Post-Listing Requirements of the Nigeria Stock Exchange.

The Bank conducts an Annual Board Appraisal covering the Board�s responsibilities, processes, relationships, structure and composition through an independent consultant. Messrs. Nextzon Business Services Ltd were engaged to conduct the Annual Board Appraisal for the financial year ended 31 December, 2018. Their review and recommendations are contained in the Annual Report and would be presented to shareholders at the Annual General Meeting.

Board Structure The Board of the Bank is made up of seasoned professionals who possess the requisite integrity, skills and experience to bring to bear independent judgment on the deliberations and decisions of the Board. The Board is a mix of Executive and Non-Executive Directors (NEDs), headed by a Chairman. The Board presently consists of 14 members made up of 11 Non-Executive Directors and 3 Executive Directors as set out below. Two of the Non-Executive Directors are Independent Directors appointed based on criteria laid down by the Central Bank of Nigeria�s Guideline on Independent Directors of Banks in Nigeria. The position of the Managing Director and Chairman are held by separate persons, and their roles are clearly defined.

S/N NAMES DESIGNATION1

Alh. (Dr.) Umar Abdul Mutallab Chairman2

Prof. Tajudeen Adepemi Adebiyi Independent Director3

Nafiu Baba-Ahmad Independent Director 4

Alh. (Dr.) Aminu Alhassan Dantata Non-Executive Director

5 Alh. Musbahu Muhammed Bashir Non-Executive Director

6 Alh. Mukhtar Danladi Hanga Non-Executive Director

7 H.R.H. Engr. Bello Muhammad Sani Non-Executive Director

8 Mall. Falalu Bello Non-Executive Director

35 | P a g e


9 Mr. Mohamed Ali Chatti Non-Executive Director

10 Alh. (Dr.) Umaru Kwairanga Non-Executive Director

11 Alh. (Dr.) Muhammadu Indimi Non-Executive Director

12 Mallam Hassan Usman Managing Director

13 Mahe Mahmud Abubakar Deputy Managing Director

14 Mr. AbdulFattah Olanrewaju Amoo Executive Director/Chief Financial Officer

Board Changes There were no changes on the Board in the course of the 2018 Financial Year.

Board Responsibilities The Board leads and provides directions for the management by determining the strategic objectives and policies of the Bank and overseeing its implementation. The Board has delegated to the Managing Director its powers which relate to the operational running of the Bank. Specific matters have been reserved for approval by the Board and include but are not limited to the following: Defining the Bank�s Strategic Plans and Objectives. Ensuring integrity of financial reports. Approval of major changes to the Bank�s accounting policies. Appointment and removal of Directors and the Company Secretary. Approval of charter and membership of Board Committees. Establishing effective internal control systems. Instilling a culture of compliance with rules and regulations. Formulating risk policies. Approval of quarterly, half yearly and full year financial statements. Ensuring planned Management succession. Effective communication with shareholders. Performance appraisal and compensation of Board members and Senior Executives.

Director’s Appointment Process, Induction and Training The Board has developed a comprehensive policy on Board appointments. Board Governance, Remuneration and Nominations Committee is responsible for leading the process for Board appointments and for identifying and recommending suitable candidates for the approval of the Board. In making Board appointments, the Board takes cognizance of the knowledge, skill, experience and other qualities considered necessary for the role. The appointment of Directors is subject to the approval of the shareholders and the Central Bank of Nigeria.

36 | P a g e


In line with best practice, a personalized induction programme on the Bank�s operational processes and expected duties and responsibilities is conducted for new members of the Board. The member also receives an induction pack which comprises of the Board�s charter, charter of the various Board Committees, significant reports, memorandum and articles of association of the Bank, Board/Board Committee resolutions, important legislations/policies and a calendar of Board activities.

The Board ensures that members are trained on issues relating to their oversight functions. Directors are required to partake in periodic relevant continuing professional development programmes to update their knowledge and skills to keep them abreast of new developments in the industry and operating environment. The table below provides the details of continuous education training programmes undertaken by directors in 2018.

S/N NAMES OF DIRECTOR

TRAINING ORGANISER LOCATION DATE

1 Hassan Usman

Mahe Mahmud Abubakar

Prof Tajudeen Adebiyi

Alh. Mukhtar Danladi Hanga Sani

Nafiu Baba-Ahmed

Alh. Tajudeen Dantata

Business Transformation in a Recovering Economy

The Nigerian Stock Exchange/Lagos Business School

Lagos 22nd February, 2018

2 AbdulFattah O. Amoo

Company Direction Course 1

Institute of Directors

Abuja 27th to 28th

February, 2018

3 Alh. (Dr.) Umaru Abdul Mutallab

Mall Falalu Bello

Alh. Mahe Mahmud Abubakar

Alh. (Dr.) Musbahu Muhammad Bashir

International Executive Program in Islamic Finance

Islamic Economics Institute � Kind Abdulazeez University � Saudi Arabia

Jeddah 19th to 22nd

March, 2018

37 | P a g e


Alh. (Dr.) Umaru Kwairanga

4 AbdulFattah O. Amoo

CFO Programme Euromoney Learning Solution

Dubai 8th to 12th

April, 2018

5 HRH Engr Bello Muhammad Sani

Nafiu Baba Ahmed

Alh. Mukhtar Danladi Hanga Sani

Corporate Governance

Euromoney Learning Solution

Dubai 15 to 18th

April, 2018

6 Amb. Mustapha Sam

Dr. Mohamed Ali Chatti.



Miami, USA 9th to 11th July, 2018

7. Hassan Usman Leadership programme

Madinah Institute for Leadership Entrepreneurship

Jeddah, KSA November 2018

8. All Board Members Training on AML/CFT (In-plant)

DATAPRO In-plant 5th December 2018

9. Prof. Tajudeen Adebiyi



New York, USA

10th to 13th

December, 2018

Tenure of Directors In order to ensure both continuity and injection of fresh ideas, the tenure for Non-Executive Directors is limited to a maximum of three (3) terms of four (4) years each, i.e. twelve (12) years while the maximum tenure for Executive Directors is limited to a maximum of two (2) terms of five (5) years each, i.e. ten (10) years.

This is in compliance with the provisions of the CBN Code.

Board Meetings The Board meets quarterly and additional meetings are convened as the need arises. The Board has the authority to delegate matters to Board Committees and the Executive Management.

38 | P a g e


Attendance of Meetings In its bid to continuously improve its corporate governance processes, as well as enhance attendance of Board meetings by Board members, the Company Secretary prepares an annual calendar of meetings which is subsequently reviewed and adopted by the Board prior to the commencement of a new financial year. .

The table below is the record of attendance for the Board of Directors meetings for the 2018 financial year.

Board Committees The Board has established various Committees with well-defined Terms of Reference defining their scope of responsibilities. The Committees meet quarterly but may hold additional meetings as the need arises. The Board has five standing Committees and they include:

1. Board Risk Management Committee. 2. Board Investment Committee. 3. Board Finance & General Purpose Committee. 4. Board Governance Remuneration and Nomination Committee. 5. Board Audit Committee.

In addition to the above committees, and in line with the provisions of the Companies and Allied Matters Act, the Board also established the Statutory Audit Committee with six (6) members drawn from among the shareholders and the Board.

S/N Names of Directors 14-Mar-18 10-May-18 17-Sep-18 05-Dec-18

1 Alhaji (Dr.) Umaru Mutallab, CON √ √ √ √

2 Hassan Usman √ √ √ √

3 Mahe Abubakar Mahmud √ √ √ √

4 AbdulFattah O. Amoo √ √ √ √

5 Alhaji (Dr.) Aminu Dantata, CON √ X √ √

6 Mallam Falalu Bello, OFR √ √ √ √

7 Alhaji (Dr.) Umaru Kwairanga X √ √ √

8 Nafiu Baba-Ahmad, mni. √ √ √ √

9 Dr. Mohamed Ali Chatti √ √ √ X

10 Alhaji (Dr.) Muhammadu Indimi, OFR √ √ √ √

11 HRH (Engr.) Bello Muhammad Sani, OON √ √ √ √

12 Prof. Tajudeen Adebiyi √ √ √ √

13 Alhaji Mukhtar Sani Hanga √ √ √ √

14 Alhaji Musbahu M. Bashir √ √ √ √

39 | P a g e


Board Governance Remunerations & Nominations Committee

Membership

1. Alh. (Dr.) Muhammadu Indimi (Chairman) 2. Alh Mukhtar S. Hanga 3. Alh. (Dr.) Aminu A. Dantata 4. Nafiu Baba Ahmad 5. Alh. (Dr.) Musbahu M. Bashir

The Committee’s major responsibilities includes:

Considering matters relating to Board’s remunerations and Appointment; Recommending any proposed change(s) to the Board; Keeping under review the need for appointments; Preparing a description of the specific experience and abilities needed for each Board appointment,

considering candidates for appointment as either Executive or Non-Executive Directors and recommending such appointments to the Board;

Advising the Board on succession planning regarding the roles of the Chairman, Chief Executive Officer and Executive Directors;

Advising the Board on the contents of the Directors Annual Remuneration Report to shareholders; Revising personnel policies for Board approval, reviewing job descriptions, establishing or periodically

reviewing the staff salary structure and staff benefits package.

The Committee met three (3) times during the 2018 financial year.

Committee Meeting Attendance

Names of Directors 8th May 4th July 22nd OctoberAlh. (Dr.) Muhammadu Indimi

√ √ √

Alh. (Dr.) Aminu A. Dantata

X √ √

Nafiu Baba-Ahmad √ √ √

Alh. Mukhtar S. Hanga √ X √

Alh. (Dr.) Musbahu M. Bashir

√ √ √

40 | P a g e


Board Investment Committee (BIC)

Membership 1. Alh (Dr.) Musbahu M. Bashir (Chairman) 2. Alh (Dr.) Umaru Kwairanga 3. Prof. Tajudeen A. Adebiyi 4. HRH Engr. Bello Muhammad Sani 5. Hassan Usman (Managing Director) 6. Mahe Mahmud Abubakar (Deputy Managing Director)


Evaluating and approving all investments within its powers delegated by the Board; Evaluating and recommending all investments beyond its powers to the Board; Reviewing investments portfolio in line with set objectives. Reviewing classification of investments of the Bank based on prudential guidelines on quarterly basis; Approving the restructuring and rescheduling of investments within its powers; Writing-off and grant of waivers within powers delegated by the Board; and Periodic review of Investment Manuals and Guidelines.

The Committee met six (6) times during the 2018 financial year.

BIC Meeting Attendance

Names of Directors

7th Feb 13th March 4th April 25th June 5th Sept 1st Nov

Alh (Dr.) Musbahu M. Bashir

√ √ √ √ √ √

Hassan Usman √ √ √ X √ √


√ X √ √ √ √

Prof. Tajudeen A. Adebiyi

√ √ √ √ √ √

HRH Engr. Bello Muhammad Sani

√ √ √ √ √ √


√ √ √ √ √ √

41 | P a g e


Board Risk Management Committee (BRMC)

Membership 1. Mall. Falalu Bello (Chairman) 2. Alh. (Dr.) Muhammadu Indimi 3. Alh. Mukhtar S. Hanga 4. Hassan Usman (Managing Director) 5. Mahe Abubakar Mahmud (Deputy Managing Director) 6. AbdulFattah O. Amoo (Executive Director)

The Committee’s major responsibilities includes: Overseeing the overall Risk Management of the Bank; Reviewing periodically, Risk Management objectives and Policies for consideration of the full Board; Approving the Risk Rating Agencies, Credit Bureau and other related services providers to be engaged

by the Bank; Approving the Internal Risk Rating Mechanism; Reviewing the Risk compliance reports for regulatory authorities; Reviewing and approving exceptions to the Bank’s Risk policies; Reviewing policy violations on Risk issues at Senior Management level; Certifying Risk reports for investments, operations, market/liquidity subject to limits set by the Board. Consider the appointment, resignation or dismissal of the Bank’s Chief Risk Officer;

The Committee met four (4) times during the 2018 financial year.

BRMC Meeting Attendance

Names of Directors

18th March 18th April 18th July 17th Oct

Mall. Falalu Belo √ √ √ √

Alh. (Dr.) Muhammadu Indimi

√ √ √ √

Alh. Mukhtar S. Hanga

√ √ √ √

Hassan Usman √ √ √ √


√ √ √ √

AbdulFattah O. Amoo

√ √ √ √

42 | P a g e


Board Finance & General Purpose Committee (BFGPC)

Membership

1. HRH Engr. Bello Muhammad Sani 2. (Chairman) 3. Alh (Dr.) Umaru Kwairanga 4. Mall Falalu Bello 5. Alh (Dr.) Aminu A. Dantata 6. Nafiu Baba-Ahmad 7. Hassan Usman (Managing Director)

The Committee’s major responsibilities are to:

Consider and advise the Board of Directors on all aspects of the Bank’s finances; Consider and make recommendations to the Bank on the annual estimates of income and expenditure,

other budgets and the financial forecasts for the Bank; Consider and make recommendations to the Board of Directors for its approval, the framework for

expenditure on capital items and to review the list of priorities within the framework; Consider, review and report on the periodic management accounts of the Bank, and to also advise the

Board of Directors on the year-end accounts. Consider and make representations to the Board of Directors on the solvency of the Bank and the

safeguarding of its assets; Consider and advise the Board of Directors on any relevant taxation issues;


BFGPC Meeting Attendance

Names of Directors 15th March 26th April 19th July 27th Nov

HRH Engr. Bello Muhammad Sani

√ √ √ √


X X √ √

Mall. Falalu Bello √ √ √ √

Alh. (Dr.) Aminu A. Dantata

X X X X

Nafiu Baba-Ahmad √ √ √ √

Hassan Usman √ √ √ √

43 | P a g e


Board Audit Committee

Membership 1. Prof. Tajudeen A. Adebiyi (Chairman) 2. Alh. (Dr.) Umaru Kwairanga 3. Alh. (Dr.) Muhammadu Indimi


To develop and keep under review the Bank’s accounting policies in order to ensure that they were in consonance with the applicable Accounting Standards;

To review the effectiveness of the Bank’s system of accounting, reporting, and internal control and ensure compliance with legal and ethical requirements of the Bank;

To review the integrity of the bank’s financial reporting and the independence of the external auditors;

To review the appropriateness and completeness of the Bank’s statutory accounts and other published financial statements, and thus;

Consider, review and report on the periodic Management Accounts of the Bank; and also advise the Board of Directors on the year-end accounts;

Ensuring that the Bank complies with all relevant internal policies and procedures as well as regulations governing the Bank;

To review the summaries of the whistleblowing cases reported and the result of the investigation from the Head of Internal Audit.

Review the internal audit reports and assess the adequacy of the internal controls. Review the Compliance Reports for each quarter. Ensuring full and prompt implementation of recommendations of Internal Auditors, Examiners and

External Auditors.


Names of Directors 8th & 9th

March 17th April 17th July 18th Oct.

Prof. Tajudeen A. Adebiyi

√ √ √ √

Alh. (Dr.) Muhammadu Indimi

√ √ √ √


√ √ √ √

44 | P a g e


Statutory Audit Committee Membership Terms of ReferenceAlh. Shehu Mohammed, FCA (Chairman/Shareholder)

The Committee is saddled with the following responsibilities amongst others:

Alh. Muhammad Rabiu El-Yakub (Shareholder)

To ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirements and agreed ethical practices;

Alh. Mohammed Gulani Shuaibu (Shareholder) Review and approve the scope and planning of audit requirements;

Alh. (Dr.) Aminu Alhassan Dantata, CON (Non-Executive Director)

Review the findings on management matters in conjunction with the External Auditors and Management’s responses thereon;

Alh. (Dr.) Musbahu M. Bashir (Non-Executive Director) Oversee the independence of the external auditors;

Alhaji (Dr.) Umaru Kwairanga (Non-Executive Director)

Keep under review the effectiveness of the Bank’s system of accounting and internal control systems;

Oversee management’s process for the identification of significant fraud risks across the Bank and ensure that adequate prevention, detection and reporting mechanisms were in place;

At least on an annual basis, obtain and review a report by the internal auditor describing the strength and quality of internal controls including any issues or recommendations for improvement raised by the most recent internal control review of the company;

Discuss the annual audited financial statements and half yearly unaudited statements with management and external auditors.

The Statutory Audit Committee met four times in 2018 and the record of attendance is provided below:

Name 8th & 9th March 12th July 23rd October

Alh. Shehu Mohammed, FCA √ √ X

Alh. Muhammad Rabiu El-Yakub √ √ √

Alh. Mohammed Gambo Fagge √ No longer a member No longer a member

Mall. Falalu Bello √ No longer a member No longer a member

Prof. Tajudeen A. Adebiyi √ No longer a member No longer a member

Alh. (Dr.) Muhammadu Indimi √ No longer a member No longer a member

Alh. (Dr.) Aminu A. Dantata Not yet elected √ √

Alh. (Dr.) Umaru Kwairanga Not yet elected √ √

Alh. Mohammed Gulani Shuaibu Not yet elected √ √

Alh. (Dr.) Musbahu M. Bashir Not yet elected √ √

45 | P a g e


Management Committees The Board Committees are supported by Management Committees of the Bank, Comprising of senior officers who are responsible for the day-to-day operation of the Bank as a going concern. They ensure that laid down policies are followed and that the Bank abides by all relevant regulatory and legal requirements.

Executive Management Committee is the highest Management Committee comprising of the Executive Directors and Top Management Staff of the Bank. Other Management Committees include Management Committee (MANCO), Assets and Liability Committee (ALCO), Management Investment Committee (MIC); Development Committee; Procurement Committee; IT Steering Committee; Disciplinary Committee; Criticized Asset Committee (CAC), and Operations Risk Management Committee. These Committees review and formulate strategies to implement the Board’s broad strategic direction in various areas including business and financial performance, strategic planning, manpower planning, operations, customer service, investor relations, external relations, and organizational efficiency amongst others.

Ownership Structure

The ownership structure of the Bank is as follows:

S/N CATEGORY NO UNITS1 INDIVIDUAL 27,167 11,694,399,6932 STATE GOVERNMENT 7 1,766,273,2693 LOCAL GOVERNMENT 114 1,554,821,9503 CORPORATE 283 11,915,754,5384 JOINT 166 75,323,1185 INSTITUTION 196 376,052,3736 FOREIGN 1 2,506,666,588

TOTAL 27,934 29,464,249,300

Sustainability Banking

We at Jaiz Bank Plc strive to do business in an ethical and socially impactful manner. We are therefore mindful of business decisions on the environment, as a result of which we are constantly developing and implementing policies with the ultimate objective of enhancing the quality of life of our people and other stakeholders within our community, protecting our environment, whilst ensuring the growth of our business. We have consequently adopted significantly, the Nigerian Sustainable Banking Principles (NSBP).

46 | P a g e


Code of Ethics

The Bank has an Ethical Conduct and Integrity Policy in place and all employees are required to abide by it. All employees are expected to maintain high ethical standards in all aspect of their professional life. The Policy also provides sample offences and appropriate disciplinary measures to be adopted.

The Bank also has a Code of Conduct & Ethics for its Directors which specifies expected behaviours.

Dealing in Company Securities and price sensitive information

The Bank has adopted a policy on insider trading and market abuse regarding all transactions in the Bank’s securities which is applicable to its Directors, Officers, employees, contractors and consultants who have access to material public information. In line with the policy, affected persons are prohibited from trading on the Bank’s security during a closed period.

Whistle Blowing Procedure

The Bank has established a robust whistle blowing procedure which covers internal whistle blowers and extends to the conduct of the stakeholder. The Bank has a direct link on its website and intranet to enable stakeholders to report any allegations they want the Bank to investigate. Apart from the direct link, unethical practices can be reported via the email address [email protected].

A team comprising selected members of Top Management are responsible for reviewing reported cases and recommending appropriate action to the Board through the Audit Committee depending on the severity of the issues involved. In any case however, a quarterly report of all whistleblowing cases are forwarded to the Board.

The Chief Compliance Officer of the Bank similarly renders quarterly whistle blowing report to the Central Bank of Nigeria.

Remuneration Policy

In line with corporate governance best practices, the Board had developed a robust policy on Remuneration for the Bank. The Policy takes into account the environment in which the Bank operates and the results it achieves at the end of each financial Year. The bank’s remuneration comprises of the following elements:

Fixed remuneration: This is primarily based on the level of responsibility and constitutes a relevant part of total compensation. It entails the base salary and allowances payable monthly, in arrears or annually. A wage benchmark is established for each position/level.

Variable remuneration: This is primarily linked to the achievement of previously established targets and prudent risk management. It comprises profit sharing/productivity bonus payable annually.

The combination of these elements serves as the basis for a balanced remuneration system reflecting the bank’s strategy, its values as well as the interests of its shareholders.

47 | P a g e


i. Remuneration to Non-Executive Directors:

The Non-executive Directors of the Bank are paid remuneration by way of sitting fees for attending the meetings of the Board of Directors and its Committees. Beside the sitting fees they are also entitled to Directors fees, reimbursement of travel, hotel, and other out-of-pocket expenses incurred in the course of discharging their responsibilities. The Non-executive Directors of the Company are not paid any other remuneration or commission.

The sitting fees of the Non-executive Directors for attending meetings of Board of Directors and the Committees of Board of Directors may be modified or implemented from time to time only with the approval of the Board.

ii. Remuneration to Executive Directors,

The remuneration for Executives comprises of fixed remuneration, benefits & perquisites, retirement/exit benefit and performance based remuneration (short term incentives and long term incentives).

Contingency Planning Framework

The framework for contingency planning consists of a set of identified policies, actions and processes necessary for the prevention, management and containment of banking systemic distress and crisis.

The Board has put in place various contingency plans for capital and liquidity restoration, amongst others which would enhance the Bank’s ability to withstand both temporary or long term disruptions in its ability to fund its activities in a timely manner.

Shareholders’ interest

The Bank in its bid to protect the interest of its shareholders including particularly, its minority shareholders, ensures that Shareholders meetings are convened in a transparent and fair manner. Adequate notice of general meeting is provided to shareholders and their rights are protected at all times. Attendance of general meeting is open to all shareholders or their proxies. The proceedings are usually monitored by the representatives of the Central Bank of Nigeria, Corporate Affairs Commission, Nigerian Deposit Insurance Commission and the Securities and Exchange of Commission.

The Bank has an Investor Relations Unit, which deals with communications among the Bank; the shareholders; as well as the capital market. The Bank also has an Investor Relations Portal on its website where the Bank’s annual reports and accounts and other relevant information are made accessible to its shareholders. The Bank has a dedicated email address through which shareholders and prospective investors can channel their enquiries for prompt response. The email address is [email protected].

48 | P a g e


Communication Policy

The main objective of the Policy is to support the Bank in achieving its objectives in pursuit of best corporate governance practices. The Executive Management ensures that communication and dissemination of information is done in English language which must be clear, relevant, objective, easy to understand and useful. The Policy also ensures that the Bank delivers prompt, courteous and responsive service that is sensitive to the needs and concerns of the customers and other stakeholders.

Advisory Committee of Experts (ACE) The independent Committee of Shariah Experts reviews the Banks operations to confirm that activities were carried out in accordance with the Shariah. The ACE has the responsibility of providing assurances that the Banks funds are not invested in prohibited activities or transactions, and also certify that all the Bank’s products and services are compliant with the Shariah. The members of the Shari'ah Advisory Board are a mixture of Islamic scholars well versed in Islamic laws, principles and traditions relating to trade, finance and economics, as well as financial experts.

Internal Control Various aspects of the internal control of the bank are the responsibilities of key officers. The Chief Audit Executive, the Chief Compliance Officer, the Chief Risk Officer, the Chief Finance Officer, and the Company Secretary/Legal Adviser are all responsible for managing the internal control of the Bank.

The System of the Bank provides adequate assurance that the Bank will not be adversely affected by any event that could be reasonably foreseen.

Company Secretary The Company Secretary is responsible for assisting the Board and Management in the implementation of the applicable Codes of Corporate Governance. The Company Secretary serves as a point of reference and support for all Directors. The appointment of the Company Secretary is done through a rigorous process that is similar to those of directors. The Company Secretary is fully empowered to discharge this responsibilities and the position reports directly to the Board, with dotted line to the MD/CEO.

Statement of Compliance The Bank complies with the relevant provisions of the SEC and CBN Codes of Corporate Governance. In the event of any conflict between the two Codes regarding any matter, the Bank would defer to the provision of the CBN Code as its primary Regulator.

Monitoring Compliance with Corporate Governance The Chief Compliance Officer monitors compliance and implementation of the Central Bank of Nigeria (CBN) Code of Corporate Governance as well as the Securities and Exchange Commission (SEC)’s Code of Corporate Governance.

49 | P a g e


Complaints Management Policy

The Bank has put in place a Complaints Management Policy Framework to resolve complaints arising from issues covered under the Investments and Securities Act, 2007 (ISA).

Customer’ Complaints Report for the Year Ended December 31, 2018 The Bank complied with the provision of the CBN Circular on handling customer complaints. Various channels such as, 24 hour contact centre; customer service desks and contacts through the Bank’s website have been provided to facilitate seamless complaint and feedback process. The report below details the customer complaints for the Year ended December 31, 2018.

NAIRA NUMBER AMOUNT CLAIMED

(NAIRA) AMOUNT REFUNDED (NAIRA)

S/N DESCRIPTION 2018 2017 2018 2017 2018 2017

1 Pending Complaints B/F 114 179,800.00

2 Received Complaints 33,898 7,549 42,644,411.24 3,799,823.00 -

3 Resolved Complaints 33,793 7,435 42,299,631.24 3,620,023.00 42,299,631.24 2,464,223.00

4 Unresolved Complaints Escalated to CBN for Intervention

-

- - - - -

5 Unresolved Complaints Pending with the Bank C/F

105 114 344,780.00 179,800.00 -

50 | P a g e


51 | P a g e


STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Statement of Directors� responsibilities in relation to the Financial Statements for financial year ended December 31, 2018

The Directors accept responsibility for the preparation of the financial statements that give a true and fair view in accordance with the requirements of the International Financial Reporting Standards (IFRS), the Financial Accounting Standards issued by AAOIFI and in the manner required by the Companies and Allied Matters Act Cap C20, Laws of the Federation of Nigeria 2004, the Financial Reporting Council of Nigeria Act 2011, the Banks and Other Financial Institutions Act, CAP B3, LFN 2004, and relevant Central Bank of Nigeria (CBN) Guidelines and circulars.

The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the Directors determine necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

Going Concern: The Directors have made assessment of the Bank’s ability to continue as a going concern and have no reason to believe that the Bank will not remain a going concern in the years ahead. Resulting from the above, the directors have a reasonable expectation that the company has adequate resources to continue operations for the foreseeable future. Thus, directors continued the adoption of the going concern basis of accounting in preparing the annual financial statements.

SIGNED ON BEHALF OF THE DIRECTORS BY:

Hassan Usman, FCA Abdufattah O. Amoo, FCA Managing Director/CEO Chief Financial OfficerFRC/2013/ICAN/0000003984 FRC/2018/ICAN/00000017779

52 | P a g e


53 | P a g e


54 | P a g e


JAIZ BANKSTATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2018

2018 2017Notes N'000 N'000

Assets

Cash and Balances with Central Bank of Nigeria 3 23,409,751 23,909,987 Due from Banks and Other Financial Institutions 4 7,408,063 5,441,073 Sukuk Investment 5 19,819,872 6,387,918 Investment in Musharaka 6 - 1,200,000 Murabaha Receivables 7A 25,330,697 22,677,161 Investment in Bai Mu'ajjal 7B 59,186 - Investment in Istisna 8 1,865,656 1,335,361 Investment in Ijara Assets 9 12,810,714 13,153,201 Qard Hassan 10 171,948 149,082 Investment Properties 10ii 1,603,513 - Investment in Assets Held for Sale 11i 7,699,830 5,883,288 Property, Plant and Equipment 12 2,578,588 2,123,997 Leasehold Improvement 13 58,118 34,932 Intangible Assets 14 370,748 340,286 Other Assets 15 5,263,406 4,676,323 Deferred Taxation Asset 16b 12,368 - Total Assets 108,462,458 87,312,609

LiabilitiesCustomer Current Deposits (17a) 45,950,138 33,706,359 Other Financing 18a 2,000,000 - Other Liabilities 18b 8,229,960 5,367,886 Tax payable 16a 90,344 135,677 Deferred tax 16b - 14,641 Total liabilities 56,270,442 39,224,563

Equity of Investment Account HoldersCustomers' Unrestricted Investment Accounts (17b) 36,716,950 32,054,392 Mudaraba Term Deposit (17b) 2,365,904 2,354,505

39,082,854 34,408,897

Owners' EquityShare Capital 19 14,732,125 14,732,125 Share Premium 20 627,365 627,365 Retained Earnings 21 (4,574,108) (4,244,308)Risk Regulatory reserve 22 1,619,336 2,267,029 Statutory Reserve 22i 504,826 254,517 Other Reserves 22ii 199,618 42,420 Total Equity 13,109,162 13,679,148

Total Equity and Liabilities 108,462,458 87,312,609Guarantee And Other Contingent Assets & Liabilities 29,110,417 16,377,419

Dr. Umaru A. Mutallab, FCA, CON (Chairman) FRC/2013/ICAN/00000004391

Hassan Usman, FCA (Managing Director/CEO)FRC/2013/ICAN/00000003984

Abdufattah O. Amoo, FCA (Chief Finance Officer)FRC/2018/ICAN/00000017779

The accounting policies and the accompanying explanatory notes form part of these financial statements. *Prior year amounts have been regrouped to align with current year presentation. This does not have any impact on the results.

This financial statement were approved by the Board of Directors for issue on 5th March, 2019 and signed on its behalf by

"61"

JAIZ BANK

INCOME FOR THE YEAR ENDED 31ST DECEMBER 2018

2018 2017Notes N'000 N'000

Income:Income from Financing Contracts 23 6,291,944 6,239,803 Income from Investment Activities During the year under review, a sum of N0m was transfered from Statement of Changes in Equity (SCE ) to Risk Regulatory Reserve(Non Distributable Reserve).24 1,223,633 684,854 Gross Income from financing transactions 7,515,577 6,924,657 Return on Equity of Investment Account Holders 25(i) (1,916,804) (1,397,009)Bank's share as a Mudarib/Equity investor 25(ii) 5,598,773 5,527,648 Net impairment (charges)/Writeback for the year 32 231,584 (161,459)Net Spread after Provision 5,830,357 5,366,189 Other IncomeFees and Commisssion 26 988,439 748,709 Other Operating Income 27 240,305 182,003 Total Income 7,059,101 6,296,901

Expenses:Staff Costs 29 2,808,765 2,374,457 Depreciation and Amortisation 30 608,398 522,187 Operating Expenses 31(i) 2,744,236 2,506,250 Total Expenses 6,161,399 5,402,894

Operating Profit/(Loss) Before Tax 897,702 894,006 Income Tax Expenses 16a (63,336) (356,891)Profit/(Loss) for the Year after Tax 834,366 537,117

Other Comprehensive IncomeItem that may be reclassified to profit or lossNet Gain on Gifted Property 28 112,313 - Total comprehensive income for the year 946,678 537,117

Earnings Per ShareBasic and diluted Earnings per share (Kobo) 2.83 kobo 1.82 kobo

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

The accounting policies and the accompanying explanatory notes form part of these financial statements

*Prior year amounts have been regrouped to align with current year presentation. This does not have any impact on the results.

"62"

JAIZ BANK

STATEMENT OF CHANGE IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2018

Share Capital Share

Premium Retained Earnings

Risk Regulatory

Reserve

CBN (AGSMEIS)

Reserve

Other Comprehensive

Income Statutory Reserve Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Balance at 1 January 2018 14,732,125 627,365 (4,244,307) 2,267,029 42,420 - 254,516 13,679,147Adjustment on IFRS 9 initial recognition - (1,516,664) - (1,516,664)Restated Opening Balance under IFRS 9 14,732,125 627,365 (4,244,307) 750,364 42,420 - 254,516 12,162,483Revaluation Reserve - - - - - 112,313 - 112,313Transfer to Risk Regulatory Reserve - - (868,971) 868,971 - - - - Transfer to Statutory Reserve - - (250,310) - - - 250,310 - Transfer to AGSMEIS - - (44,885) - 44,885 - - - Profit for the year - - 834,366 - - - - 834,366Balance at 31 December 2018 14,732,125 627,365 (4,574,108) 1,619,336 87,305 112,313 504,826 13,109,161

Share Capital Share

Premium Retained Earnings

Risk Regulatory

Reserve

CBN (AGSMEIS)

Reserve

Other Comprehensive

Income Statutory

Reserve Total N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2017 14,732,125 627,365 (3,669,861) 1,360,774 - - 93,381 13,143,784 Transfer to Risk Regulatory Reserve - - - 906,255 906,255 - - - - Transfer to Statutory Reserve - - (161,135) - - - 161,135 - Adjustments - - (1,754) - - - - - 1,754 Transfer to AGSMEIS - - (42,420) - 42,420 - - - Profit for the year - - 537,117 - - - - 537,117 As at 31 December 2017 14,732,125 627,365 (4,244,307) 2,267,029 42,420 - 254,516 13,679,147

31 December 2018

31 December 2017

Other Reserves

Other Reserves

"63"

JAIZ BANKSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017Notes N'000 N'000

Cash flow from operating activitiesTotal comprehensive income for the year 946,678 894,008 Adjustments for non cash items: - Depreciation 12 502,007 438,373 Amortization of Intangible Assets 14 64,204 57,793 Amortisation of leasehold Improvement 13 20,832 26,294 Provision for financing impairment 32 - 161,459 Amortisation of prepaid rent 31(i) 326,041 271,114 Tax 16a 90,345 - Gifted Item 28 (112,313) - Operating profit before changes in operating asset and liabilities 1,837,795 1,849,042

Working capital adjustment:Interbank Murabaha 5a - 1,000,000 Sukuk 5 (13,431,955) (5,008,701)Murabaha receivables 7A (5,773,997) (6,555,114)Investment in Musharaka 6 1,200,000 - Qard Hassan 10 (26,849) (21,408)Istisna 8 (505,057) (492,972)Bai Muajjal 7B (59,186) - Ijara rental receivables 9 321,518 1,169,533 Investment in trading assets 11i (1,816,542) (3,181,832)Other assets 15 (1,112,814) (2,206,822)Customers' current account (17a) 12,243,779 9,290,815 Other Financing 18a 2,000,000 (996,635)Other liabilities 18b 2,854,097 3,815,227 Tax paid 16a (135,677) (77,087)Net cash from/(used in) operating activities (2,404,887) (1,415,954)

INVESTING ACTIVITIESPurchase of property, plant & equipment 12 (656,964) (650,618)Purchase of intangible assets 14 (87,391) (29,990)Improvement on leasehold properties 13 (51,295) (68,142)

(795,649) (699,398)

FINANCING ACTIVITIESDistribution to charity SUCF (6,664) - AGSMEIS adjustment 22ii(b) - (15,564)Customers investment accounts (17b) 4,673,957 8,540,783 Net cash provided by (used in) financing activities 4,667,292 8,525,219

Increase (Decrease) In Cash And Cash Equivalents 1,466,756 6,409,867Cash and cash equivalents at beginning of year 29,351,060 22,984,879 Cash And Cash Equivalents At 31 December 30,817,816 29,394,746


"64"

JAIZ BANKSTATEMENT OF SOURCES AND USES OF QARD FUNDFOR THE YEAR ENDED 31ST DECEMBER 2018

Qard Hasan Receivables Total

Qard Hasan Receivables Total

Balance at 1 January 149,082 149,082 127,674 127,674Granted to Staff - - - -Granted to customers 83,178 83,178 94,759 94,759Total uses during the year 232,260 232,260 222,433 222,433RepaymentsStaff Repayment 16,043 16,043 17,917 17,917Customer Repayment 41,620 41,620 55,486 55,486Balance at 31 December 57,663 57,663 73,403 73,403

impairment Allowance (2,649) (2,649) (52) (52)Contribution by the bank 171,948 171,948 149,082 149,082

2018 2017N'000 N'000

The staff portion is made up of facilities granted to employees to buy the Bank's shares under 2012Private Placement exercise and facilities taken over by the Bank from their previous employers. Staffunder critical situations were also granted this type of facility. The amount granted to customersduring the year was N83.18million.


"65"

JAIZ BANKSTATEMENT OF SOURCES AND USES OF CHARITY FUNDFOR THE YEAR ENDED 31ST DECEMBER 2018

2,018 2,017 N'000 N'000

Sources of Charity Funds

Undistributed Charity funds at the beginning of the year - 13,193Non-permissible income during the year 9,962 7,131Total Sources Of Charity Funds During The Year 9,962 20323.83062

Uses of Charity FundsTransfer to Jaiz Foundation 6,364 -Philontropic Activities 300 20,324Total uses of funds during the year 6,664 20323.83062

Undistributed charity funds at the end of the year 3,298 �

This Statement discloses how the Non-permissible Income was utilised. During the period under review the Bank utilised all the non-permissible income of N6.66million which was mainly generated in the current year.


"66"

67

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2018

1 Reporting entity Jaiz Bank Plc (the �Bank�) is the first fully fledged non-interest financial institution in Nigeria. The Bank was granted a banking licence to carry on the business of non interest banking and commenced operation on January 6th, 2012 with three branches in two states and the Federal Capital Territory.

The Bank's Corporate Headquarter address is Kano House, Plot 73, Ralph Shodeinde Street, Central Business District, Abuja, Nigeria.

The Financial Statement of the Bank as at 31 December 2018, is only for the Bank as it has no subsidiary and/or Associate company.

2 Change in accounting policies The accounting policies adopted are consistent with those of the previous financial year except as noted below.

During the year the Bank has adopted the following new standards / amendments to the standards effective for the annual period beginning on or after 1 January 2018.

(a) IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, effective for periods beginning on 1 January 2018 with early adoption permitted. IFRS 15 defines principles for recognizing revenue and will be applicable to all contracts with customers. However, interest and fee income integral to financial instruments and leases will continue to fall outside the scope of IFRS 15 and will be regulated by the other applicable standards (e.g. IFRS 9, and IFRS 16 Leases).

Revenue under IFRS 15 will need to be recognised as goods and services are transferred, to the extent that the transferror anticipates entitlement to goods and services. The following five step model in IFRS 15 is applied in determining when to recognise revenue, and at what amount: i) Identify the contract(s) with a customer ii) Identify the performance obligations in the contract iii) Determine the transaction price iv) Allocate the transaction price to the performance obligations in the contract v) Recognise revenue when (or as) the entity satisfies a performance obligation

The standard also specifies a comprehensive set of disclosure requirements regarding the nature, extent and timing as well as any uncertainty of revenue and the corresponding cash flows with customers. This standard does not have any significant impact on the Bank.

68

(b) IFRS 9 Financial Instruments In July 2014, the IASB issued IFRS 9 Financial Instruments (�IFRS 9�), which replaces IAS 39 �Financial Instruments: Recognition and Measurement�. IFRS 9 addresses all aspects of financial instruments including classification and measurement, impairment and hedge accounting. The adoption of IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instrument Disclosures.

The transitional provisions of IFRS 9 permitted the Bank to elect not to restate comparative figures. Adjustments to the carrying amounts of financial assets and financial liabilities at the date of the transition were recognised in the opening retained earnings and other reserves of the current period.

2.1 New standards, interpretations and amendments to existing standards that are not yet effectiveThe standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Bank�s financial statements are disclosed below. The Bank intends to adopt these standards, if applicable, when they become effective.

IFRS 16: Leases The standard was issued in January 2016 and sets out the principles for the recognition, measurement, presentation and disclosure of leases. It introduces a single lessee accounting model and requires a lessee to recognise: assets and liabilities for all leases with a term of more than 12 months, unless the

underlying asset is of low value. For lessor accounting, it substantially carries forward the requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. An entity shall apply this Standard for annual reporting periods beginning on or after 1 January 2019. The Bank is currently assessing the impact of the standard.

2.2 Significant Accounting Policies

(a) Statement of compliance with International Financial Reporting Standards

The financial statements have been prepared in accordance with the requirements of International Financial Reporting standards (IFRS) as issued by International Accounting standards Board (IASB). For matters on which no IFRS standard is applicable or IFRS conflicts with Shari'ah rules and principles, the bank uses the relevant Financial Accounting Standard as issued by the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) and shariah rulings as determined by the shariah supervisory committee of the Bank.

69

(b) Basis of Preparation and Accounting

Financial statements are to be prepared under the historical cost convention, and may be modified by their valuation of certain investment securities, property, plant and equipment. Financial statements are to be prepared mainly in accordance with the International Financial Reporting Standards (�IFRS�) issued by the International Accounting Standards Board (�IASB�). For matters that are peculiar to Islamic Banking and Finance, the Bank shall rely on the Statement of Financial Accounting (�SFA�) and Financial Accounting Standards (�FAS�) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (�AAOIFI�), Standards issued by the Islamic Financial Services Board (�IFSB�) and Circulars issued by the Central Bank of Nigeria (�CBN�) shall also be of guidance.

2.3 Use of estimates and judgments.The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Significant items where the use of estimates and judgments are required are outlined below:

(a) Transactions in Foreign Currencies

The financial statements are presented in Nigerian Naira, which is the reporting currency in line with IAS21 (Effects of foreign exchange)

Transactions in foreign currencies are recorded in the books at the rate of exchange ruling on the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies are converted into Naira at the rate of exchange ruling at the balance sheet date. All differences are taken to the statement of income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated into Naira using the exchange rates as at the dates of the initial recognition. Non-monetary items measured at fair value in a foreign currency are translated into Naira using the exchange rates at the date when the fair value is determined. Exchange gains and losses on non-monetary items classified as �fair value through statement of income� are taken to the income statement and for items classified at �fair value through equity� such differences are taken to the statement of comprehensive income.

70

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

(b) Cash and Cash Equivalent

Cash comprises: i Cash in hand ii Balance held with Central Bank of Nigeria iii Balance with banks in Nigeria and outside Nigeria iv Demand deposit denominated in Naira and other foreign currencies

Cash equivalent are short term, highly liquid instruments which are:

a. readily convertible into cash, whether in local and foreign currencies; and b. so near to their maturity dates as to present insignificant risk of changes in value as a result of changes in profits rates.

(c) Going Concern The Bank's management shall be making assessment of the Bank's ability to continue as a going concern and where satisfied that the Bank has the resources to continue in business for the foreseeable future shall form a judgment and prepare accounting information based on that. In any situation whereby the Board of Directors is aware of any material uncertainties that may cast significant doubt upon the Bank's ability to continue as a going concern such issues shall be disclosed in the annual report.

(d) Financial instrument The Bank applied the classification and measurement requirements for financial instruments under IFRS 9 'Financial Instruments' for the year ended 31 December 2018. The 2017 comparative period was not restated, and the requirements under IAS 39 'Financial Instruments: Recognition and Measurement' were applied. The key changes are in the classification and impairment requirements.

Recognition and initial measurement

All the financial assets and financial liabilities of the Bank are initially recognised on the trade date for regular way contracts, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is measured initially at fair value plus or minus, for an item not at fair value through profit or loss, direct and incremental transaction costs that are directly attributable to its acquisition or issue. Transaction costs of financial assets and liabilities carried at fair value through profit or loss are expensed in income statement at initial recognition.

71

Classification The Bank classifies its financial assets under IFRS 9, into the following measurement categories:

those to be measured at fair value either through other comprehensive income, or through profit or loss; and

those to be measured at amortised cost.

The classification depends on the Bank�s business model (i.e. business model test) for managing financial assets and the contractual terms of the financial assets cash flows (i.e. solely payments of principal and return � SPPI test).

The Bank also classifies its financial liabilities as liabilities at fair value through profit or loss and liabilities at amortised cost. Management determines the classification of the financial instruments at initial recognition.

Subsequent measurements Financial assets or financial liabilities carried at amortised cost

(i) Debt instruments

The subsequent measurement of financial assets depend on its initial classification:

Amortised cost: A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and return on the principal amount outstanding.

The gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in income statement when the asset is derecognised or impaired. Returns from these financial assets is determined using the effective rate of return (ERR) method and reported in income statement as �income�.

The amortised cost of a financial instrument is defined as the amount at which it was measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the 'effective rate of return method' of any difference between that initial amount and the maturity amount, and minus any loss allowance. The effective rate of return method is a method of calculating the amortised cost of a financial instrument (or group of instruments) and of allocating the income or expense over the relevant period. The effective rate of return (ERR) is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the instrument or, when appropriate, a shorter period, to the instrument's net carrying amount.

72

Fair value through other comprehensive income (FVOCI): Investment in debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:

the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and return on the principal amount outstanding.

The debt instrument is subsequently measured at fair value. Gains and losses arising from changes in fair value are included in other comprehensive income within a separate component of equity. Impairment gains or losses, return revenue and foreign exchange gains and losses are recognised in profit and loss. Upon disposal or derecognition, the cumulative gain or loss previously recognised in OCI is reclassified from equity to income statement and recognised in net gains on investment securities while the cumulative impairment loss recognised in the OCI and accumulated in equity will be reclassified and credited to income statement. Income from these financial assets is determined using the effective rate of return method and recognised in income statement as �income�. The measurement of credit impairment is based on the three-stage expected credit loss model as applied to financial assets at amortised cost.

Fair value through profit or loss (FVTPL): Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. The gain or loss arising from changes in fair value of a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is included directly in the income statement and reported as �Net gains/(losses)from financial instruments held for trading�in the period in which it arises. Returns from these financial assets is recognised in income statement as �income�.

(ii) Equity instruments

The Bank subsequently measures all equity investments at fair value. For equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis. Where the Bank�s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to income statement. Dividends from such investments continue to be recognised in income statement as dividend income when the company�s right to receive payments is established unless the dividend clearly represents a recovery of part of the cost of the investment. Changes in the fair value of financial assets measured at fair value through profit or loss are recognised in �Net gains/(losses) from financial instruments held for trading�.

All other financial assets are classified as measured at FVTPL. In addition, on initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the

73

requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Business model assessment

The Bank makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

1) The stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management�s strategy focuses on earning contractual return revenue, maintaining a particular return rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;

2) How the performance of the portfolio is evaluated and reported to management; 3) The risks that affect the performance of the business model (and the financial

assets held within that business model) and how those risks are managed; 4) How managers of the business are compensated e.g. whether compensation is

based on the fair value of the assets managed or the contractual cash flows collected; and

5) The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank�s stated objective for managing the financial assets is achieved and how cash flows are realised.

The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case� scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Bank's original expectations, the Bank does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

Assessment of whether contractual cash flows are solely payments of principal and return on principal amount outstanding

As a second step of its classification process the Bank assesses the contractual terms of financial to identify whether they meet the SPPI test.

74

�Principal� for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount).�Return� is include consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

The most significant elements of return within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Bank applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the return rate is set.

Financial liabilitiesThe Bank�s holding in financial liabilities is in financial liabilities at fair value through profit or loss and financial liabilities at amortised cost. Financial liabilities are derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in income statement.

(i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss are financial liabilities held for trading. A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorised as held for trading unless they are designated and effective as hedging instruments. Financial liabilities held for trading also include obligations to deliver financial assets borrowed by the Bank. Gains and losses arising from changes in fair value of financial liabilities classified as held for trading are included in the income statement and are reported as �Net gains/(losses) on financial instruments classified as held for trading�. Return expenses on financial liabilities held for trading are included in �Net income�.

From 1 January 2018, under IFRS 9, where a financial liability is designated at fair value through profit or loss, the movement in fair value attributable to changes in the Bank�s own credit quality is calculated by determining the changes in credit spreads above observable market return rates and is presented separately in other comprehensive income.

(ii) Financial liabilities at amortised cost Financial liabilities that are not classified at fair value through profit or loss fall into this category and are measured at amortised cost. Financial liabilities measured at amortised

75

cost are deposits from banks or customers, debt securities in issue for which the fair value option is not applied, convertible bonds and subordinated debts.

Modifications of financial assets and financial liabilities

(i) Financial assets If the terms of a financial asset are modified, the Bank evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value. Any difference between the amortised cost and the present value of the estimated future cash flows of the modified asset or consideration received on derecognition is recorded as a separate line item in income statements as �gains and losses arising from the derecognition of financial assets measured at amortised cost�.

If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Bank recalculates the gross carrying amount of the financial asset as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset�s original effective rate of return (or credit-adjusted effective rate of return for purchased or originated credit-impaired financial assets). The amount arising from adjusting the gross carrying amount is recognised as a modification gain or loss in income statement as part of impairment charge for the year.

(ii) Financial liabilities The Bank derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. This occurs when the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate of return, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in income statement. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment (i.e. the modified liability is not substantially different), any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

Offsetting of financial instruments Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right and

76

under Sharia�a framework to set off the recognized amounts and the Bank intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously.

Impairment of Financial Assets

The Bank recognizes allowance for expected credit losses for all loans and other debt financial assets not held at FVPL, together with loan commitments and financial guarantee contracts, in this section all referred to as �financial instruments�. Equity instruments are not subject to impairment under IFRS 9.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months� expected credit loss (12mECL)

The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments

Loss allowances for accounts receivable are always measured at an amount equal to lifetime ECL. The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument�s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument.

Based on the above process, the Bank groups its loans into Stage 1, Stage 2, Stage 3 and POCI, as described below: � Stage 1: When loans are first recognised, the Bank recognises an allowance based on 12mECLs. Stage 1loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2.

� Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECLs. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.

� Stage 3: Loans considered credit-impaired. The Bank records an allowance for the LTECLs.

� POCI: Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and return is subsequently recognised based on a credit-adjusted ERR. ECLs are only recognised or released to the extent that there is a subsequent change in the expected credit losses.

If, in a subsequent period, credit quality improves and reverses any previously assessed significant increase in credit risk since origination, depending on the stage of the lifetime

77

2 or stage 3 of the ECL bucket, the Bank would continue to monitor such financial assets for a probationary period of 90 days to confirm if the risk of default has decreased sufficiently before upgrading such exposure from Lifetime ECL (Stage 2) to 12-months ECL (Stage 1). In addition to the 90 days probationary period above, the Bank also observes a further probationary period of 90 days to upgrade from Stage 3 to 2. This means a probationary period of 180 days will be observed before upgrading financial assets from Lifetime ECL (Stage 3) to 12-months ECL (Stage 1).

For financial assets for which the Bank has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

Measurement of ECLs

The Bank calculates ECLs based on probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the expected profit rate. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

The mechanics of the ECL calculations are outlined below and the key elements are, as follows:

PD: The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

EAD: The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and return, whether scheduled by contract or otherwise, expected draw downs on committed facilities, and accrued return from missed payments.

LGD: The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

When estimating the ECLs, the Bank considers three scenarios (a base case, an upside and downside). Each of these is associated with different PDs, EADs and LGDs.

When relevant, the assessment of multiple scenarios also incorporates how defaulted loans are expected to be recovered, including the probability that the loans will cure and the value of collateral or the amount that might be received for selling the asset.

Impairment losses and releases are accounted for and disclosed separately from modification losses or gains that are accounted for as an adjustment of the financial asset�s gross carrying value.

The mechanics of the ECL method are summarised below:

78

� Stage 1: The 12mECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12months after the reporting date. The Bank calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR. This calculation is made for each of the four scenarios, as explained above.

� Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.

� Stage 3: For loans considered credit-impaired, the Bank recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.

� POCI: POCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the cumulative changes in lifetime ECLs since initial recognition, based on a probability-weighting of the four scenarios, discounted by the credit-adjusted EIR.

� Loan commitments and letters of credit: When estimating LTECLs for undrawn loan commitments, the Bank estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down, based on a probability-weighting of the four scenarios. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.

Presentation of allowance for ECL in the statement of financial position

Loan allowances for ECL are presented in the statement of financial position as follows: Financial assets measured at amortised cost: as a deduction from the gross

carrying amount of the assets; Loan commitments and financial guarantee contracts: generally, as a provision; Where a financial instrument includes both a drawn and an undrawn

component, and the Bank cannot identify the ECL on the loan commitment component separately from those on the drawn component: the Bank presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and

Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is

79

their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve.

Renegotiated financing facilitiesWhere possible, the Bank seeks to restructure financing facilities rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new conditions. Management continually reviews renegotiated facilities to ensure that all future payments are highly expected to occur. When the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the finance customer, then an assessment is made of whether the financial asset should be derecognized and ECL are measured as follows: - If the expected restructuring will not result in derecognition of the exiting asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. - If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset. The cash shortfalls are discounted from the expected date of derecognition to the reporting date using the original effective profit rate of the existing financial asset.

Collateral valuation

To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The Bank�s accounting policy for collateral assigned to it through its lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded on the Bank�s statement of financial position. However, the fair value of collateral affects the calculation of ECLs. It is generally assessed, at a minimum, at inception and re-assessed on a quarterly basis. However, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which do not have readily determinable market values are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, or based on housing price indices.

Collateral repossessed

The Bank�s accounting policy under IFRS 9 remains the same as it was under IAS 39. The Bank�s policy is to determine whether a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for the internal operations

80

are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets)and fair value less cost to sell for non-financial assets at the repossession date in, line with the Bank�s policy.

In its normal course of business, the Bank does not physically repossess properties or other assets in its retail portfolio, but engages external agents to recover funds, generally at auction, to settle outstanding debt. Any surplus funds are returned to the customers/obligors. As a result of this practice, the residential properties under legal repossession processes are not recorded on the balance sheet.

Write-off After a full evaluation of a non-performing exposure, in the event that either one or all of the following conditions apply, such exposure is recommended for write-off (either partially or in full):

continued contact with the customer is impossible; recovery cost is expected to be higher than the outstanding debt; amount obtained from realisation of credit collateral security leaves a balance of

the debt; or it is reasonably determined that no further recovery on the facility is possible.

All credit facility write-offs require endorsement by the Board Credit Committee, as defined by the Bank. Credit write-off approval is documented in writing and properly initialed by the Board Credit Committee. A write-off constitutes a derecognition event. The write-off amount is used to reduce the carrying amount of the financial asset. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Bank's procedures for recovery of amount due. Whenever amounts are recovered on previously written-off credit exposures, such amount recovered is recognised as income on a cash basis only.

Forward looking information

In its ECL models, the Bank relies on a broad range of forward looking information as economic inputs, such as: � GDP growth � Unemployment rates � Central Bank base rates � House price indices The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material. Detailed information about these inputs and sensitivity analysis are provided in Note 4 in the pro-forma financial statements.

81

Financial guarantees and loan commitments

The date that the entity becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of applying the impairment requirements. Financial guarantees issued are initially measured at fair value and the fair value is amortised over the life of the guarantee. Subsequently, the financial guarantees are measured at the higher of this amortised amount and the amount of expected loss allowance. The premium received is recognised in the income statement in Net fees and commission income on a straight line basis over the life of the guarantee. The Bank also recognises loss allowance for its loan commitments. The expected loss allowance for the Loan commitment is calculated as the present value of the difference between the contractual cash flows that are due to the Bank if the commitment is drawn down and the cash flows that the Bank expects to receive.

The Bank has issued no loan commitment that is measured at FVTPL.

iii Impairment Provisions against Financing Contracts with Customers

The Bank shall review its financing contracts at each reporting date to assess whether an impairment provision should be recorded in the financial statements. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provision required. Such estimates are based on assumptions about factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes to the provisions. In addition to specific provisions against individually significant financing contracts, the Bank also shall make a collective impairment provision of 2% against exposures which, although not specifically identified as requiring a specific provision, have a greater risk of default than when originally granted. This takes into consideration, factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows.

iv Impairment of Investments at Fair Value through Equity

The Bank shall treat investments carried at fair value through equity as impaired when there is a significant or prolonged decline in the fair value below their costs or where other objective evidence of impairment exists. The determination of what is 'significant' or 'prolonged' requires judgment. The Bank would evaluate factors, such as the historical share price volatility for comparable quoted equities and future cash flows and the discount factors for comparable unquoted equities.

v Liquidity The Bank shall manage its liquidity through consideration of the maturity profile of its assets and liabilities on daily basis. This requires judgment when determining the maturity of assets and liabilities with no specific maturities.

82

(e) InventoryInventory of stationery and consumables held by the Bank are to be stated at the lower of cost and net realizable value in line with IAS 2. When inventories become old or obsolete, an estimate is to be made of their net realizable value. For individually significant amounts, this estimation is to be performed on an individual basis. For amounts that are not individually significant, collective assessment shall be made and allowance applied according to the inventory type and degree of ageing or obsolescence based on historical selling prices.

(f) Non-Current Assets

Non-current (fixed) assets are initially recorded at cost. They are to be subsequently stated at historical cost less depreciation and any accumulated impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Bank and the cost of the asset can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Construction cost in respect of offices is carried at cost as work in progress. On completion of construction, the related amounts are transferred to the appropriate category of fixed assets. Payments in advance for items of fixed assets are included as Prepayments in Other Assets and upon delivery are reclassified as additions in the appropriate category of property and equipment.

Asset that do not reach a limit of N25,000 (Twenty Five Thousand Naira Only) are expensed immediately in the income statement, but capitalized if above limit.

Depreciation is to be provided on a straight-line basis to write off the cost of asset over their estimated useful live. The annual rate which should be applied consistently over time are as follows:

Motor vehicle (5 years) 20% Furniture and fittings (5 years) 20% Equipment (5 years) 20% Computer Equipment- General (3 years) 33% Computer Equipment- Special (5 years) 20% Computer software (10 years) 10% Freehold Buildings (50 years) 2% Leasehold building over the expected life of the lease

Leasehold improvement over the period of the lease

83

Property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from it use. Gain and losses are recognised in the income statement.

Depreciation is charged when the assets are available for use irrespective of whether they are put to use. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the statement of income for the year.

(g) Intangible AssetsSoftware licenses acquired by the Bank are stated at cost less accumulated amortization and accumulated impairment loss (if any). Expenditure incurred on internally developed software is recognized as an asset when the Bank is able to complete the software development and use it in such a manner that it will be able to generate economic benefit to the Bank, and that the cost to complete the development can reliably be measured by the Bank. Internally developed software cost that is capitalized includes cost directly attributable to developing the software, and is amortized over the useful economic life of the software.

Amortization is recognized in the income statement on a straight line basis over the estimated useful life of the software.

(h) Ijarah (Leasing) The Bank shall comply fully with the requirements of Sharia in recognition and measurement of Ijarah financing. The periodic lease rentals receivable are treated as rental income during the period they occur and charge thereon is included in operating expenses while initial direct cost incurred are written off to the income statement in the period they are incurred.

(i) Murabaha Receivables from Banks

These are interbank commodity Murabaha transactions. The Bank arranges a Murabaha transaction by buying a commodity (which represents the object of the murabaha) and then resells this commodity to the beneficiary murabeh (after adding a profit margin). The sale price (cost plus the profit margin) is paid either lump sum at Maturity or in installments by the Murabeh over the agreed period. Murabaha receivables from banks are stated net of deferred profits and provision for impairment, if any.

84

(j) Murabaha Receivables from Customers

Customer Murabaha receivables consist of deferred sales transaction agreements and are stated net of deferred profits, any amounts written off and provision for impairment, if any. Promise made in the Murabaha to the purchase Orderer is obligatory upon the customer and the bank can claim damages to the exact amount of loss suffered.

(k) Musharaka Musharaka contracts represents a partnership between the Bank and a customer whereby each party contributes to the capital in equal or varying proportions to establish a new project or share in an existing one, and whereby each of the parties becomes an owner of the capital on a permanent or declining basis and shall have a share of profits or losses. These are stated at the fair value of consideration given less any amounts written off and provision for impairment, if any.

(l) Wakalah A contract between a Bank and a customer whereby one party (the principal: the Muwakkil) appoints the other party (the agent: Wakil ) to invest certain funds according to the terms and conditions of the Wakalah for a fixed fee in addition to any profit exceeding the expected profit as an incentives for the Wakil for the good performance. Any losses as result of the misconduct or negligence or violation of the the terms and conditions of the Wakalah are borne by the Wakil for otherwise, they are by the principal.

(m) Income Recognition Income is recognised on the above Islamic products as follows:

i MurabahaWhere the income is quantifiable and contractually determined at the commencement of the contract, income is recognized on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful.

ii Ijarah Muntahia Bittamleek

Ijarah income is recognized on a time-apportioned basis, over the lease term. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful.

iii Musharaka Income on Musharaka Contracts is recognized when the right to receive payment is established or on distribution by the Musharek.

iv Dividends Dividends from investments in equity securities are recognized when the right to receive the payment is established. This is usually when the dividend has been declared.

85

v Fees and Commission Income

The Bank earns fee and commission income from a diverse range of services it provides to its customers.

vi Sukuk Income is accounted for on a time apportioned basis over the terms of the Sukuk.

vii Sale of Property under Development

Where property is under development and agreement has been reached to sell such property when construction is complete, the bank considers whether the contract comprises:

Contract to construct a property; or

Contract for the sale of completed property

Where a contract is judged to be for the construction of a property, revenue is recognized using the percentage of completion method, as construction progresses. The percentage of work completed is measured based on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred.

Where the contract is judged to be for the sale of a completed property, revenue is recognized when the significant risks, rewards and control of ownership of the property are transferred to the buyer.

viii Non-Credit Related Fee Income

This is recognized at the time the services have been performed and delivered or the transaction has been completed.

ix Foreign Income

a) Commission on negotiation of various letters of credit and overdue Profit on delayed foreign payments are accounted for on receipt.

b) Other Profit and income earned on the Bank's own funds held outside Nigeria are accounted for on receipt.

x Earnings Prohibited by Shari 'a

The bank is committed to avoid recognizing any income generated from non-Islamic sources. Accordingly, all non-permissible income is transferred to charity.

86

xi Service Income

Revenue from rendering of services is recognized when the services are rendered.

xii Revenue from Sale of Goods

Revenue from sales of goods is recognized when the significant risks, rewards and control of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

xiii Bank's Share as a Mudarib

The Bank's share as a mudarib for managing the equity of investment account holders is accrued based on the terms and conditions of the related mudaraba agreements whereas, for off balance sheet equity of investment accounts, mudarib share is recognized when distributed.

xiv Expense Recognition

a) Profit on mudaraba payable (banks and non-banks)

Profit on these is accrued on a time-apportioned basis over the period of the contract based on the principal amounts outstanding.

b) Return on Equity of Investment Account Holders

Return on equity of investment account holders is based on the income generated from jointly financed assets after deducting Mudarib share and is accrued based on the terms and conditions of the underlying Mudaraba agreement. Investors' share of income represents income generated from assets financed by investment account holders net off allocated administrative expenses and provisions. The bank's share of profit is deducted from the investors' share of income before distribution to investors

(n) Taxation

i Current Income Taxation

Income tax is the amount of income tax payable on the taxable profit for the period determined in accordance with current statutory rate. Income tax payable on profits, based on the applicable tax law, is recognized as an expense in the period in which the related profits arise. All taxes related issues including deferred tax are treated in accordance with IAS 12 (Income taxes)

87

ii Deferred Taxation

Provision for deferred taxation is made by the liability method and calculated at the current rate of taxation on the temporary differences between the net book value of qualifying fixed assets and their corresponding tax written down value in accordance with IAS 12 (Income taxes). The principal temporary differences arise from depreciation of property, plant and equipment, provisions for pensions and other post-retirement benefits, provisions for Investment losses and tax losses carried forward. The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognized where it is probable that future taxable profit will be available against which the timing differences can be utilized.

(o) Investments i Investment Securities

Investment securities are initially recognized at cost and management determines the classification at initial investment. Investments in securities are classified, measured and recognize in accordance with IAS 39 (Financial Instruments measurement and recognition). ii Investments at Fair Value through Equity

Investments at fair value through equity are those which are designated as such or are not classified as carried at fair value through statement of income. These include investments in equity securities and managed funds.

After initial measurement, investments at fair value through equity are subsequently measured at fair value. Unrealised gains and losses are recognised in statement of comprehensive income and then transferred to the available for sale reserve in the consolidated statement of changes in equity. When the investment is disposed of or determined to be impaired, the cumulative gain or loss, previously transferred to the available for sale, reserve is recognised in the consolidated statement of income. Where the Bank holds more than one investment in the same security they are deemed to be disposed off on a weighted average basis. Profit earned whilst holding investments at fair value through equity is reported as Income from investment activities' using the effective profit rate method. Long-term investments are investments held over a long period of time to earn income. Long-term investments may include debt and equity securities.

iii Investments in Subsidiaries Investments in subsidiaries are carried in the company's balance sheet at cost less provisions for impairment losses. Where, in the opinion of the Directors, there has been impairment in the value of an investment, the loss is recognized as an expense in the period in which the impairment is identified.

88

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income.

(p) Employee benefits A defined contribution plan is a pension plan under which the Bank pays fixed contributions to a separate entity. A defined contribution scheme, which is funded by contribution from the bank and employees. The rate of contribution by the by the employee is 8.0% and 10% by the Bank based on annual basic salary, housing and transport allowances in line with the new Pension Reform Act, 2014. Membership of the scheme is automatic upon resumption of duty with the Bank. The Bank has no further payment obligations once the contributions have been paid.

The Bank's liabilities in respect of the defined contribution are to be charged against the profit of the year in which they become payable. Payments are made to Pension Fund Administration companies, who are financially independent of the bank.

(q) Provisions, Contingent Assets and Contingent Liabilities

Provision is recognized when the Bank has a present obligation whether legal or constructive as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount can be reliably measured, in accordance with the International Financial Reporting Standards (IAS 37). Transactions that are not currently recognized as assets or liabilities in the balance sheet, but which nonetheless give rise to credit risks, contingencies and commitments are reported off balance sheet. Such transactions included letters of credit, bonds, guarantees, acceptances, trade related contingencies such as documentary credits etc.

Outstanding and unexpired commitments at year end in respect of these transactions are to be shown by way of note to the financial statements.

Income on off-balance sheet engagement is in form of commission and fees.

Commission and fees are recognized when transactions are executed.

(r) Borrowings i Murabaha and Due to Banks

This represents funds received from banks on the principles of murabaha contracts and are stated at fair value of consideration received less amounts settled.

ii Murabaha and due to non-banks

89

These are stated at fair value of consideration received less amounts settled. Profit paid on borrowings is recognized in the statement of income for the year.

(s) Fiduciary Activities The Bank acts as trustee in its capacity as a Mudarib when managing the equity of investment account holders. Equity of investment account holders is invested in murabaha and due from banks, sukuk and financing contracts with customers. Equity of investment account holders is carried at fair value of consideration received less amounts settled. Expenses are allocated to investment accounts in proportion of average equity of investment account holders to total average assets of the Bank.

Income is allocated proportionately between equity of investment account holders and owners' equity on the basis of the average balances outstanding during the year and share of the funds invested. Equity and assets of restricted investment account holders are carried off-balance sheet as they are not assets and liabilities of the Bank.

(t) Segment Reporting

The Bank prepares its segment information based on geographical and business segments as primary and secondary reporting segments, respectively in accordance with IFRS 8 (Operating segments).

A business segment is a Bank of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of segments operating in other economic environments.

The Bank has appointed the Management committee charged with the responsibility of allocating resources and assessing performance as the Chief Operating Decision Maker as required under IFRS 8. The CODM is reviewed and advised by the Board for decisions on significant transactions and or events.

(u) Ordinary Share Capital

i Share Issue Costs

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

ii Dividend on Ordinary Shares

Dividends on ordinary shares are recognised in revenue reserve in the period they are approved by the Bank's shareholders.

90

Dividends for the year that are approved by the shareholders after the balance sheet date are dealt with in the subsequent events note.

Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act 1990.

(v) Gifted Assets The recording of the gift would be based on nature, lifetime and materiality of the gift. If the gift is usable or has a material value addition to the business like Property, plant and equipment would be recognized in an asset of appropriate category hence a debit, In terms of credit several approaches are acceptable recognizing it to Owners equity via Profit or Loss Account or Other Comprehensive Income. The Bank adapted recognition through other comprehensive income to the owners� equity.

(w) Investment property An Investment Property is an investment in land or buildings held primarily for generating income or capital appreciation and not occupied substantially for use in the operations of the Bank. A piece of property is treated as an investment property if it is not occupied substantially for use in the operations of the Bank, an occupation of more than 15% of the property is considered substantial. The initial Recognition is to be at its cost price while for subsequent measurement the Bank adapted the fair value model which carry the investment properties in the balance sheet at their market value and revalued periodically on a systematic basis at least once in every three years in accordance with (IAS 40). Investment properties are not subject to periodic charge for depreciation. When there is a decline in value of an investment property, the carrying amount of the property is written down to recognize the loss. Such a reduction is charged to the statement of income. Reductions in carrying amount are reversed when there is an increase, following a revaluation in accordance with the Bank�s policy, in the value of the investment property, or if the reasons for the reduction no longer exist. An increase in carrying amount arising from the revaluation of investment property is credited to owners' equity as revaluation surplus. To the extent that a decrease in carrying amount offsets a previous increase, for the same property that has been credited to revaluation surplus and not subsequently reversed or utilized, it is charged against that revaluation surplus rather than the statement of income. An increase on revaluation which is directly related to a previous decrease in carrying amount for the same property that was charged to the income statement is credited to income statement to the extent that it offsets the previously recorded decrease. Investment properties are disclosed separate from the property and equipment used for the purposes of the business in line with IAS 40 (Investment Properties)

JAIZ BANKNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2018

3 Cash and Balances with Central Bank of Nigeria 2018 2017N '000 N '000

Cash 3,969,149 2,651,233 Current account with CBN 8,593,192 8,842,420 Deposit with CBN 10,804,990 12,400,770 CBN AGSMEIS Balance 42,420 15,564 As at 31 December 23,409,751 23,909,987

4 Due from Banks and Other Financial Institutions 2018 2017N'000 N'000

Balances with banks within Nigeria:First Bank Plc 236,096 253,270

a 236,096 253,270 Balances with banks outside Nigeria:First Bank UK 6,320,529 4,778,383 Habib Bank UK - 290,182 Banco De Sabadel 200,980 - Standard Chartered 153,932 1,025 Bank Al-Bilad 189,307 118,212 Zenith Bank UK 307,218 -

b 7,171,967 5,187,802

As at 31 December a+b 7,408,063 5,441,072

5 Total Sukuk Investment 2018 2017N'000 N'000

Opening Balance 6,068,953 1,060,252 Addition during the year 13,325,033 5,166,305 Disposal/Redemption (479,321) (157,604)Gross investment in Sukuk 18,914,665 6,068,953 Premium 473,967 50,347 Rental Receivable 380,894 268,618 As at 31 December 19,819,872 6,387,918

Cash on hand constitutes the aggregate cash balances in the vaults of the Bank branches whileDeposits with the Central Bank of Nigeria represent Mandatory Reserve Deposits(as prescribedby the CBN) and are not available for use in the bank�s day�to�day operations.

The balances held with Banks outside Nigeria substantially represent the Naira equivalent ofForeign Currency balances held on behalf of customers in respect of Letters of Credittransactions. The corresponding Liabilty is included in Margin Deposits under "OtherLiabilities" (see Note 18). The amount is not available for the day to day operations of the Bank.

"91"

The total sukuk investment is broken down into i and ii below:i Osun State Sukuk 2018 2017

N'000 N'000Opening Balance 902,648 1,060,252 Addition during the year 565,853 - Disposal/Redemption (479,321) (157,604)Gross investment in Sukuk 989,180 902,648 Premium 52,930 50,347 Rental Receivable 38,333 125,350As at 31 December 1,080,443 1,078,345


ii FGN Sovereign Sukuk 2018 2017N'000 N'000

Opening Balance 5,166,305 - Addition during the year 12,759,180 5,166,305 Disposal/Redemption - - Gross investment in Sukuk 17,925,485 5,166,305 Premium 421,037 - Rental Receivable 342,561 143,268As at 31 December 18,689,083 5,309,573

6 Investment in Musharaka 2018 2017N'000 N'000

Gross Investment in Musharaka - 1,200,000 Allowance for impairement - -As at 31 December - 1,200,000

7A Murabaha Receivables 2018 2017N'000 N'000

Murabaha Retail 7,030,831 5,762,414 Murabaha Corporate 21,642,820 18,925,850 Murabaha Staff 1,125 5,799 Murabaha SME 44,425 24,199 Gross Recievable 28,719,201 24,718,262 Allowance for impairment note 32b(ii) (1,724,308) (458,277)Deffered Profit (1,664,196) (1,582,824)As at 31 December 25,330,697 22,677,161

During the year, the Bank invested N8.80billion in Sukuk issued by the Federal Government ofNigeria (FGN). The Sukuk has 7 Years tenor which is due in 2025 at a return of 15.743%. TheBank also purchased, through the secondary market, Sukuk worth N3.96billion. The rentalpayment is semi-annually while the principal redemption is a bullet payment on maturity.

"92"

7B Investment in Bai Mu'ajjal 2018 2017 N'000 N'000

Bai Mu;ajjal Corporate 79,968 - Gross Receivables 79,968 - Allowance for impairement - - Deffered Profit - 20,782 - As at 31 December 59,186 -

8 Investment in Istisna 2018 2017N'000 N'000

Istisna Recievable 2,024,325 1,599,125 Allowance for impairement note 32b(ii) (11,827) (35,948)Deffered Profit (146,841) (227,816)As at 31 December 1,865,656 1,335,361

9 Investment in Ijara Assets 2018 2017N'000 N'000

Ijara wa Iqtina 12,102,569 12,593,093 Ijara home finance 22,475 23,736 Ijara Auto & Others 260 254 Ijara Others 741,093 563,193 Gross investment in Ijara 12,866,397 13,180,277 Allowance for impairement note 32b(ii) (55,683) (27,076)As at 31 December 12,810,714 13,153,201


10 Qard Hassan 2018 2017N'000 N'000

Balance at 1 January 149,082 127,674 Granted to Staff - - Granted to customers 83,178 94,759 Total during the year 232,260 222,433 RepaymentsStaff Repayment 16,043 17,917 Customer Repayment 41,620 55,486 Total Repayment during the year 57,663 73,403

impairment Allowance note 32b(ii) (2,649) -52Balance as at 31 December 171,948 149,082

The staff portion is made up of facilities granted to employees to buy the Bank's shares under2012 Private Placement exercise and facilities taken over by the Bank from their previousemployers. Staff under critical situations were also granted this type of facility. The amountgranted to customers during the year was N83.18million.

"93"

10ii Investment Properties 2018 2017 N'000 N'000

Investment Properties Corporate 1,603,513 - Gross Investment Properties 1,603,513 - Allowance for impairement - - As at 31 December 1,603,513 -

11i Investment in Assets Held for Sale 2018 2017N'000 N'000

Advances for LC Murabaha 3,045,817 1,287,288Inventory for Sale 4,654,012 4,596,000 As at 31 December 7,699,830 5,883,288

(ii) Schedules Inventory for Sale N'000 N'000Repossessed Property 831,513 854,513 Other Properties 1,444,221 1,358,000 Special Murabaha Inventory 1,310,000 - Inventory Purchase-Fertilizer 749,417 1,170,244 Inventory Hajj Mat & Chemical 174,000 474,502 Inventory Hide & Skin 144,861 251,527 Inventory JAMB Computers - 17,826 Inventory JAMB Application Pin - 469,388 Total Inventory for Sale 4,654,012 4,596,000

Investment properties represents the summation of N1.5billion and N103.51million (the rentalincome on the property for one year from 12 September 2018 to 11 September 2019) totallingN1,603,512,500. The accrued rental income of N28.21million (note 24) was recognized asrental income while the balance of N75.31million is included as unearned income under otherliabilities (note 18b).

"94"

JAIZ BANK

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2018

12 Property, Plant and Equipment

Freehold Land

Building Freehold

Office Equipment

Motor Vehicle

Furnitures and Fixtures

Computer Equipment

Fixed Assets WIP Total

Cost N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 0001 January 2018Cost 3,086 495,327 676,346 405,207 181,608 1,608,113 276,101 3,645,788 Additions/Reclassifiaction 54,000 63,884 166,384 70,224 32,882 419,405 166,662 973,443 Disposals - - - - - - - - 31 December 2018 57,086 559,211 842,730 475,431 214,490 2,027,518 442,763 4,619,231

Accumulated depreciation1 January 2018 - 16,710 302,785 178,359 113,087 910,851 - 1,521,791 Depreciation - 10,025 126,481 64,083 26,550 296,222 - 523,362 Adjustment - 0 (46) (4,189) (276) 0 (4,511)Disposals - - - - - - - - 31 December 2018 - 26,735 429,220 238,253 139,362 1,207,073 - 2,040,642

2017Cost 1,000 460,849 491,761 303,315 149,741 1,374,232 214,272 2,995,170 Additions/ Reclassification 2,086 34,478 184,585 101,892 31,867 233,881 61,829 650,618 Disposals - - - - 31 December 2017 3,086 495,327 676,346 405,207 181,608 1,608,113 276,101 3,645,788

Accumulated depreciation1 January 2017 - 7,520 190,067 145,065 86,415 675,077 - 1,104,144 Depreciation - 9,190 112,745 57,109 27,724 231,332 438,373 Adjustment - - (27) - 23,815 - 1,052 4,442 - (20,726)31 December 2017 - 16,710 302,785 178,359 113,087 910,851 - 1,521,791

Netbook value31 December 2018 57,086 532,476 413,510 237,179 75,128 820,446 442,763 2,578,588

31 December 2017 3,086 478,617 373,561 226,848 68,521 697,262 276,101 2,123,997

Included in Freehold Land and Building are N54million and N96million respectively which total N150million. This is the professional value of agifted asset received during the year by the Bank. The professional valuation of the property was issued by Osas & Oseji Estate Surveyors &Valuers. The value has been reflected as a gifted asset income through the other comprehensive income (note 28).

"95"


13 Leasehold Improvement 2018 2017Cost N'000 N'000Balance at 1 January 810,819 795,549 Adjustments - - Addition 37,639 15,270 As at 31 December 848,458 810,819

AmortisationBalance at 1 January 775,888 775,888 Adjustments (6,380) (26,295)Amortisation for the year 20,832 26,294As at 31 December 790,340 775,888

Carrying amountsAs at 31 December 58,118 34,932

14 Intangible Assets 2018 2017N'000 N'000

CostComputer

softwareComputer

softwareBalance at 1 January 593,232 563,242 Addition 94,666 29,990 As at 31 December 687,898 593,232

Amortisation and impairment lossesBalance at 1 January 252,946 195,153 Amortisation for the year 64,204 57,793 As at 31 December 317,150 252,946

Carrying amountsAs at 31 December 370,748 340,286

"96"

JAIZ BANK


15 Other Assets 2018 2017N'000 N'000

Sundry Debtors 360,498 524,425 Prepaid rent 450,254 470,044 Other prepayments 307,256 117,463 Prepaid Staff 106,658 35,132 Inventory and Other Security items 48,590 47,758 Branch development expenditure 308,905 272,047 Account receivables 319,005 189,460 Ijara accrued Profit 2,454,197 2,444,916 Settlement Suspense 948,276 617,877 Interbranch 717 (1,849)Total 5,304,356 4,717,273 Impairment of Other Assets (40,950) (40,950)As at 31 December 5,263,406 4,676,323

Movement in other assets:2018 2017

N'000 N'000Balance at 1 January 4,676,323 5,233,384 Changes in the year 628,032 (516,111)Impairment of Other Assets (40,950) (40,950)As at 31 December 5,263,406 4,676,323

16a Tax PayableStatement of Financial position 2018 2017

N'000 N'000Balance brought forward 135,677 77,087 Charge for the year 90,345 135,677

226,022 212,764 Less payment during the year (135,677) (77,087)As at 31 December 90,344 135,677

ii) Income statement 2018 2017N'000 N'000

Company Income Tax 82,301 105,688 Education Tax 2,599 21,138 Information Technology levy 5,445 8,852

90,345 135,677 Deferred tax expensesDeferred tax expenses(Origination/(Reversal) of temporary differences) (27,009) 221,214 Balance at 31 December 63,336 356,891

The total tax expenses of N357 million for the current year comprises of the Company Income Tax, Educationtax and Information Technology tax of N136million while the N221 million is the Deferred tax expenses thatcame up as a result of the reversal of temporary differences in the period.

"97"

JAIZ BANK


16b Deferred Tax Asset 2018 2017N'000 N'000

Balance at 1 January - 206,573 Deferred tax expenses(Origination/(Reversal) of temporary differences) 12,368 (221,214)Transfer to Deferred Liability - 14,641 As at 31 December 12,368 -

Deferred Tax Liability 2018 2017 N'000 N'000

Balance at 1 January 14,641 - Deferred tax expenses(Origination/(Reversal) of temporary differences) (27,009) 14,641 Transfer to Deferred Assets 12,368 - As at 31 December - 14,641

(ii) Reconciliation of Tax Expense and the Accounting Profit 2018 2017N'000 N'000

Accounting Profit before tax 549,924 894,008

Add non-deductible expenses for tax purposeDepreciation of PPE, Collective Impairment & Others 769,879 438,373

1,319,803 1,436,252 Less: Exempted Income on Sukuk Bond 1,163,084 370,524 Collective Impairment write-back 21,321 0 Capital Allowance 86,636 704,585 Technology Levy 5,445 8,852Adjusted Profit 43,317 352,292

Company Income Tax at 30% of Adjusted Profit 0 105,688Minimum Tax 82,301 0Technology Levy 5,445 8,852Education Tax 2,599 21,138Total Tax Payable 90,345 135,677Deferred Tax (Origination)/Reversal (27,009) 221,214Income Tax Expense 63,336 356,891

(iii) Deferred Tax Movement 2018 2017N'000 N'000

Property, Plant & Equipment 173,516 188,583Collective Impairment 15,834 (48,438)Unabsorbed Capital Allowance (216,359) 81,069 Deferred Tax (Origination)/Reversal (27,009) 221,214

The movement in the deferred tax account during the year by various components was as follows:

"98"


17 Due to customers 2018 2017N'000 N'000

Analysis by type of account(17a) Current Account 45,950,138 33,706,359 (17b) Savings & JAPSA 36,716,950 32,054,392 (17b) Mudaraba Term Deposit 2,365,904 2,354,505

As at 31 December 85,032,992 68,115,256

Analysis by type of Depositor 2018 2017N'000 N'000

Government 906,691 9,084,326 Corporate 31,208,143 22,729,985 Individual 52,918,157 36,300,945 As at 31 December 85,032,992 68,115,256

(17b) Equity of Investment Accountholders 2018 2017N'000 N'000

Savings Account 18,603,819 13,860,996 Children saving Account 1,114,825 736,805 Jaiz premium Savings Account 16,998,306 17,135,229 Others including MTDs 2,365,904 2,675,867 As at 31 December 39,082,854 34,408,897

18a Other Financing 2018 2017N'000 N'000

Fund Sources Outside the Bank (CBN/CACS) 2,000,000 - As at 31 December 2,000,000 -

18b Other Liabilities 2018 2017N'000 N'000

Manager Cheque 798,008 213,382 Margin Deposits 5,754,137 3,863,379 Accounts Payable 80,010 84,688 Vendors payable 284,144 19,905 Tax Liabilities 33,896 54,007 Profit payable to Mudararaba Savings Account 63,853 47,879 e-Banking Payables 357,102 478,498 Due to Charity 3,298 - Sundry Payables 644,436 491,083 Accrued audit fee 13,263 15,939 Sundry Deposit 29,076 18,354 Impairment Balance on Off Balance Sheet Items 11,914 - Unearned Income 72,171 - Dividend Payab;e - - Other Payables 84,652 80,772 As at 31 December 8,229,960 5,367,886

This represents the balance on the on-lending facilities granted by the Central Bank of Nigeria incollaboration with the Federal Government of Nigeria (FGN) under the Commercial Agriculture CreditScheme (CACS). The FGN is represented by the Federal Ministry of Agriculture and Rural Development)who has the aim of providing concessionary funding for agriculture so as to promote commercial agriculturalenterprises in Nigeria. The facility is for a period of 7 years but should not exceed the exit date of the schemein September 2025 at overall target profit rate of 9% The profit distribution ratio between the CBN asCapital Provider and the NIFI as the Implementing Party is in the ratio of 2:7.

"99"


19 Owners EquityA Share capital

(i) Authorised 2018 2017N'000 N'000

25,000,000 25,000,000

As at 31 December 25,000,000 25,000,000

(ii) Issued and Fully paid Share capital 2018 2017N'000 N'000

- - As at 31 December 14,732,125 14,732,125

20 Share Premium 2018 2017N'000 N'000

Balance as at 1 January 627,365 627,365 Movement during the year - - As at 31 December 627,365 627,365

21 Retained Earnings 2018 2017N'000 N'000

Balance at 1 January (4,244,308) (3,669,861)Adjustment - (1,754)Net profit for the year 834,366 537,117 Statutory Regulatory Reserve (250,310) (161,135)AGSMEIS (44,885) (42,420)Risk regulatory reserve (868,971) (906,255)As at 31 December (4,574,108) (4,244,308)

50,000,000,000 Ordinary shares of N0.50 each

29,464,249,300 Ordinary shares of N0.50 each at 1 January 14,732,125 14,732,125

Share premium is the excess paid by shareholders over the nominal value for their shares. There was no movement in share premium during the year.

There was no movement in the share capital account during the year. The holders of ordinary shares are entitled to receive dividends and each shareholder is entitled to a vote at the meetings of the Bank. All ordinary shares rank equally.

"100"

22 Risk Regulatory Reserve 2018 2017N'000 N'000

Balance as at 31 December 2017 2,267,029 1,360,774 Impact of adopting IFRS 9 (1,516,664) - Restated Opening Balance under IFRS9 750,365 1,360,774 Adjustment against retained earnings 868,971 906,255 As at 31 December 1,619,336 2,267,029

22 i Statutory Reserve 2018 2017N'000 N'000

Balance at 1 January 254,517 93,381 Adjustment against retained earnings 250,310 161,135 As at 31 December 504,826 254,517

22ii(a) Other Comprehensive Income 2018 2017N'000 N'000

Balance at 1 January - - Movement in the year 112,313 - As at 31 December 112,313 -

22ii(b) Agric-Business/Small and Medium Enterprises Investment Scheme 2018 2017N'000 N'000

Balance at 1 January 42,420 - Provision for the year 44,885 42,420 As at 31 December 87,305 42,420

In April 2017, the Central Bank of Nigeria issued guidelines to govern the operations of theAgriculture/Small and Medium Enterprises Scheme (AGSMIES), all Deposit Money Banks(DMBs) arerequired to set aside 5% of their annual Profit After Tax (PAT). N41.72 million represents 5% provisionmade for the year ended 31 December 2018.

"101"


23 Income from Financing Contracts 2018 2017N'000 N'000

Murabaha profit Corporate 2,557,299 2,460,345 Murabaha profit Retail 817,141 730,866 Murabaha LC Income 2,931 1,988 Bai Mu'ajjal Income 2,066 - Total profit from Murabaha transactions 3,379,437 3,193,199 Ijara TransactionsIjara wa Iqtina Profit 2,278,018 2,487,364 Ijara Finance Lease Profit 81,851 92,647 Ijara profit home finance 1,194 1,327 Ijara Others 545 816 Total profit from Ijara transactions 2,361,608 2,582,153 OthersIstisna Profit 313,975 126,585 Salam Profit - 2,044 Musharaka Profit 200,198 228,765 InterBank Murabaha Income 36,726 107,057 Total profit from other Financing/Investment Contracts 550,899 464,450

6,291,944 6,239,803

24 Income from investment activities 2018 2017N'000 N'000

Trading Assets Income 32,342 332,638 Sukuk 1,163,084 352,216 Rental Income 28,207 - Total Investment income 1,223,633 684,854

25 (i). RETURN ON EQUITY OF INVESTMENT ACCOUNT HOLDERS 2018 2017N'000 N'000

1,916,804 1,397,009 Profit from Financing Investments paid to Mudarabah Account Holders 1,916,804 1,397,009

(ii) Mudarib fees/ profit of Joint Investments

Bank's fees as Mudarib. 3,427,742 2,623,045 Profit from the Bank's Joint Financing investments 2,171,031 2,904,604 Bank's fee as Mudarib/Profit of owned Joint Investmets 5,598,773 5,527,649

Profit paid to Unrestricted Mudarabah Account Holders / Fees of Mudarib

Total Income from financing Contracts

The Bank operates the Unrestricted type of Mudaraba Investment, in which the Mudarib (the Bank) is authorizedby the providers of Funds (Rabbul Mal) to invest their funds in the manner which the Mudarib deemsappropriate. Profits are shared as a common Percentage Rate rather than a Fixed amount. The Investments werejointly funded by the Bank and the Equity of Investment Account holders. The amount of N1.92Billion was paidby the Bank to the Mudaraba Account Holders for 2018 finanacial Year.

"102"

26 Fees and Commisssion 2018 2017N'000 N'000

Banking Services 264,739 204,065 Net Income from E-Business 322,532 303,373 LC/ Trade Finance Income 401,168 241,271

988,439 748,709

27 Other Operating Income 2018 2017N'000 N'000

Wakala income 240,305 182,003 240,305 182,003

28 Other Comprehensive Income2018 2017

Gifted Assets Income 112,313 - 112,313 -


29 Staff Costs 2018 2017N'000 N'000

Salaries 2,444,419 1,961,091 Staff pension 156,469 170,199 Training and Seminar expenses 111,800 162,124 Other Staff Expenses 96,077 142,835

2,808,765 2,374,457

30 Depreciation and Amortisation 2018 2017N'000 N'000

Depreciation of Property, Plant & Equipment 523,362 438,099 Amortisation of Leasehold Improvement 20,832 26,294 Amortisation of Intangible Assets 64,204 57,793

608,398 522,187

31(i) Operating Expenses 2018 2017N'000 N'000

Advertising and marketing 99,291 93,193 Administrative - note 31 (ii) 1,526,180 1,620,944 Subscription and Professional fees 122,246 36,399 ACE's Expense 40,038 47,685 Rental charges (Occupancy Cost) 326,041 271,114 Licences 322,129 133,807 Bank Charges 56,974 48,558 Audit fee & Other Expenses 27,400 26,559 Directors expenses 223,937 227,992

2,744,236 2,506,250

"103"

31(ii) Administrative 2018 2017N'000 N'000

Telephone expenses 6,097 1,831 Bandwith Connectivity 161,173 175,143 SWIFT/NIBBS Charges 16,466 17,903 Courier charges 16,843 20,771 Local and foreign travels 51,957 63,266 Printing & Stationaries 67,770 57,668 Repairs and maintenance 202,837 117,245 Security Related Expenses 68,139 58,270 Money and other Insurance 23,486 29,175 NDIC Premium 271,709 209,502 Fuel Expense 81,223 72,763 Service contract (HR and Admin) 377,900 284,394 Data Recovery & IT Related Expenses 6,790 39,881 Newspaper, Magazine & Periodicals 5,100 1,734 Entertainment 5,966 5,494 Penalty & Regulatory Expenses 8,715 65,991 Sundry expenses 84,093 95,431 Cash shortage W/O 1,585 362 Listing Expenses 55,670 289,833 Industry Certification 12,661 14,288

1,526,180 1,620,944

"104"

JAIZ BANKNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2018 +

32 Impairment Provisions32 (a) PROVISION FOR IMPAIRMENT OF FINANCING AND INVESTMENT

Prudential Adjustment for the Year ended 31st December 2018

Provision on Risk Assets 2018 Specific General OKL TOTAL

N'000 N'000 N'000 N'000Provision per CBN Prudential Guidelines 2,708,961 716,755 40,950 3,466,666 impairment Allowance per IFRS9 (Specific and Collective) 1,197,381 609,000 40,950 1,847,331 Risk Regulatory Reserves balance as at 31st December 2018 1,511,579 107,755 0 1,619,335

2017 Specific General OKL TOTAL

N'000 N'000 N'000 N'000

Provision per CBN Prudential Guidelines 2,060,174 728,155 40,950 2,829,279

impairment Allowance per IAS 39 (Specific and Collective) 357,629 163,672 40,950 562,251

Risk Regulatory Reserves balance as at 31st December 2017 1,702,545 564,483 - 2,267,028

32 (b) PROVISION FOR IMPAIRMENT OF FINANCING AND INVESTMENT

(i) Impairment Loss 2018 2017Credit N'000 N'000Murabaha (17,611) 357629Musharaka - - Istisna 1,117 30164Ijarah 7,639 1835Qard Hassan (1,335) - Salam - - Off Balance Sheet (221,393) - Total (231,584) 389628Impairment WriteBack - (228,169)Net impairment charges for the year (231,584) 161459

(iia) impairment by Products (IFRS) 2018

Murabaha Musharaka Qard Hassan Istisina IjaraOff Balance Sheet Item

Other Assets Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Restated Opening Balance under IFRS9 1,741,919 0 3,984 10,710 48,045 233,307 40,950 2,078,914Re-classification/ Provision no Longer Required - - - - - - - 0.11 - 0.11

Impairment for the current year (17,611) - (1,335) 1,117 7,639 (221,393) - (231,584)Balance at 31 December 1,724,308 - 2,649 11,827 55,683 11,914 40,950 1,847,331

The impairment is based on the impairment test conducted by the Bank in accordance with the International Financial Reporting Standards (IFRS9).The first and second table are both IFRS 9 impairment for 2017 and 2018 respectively while the second table is for the provision on Risk Assets inaccordance with the Central Bank of Nigeria's Prudential Guidelines. Under the total Column in International Financial reporting Standard (IFRS)impairment table below, addition of the prior year over impairment charges and impairment for current year makes up the current year charges.

During the year under review, the sum of N868.97million was transfered from Retained Earnings to Risk Regulatory Reserve. The reserve thereforeincreased from its restated opening balance position of N750.36million to N1.62Billion on account of the transfer.

"105"

(iib) impairment by Products (IFRS) 2017


Other Assets Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 129,079 8,296 - 123,889 98,577 - 62,271 422,112 Re-classification/ Provision no Longer Required (28,431) (8,296) - (118,106) (73,336) - (21,321) (249,490)

Impairment for the current year 357,629 - - 30,164 1,835 - - 389,628 Balance at 31 December 458,277 0 0 35,947 27,076 0 40,950 562,250 Impact of adopting IFRS 9 1,283,642 3,984 (25,237) 20,969 233,307 - 1,516,664 Balance at 1 January (Restated) 1,741,919 - 3,984 10,710 48,045 233,307 40,950 2,078,914

(iii) Provision by Products (CBN)


Other Assets Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000Balance as at 31 December 2017 2,019,357 24,000 2,982 265,486 476,504 - 40,950 2,829,279 Re-classification/ Provision no Longer Required - (24,000) - - 57,965 - 27,295 - - (109,260)Provision for the current year 746,137 510 . . 746,647 Balance at 31 December 2,765,493 - 3,492 207,521 449,210 - 40,950 3,466,666

- (iv) impairment by Type

Murabaha Musharaka Qard Hassan Istisina Ijara SalaamOther Assets Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000General Provision 427,687 - 2,982 27,217 258,870 - 40,950 757,705 Specific Provision 2,337,806 - 510 180,304 190,340 - - 2,708,961 Balance at 31 December 2,765,493 - 3,492 207,521 449,210 - 40,950 3,466,666

(v) Investment Classification (IFRS)

MurabahaBai

Mu'ajjal Qard Hassan Istisina Ijara TotalN'000 N'000 N'000 N'000 N'000 N'000

Performing 25,896,032 79,968 174,597 1,750,111 12,615,254 40,515,962 Non-performing 2,823,169 - - 274,213 251,143 3,348,526 Balance at 31 December 28,719,201 79,968 174,597 2,024,325 12,866,397 43,864,488

(vi) Investment Classification (CBN)

MurabahaBai

Mu'ajjal Qard Hassan Istisina Ijara TotalN'000 N'000 N'000 N'000 N'000 N'000

Performing 25,387,354 79,968 174,597 1,786,056 12,627,489 40,055,463 Non-performing 3,331,847 - 0 238,268 238,908 3,809,024 At 31 December 28,719,201 79,968 174,597 2,024,325 12,866,397 43,864,488

"106"


32 (c ) - IFRS9 Transition disclosures

Reserves andretained earnings

N'000Risk regulatory reserveClosing balance under AAOIFI (31 December 2017) 2,267,029 Excess charges from IFRS 9 ECL computation (see below) (1,516,664)

Opening balance under IFRS 9 (1 January 2018) 750,365

Retained earningsClosing balance under AAOIFI (31 December 2017) (4,244,308)Recognition of IFRS 9 ECLs including those financial guarantees & loan commitments (see below) (1,516,664)Reversal of prudential adjustment no longer required on adoption of IFRS 9 1,516,664Opening balance under IFRS 9 (1 January 2018) (4,244,308)

Total change in equity due to adopting IFRS 9 (1,516,664)

Allowance for impairment under

AAOIFI at 31 December 2017

Re-measurementECLs underIFRS 9 at 1

January 2018

N'000 N'000 N'000Impairment allowance for:

Financial assets: Debt instrument at amortised cost (IFRS 9)

Cash and balances with the Central Bank of Nigeria - - -

Due from Banks and Financial Institution - - -

InterBank Murabaha - - -

Total Sukuk Investment - - -

Murabaha Receivables 458,277 1,283,642 1,741,919 Investment in Istisna 35,948 - 25,237 10,711 Investment in Ijara Asset 27,076 20,969 48,045 Qard Hassan - 3,984 3,984

Provision - financial guarantees (Wakala & others) - 233,307 233,307

521,301 1,516,664 2,037,965

Stage1 Stage2 Stage3 TOTALN'000 N'000 N'000 N'000 N'000 N'000

MURABAHA 940,983 247,204 553,732 1,741,919 458,277 1,283,642IJARA 15,073 7,259 25,712 48,045 27,076 20,969ISTISNA 4,218 354 6,138 10,711 35,948 -25,237 QARD 3,984 0 0 3,984 52 3,932OFF BALANCE SHEET 216,930 0 16,377 233,307 0 233,307TOTAL 1,181,189 254,817 601,960 2,037,965 521,353 1,516,613

The transition to IFRS 9 impacted the account. The transitonal impact was less than the Bank's Regulatory Risk Reserves balance as at 31st December 2017 and has been fully absorbed. The details of the impact are as follows:

The following table reconciles the aggregate opening allowance for impairment under IAS 39-Financial instruments and provisions forloan commitments and financial guarantee contracts in accordance with IAS 37-Provisions Contingent Liabilities and ContingentAssets to the ECL allowances under IFRS 9.

IFRS9 IMPAIREMENT SUMMARY - 01JAN2018 IAS39 AT 31DEC2017 DAY ONE IMPACT

Loan commitments and financial guarantee contracts (IFRS9)

"107"

JAIZ BANKNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2018 +

33 SIGNIFICANT SHAREHOLDING (5% UNIT & ABOVE) 2018 2017Holdings % Holdings %

Dr. Umaru Abdul Mutallab 4,000,000,000 13.58 4,000,000,000 13.58 Dantata Investment & Securities Limited 3,904,369,327 13.25 3,904,369,327 13.25 Dr.Muhammadu Indimi 2,733,813,044 9.28 2,733,813,044 9.28 Islamic Development Bank 2,506,666,588 8.51 2,506,666,588 8.51 Dangote Indutries Ltd 2,500,000,000 8.48 2,500,000,000 8.48 Altani Investment Limited 2,200,000,000 7.47 2,200,000,000 7.47 Dr. Aminu Alhassan Dantata 1,565,210,516 5.31 1,565,210,516 5.31 At 31 December 19,410,059,475 65.88 9,572,128,971 65.88

34 Earnings per share

Basic earnings per share

Profit attributable to ordinary shareholders 2018 2017N'000 N'000

Profit for the period 834,366 537,117 Profit attributable to ordinary shareholders 834,366 537,117

Weighted average number of ordinary shares 2018 2017In Thousand In Thousand

Issued ordinary shares at 1 January 29,464,249 29,464,249 Effect of share options exercised - Weighted average number of ordinary shares at 31 December 29,464,249 29,464,249

Basic and diluted earnings per share (Kobo) 2.83 kobo 1.82 kobo

There have been no transactions during the year which caused dilution of the earnings per share.

Basic earnings per share of 2.83 kobo (2017:-1.82 kobo) is based on the profit of N897.7million (2017: N894.01million) attributable to shareholders with ordinary shares of 29,464,249,300 (2017:-29,464,249,300)

"108"

JAIZ BANK

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31ST DECEMBER, 2018

35 Related parties(i)

(ii)

2018N'000 N'000

RELATED PARTYRELATIONSHIP WITH THE BANK LIMIT

AMOUNT RECEIVABLE CLASSIFICATION

NOBLE HALL LIMITED DR. UMARU ABDULMUTALLAB CHAIRMAN 329,995 296,749 PERFORMINGUMARU ABDUL MUTALLAB DR. UMARU ABDULMUTALLAB CHAIRMAN 810,000 169,116 PERFORMINGHASSAN USMAN HASSAN USMAN MANAGING DIRECTOR 30,000 31,153 PERFORMINGMAHE MAHMUD ABUBAKAR MAHE ABUBAKAR DEPUTY MANAGING DIRECTOR 67,950 49,925 PERFORMINGABDULFATTAH OLANREWAJU AMOO ABDULFATTAH OLANREWAJU AMOO EXECUTIVE DIRECTOR 59,400 59,400 PERFORMINGMBS MERCHANTS LTD FALALU BELLO DIRECTOR & CHAIRMAN, BOARD INVESTMENT COMMITTEE 1,073,648 1,162,427 WATCHLISTBELLMARI ENERGY LIMITED ALIKO DANGOTE DIRECTOR REPSRESENTED BY MUKHTAR DH SANI 707,176 629,229 PERFORMINGFURSA FOODS LTD ALIKO DANGOTE DIRECTOR REPSRESENTED BY MUKHTAR DH SANI 118,400 119,236 PERFORMINGMUKHTAR DANLADI HANGA SANI MUKHTAR DANLADI HANGA SANI DIRECTOR REPSRESENTED BY MUKHTAR DH SANI 54,000 32,909 PERFORMINGDARUL HUDA FOUNDATION AMINU DANTATA DIRECTOR REPSRESENTED BY TAJUDDIN DANTATA 29,391 9,172 PERFORMINGTAMIDAN NIGERIA LIMITED AMINU DANTATA DIRECTOR REPSRESENTED BY TAJUDDIN DANTATA 630,000 630,000 SUBSTANDARDBAZE UNIVERSITY LIMITED NAFIU BABA-AHMAD INDEPENDENT NON-EXECUTIVE DIRECTOR 40,000 27,601 PERFORMINGAHMAD RUFA'I SANI HRH ENGR. SANI BELLO NON-EXECUTIVE DIRECTOR 510,000 343,516 PERFORMINGBELLO MUHAMMAD SANI HRH ENGR. SANI BELLO NON-EXECUTIVE DIRECTOR 80,250 80,250 PERFORMINGRUFAI POULTRY LIMITED HRH ENGR. SANI BELLO NON-EXECUTIVE DIRECTOR 226,600 42,272 PERFORMING

AT 31ST DECEMBER 4,766,810 3,682,955

OFF BALANCE SHEETINCAR PETROLEUM DR. UMARU ABDULMUTALLAB CHAIRMAN 386,281 PERFORMING

AT 31ST DECEMBER 386,281

2017N'000 N'000

RELATED PARTY

RELATIONSHIP WITH THE BANK LIMITAMOUNT

RECEIVABLE CLASSIFICATIONDr. Umaru Abdulmutallab Dr. Umaru Abdulmutallab Chairman 810,000 370,456 PERFORMINGNoble Hall Schools Dr. Umaru Abdulmutallab Chairman 330,000 265,736 WATCHLISTNoble Hall Schools Dr. Umaru Abdulmutallab Chairman 50,000 33,010 WATCHLISTTamidan Nigeria Limited Dr. Aminu Dantata Director 630,000 630,000 SUBSTANDARDDarul Huda Foundation Dr. Aminu Alhassan Dantata Director 36,738 16,437 PERFORMINGDantata Plastics Limited Aliko Dangote Director 44,806 55,552 PERFORMINGDantata Plastics Limited Aliko Dangote Director 38,400 22,201 PERFORMINGBellmari Energy Limited Aliko Dangote Director 800,000 543,850 PERFORMINGFursa Foods Limited Aliko Dangote Director 95,000 103,270 PERFORMINGFursa Foods Limited Aliko Dangote Director 23,400 19,330 PERFORMINGMukhtar Danladi Hanga Sani Mukhtar Danladi Hanga Sani Director 54,000 36,810 PERFORMINGMBS Merchant Limited Falalu Bello Director 1,120,000 1,506,497 WATCHLISTAhmad Rufai Sani HRH. Engr. Sani Bello Director 65,000 17,824 PERFORMINGAhmad Rufai Sani HRH. Engr. Sani Bello Director 510,000 420,513 WATCHLISTAhmad Rufai Sani HRH. Engr. Sani Bello Director 162,250 32,278 PERFORMINGHRH. Engr. Sani Bello HRH. Engr. Sani Bello Director 80,250 80,250 PERFORMINGBaze University Nafiu Baba-Ahmad Director 160,000 60,823 PERFORMINGBaze University Nafiu Baba-Ahmad Director 40,000 27,601 PERFORMINGMahe Abubakar Executive Director Executive Director 64,350 45,330 PERFORMINGHassan Usman Managing Director Managing Director 30,000 30,000 PERFORMINGStaff Facility Employee Employee 1,543,691 1,390,775 PERFORMINGAT 31ST DECEMBER 6,687,885 5,708,541

Transaction with key management personnel: The Bank's key management personnel, and persons connected with them, are also considered related parties. The definition of key management includes the close members family of key personnel and anyentity over which key management exercise control. Close family members are those who may be expected to influence, or be influenced by that individual in their dealings with Jaiz Bank plc and its related entities/parties.

Related parties: Parties are considered to be related if one party has the ability to control the other party or exercise influence over the other party in making financial and operational decisions, or one other party controls both. The definition includesinvestment as well as key management personnel.

"109"


36 INFORMATION REGARDING DIRECTORS 2018 2017N'000 N'000

EmolumentsFees:

Chairman 5,000 5,000

Other directors (N4,000,000 each) 40,000 44,000

Emolument as executives 135,615 87,778

Highest paid director 48,577 42,326

N N 2018 2017Number Number

5,000,000 - 10,000,000 - -10,000,001 - 15,000,000 - -15,000,001 - above 3 2

37 INFORMATION REGARDING EMPLOYEES

N N 2018 2017Number Number

Below - 400,000 334 290400,001 - 500,000 74 -500,000 - 600,000 71 133600,000 - 700,000 72 53700,000 - 800,000 10 17800,000 - 900,000 - -900,000 - 1,000,000 36 -1,000,000 - 5,000,000 211 2035,000,000 - 10,000,000 - 3Above - 10,000,000 - -

Number of persons employed as at the end of the year were:2018 2017

Number NumberManegerial 6 11Senior 75 65Junior 727 623

808 699

38 EVENTS AFTER THE REPORTING PERIOD

No. of Directors excluding the chairman with gross emoluments within the following ranges were:

The number of employees excluding Directors in receipt of emoluments excluding allowances in the following ranges were:

There were no events after the reporting date which could have had a material effect on the financial statements as at31 December 2018.

"110"

39 CARD ISSUANCE AND USAGE IN NIGERIA AS AT 31 DECEMBER 2018

CARD TYPE

TRANSACTION VOLUMES TRANSACTION

VALUEN'000

VERVE DEBIT CARD 4,618,159 56,593,464 MASTERCARD CARD 440,048 6,355,561

Total 5,058,207 62,949,025

(i) ATM complaints data- 31 December 2018

Number AMOUNT

N'000 Unresolved as at 1 January 114 262 Number of complaints 33,898 42,644 Number of complaints resolved 33,793 42,300 Unresolved as at 31 December 219 607


(ii) ATM complaints data- 31 December 2017

Number AMOUNT

N'000 Unresolved as at 1 January 58 1,455 Number of complaints 7,491 5,292 Number of complaints resolved 7,435 6,485 Unresolved as at 31 December 114 262

In line with Sec.11 of the CBN' Circular on The Guidance for issance and usage of cards in Nigeria, below is theBank's information on it's Card

In line with CBN circular Ref FPR/DIR/CIR/GEN/01/020, below are the customer complaints data for the year:

"111"

JAIZ BANK NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018

112

40a - RISK MANAGEMENT

Jaiz Bank takes an integrated bank-wide perspective of risk exposure, encompassing its individual business lines and business units with the aim of optimal protection of the wealth of its shareholders and interest of all stakeholders in line with the mandate of Non-Interest Financial Institutions (NIFIs). The mandate considers a holistic approach in ethically managing assets and liabilities including assessment of the adequacy of capital and liquidity in relation to the risk profile, market and macroeconomic conditions. The process takes into account appropriate steps to comply with Shari�ah rules and principles in all of the risk management activities.

The risk management process leverages on a sound management framework which was broke down into operational manuals that closely adhere to the bank�s policy regarding all the major categories of risk that the bank faces when carrying out its business. These are: Investment (Credit), Liquidity, Market (including Equity Price, Profit Rate and Foreign Exchange risk), Operational (including Fraud Risk and Information Security Risk), and Documentation & Shari�ah Non-Compliance risks.

The whole risk management processes of the Bank are guided by the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC) and other relevant regulatory authorities, International Financial Reporting Standard (IFRS), the Islamic Financial Services Board (IFSB), the Accounting and Auditing Organization of Islamic Financial Institution (AAOIFI), as well as the best practice.

RISK MANAGEMENT OBJECTIVES

Jaiz Bank defines risk as the internal or external uncertainty the Bank faces in achieving its objectives, as well as the probability that an actual return on an investment will be lower than the expected return due to the different categories of risk that are inherent in its business model or the environment. The Bank maintains the following objectives:

i. Full compliance with all Shari�ah, regulatory and legal requirements, which are reflected in all the documented frameworks and policies of the bank, specifically in the Enterprise Risk Management framework, and Investment Policy manual.

ii. Developing a professional risk management culture bank-wide via a disciplined approach to risk-taking based on comprehensive bank-wide policies, processes and limits, professionally qualified staff, and ongoing technical development.

iii. Investing and utilizing technology and systems that enable enterprise-wide access to information for best practice risk management.

iv. Delineation of reporting lines and segregation of control between staff that are frontline business owners and, staff processing the business mandates.

v. Ensuring the Bank�s financing and investments are geared towards contribution to the real economy in an ethical manner that transcends business profits.


113

vi. Risk related issues are taken into consideration in all business decisions. The Bank will always strive to maintain a conservative balance between risk and revenue considerations and in consonance with the import of Islamic Jurisprudence.

vii. Risks are reported openly and fully to the appropriate levels once they are identified.

RISK APPETITE:

The Bank�s risk appetite is set by the Board of Directors annually at a level that minimizes erosion of earnings or capital due to avoidable losses - including income loss from non-compliance with Shari�ah, in its overall asset and liability portfolio in the banking and trading books, or from frauds or operational inefficiencies. The Bank�s appetite for risk is governed by investing in high quality risk assets measured by five Key Performance Indicators:

I. Ratio of Non-Performing Investment (NPI) to Total Investment ; II. Ratio of investment loss expenses to profit returns;

III. Ratio of investment loss provision to gross non-performing investments. IV. Ratio of investment income loss (Balance sheet risk) due to Shari�ah violation to total

investment income. V. Ratio of penalty against sale based investments (Murabaha etc) to total Investment income

The broad objective is to be among the industry leaders with respect to (i) and (ii) above, and for (iii) to maintain a ratio that ensures that there are adequate provisions for all non-performing assets based on their levels of classification. In the case of (iv), due care is enshrined to make transactions Shari�ah compliant before disbursement and (v), monitoring and investment supervision mechanisms shall be strictly followed in a post-disbursement environment, up to recovery.

i. Diversification targets are set for the investment portfolio and limits are also set for aggregate large exposures.

ii. Losses due to frauds and operational lapses are pegged at a maximum of a specified percentage of gross earnings and in any case must be lower than the industry average.

iii. Financial and Prudential ratio targets are pegged at a level more conservative than regulatory requirements and better than the average of benchmark banks. These include, but not limited to, liquidity ratios, deposit concentration limits, open-position limits and provisioning policies.

iv. Primary Shari�ah screening mechanisms are put in place in Investment Appraisal Memos (IAMs) and careful checks conducted in the pre-disbursement phase by screening contracts and invoices; due process in the purchase and sale stage; and finally, proper documentation to avoid any Shari�ah violations.

v. Periodic visitation, monitoring of sale proceeds (receivables), account turnover monitoring and vigilance in the maturity diary is exercised by relationship management as well as supervised by risk


114

officers to avoid past dues in sale transactions which are prone to investment income loss. Penalties have to be strictly realized from customers without any favor unless the reason for lateness is not willful.

vi. The Bank aims at minimizing the following independent indicators of excessive appetite for risk:

a. Exception reporting by internal control officers, auditors, shari�ah auditors, regulators and external rating agencies.

b. Adverse publicity in both local and international press. c. Frequent litigations. d. Payment of fines and other regulatory penalties. e. Above average level of staff and customer attrition.

RISK MANAGEMENT PROCESS

The bank has standardized risk management policies Bank-wide in agreement with Shari�ah principles which give a clear and consistent direction for the creation of risk exposures across all asset creating business units.

The bank has continued to maintain momentum towards achieving optimal risk management policies, practices and procedures, pursuing the following key objectives: Continuous improvement in investment and risk management practices, escalating monitoring and collections, recoveries and settlement of outstanding debts to bring about resilient asset quality in face of increased challenges in its markets

A provision for a comprehensive guide and framework in creating and managing risk assets is in place; this ensures prompt identification of problems through risk management and prudent management when there is a decline in risk asset quality.

A sound process is in place for executing all elements of risk management including risk identification, measurement, mitigation, monitoring and reporting of individual exposures and the overall risk asset portfolio.

When asset quality declines, a system of adequate controls over investment collection & recovery, with appropriate checks and balances, is in place.

A framework is in place to manage the Bank�s risk management policies and processes, including an income smoothing plan to manage Displaced Commercial Risk (DCR) by smoothing the profits payout to Investment Account Holders (IAH) through the Profit Equalization Reserve (PER) and the Investment Risk Reserve (IRR). The quality and timeliness of risk reporting to regulatory authorities and provision of additional and voluntary information needed to identify emerging problems possibly giving rise to systemic risk issues, is enshrined.

Appropriate and timely disclosure of information to Investment Account Holders (IAH) is maintained so that the investors are able to assess the potential risks and rewards of their investments and to protect their interest in their decision making process.


115

RISK CULTURE

i. Minimization of potential risks that can jeopardize its fiduciary responsibility as a Non-Interest Financial Institution (NIFI) operating under Islamic financial principles while expanding the Bank�s market share.

ii. The responsibility for risk management in the Bank is fully vested in the Board of Directors, which in turn delegates such to senior management.

iii. The Bank pays attention to both quantifiable and unquantifiable risks with special treatment for shari�ah non-compliance risk.

iv. The Bank�s management promotes awareness of risk and risk management across the Bank. v. The Bank avoids products, markets and businesses where it cannot objectively assess and manage

the associated risks in line with both the shari�ah, and country perspectives.

RISK GOVERNANCE STRUCTURE

The Board

The Board of Director is ultimately responsible for overall risk management of the Bank and for establishing and monitoring the effectiveness of its Risk Management and Corporate Governance frameworks.

The Advisory Committee of Experts

The independent committee sits quarterly, endorses risk management processes and reviews accounts, validates products and services in line with shari�ah principles, and their decision is final, subject to the Financial and Regulatory Advisory Committee of Experts (FRACE) of the CBN.

The Board Risk Management Committee

The Board Risk Management Committee is a standing Board committee comprising of the Managing Director, 1 Executive Director and 3 Non-Executive Directors of the Bank that considers risk reports periodically to ensure transparency and risk control.

In addition to the BRMC, the following Board committees are also directly or indirectly responsible for reviewing and guiding risk management functions.

i. Statutory Board Audit Committee (BAC) ii. Board Investment Committee (BIC) iii. Board Finance & General Purpose Committee (F&GPC) iv. Board Governance/Remunerations Committee


116

The following senior management committees are also directly or indirectly responsible for examining and recommending risk management functions:

1. Executive Management Committee (EXCO) 2. Operational Risk Management Committee in conjunction with the Management Committee (MANCO)

3. Asset & Liability Committee (ALCO) 4. Management Investment Committee (MIC) 5. IT Steering Committee 6. Criticized Assets Committee (CAC)

COMPOSITION OF THE RISK MANAGEMENT DIVISION

The Risk Management Division of the bank is broadly arranged into the following units -

i. Investment (Credit) Risk Unit, ii. Investment Monitoring Unit iii. Market and Liquidity Risk Unit iv. Documentation and Other Unique Risks Unit (including Shari�ah Non-Compliance) v. Operational Risk Unit

INVESTMENT (CREDIT) RISK MANAGEMENT

Credit risk is the risk of economic loss from default or changes in ratings or other credit events. In a typical NIFI, it is defined as �the potential that a counterparty fails to meet its obligations in accordance with agreed terms under a financial contract�. It arises principally from (i) Financing in Bai� (sale) e.g. Murabaha, promising to buy, or deliver in Istisna� and Salam; (ii) leasing in Ijarah for rentals and leasing-to-own in Ijarah wa Iqtina� (iii) Investing in business performance on PLS (profit & loss sharing) in the Musharakah and Mudarabah contracts. Credit risk can also arise as a result of the crystallization of any off-balance sheet transaction.

PECULIARITY OF CREDIT RISK EVENTS

i. The role of the Bank can be that of financier, supplier, Muḍarib (fund manager to Investment Account Holders) and Musharakah partners (customers). The bank principally concerns itself with the risk of counterparties� failure to meet their obligations in terms of receiving a deferred payment and making or taking delivery of an asset. A failure could relate to a delay or default in payment, or in delivery of the goods/assets of Salam or Parallel Istisna`, entailing a potential loss of income and even capital.


117

ii. Due to the unique characteristics of each financing instrument, such as the non-binding nature of some contracts, the commencement stage involving credit risk varies. Therefore, credit risk is assessed separately for each financing instrument to facilitate appropriate internal controls and risk management systems.

iii. The Bank also considers other types of risks that give rise to credit risk. For example, during the contract life, the risk inherent in a Murabaha contract is transformed from market risk to credit risk; the invested capital in a Muḍarabah or Musharakah contract will be transformed to debt in case of proven negligence or misconduct of the Mudarib or the Musharakah�s managing partner.

iv. Adequate collateral with minimum coverage is taken in line with the peculiarities of each transaction, as well as adequate covenants and protections embedded in the applicable and transaction-specific agreements.

v. In case of default in certain cases, the Bank does not impose a penalty except in the case of deliberate procrastination, thus increasing the probability of default. As a matter of fact, the Bank is prohibited from using the amount of any penalty for its own benefit or taking it into income; it must donate any such amount to charity. This increases the cost of default.

The Bank�s Credit Risk unit verifies and manages the credit process from origination to collection and recovery; monitoring and controlling all such risks by adhering to sound policies and processes that have been laid down to guard against their (risk) manifestation in compliance with the Shari�ah contracts� specific risk as per best practice.

MARKET AND LIQUIDITY RISK

The Market & Liquidity Risk unit monitors disciplined risk taking within a frame work of the well-defined risk appetite that enables the Bank to enhance shareholders� wealth while retaining its competitive advantage.

As a NIFI, the Bank is exposed to rate of return risk in the context of its overall balance sheet exposures. An increase in industry benchmark rates may result in Investment Account Holders� (IAHs) having expectations of a higher rate of return on their deposits, failure of which can turn to a Displaced Commercial Risk (DCR). In consideration, the Bank analyses the Rate of Return Risk and has developed a reporting format to the ALCO to identify, measure and mitigate the risk of DCR to protect the interest of Investment Account Holders.

Liquidity Risk is the risk that the Bank does not have sufficient financial resources to meet its obligations as they fall due, or will have to meet the obligation at excessive cost. This risk arises from mis-matches in the timing of cash flows. Funding risk (a form of liquidity risk) arises when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.

As a protective measure against liquidity risk, the Bank solicits and attracts various sources of funds to channel to its financing and investment activities in Shari�ah compliant instruments from the money and


118

capital markets, where available. The Bank, as the sole full-fledged NIFI and in conjunction with other window-NIFIs and the regulators, is working on the development of additional compliant instruments. The bank has set its liquidity ratio at 3% above the regulatory limit, and its investment to deposit ratio at 5% below the regulatory limit.

RATE OF RETURN RISK

A greater portion of investment funds raised by NIFIs is based on the Mudarabah contract, which is a partnership between �work� and �capital� in which the capital provider (Rabb-ul-Mal) is exposed to losses of their capital, while the provider of work (Mudarib) is exposed to losing its time and effort. The contract thus involves profit-sharing for both partners and loss-bearing for the provider of capital. Under the Mudarabah contract, the IAHs agree to participate as Rabb-ul-Mal in the financial activities undertaken by the NIFI as Mudarib, and to share the profits generated from financing and investment activities based on a contractually predetermined profit-sharing ratio.

As capital owners, IAHs are liable to bear the losses arising from the assets funded by their deposits, except in the case of fraud, misconduct, negligence, or breach of contracted terms and conditions by the NIFI.

Under the Mudarabah contract, the IAHs therefore bear the commercial risk associated with the investment financed by the funds provided by them. Concurrently, the Bank is responsible for managing the investment of assets and is under a fiduciary obligation to safeguard the interests of the IAHs through the establishment of sound and prudent policies in the management of the investments funded by IAHs. However, NIFIs are faced with a number of limitations while managing funds provided by the IAHs.

Some progress has been achieved in the availability of a Shariah-compliant lender-of-last-resort facility that is provided by the Central Bank/monetary authorities (the CBN Non-Interest Note). Equally important is the limited coverage of the Nigerian Deposit Insurance Scheme for Profit-Sharing Investment Accounts (PSIA). The Federal Government issued the 1st sovereign Sukuk in the 4th quarter of 2017, which has greatly aided the bank in placing its idle funds in a shari�ah-compliant instrument. The bank actively anticipates the development of an active secondary capital market to serve as additional window for managing liquidity.

The unavailability or limited supply of the aforementioned instruments or market mechanisms in many jurisdictions impacts on a NIFI�s liquidity management and leaves a huge idle fund which generates no income. This may result, at times, in the returns earned on its IAH funds being uncompetitive compared to those being offered by its competitors. This leads to the Rate of Return Risk, which is a particular problem with respect to funds of Unrestricted Investment Account Holders (UIAH), who typically may withdraw their funds at short notice subject to loss of profit share. In such a scenario, rate of return risk exposes the NIFI to withdrawal risk � namely, the risk that their UIAH may withdraw their funds at short notice and place them with other Banks that offer better expected or actual rates of return. If unmitigated, UIAH withdrawals can reach systemic proportions and become a cause for concern on the part of both the NIFI and supervisory authorities

Displaced Commercial Risk refers to the risk (i.e. volatility of the stream of profits) arising from assets managed on behalf of IAHs which is effectively transferred to the NIFI�s own capital because the NIFI


119

may follow the practice of forgoing part, or all of its Mudarib�s share of the profit on such funds, and/or making a transfer to UIAHs out of the shareholders� investment profit as a hibah (gift), when it considers this necessary.

In the absence of smoothening mechanisms, the rate of return paid to the UIAHs may thus be �smoothened� at the expense of the profits attributable to the NIFI�s shareholders.

In addition to the effects on profitability and the limitations on liquidity management, a major cause of DCR is the Rate-of-Return risk. The Rate-of-Return risk is the risk of facing a lower rate of return on assets than that currently expected by depositors from other competitors. For instance, NIFIs may have invested UIAH funds into relatively long maturity assets such as long-maturity Murabaha or other fixed sale products and thereby have locked in lower rates of return on assets than those currently on offer in the market. DCR results when there is pressure on the NIFI to match the market expectations of UIAHs.

CLASSES OF INVESTORS AND INVESTMENT ACCOUNTS

NIFIs have three main types of funding:

i. Equity ii. Demand deposits based on �Qard hassan� which pay no return, and are repayable in full on

demand, and iii. Investment accounts which are mainly based on Mudarabah principles. Investment accounts are

divided into two types: Unrestricted Investment Accounts (UIA) and Restricted Investment Accounts (RIA). In managing UIAs, a NIFI has full discretion to utilize the funds for the provision of finance and/or investments as UIAHs provide funds without specifying any restrictions as to where, how or for what purpose the funds should be invested, provided that they are Shari�ah compliant and are within the standards of banking prudential and due diligence guidelines.

A common practice in NIFIs is to hold UIAs on Mudarabah basis and RIAs on Wakalah basis, which is off-balance sheet by its nature and known as Wakalah Investment Deposit (WID). Qard-based current deposits which are by nature demand deposits, do not participates in profit distribution.

In principle, smoothening applies to both UIAs and shareholders� equities, but in practice, it is generally found in connection with UIAs since they are considered a Shari�ah-compliant substitute for conventional deposits.

CLASSIFICATION OF SMOOTHING TECHNIQUES

As per industry practices and guidance note on the practice of smoothing the profit pay-outs to IAHs in order to mitigate withdrawal risk, NIFIs resort to various smoothing techniques, each taking different forms and therefore entailing different legal and governance consequences for the NIFI. The basic purpose of smoothing is to give better rates of payout to UIAHs in periods when assets financed from UIAH funds fail to generate competitive returns vis-à-vis competitors� distributable return. In addition, some NIFIs are also involved in the practice of building separate reserves for covering losses on the UIAHs� investment.


120

The smoothing methods used by NIFIs in various jurisdictions entail mitigation of DCR by the use of reserves. DCR occurs when NIFI effectively transfer risk (i.e. volatility of the income stream) arising from the assets managed on behalf of UIAHs to their own capital, by forgoing a part or all of (a) the Mudarib�sshare of profit, and/or (b) the shareholders� portion of profit in the joint investments, in order to increase the rate of return payable to UIAHs.

Methods which entail DCR without resorting to setting any reserves include the following:

i. A NIFI may forgo or give up part or the entire Mudarib�s share of profit earned on UIAH funds. Normally, in this case, the contractual percentage of the Mudarib�s share is established at a high level, so as to provide flexibility in setting the percentage share for any particular year.

ii. Alternatively, even when the contractual distribution of profit between the Mudarib and the UIAH is set at a moderate level, the directors may decide to give up a part of the profit due to the Bank to the UIAH, in order to avoid withdrawal risk.

In both cases, a NIFI may make a transfer from the shareholders� current or retained profits to the UIAH on the basis of Hibah. This of course requires an authorization from the general assembly in its annual meeting while at the same time; it may not require any amendment or change in the contractual relationships with the UIAH.

Methods by which DCR is mitigated by the Bank may include the following:

i. Establish a reserve called a Profit Equalization Reserve (PER) by setting aside amounts from the investment profits before allocation between the shareholders and the UIAH i.e. before the calculation of the NIFI�s Mudarib share of profits. Funds from this PER are used in bad years to supplement the return which is distributed to the UIAH.

ii. Maintain a reserve called an Investment Risk Reserve (IRR) by setting aside amounts from the investment profits attributable to the UIAH, after deducting the NIFI�s Mudarib�s share of profits. The IRR can be used only to cover losses on the capital or principal of UIAH deposits. The use of the IRR mitigates withdrawal risk and reinforces the effect of the PER.

Jaiz Bank has adopted a framework to build Investment Risk Reserve (IRR) to protect both shareholders and investment depositors (UIAHs).

DOCUMENTATION AND OTHER UNIQUE RISKS

Shari�ah Non-Compliance risk is the risk that arises from failure to comply with the rules of Shari�ah and its principles as determined by the Bank�s Advisory Committee of Experts (ACE) and the Central Bank�s Financial Regulatory Advisory Council of Experts (FRACE). Shari�ah compliance is critical for NIFIs� operations and such compliance requirements must permeate throughout the organization�s products and activities. The Bank is strictly determined to comply with Islamic commercial jurisprudence in all its activities.


121

Other unique risks are exclusively associated with NIFIs which the Bank manages through effective monitoring and complying with pre- and post-disbursement modalities.

i. Risk of continuity of usufruct in Ijarah since a fundamental ethical axiom in Ijarah is that �rent is a price of usufruct; it is due as long as usufruct exists�.

ii. Reputational risk due to breach of Shari�ah compliance which may result to loss of shareholders and IAHs� confidence.

iii. Ownership Risk which is that risk associated with owning a property, asset or commodity especially in Murabaha and Ijarah modes.

iv. Legal, fiduciary, regulatory and strategic risks are also managed appropriately.

OPERATIONAL RISK

Operational Risk is defined as a risk of loss arising from failure in internal processes, people, systems or external events. This includes legal risk but excludes reputational and strategic risks.

The responsibility of Operational Risk in Jaiz Bank is to prevent the occurrence and /or crystallization of such losses and/or to reduce the impact and severity when they occur. The Bank achieves this by creating appropriate policies and platforms to reduce the occurrence of such incidences. Some of the objectives of operational risk are attained by ensuring that trained and competent people � and appropriate infrastructure, controls and systems � are in place to ensure the identification, assessment and management of all substantial risks. An operational risk framework is in place to guide the governance and implementation of operational risk. The objectives of the framework are:

i. minimize or eliminate losses attributable to operational risk� ensure operational risk awareness and effective control of operations

ii. improve performance measurement and feedback

iii. embed early warning signals when exceptions occur.

The bank is also exposed to risks relating to its fiduciary responsibilities towards fund providers. Fiduciary risk arises from the failure to perform in accordance with explicit and implicit standards applicable to an Islamic bank�s fiduciary responsibilities, leading to losses in investments or failure to safeguard the interests of the investment account holders. The appropriate mechanisms are in place to safeguard the interests of all fund providers. Where investment account holders� funds are co-mingled with the bank�s own funds, it is ensured that the basis for asset, revenue, expense and profit allocations are established, applied and reported in a manner consistent with the bank�s fiduciary responsibilities as approved by the regulatory authorities.

The basic tools of operational risk management i.e.

Risk Register


122

An operations risk management tool used for documenting risks across the bank, and appropriate actions are taken on those risk. The toll is used for effective management of risks. As the risks are identified they are logged on the register and actions are taken to mitigate the identified risks. Risk Control Self-Assessment (RCSA) Risk Control Self-Assessment is a key component of Jaiz Bank�s operational risk framework. It is used by each business unit within the bank proactively identifying and assessing its significant operational risks and the controls in place to manage those risks. A RCSA template is used for this risk assessment. Key Risk Indicator (KRI) - Key Risk Indicator is measures which indicate the risk profile of the bank and any change thereof. KRIs act as early warning indicators and are used to monitor and predict potential operational loss events. KRIs are used in conjunction with system of thresholds. When the threshold or tolerance level for any KRI is breached, it triggers review, escalation or management action. Risk indicators help keep the operational risk management dynamic and risk profile current.

Loss Trend ReportingIncorporated in order to lead to seamless reporting, analysis, mitigation and eventual prevention of operational risk losses that may be inherent in the system. The Bank is ISO-certified for business continuity; for information security; and payment card security as follows.

ISO27001

ISO22301

ISO20000

Payment Card Industry Data Security Standard � (PCIDSS)

CAPITAL MANAGEMENT

The Bank maintains sufficient capital resources to support its investment credit business and general business growth. Capital adequacy is reviewed periodically alongside the monitoring and reporting of changes to the capital forecasts. The Board will consider the need to change its capital forecasts and capital plans based on these reviews.

The Bank holds capital at a level that the Board considers necessary, and the assessment of minimum capital requirements is a combination of regulatory requirement, and sound judgment exercised by the Board. In assessing the adequacy of its capital, the Bank considers its risk appetite, the material risks to which the Bank is exposed, and the appropriate management strategies for each of the material risks, including whether or not capital provides an appropriate buffer.

The Bank adopted Basel II/III in January 2014 in line with the CBN�s circular dated 10th December 2013 on the implementation of Basel II/III through a 'simple' approach with respect to Pillar 1 requirements as follows:


123

Credit Risk (Investment Risk) - Standardised Approach

This is similar to previous (Basel I) requirements whereby regulatory capital requirements are calculated by multiplying the value of the Bank's exposure by an appropriate risk weight. Under Basel II, the risk weight is determined by the credit rating of the counterparty, where available, as well as the type of exposure.

Market Risk � Standardised Approach

Similarly, the Standardized Approach is used for the calculation of market risk.

Operational Risk - Basic Indicator Approach

Whereby regulatory capital is calculated by taking a single risk-weighted multiple (15%) of the Bank's average gross operating income.

In pursuant of the Islamic Financial Services Board (IFSB) standard No.1 in addition to the above Pillar 1 requirements, Equity Investment risk (which we include under credit risk), Rate of Return risk including Displaced Commercial Risk (under market risk) and Shariah Non-Compliance risk (under operational risk) have been taken care of in line with the requirement of Non-Interest Financial Institutions. Under the Pillar 2 of the Basel II requirements, the Bank has undertaken a self-assessment of its internal capital requirements - an Internal Capital Adequacy Assessment Process, or ICAAP.

The Bank makes certain disclosures on solo basis to the market to encourage market transparency and discipline. The aim is to allow market participants to assess key pieces of information on the Bank�s capital, risk exposures and risk assessment process. The disclosures, which are to complement the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2), are to be made to the market for its benefit.

STRESS TESTING

The Bank conducts stress test on its capital adequacy and liquidity position on quarterly basis under a range of scenarios. The scenarios are agreed by the Asset and Liability Committee (ALCO) and reviewed by the Executive Management Committee (EXCO), and regularly updated to reflect the Bank�s risk profile and external risks, including risks associated with the economic cycle.

Where applicable, the stress tests cover all relevant risks to which the Bank is exposed, for example, capital adequacy stress tests based on macro-economic scenarios would be geared towards analysing the impact on both credit and market risk exposures.

Liquidity stress tests are performed monthly and capital adequacy stress tests yearly. In addition, periodic ad-hoc stress tests are performed as required by the Executive Management or the ALCO.


124

Detailed results of stress tests are presented to the ALCO, including the impact of the stress scenario on the Bank�s capital requirement, its capital resources and its profitability; summary results are presented to the EXCO. Stress testing is used to determine the Bank�s capital adequacy, the adequacy of its liquidity position and to influence strategy and medium term planning.

IFRS 9 IMPLEMENTATION

The Bank has adopted IFRS 9 for the computation of Expected Credit Loss on its financial instruments. The impact assessment has been undertaken and reviewed and all necessary adjustments to the system are being implemented. Model documentation has been approved and appropriate credit models and financial policies have been developed.

Model Development Approach

In developing the ECL models, we adopted the following steps:

Data Preparation

The first step was to prepare the provided data based on IFRS 9 requirements. Activities in this step included but not limited to the exclusion of bank charges from the loan book and allocation of shared collateral values for the same obligor based on exposure amounts.

Portfolio Segmentation

Based on shared credit risk characteristics, exposures in the Bank�s credit portfolio were grouped into 3 segments for which separate models were developed: Corporate, Retail and Off-balance sheet.

Stage transfer criteria

Assumptions for assessing Significant Increase in Credit Risk were developed and utilized in classifying different exposures into Stage 1, Stage 2 and Stage 3 buckets.

Estimation of Probability of Default

A robust model for the estimation of Lifetime PDs was developed by assessing rating transition using historical data of five (5) years per investment product type. Forward looking information was incorporated using a regression model that simulates the expected PD term structure under three distinct macroeconomic scenarios.

Estimation of Exposure at Default


125

The EAD model estimates the expected outstanding balance at each point in time based on the outstanding balance as at the reporting date, nature of the products, contractual repayment structures, foreign currency, prepayment rates, and moratorium concessions. For revolving facilities such as Murabahah products and similar products, the undrawn portion is treated under the off-balance sheet portfolio.

Estimation of Recoverable Amount

The recoverable amount per exposure was obtained at each point in time by segmenting the collaterals by type (with mortgages further segmented based on location), and projecting future values per collateral type based on historical growth rates, forced sale haircuts, perfection status, expected time to recovery and direct costs of recovery (including additional cost for unperfected collaterals). The model also includes unsecured recoveries based on estimated historical recovery rates

Estimation of Loss Given Default

The LGD at each point was estimated as a function of the EAD and the recoverable amount. Assumptions were made for the LGD for unsecured exposures based on the BASEL convention and peculiarities of the Nigerian operating environment.

Estimation of ECL Probability-Weights The probability weights of each macroeconomic scenario was determined by analyzing the NSE All Share Index volume over a select period. The probability of the upturn and downturn scenarios were determined by considering periods of outlying index values outside of a specified base threshold.

Final ECL Computation

The resultant ECL is a product of the EAD, LGD and PD calculated based on the probability weights of each macroeconomic scenario. To account for the time value of money, the ECL was also discounted to present value using the Effective Rate of Return of each exposure.

Portfolio Segmentation In measuring impairment under the IFRS 9 Standard, facilities with shared credit characteristics may be grouped and assessed in distinct portfolios. To achieve this, all the Bank�s financial assets under the scope of IFRS 9 have been segmented into three categories namely:

i. Corporate: This segment of the portfolio contains loans to Corporate, Commercial and Public Sector entities grouped based on internally-defined thresholds for turnover and balance sheet size.

ii. Retail: This segment of the portfolio contains loans and advances to individuals and entities classified by the Bank as non-corporate.


126

iii. Off-balance sheet: This segment of the portfolio contains investments in resulting from Guarantees, Letters of Credits and Undrawn Commitments under Murabahah facilities

Default Definition

In accordance with IFRS 9 standard, the Bank considers default for the purpose of stage classification. Facilities that are more than 90 days past due are classified as being in default. The implication of this is that, if there is at least one default event for a client on one of his exposures, all other exposures to the client are considered to be in default.

Development of staging criteria In applying the IFRS 9 standard, it is critical to ascertain whether the credit risk of a loan or receivable has increased significantly relative to the credit risk at the date of initial recognition. This is the basis with which an entity may change its calculation of impairment from 12 month ECLs to Lifetime ECLs. To determine whether such an increase has occurred, an entity must consider reasonable and supportable information that is available without undue cost or effort, including information about the past and forward-looking information. Additionally, the CBN Guidance note on IFRS 9 implementation advises banks to consider quantitative, qualitative and �backstop� indicators in assessing significant increase in credit risk. Four different indicators are implemented in this model, and they are based on:

i. Days past due

ii. Prudential classification

iii. Forbearance (Restructured)

iv. Credit rating migration

While IFRS 9 allows the assessment of significant increase in credit risk to be carried out individually or

collectively for financial assets with homogeneous risk characteristics, this model adopts an individual

assessment method to enable a granular view of the loss allowance across the portfolio. Each indicator is

explained in detail below.

1. Days Past Due (DPD): This classification is based on the number of days from a contractual

repayment date after which the obligor has not paid the contractual repayment amount. In

deriving this classification, the following thresholds were applied:


127

There are instances where expired investments are classified as performing. The model has been adjusted

to map to stage 3, all investments that expired 90days before the reporting date. Going forward, the Bank

shall put in place adequate system to accurately compute days past due of investments.

2. Prudential Classification: In staging its financial assets, the Bank also considers CBN prudential classification as shown below:

Stage Classification Prudential Classification

Stage 1 PERFORMING

Stage 2 WATCHLIST

Stage 3 SUBSTANDARD, DOUBTFUL, LOST

3. Forbearance Flag: The stage classification is also defined based on whether or not a facility has been restructured due to forbearance at any point since initial recognition. In deriving this classification, the following was applied:

Stage Classification Forbearance Flag

Stage 1 No Forbearance

Stage 2 Forbearance granted

Stage Classification Days Past Due

Stage 1 Less than 30 days

Stage 2 Between 30 � 90 days

Stage 3 Above 90 days


128

4. Credit Rating: This classification indicates the obligor�s credit rating and it takes into consideration the initial credit rating and the credit rating as at the reporting date.

Model Classification: The model classification, is the resultant stage classification based on the four indicators outlined above (a, b, c and d). The maximum stage classification value is determined to be the model classification of each obligor.

Classification override: There are specific instances where the Bank may possess alternate information that defines an exposure�s stage classification, despite the resultant model classification. For such instances, an option has been provided in the model to provide a stage classification based on the Bank�s expert judgement that will be assigned to the exposure irrespective of the classification based on the model�s indicators.

Final Stage Classification: In instances where the Bank provides a classification override, that becomes the final stage classification. Otherwise, the model classification is the final stage classification.

Stage Classification Credit Rating Migration

Stage 1 Rating downgrade of not more than2 notches since initial recognition

Stage 2 Rating downgrade of more than 2 notches since initial recognition

Stage 3 Default


40b FINANCING ANALYSIS

(i) By Security 2018 2017N'000 N'000

Legal Mortgage 31,234,249 28,560,852Total Asset Debenture 1,849,837 5,113,172Cash and Deposits 147,945 0Equity 17,148 0Assets - Other 10,700,512 7,172,720Total 43,949,690 40,846,744

(iii) By Product 2018 2017N'000 N'000

Murabaha Finance 28,871,560 24,716,154Ijara Finance 11,848,381 12,318,325Istisna 2,046,820 1,599,124Musharaka - 1,200,000Ijara Service 1,008,333 864,060Qard 174,597 149,081Total 43,949,690 40,846,744

2018 2017(iv)) By Sector N'000 N'000General 8,789,227 9,286,201Oil & Gas 8,508,618 9,653,484Real Estate Activities 7,193,616 7,754,943General Commerce 6,686,380 5,818,695Agriculture 5,432,503 2,658,480 Construction 2,918,065 2,881,414Manufacturing 2,548,291 1,486,216Education 1,285,783 1,006,059Information And Communication 570,386 298,975Recreation 8,442 - Human Health And Social Work Activities 8,379 2,275Total 43,949,690 40,846,744

2018 2017(iii) By Business Unit N'000 N'000

Corporate 35,479,885 30,825,060Retail 8,469,806 10,021,684Total 43,949,690 40,846,744

2018 2017(v) By Tenor N'000 N'0000 - 30 days 68,437 4,673,85331 - 60 days 828,290 1,532,10461 - 90 days 4,421,642 5,806,22591 - 180 days 7,559,193 6,783,688180 - 360 days 5,281,827 6,215,379Over 360 days 25,790,302 15,835,495Total 43,949,690 40,846,744

"129"

JAIZ BANK


40c Capital Adequacy Ratio

31 DECEMBER 2018

N'000Regulatory capital

Tier 1 capital Share capital 14,732,125Share premium 627,365Retained earnings (4,574,108)Statutory Reserves 504,826Other Reserves 87,305

11,377,513Less: Deferred Tax Assets 12,368 Intangible Assets 370,748

Total qualifying Tier 1 Capital 10,994,397Tier 2 capital Qualifying Other Reserves -Other Comprehensive Income 112,313

112,313

Total Qualifying Capital 11,106,710

Risk - weighted assets:Risk Weighted Amount for credit risk 41,785,629Risk Weighted Amount for operational risk 10,537,145Risk Weighted Amount for market risk 246,545Total risk-weighted assets 52,569,319

Ratio 21.13%

.

The Bank presents details of it's regulatory capital resources in line with the CentralBank of Nigeria's guidance on Pillar I Capital requirments.

Total qualifying Tier 2 Capital(100% of total qualifyingtier I capital)

2


41 LEGAL CLAIMS

42 CONTINGENT LIABILITIES AND COMMITMENTS2018 2017

(i) Contingent Liabilities N'000 N'000

Advanced Payment Guarantees 7,303,629 3,862,702Letters of Credit 5,701,475 2,892,717Bonds and Guarantees 4,456,898 2,116,279Wakala Guarantee 11,648,416 7,505,721

29,110,417 16,377,419

(ii) Capital Commitments

(iv) Guarantees and other Financial Commitments

43 OPERATING SEGMENTS

Corporate Banking Retail Banking TotalAs at 31 December 2018 N'000 N'000 N'000Sukuk Investment 19,819,872 - 19,819,872 Murabaha Finance 26,268,814 2,602,746 28,871,560 Ijara Finance 6,822,573 5,025,808 11,848,381 Ijara Service 888,970 119,363 1,008,333 Istisna 1,499,527 547,292 2,046,820 Qard - 174,597 174,597 Investment Properties 1,603,513 - 1,603,513 Investment in Assets Held for Sale - - - Total Assets 56,903,269 8,469,806 65,373,075

Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has proper controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing.

The Bank, in its ordinary course of business, is presently involved in 29 litigation suits: 12 cases instituted against the Bank, 13 cases instituted by the Bank, 3 judgement in favour of the Bank awaiting execution and 1 civil appeal against the Bank. The Directors are of the opinion that none of the aforementioned cases is likely to have a material adverse effect on the Bank and are not aware of any other pending or threatened claims and litigations.

There were no capital commitments at the end of the reporting period of 31 December 2018.

The Directors are of the opinion that all known liabilities and commitments which are relevant in assessing thecompany's financial position, financial performance and cash flows have been taken into account in the preparation ofthese financial statements.

For reporting purposes, the Bank is organised into business segments and has reportable operating segments as follows:

Resources are allocated based on the business segments and Management reviews the segments on periodic basis to assess their performance. The Management Committee reviews and allocates the necessary resources for the achievement of the Bank's objectives.

"131"

Corporate Banking Retail Banking Total

As at 31 December 2017 N'000 N'000 N'000Total Sukuk Investment 6,068,953 - 6,068,953 Investment in Musharaka 1,200,000 - 1,200,000 Murabaha Receivables 16,914,747 5,762,414 22,677,161 Qard Hassan 149,082 - 149,082 Investment in Istisna 1,335,361 - 1,335,361 Investment in Ijara Asset 5,697,241 7,455,959 13,153,200 Investment in Assets Held for Sale 3,670,774 - 3,670,774 Total Assets 35,036,158 14,486,790 48,254,531

44 CONTRAVENTION OF CBN GUIDELINESCONTRAVENTION 31 December 2018 NIn 2018 Financial Year, the Bank did not contravene any CBN/NDIC guidelines . Nil

CONTRAVENTION 31 December 2017 Numbers NUntimely Rendition of eFASS daily returns for the period 3rd and 25th November, 2017 2 50 Failure to Repatriate outstanding balance of export proceeds against Customer 1 2,000 Disbursement of facilities to Government Agencies prior to obtaining the Finance Ministry consent.1 2,000 Non-implement prior year external Auditor recommendation and submission of quarterly updates.1 2,000 Penalty for non-utilization of FX forwards transactions and non compliance with CBN guideline1 2,000 Total Penalties Paid as at 31st December 2017 6 8,050

45 COMPARATIVE FIGURES

46 EMPLOYEE BENEFIT PLANS 2018 2017N'000 N'000

Opening defined contribution obligation 22,115 15,691Charge for the year 156,470 87,206Payment to Fund administrator (152,431) (80,782)

26,154 22,115

Certain comparative figures have been restated where necessary for a more meaningful comparison

A defined contribution plan is a pension plan under which the Bank pays contributions at a fixed rate. The Bank does not have any legal obligation to pay further contributions over and above the fixed rate as determined by the Penison Act, 2004 as amended. The total expense charged to income for the year was N156.47m.

In line with AOAFII requirements, the Investments in Islamic Finance are shown here as Gross , while on the face of Statement of Financial position they are shown as Net of impairment and Deferred Profit. This account for the difference between the Balance sheet size in the Notes to the Account and what was shown on the face of the Statement of Financial Position.

"132"

JAIZ BANK

OTHER NATIONAL DISCLOSURESFINANCIAL SUMMARY

2018 2017 2016 2015 2014N`000 N`000 N`000 N`000 N`000

AssetsCash and Balances with Central Bank of Nigeria 3 23,409,751 23,909,987 21,506,853 18,168,226 9,156,773 Due from Banks and Financial Institution 4 7,408,063 5,441,073 1,478,026 1,886,533 3,621,902 InterBank Murabaha 5a - - 1,000,000 - - Total Sukuk Investment 5b 19,819,872 6,387,918 1,060,252 1,242,396 2,400,000 Investment in Musharaka 6 - 1,200,000 1,191,704 637,000 643,500 Murabaha Receivables 7A 25,330,697 22,677,161 16,451,245 10,595,013 10,282,739 Total 59,186 - Investment in Istisna 8 1,865,656 1,335,361 754,448 638,722 678,328 Investment in Ijara Asset 9 12,810,714 13,153,201 14,251,232 11,812,999 7,744,873 Qard Hassan 10 171,948 149,082 127,674 147,242 164,281 Investment Properties 1,603,513 - Investment in Assets Held for Sale 11i 7,699,830 5,883,288 488,942 27,111 3,673,717 Property, Plant and Equipment 12 2,578,588 2,123,997 1,892,970 1,383,189 1,236,902 Leasehold Improvement 13 58,118 34,932 42,435 82,506 147,659 Intangible Assets 14 370,748 340,286 368,089 307,880 271,061 Other Assets 15 5,263,406 4,676,323 5,233,384 3,983,853 2,840,202 Deferred Taxation Asset 16b 12,368 - 206,573 1,726,574 1,566,004 Total Assets 108,462,458 87,312,608 66,053,824 52,639,243 44,427,941

LiabilitiesCustomer Current Deposits (17a) 45,950,138 33,706,359 24,415,544 15,475,620 10,847,954 Other Financing 18a 2,000,000 - 996,635 1,000,000 - Other Liabilities 18b 8,229,960 5,367,886 1,552,659 1,463,675 5,659,746 Tax payable 16a 90,344 135,677 77,087 43,897 10,544 Deferred tax 16b - 14,641 - - Total liabilities 56,270,442 39,224,563 27,041,925 17,983,192 16,518,244

Equity of Investment Account HoldersCustomers' Unrestricted Investment Accounts (17b) 36,716,950 32,054,392 24,924,792 23,247,923 16,681,010 Mudaraba Term Deposit (17c) 2,365,904 2,354,505 943,323 721 -

39,082,854 34,408,897 25,868,115 23,248,644 16,681,010

Owners' EquityShare Capital 19 14,732,125 14,732,125 14,732,125 11,829,700 11,829,700 Share Premium 20 627,365 627,365 627,365 549,886 632,289 Retained Earnings 21 (4,574,108) (4,244,308) (3,669,861) (1,714,073) (1,348,767)Risk Regulatory reserve 22 1,619,336 2,267,029 1,360,774 741,894 115,465 Statutory Reserve 22i 504,826 254,517 93,381 - - Other Reserves 22ii 199,618 42,420 - - - Total Equity 13,109,162 13,679,147 13,143,784 11,407,407 11,228,687

0 - - Total Equity and Liabilities 108,462,458 87,312,608 66,053,824 52,639,243 44,427,941

"133"

JAIZ BANKOTHER NATIONAL DISCLOSURES

FINANCIAL SUMMARY2018 2017 2016 2015 2014

N`000 N`000 N`000 N`000 N`000Income:Income from Financing Contracts 23 6,291,944 6,239,803 5,289,075 4,006,736 2,371,737 Income from Investment Activities 24 1,223,633 684,854 188,967 883,009 621,985 Gross Income from financing transactions - 7,515,577 6,924,657 5,478,042 4,889,745 2,993,722

- - -

Return on Equity of Investment Account Holders 25(i) (1,916,804) (1,397,009) - (948,913) (692,895)

Bank's share as a Mudarib/Equity investor 5,598,773 5,527,648 4,296,255 3,940,832 2,300,827 Total 32 - - - 94,790 122,493 190,666 Impairment write Back of non-performing Financing and Investment 32 231,584 - 161,459 - - - Net Spread after Provision - 5,830,357 5,366,189 4,201,465 4,063,325 2,491,493 Other Income - - - Fee and commisssion 26 988,439 748,709 364,171 380,509 244,422 Other Operating Income 27 240,305 182,003 122,440 100,000 324,396 Non Trading Exchange (Loss)/Gain - - - - - 32,077 Total Income - 7,059,101 6,296,901 4,688,076 4,543,834 3,092,388

Expenses: - Staff costs 29 2,808,765 2,374,457 1,944,405 1,704,927 1,339,986 Depreciation and Amortisation 30 608,398 522,187 531,054 414,259 286,948 Operating Expenses 31(i) 2,744,236 2,506,250 2,059,180 1,385,468 957,298 Total Expenses 6,161,399 5,402,894 4,534,639 3,504,654 2,584,232

- - Operating Profit/(Loss) Before Tax - 894,006 343,017 794,194 126,824

Income Tax Expenses 16a 897,702 - 356,891 - 31,745 116,013 564,447

Profit/(Loss) for the Year after Tax 834,366 537,117 311,272 910,207 691,271

Other Comprehensive IncomeItem that may be reclassified to profit or lossNet Gain on Gifted Property 28 112,313 - - - - Total comprehensive income for the year - 946,678 537,117 311,272 910,207 691,271

- - -Basic and diluted Earnings per share (Kobo) 2.83 kobo 1.82 kobo 1.16 kobo 0.07 0.01

"134"

JAIZ BANK

OTHER NATIONAL DISCLOSURES

VALUE ADDED STATEMENT

31 Dec. 201831 Dec.

2018 31 Dec. 201731 Dec.

2017

N`000 % N`000 %Gross Income from financing transactions 8,744,322 7,855,369

Return on Equity of Investment Account Holders (1,916,804) (1,397,009)

Bank's share as a Mudarib/Equity investor 6,827,517 6,458,360 Impairment Charges against non-performing Financing and Investment 231,584 (161,459)

7,059,101 6,296,901 Bought in Goods and Services (3,352,634) (3,028,437)

Value Added 3,706,467 100% 3,268,463 100%

TotalDistribution

Employees

Salaries and Benefits 2,808,765 76% 2,374,457 84%

Government

Company Income Tax 63,336 2% 356,891 0%

Retained in the Bank

Re-invested in non-current asset & development of operation - 0% - 0%

Profit for the year (inclusive of all Statutory Reserves) 834,366 23% 537,117 16%

Total Value Added 3,706,467 100% 3,268,465 100%

"135"

0 | p a g e...4 | p a g ejaiz bank plc. kano house, 73 ralph shodeinde, central business district...

Documents