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Annual General Meeting2018

2018 ANNUAL GENERAL MEETING23th June 2018, Diamond Jubilee VIP Hall, Dar es Salaam, Tanzania

A n n u a l G e n e r a l M e e t i n g 2 0 1 8 A n n u a l G e n e r a l M e e t i n g 2 0 1 84

TAB

LE O

F C

ON

TEN

TS1. Vision and Mission Statements

2. Notices of Annual General Meeting

3. Minutes of the Third Annual General Meeting

4. Matters arising from the Third Annual General Meeting

5. Board of Directors

6. Managing Director’s Report

7. Bank’s Activities

8. Management Team

9. External Auditor’s Report and Financial Statements of the Bank

10. STATEMENT OF PROFIT AND LOSS AND COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

11. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

04

05

06

15

18

22

27

25

34

42

46

VISION AND MISSION STATEMENTS

Vision

“To become the premier bank in Tanzania, which is customer need driven with competitive returns to shareholders”.

Mission

“To grow our business whilst investing on communities that we serve and improving the lives of our employees. We strive to provide competitive and innovative financial services to all stake holders and the society”.

A n n u a l G e n e r a l M e e t i n g 2 0 1 8 A n n u a l G e n e r a l M e e t i n g 2 0 1 8 5

NOTICE OF THE FOURTH ANNUAL GENERAL MEETING:

Notice is hereby given that the Fourth Annual General Meeting of the Shareholders of Maendeleo Bank PLC

will be held on Saturday 23rd June 2018 at the DIAMOND JUBILEE VIP HALL, Dar es Salaam from 10.00 am.

The Agenda will be as follows:

1. Adoption of the Agenda for the 4th Annual General Meeting.

2. Confirmation of the Minutes of the 3rd Annual General Meeting

3. Matters Arising from the 3rd Annual General Meeting

4. Managing Directors’ Report for the Year Ending 31st December 2017.

5. External Auditor’s Report and the Audited Financial Statements for the

Year Ended 31st December 2017

6. To Receive and Approve Directors’ Remuneration for 2019

7. To Receive and Approve Appointment of External Auditors for the Year

Ending 31st December 2018

8. To receive and approve dividend proposal

9. Amendments of MEMARTS

10. Any Other Business

11. Next Annual General Meeting

12. Closure of the Meeting

NOTES: 1. A member wishing to attend the meeting will do so at his/her own cost and must come with his/ her copy of depository

receipt (share certificate) together with Identity card with photo for identification. Copies of the Annual Report and proxy forms

will be available at the Head Office situated at Maendeleo Bank, Luther House, Sokoine Drive - City Centre effective from 15th

June, 2018.

2. A member entitled to attend the meeting and who is unable to attend, can appoint a Proxy to attend on his/her behalf

by submitting his/her name to the Managing Director at Maendeleo Bank PLC not less than 48 hours before the time of the

meeting. In case of a corporate body, the Proxy must be under its common seal and must come with the depository receipt.

3. Prior to the AGM there will be a seminar on current economic environment in the Banking industry and

Highlights on Bank’s products between 9.00am and 10.00am.

BY ORDER OF THE BOARD

Ibrahim Mwangalaba MANAGING DIRECTOR AND SECRETARY TO THE BOARD. 23th May 2018


MINUTES OF THE 3RD ANNUAL GENERAL MEETING (AGM) OF THE MAENDELEO BANK PLC HELD ON 06TH MAY 2017 AT DIAMOND JUBILEE, DAR ES SALAAM, COMMENCED AT 10:00 A.M.

Shareholders1. United Evangelical Mission Represented by Rev. Dr. Nagaju Muke

2. ELCT- Eastern and Costal Diocese Represented by Dean Chediel Lwiza / Mr. Godgrey Nkini

3. Other Shareholders List Attached

Directors1. Mr. Amulike Ngeliama Chairman

2. Ms. Dosca Mutabuzi Vice Chairperson

3. Amb. Richard Mariki Director 4. Mr. Naftal Nsemwa Director 5. Rev. Ernest Kadiva Director 6. Mr. Felix Mlaki Director 7. Mrs. Anna Mzinga Director

8. Mr. Ibrahim Mwangalaba Managing Director and Secretary to the Board

In Attendance

1. Mr. Peter Tarimo Head of Finance

2. Mr. Silvan Makole Head of Internal Audit

3. Mr. George Wandwalo Head of ICT&Operations

4. Mr. Richard Mashiku Head of Human Resources

5. Ms. Mumi Philip Head of Credit

6. Mr. Francis Mandala Operations Manager

7. Ms. Margaret Msengi Luther House Branch Manager

8. Ms. Nuru Shadrack Kariakoo Branch Manager

9. Ms. Anneth Mahondo Mwenge Branch Manager

10. Mr. Mark Shirima BOT Representative

11. Mr. Msafiri Kuboja BOT Representative

12. Mr. Benitho Kyando DSE Representative

13. Mr. George Fumbuka Core Securities

14. Mr. Christopher Mageka Innovex Auditors

15. Mr. Irvin Maning Innovex Auditors

16. Mr. James Bwana Bwana Attorneys

17. Mr. Fred Oddat CMSA Representative


Other Shareholders Attendance Register

1. ADAM S KIHEMELA

2. ADONICAM H MUNISI

3. AGNESS E NKINI

4. AGNESTA STANELY FIFI

5. AILEENPEACE MUHAMBA

6. AISHA M MBILIKIRA

7. AJUEL N MEENA

8. ALBERT JOENI MSEMO

9. ALBERT MARINGO

10. ALEX BENJAMIN

11. ALEX BRITHON

12. ALEXANDER ABSALOM

DUMA

13. ALEXANDER M SANGA

14. ALEXANDER OSTIAN

GUNDWA

15. ALIKO J MWALUKASA

16. ALLAN B MKONYI

17. AMAN ELIAS SWAI

18. AMBU EMMANUEL

19. AMBWENE KYANDO

20. AMON JONAS SAWE

21. ANALOISE KAFUKO

MAFURU

22. ANDERSON MMARI

RISHIELI

23. ANDREW N MJEMA

24. ANGELYN KOMBE

25. ANILINDA P. KYANDO

26. ANISA GIBRON KILAWE

27. ANNA E MKINDI

28. ANNA EBEU

29. ANNA I MUSHI

30. ANNA NDEKARISHO

KISHIMBO

31. ANNA NESTORY SHITIMA

32. ANNA SIFIKE SANGA

33. ANNA WILDARD SHOO

34. ANNAMARIA ALMASI

35. ANNASHANGWE

MUGOGO EDWARD

36. ANNE G LYATUU

37. ANNETH ANASE KIMARO

38. ANYUBATILE S SANGA

39. ASERINAIMAN MSANGI

40. ASHA Y MSHAMU

41. AUNYISAA ELIA NGOWI

42. AVELIN RUMISHA MUSHI

43. BABWEU JOSIA SARIA

44. BALIWA JUSTA KIMBA

45. BARACK SHOO

46. BARAKA ELIA

47. BEATRICE LYIMO

48. BEAUTY HENRY

MATONANGE

49. BENJAMIN M KEHONGO

50. BENJAMIN SEVELAY

51. BERTOD T NJAWIKE

52. BONIFACE ELIAS SAIBULL

53. BRENDA JUBILATE

54. CAROLINE A GAMSA

55. CATHERINE JILO

56. CERISSA MPANGILE

57. CHARLES AMANI KISAGA

58. CHARLES JAISON

MANGIA

59. CHARLES MARELO

60. CHRISTINA EDWARD

RINGO

61. CHRISTINA MATERU

62. CHRISTIOPHER MAGEKA

63. CHRISTOPHER JULY

NGAZI

64. CHRLES DAUD

MWAIPUNGU

65. COLLINS ASUBISYE

MWANSYOMBE

66. COMELORD K. SWAI

67. CONSTANSIA ESTO

MIHMAMBAU

68. DAINES TIMOTH

MWAMBAPA

69. DAINESS D SENKORO

70. DAN H MUSYANI

71. DAVID D MACHA

72. DEBORAH K

MWAITELEKE

73. DEODATHA D KOMEYE

74. DEOGRATIUS KASHERO

75. DEOGRATIUS KIANGU

76. DEON CHEDIEL

77. DONALD NZAGA

WARIOBA KISURI

78. DONATHA K JEKELA

79. DONISIA LISSU MPUNGA

80. DOREEN G GEORGE

81. DR.AMOS ODEA

MWAKILASA

82. EDAH LEMBA MHAMA

83. EDITH MWAKIPESILE

84. EDNA E MOSHA

85. EDWIN JONATHAN HERIN

86. EFAYO JESTA NYAMOGA

87. ELIAMEN J LEMA

88. ELIAS JOHN MAKWEGA

89. ELIBARIKI A AYO

90. ELIDHAMINI L J NDEKIMO

91. ELIETH ERNEST NGIMBWA

92. ELIHAIKA I NTELLE

93. ELIHURUMA MSUMARI

94. ELIKA E MALISA

95. ELIKUNDA H KISANGA

96. ELIMLINZI PETER TERRY

97. ELINARA U. NGAO

98. ELISARIA CHUWA

99. ELIVURU YESAYA KAAYA

100. ELIWAJA LAPIA MGORI

101. ELIWANGU ROGERS

MAKUNDI

102. ELIWARIO ISSANGYA

103. ELIZA ANDREA

KIG’HOMELA

104. ELIZA MARK THOMAS

105. ELIZABETH CHARLES SHOO

106. ELIZABETH MWAMAFUPA

107. ELIZABETH P KAHANGWA

108. ELIZABETH S MKUMBO

109. ELIZABETH THOMAS

MASSAWE

110. ELLA TUMBWENE

111. ELLY B KEHOGO

112. ELLY RABBIEL SWAI

113. ELPHAS MELAISHO

NGILORITI

114. EMANUEL D SHIJA

115. EMANUEL KILIMA

116. EMELLINE EVAREST MZAVA

117. EMMANUEL MATAJA

MWANYABUNE

118. EMMANUEL S MATONYA

119. EPENETH KATIMBUKA

120. EREICK GERVAS RWIJAGE

121. ESHER TIBESIGWA

122. ESTER DANIEL MABILE


123. ESTER GIBSON TARIMO

124. ESTER MANYANGA

125. ESTHER EMMAEL MARCO

126. ESTHER JEREMIA

127. ESTHER K MSUYA

128. ESTHER THOMAS

MWAKILIMA

129. ESTOMIHI LEVI KANYIKA

130. EV. ENEDY TEMU

131. EV. BENJAMIN

132. EV. ELIUD

133. EV. ELVIS K NGOWI

134. EV. FABIAN DILUNGA

135. EV. HILDA MCHAU

136. EV. LUSELI MWAMAKULA

137. EV. ROSE J KIHIYO

138. EVA AGNESS MSUYA

139. EVA S KIMARO

140. EVAROSE YESAYA

141. EVELISAMOA MOLLA

142. EYUDI ELIAS NZIKU

143. EZEKIEL JOSEPH KIKOTI

144. EZEKIEL R SAID

145. FADHILI SALUM WAHID

146. FARAJA M MESSO

147. FAUSTINE NYAKATALE

148. FAUZIA A KAMATH

149. FELISTER EMANUEL

SHAO

150. FELISTER STANLEY

MTUNGUJA

151. FELIX FESTO MARAND

152. FILBERTH G MASUL

153. FIRYANDIANA YONNA

MUNUO

154. FLORA DANIEL URONU

155. FLORA J. HUMBO

156. FLORA MWAHULA

157. FRANCIS KIBWANA

158. FRANK HIPHE MUSHI

159. FRANK M JAMES

160. FRANK MICHAEL

161. FRED P ODATT

162. FREDICK MLAKI

163. FREDRICK CLEMENT

MUYANZI

164. FREDRICK K KALOKOLA

165. FREDY E MWAILEGE

166. FRIDA AMULIKE

167. GADISON J AMAN

168. GALLUS D NEONEI

169. GAUDENCE WALTER

MUSHI

170. GELLITE H. LUKUTA

171. GEOFREY FILIPO MUSHI

172. GEORGE FUMBULA

173. GEORGE E LAWUO

174. GEORGE THOBIAS

175. GEORGINA JUMANNE

MGAHI

176. GHERIEL P MANKI

177. GILBERTH A KATALA

178. GILLIARD THOMAS

MASSAWE

179. GLADNESS HEMEDI

MUNUO

180. GLADNESS WILLIAM

KAWICHE

181. GLADSTONE KIMARO

182. GLORIA ANINY LEMA

183. GLORIA WILLIAM

SIJAONA

184. GODFREY J LYIMO

185. GODFREY L NKINI

186. GODLOVE M MURO

187. GODWIN ERNEST

188. GODWIN RWEIKIZA

NDYETABULA

189. GOODRON SAMWEL

KAHWA

190. GRACE B NGUDA

191. GRACE BAYONA KASSEY

192. GRACE JOHN KALAZI

193. GRACE YESSAYA HIZZA

194. HANS GERVAS MTUI

195. HAPPINESS

HEAVENLIGHT LYIMO

196. HAPPYLIGHT KAUWED

MATEMBA

197. HARRIET WANGARE

198. HARRY NYANGE

199. HELLEN MARINGO

200. HELLEN S RWEZAURA

201. HIGHNESS GAUDENCE

MUSHI

202. HILDA DAIMON ZAMBI

203. HILDA MOSES KIBWANA

204. HILDA NICHOLAUS

MKALA

205. IRVING MANNING

206. ISAKA KAWEDI MWENDE

207. ISAKWISA N BLANCKSON

208. ISSAC NEBET

209. ISSAI I NTELE

210. JACKSON PONSIAN

KAIGOMA

211. JAMES G SARIA

212. JAMES R MWIGUNE

213. JAMES SAUTI MALIGA

214. JANE J MAKUNDI

215. JANE JOHN SHADRACK

216. JANE KILAWE

217. JANE LASECK WAGWE

218. JANETH JEREMIA MKUMBI

219. JAPHET M LUMANGA

220. JESSEPHINE JACKSON

KATEGILE

221. JESTINA JULIUS

222. JIMMY KIBAKAYA

223. JOEL ELIHUDI MMBAGA

224. JOEL KOMBE

225. JOHN J MANYAMA

226. JOHN L HERMAN

227. JOHNSON GOODELI

KIMAMBO

228. JOHSON LAURIAN

KASHUSHURA

229. JONATHAN RICHARD

KOMBE

230. JOSEPHINE ALFRED

231. JOSHUA MICKDONALD

232. JOYCE E NGOWI

233. JOYCE JOHN MNYENYE

234. JOYCE JONAS MMARI

235. JOYCE NAPEGWA KIULA

236. JUDICA G MRAMA

237. JUDITH JOHNATHANI

MGAYA

238. JULIA HARRY SABUNI

239. JULIANA E KIMAMBO

240. JULIUS MOSHI

241. JUSTINO S JEKELA

242. KABRON ANDERSON

MAHOO

243. KASEMBO KUWA KANDO

244. KELAKI ELIAS OLE SAIBULL

245. KILUVYA LUTH CHURCH

246. KUKA MERERE

MWANGAYA

247. LAWRENCIA N MAKOYE


248. LAZARIUS E. MNDEME

249. LAZARO M MASEGESE

250. L.B MWAKISONGO

251. LEAH E KILIGO

252. LEONARD JAMES

KASULWA

253. LIDYA JOH

254. LIGTHNESS R LEMA

255. LILIAN Z RIWA

256. LORDEN E NZOGELA

257. LOYCE FANUEL MTAKI

258. LOYCE IFUGE

259. LUCY PETER MSHANGA

260. LUTHEREMA SIMON

MINJA

261. LUSELI MWAMAKULA

262. MADELEINE F SHIRIMA

263. MAGDALENA S OMARI

264. MAGRETH S MMBAGA

265. MANASE ONIFASI META

266. MARCO YOTHAM NGAILO

267. MARGARET KAIGARULA

268. MARGRETH ELISA TARI

269. MARGRETH FIDELIS

SHIRIMA

270. MARIA SAMUEL

271. MARK SHIRIMA

272. MARTHA MTALO

273. MARTIN J SAMEJI

274. MARY D KIUNSI

275. MARY ELIATOSHA MLAY

276. MARY G LEWANGA

277. MARY KAISI

278. MARY KANYILILI MLENZI

279. MARY L MWENDA

280. MARY REGNALD LYIMO

281. MASTIDIA F

NDYOMULWANGO

282. MATHAYO

MWAKAGAMBIA

283. MATHEW SABUNI HOZA

284. MATHIAS F CHAWA

285. MCDONALD ELISA MORI

286. MCH ANTHONY ADAM

287. MCH. T. MANOZA

288. MELUTH S. MWINUKA

289. MELVIN RWAKA

GASSANA

290. MERCY E TEMU

291. MERCY P MTEI

292. METHOD M MESSO

293. MICHAEL ELIA NJIRO

294. MICHAEL SINDATO

295. MIDIAM BEATUS KIGWILE

296. MIDIAM BEATUS

297. MIKALI P MSUYA

298. MIKE JESUSAA MALLEWO

299. MISS CATHERINE Y

MNDEME

300. MONICA A. RASHID

301. MONICA PAUL MATUMBA

302. MONICA WAREHEMA

JENGO

303. MOSES J LUMBASALA

304. MSAFIRI D KUBOJA

305. MUGISHA R. KILIBA

306. MUSA GWAMAKA

MWAKALINGA

307. MWINJI EMANUEL FRANK

308. NAEMY RAPHAEL

LUKOMBESO

309. NANCY KISAMO LAIZER

310. NATUPO SOLOMON

311. NDENISARIA G. NTUAH

312. NEEMA C MUSHI

313. NEEMA J. HAULE

314. NEEMA L NNKO

315. NELLY BALDWIN LYIMO

316. NELSON MARANDO

317. NELSON P MONTU

318. NEVINCE L MONYO

319. NGUMOI NGEREZA

LAIZER

320. NICHOLUS PETER

MUELLA

321. NIKUBUKA P SHIMWELA

322. NILIWAKO H SANGA

323. NISAMEHE

KINGHOMELLA

324. NISILE C MOLLEL

325. NITIKE ANDONGKIISY

326. NOEL AMOS MUSHI

327. NOVAT D KABOIGORA

328. NURU AMASIA

329. OKULI PETER MUSHI

330. OLIVER ELIONI TEMU

331. OLIVER IPUNGU

332. OMEGA A NGOMUO

333. ORAYGOD E NJIRO

334. OSCAR ADIEL MUNISI

335. PAMELA HENRY MEENA

336. PARMENAS GURISHA

KISIMBO

337. PAULINA GERVAS

338. PAULINA PAUL RWEZAVRA

339. PERIS R KAVISHE

340. PETER B MSHANGA

341. PETER NTANDU MISANGA

342. PHANE MATHEW KIRUMBI

343. PHILIMON N. NTIMAZA

344. PHILIP A KIMARO

345. PHILIPO R NGOTI

346. RACHEL MWAKIPESILE

347. RAHABU ASAGILE

348. RAPHAEL KARINGA

349. REGINA ELIAS SWAI

350. REGULA H SHAYO

351. REHEMA L MKEHA

352. REHEMA P KAGUO

353. RENALDA FAUSTINE

GATERA

354. RESTITUTA JUAKALI

355. REUBEN O SWAI

356. REV. AMAN LYIMO

357. REV. ELIONA KIMARO

358. REV. JOB MWAISAKA

359. REV. REMMY CHUMA

360. RHODA KIMATH

361. RHODA JULIUS KIMARO

362. RICHARD I KALAPILA

363. ROBERT TLEYES

364. ROGATHE E NGOWO

365. ROSE KATO

366. ROSE MALISA

367. ROSE SAMWEL MDUMA

368. ROSEMARY CHRISTOPHER

369. ROSEMARY M MESSO

370. ROSEMARY M NGUBESI

371. SAFIEL R MFANGAVO

372. SALAMA RAJABU MLINDO

373. SALOME KILIO

374. SALOME MWANGALABA

375. SAMBACHE MRIMI SIKI

376. SAMSON JOHN FONGO

377. SAMWEL JOHN

378. SAMWEL SIA

379. SARAH MONICA

380. SARAH MPONGO

381. SARAH SILICCA

MWAKIBINGA


382. SELINA LOHAY

383. SIAELY GIBRON KILAWE

384. SIMON URASSA

385. SOPHIA BUKUKU

386. SOPHIA JOHN

MWAKIPESILE

387. STANLEY J MWANRI

388. STANLEY NGAMBEKI

LUBAGUMYA

389. STELLA NATHAN KALUSE

390. STEPHEN KAISER LAIZER

391. STEWART S LYATUU

392. TAFUTENI RASHID

MBUGUNI

393. TAIMISY DAUD SANGA

394. TEGEMEA R KISWAGA

395. THEOPHILO M KANZA

396. TIMOTHY NOBERT

KIRWAY

397. TOGOLANI MPARE PIMA

398. TULANYIUKA W LUVINGA

399. TUPOKIGWE W KYANDO

400. TUSEKILE TIMOTH

MWABUKUSI

401. UFUNYO ZACHARIA

NGUMBI

402. UZEELI E KISENGU

403. VAILET J MLAY

404. VELIANA D SEMKIWA

405. VENANCE DEUSDEDIT

MTAMWEGA

406. VERONICA TUMBWENE

NGONDYA

407. VICTOR OMBENI MACHA

408. VICTORIA SF MTWIKE

409. WARANGE M MARUPLIU

410. WIDIEL EMMANUELI

411. WILFRED MASSAVU

412. WILLIAM A MLAKI

413. WILLIAM DATTI

414. WILLIAM P SHEKIDELE

415. WINSTO MARTIN MBUGA

416. WINYAEL MANASE META

417. WITNESS MARTIN

MPELUMBE

418. WOITARA S NDESERUA

419. YESAYA T MAGIMBI

420. YESSE ARCHBORD

421. YOHANA SUBUGO

422. YULITHER N KAHEMKE

423. ZACHARIA JILAONEKA

NGUMBI

NOTICE having been duly served on all Shareholders and there being the requisite quorum the meeting was called to order. However prior to the commencement of the meeting, shareholders received a seminar on the importance of investing in shares of companies that have been listed on the Dar es Salaam Stock Exchange.

The seminar was facilitated by Mr. Benitho Kyando from the Dar es Salaam Stock Exchange.

OPENING REMARKS BY THE CHAIRMANThe Chairman opened the meeting by welcoming all who attended the meeting. He further acknowledged the presence of members from various stakeholders; ELCT-ECD, UEM representatives, Bank of Tanzania, CMSA, DSE, Core Securities, Innovex

Auditors and Bwana Attorneys and thanked all of them for their respective contribution to the growth of Maendeleo Bank PLC.

Adoption of the Agenda

The Shareholders agreed that the Agenda be adopted as follows:

1. Adoption of the Agenda for the 3rd Annual General Meeting. 2. Confirmation of the Minutes of the Second Annual General Meeting 3. Matters Arising from the Second Annual General Meeting 4. Directors’ Report for the Year ending 31st December 2016. 5. External Auditor’s report and the Audited Financial Statements for the Year ending 31st

December 2016 6. Directors’ Remuneration for the year 2018 7. Appointment of External Auditors for the Year ending 31st December 2017 8. Amendment of MEMARTS

9. Any Other Business

10. Date of Next Annual General Meeting

11. Closure of the Meeting


Confirmation of the Minutes of the 2nd Annual General Meeting held on 30.04.2016

The minutes of the last meeting held on 30.04.2016 were read and approved subject to the following corrections;

• Attendance list: Name of the Bank Attorney, Mr. James Bwana should appear under “in attendance”

• Matters arising heading should read: Matters Arising from the “1st Annual General Meeting held on

16th May 2015”.

Subject to the above corrections, the minutes were confirmed as true and correct record of the meeting and

were signed by the Chairman.

MATTERS ARISING FROM MINUTES OF THE 2ND AGM MEETING HELD ON 30TH APRIL 2016

DIAMOND JUBILEE

Shareholders pointed out errors in the minutes and directed correction of errors names omitted in the list t of attendance to be made and corrections of the heading for matters arising of 1st AGM

Implemented

Implemented

Implemented

Implemented

Implemented

Implemented

Implemented and the request for a MEMART change will be tabled to this meeting.

Partially implemented; we request Shareholders to indicate their email address to be used in the coming meetings.

External Auditors have been invited to present their report.

Names of attendance to be listed in alphabetical order for easy reference.

External Auditors be invited to present and defend their report to the Shareholders instead of being presented by Management.

The actual �gure used in Corporate and Social Responsibili-ty (CSR) must be declared together with the target market as contained in the CSR Policy.

Preparation of the Annual General Meeting Pack be done correctly to avoid errors in the report and even if it requires to extend the AGM meeting time, the MEMART can be amended to accommodate that.

Annual General Meeting packs to be sent to the sharehold-ers timely and through emails (for those who registered their email address) to minimize costs and have timely deliv-ery of the pack.

Annual Director’s fees for Chairman and Directors will remain unchanged while sitting allowance for Chairman’s changed from TZS. 550,000 to TZS. 650,000 and Director’s allowances will be TZS. 600,000 instead of TZS. 500,000.

Innovex was appointed as External Auditor for the year 2016 at a fee of TZS. 29.0 million VAT inclusive.

Shareholders directed that the coming 3rd Annual General Meeting to be held after making sure that the Audited Accounts are fully complete and signed by External Auditors and included in the printed AGM Pack.

1 2

2 5

3 6

4 7

5 9


TO RECEIVE DIRECTORS’ REPORT FOR THE YEAR ENDING 31ST DECEMBER 2016

The Board Chairman and Managing Director presented the Bank’s performance for the year which ended on 31st December

2016. The bank’s performance was compared from its inception of operations until 31st December, 2016.

INFORMED Shareholders that the Bank’s share capital grew from TZS. 4.50billion to TZS 7.35 billion through the rights issue

which resulted into BOT’s approval to open two new Branches at Mwenge (Tumaini University) and at Kariakoo during the

year 2016.

INFORMED FURTHER that there was a policy shift of the government to move deposits from commercial Banks to BOT during

the year 2016 which affected the commercial banks.

It was REPORTED that despite the unexpected operational environment, the Bank made a net profit of TZS 554million in the

year 2016. Cummulative retained loss of TZS 937 million over the last three years swallowed up the entire profit.

It was ELABORATED that the Bank has a committed and efficient team of talented staff capable of transforming Maendeleo

Bank PLC which is in the process of issuing a new IPO before August 2017 to enable it to become a nation wide commercial

Bank.

It was REPORTED that the bank has the following plans for 2017:

• Mobilize deposits to reach TZS 74.0Billion

• Intensify lending to reach TZS. 45.0 Billion;

• Grow total assets of the bank to reach TZS 94 Billion;

• Introduce new products which includes Agency Banking and Mobile Phone credit product;

• Raise Capital through IPO by TZS 15 billion;

• Record a profit of TZS 1.8 billion.

The shareholders received and adopted the Directors’ report as presented by both the Chairman and Managing Director. They

urged that upon the Bank’s expansion more branches should be opened so as to serve clients as close as possible. They also

commended the Board and Management for the good work that has been done for the year being reported.


TO RECEIVE EXTERNAL AUDITOR’S REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2016

The financial statements for the year ended 31st December 2016 were presented to the Shareholders by External Auditors

(INNOVEX).

It was REPORTED that the Innovex Auditors conducted their audit work in accordance with International Standards on Auditing

(ISAs) and as required by the Banking and Financial Institutions Act 2006 and the Banking and its Regulations. It was therefore

REPORTED that the Bank has complied with the Act and its regulations, and therefore it was issued with a clean report. The

Shareholders received and adopted the report and Financial Statements for the year ended 31st December 2016.

TO RECEIVE AND APPROVE DIRECTORS’ REMUNERATION FOR 2017

Agenda was presented by the Managing Director who pointed out that the good performance of the bank

was a result of commitments of the Directors who direct and guide Management from time to time. It

was informed that the current annual Director’s fee and Meeting allowance should remain unchanged

however approval was sought for change in the mode of travel by air for the Chairperson and members and

Accommodation and meal Allowance within and outside the country.

Resolution: The Shareholders NOTED the good work and contribution of the Directors to the Bank and

approved the remuneration as follows:

1. Travel by Air for Chairperson and members to be Business Class at any time of Board and Committee

Meetings and any other duties relating to the bank.

2. Chairperson and members per diem be raised to TZS 400,000/- from TZS 300,000/- within the country and

USD 500 outside the country.

APPOINTMENT OF EXTERNAL AUDITORS FOR THE YEAR ENDING 31ST DECEMBER 2017The Shareholders were informed that according to the Banking and Financial Institutions (External Auditor) Regulations, 2014;

it is required that every bank or financial institution to appoint an independent external auditor annually.

The Shareholders were INFORMED that Innovex has already served as the Bank’s Independent Auditors for a period of four years

continuously; therefore the Bank was looking into engaging another auditing firm.

It was therefore reported that six Audit firms had submitted their proposals and Ernest and Young was

nominated after fulfilling the set criteria, namely:

• Capacity of the firm – the size of the Audit firm;

• Past records – List of customers served;

• Experience in IT systems audit;

• The firm to be listed in the list of approved auditors by BOT.

It was recommended that Ernest and Young be approved as the Bank’s external auditors for the financial year 31st December

2017 at a total cost of TZS 53million, VAT exclusive.

Resolution: It was therefore resolved that Ernest and Young be appointed as the External Auditor of the bank for the year

2017 at a fee of TZS 53million, VAT exclusive.


AMENDMENTS OF MEMARTSIt was REPORTED that since Maendeleo Bank PLC has been incorporated by way of a Memorandum and Articles of Association in

accordance with the Companies Act any change should comply with this law. The Companies act stipulates that a memorandum

and Articles of Association may be altered by way of special resolution so as to enable it to carry on its business more efficiently

and attain its main purpose by new or improved means.

Therefore the following proposals for amendment were PRESENTED for approval of the shareholders:

Article 22 - the word four (4) months should be amended to read six (6) months from end of financial year.

The amendment creates increase of the duration within which the annual general meeting can be held

from 4 to 6 months from end of financial year whereas the increased 2 months will prepare meeting to

get leverage of time with required standards due to time pressure.

Article 50 should read as follows:

The number of Directors shall not be less than eight (8). The first Directors of the Company shall be as

named in the particulars delivered to the Registrar of Companies pursuant to the provisions of Section

140 of the Companies Act.

This amendment is in compliance with the Companies Act since Section 45 mentioned in the Articles

does not say anything about first Directors.

Articles 55(1) and 56 should be amended whereas General Manager should be substituted to Managing Director. The

amendment is made because the title Managing Director is the one which is in use and not General Manager.

Resolution: The shareholders resolved that all amendment proposed by the Board as presented are hereby approved for

inclusion in the MEMARTS.

ANY OTHER BUSINESSThe Shareholders commended the Board of Directors for their efforts towards the Bank’s growth and performance.

There being no other business to transact, the Chairman thanked Shareholders for attending the meeting and for their

contributions. He further encouraged all Shareholders to participate fully in the buying of the new shares which will be offered

in August 2017.

DATE FOR NEXT AGMIT WAS RESOLVED that the next Annual General Meeting will be held in June 2018. The date and venue shall be determined by

the Board and shall be communicated to shareholders timely.

CLOSURE OF THE MEETINGThe Chairman closed the meeting at 1:39pm after a word of prayer from Dean Chediel Lwiza.

……………………..............……… ………………......................

C H A I R M A N SECRETARY

Date: 23/ 06 / 2018 Date: 23/ 06 / 2018


MATTERS ARISING FROM THE MINUTES OF THE 3RD ANNUAL GENERAL MEETING HELD ON 16TH MAY 2017 AT DIAMOND JUBILEE HALL

S/N Agenda Directives/Resolution Updates

1 2

2 8

3 6

6 7

7

4

5

Annual Director’s fees for Chairman and Directors will remain unchanged while mode of travel was changed to be by air (business class) for Chairperson and directors at any time of Board and Committee meetings and during perfoming duties relating to the bank.

Shareholders pointed out errors in the minutes and directed correction of errors names in the list of attendance to be made and corrections of the heading for matters arising of 1st AGM

Implemented

Implemented

Implemented

Implemented

Preparation of the Annual General Meeting Pack should be done timely.

Implemented to comply with regulatory reporting requirements.

Annual General Meeting packs to be sent to the shareholders timely and through emails (for those who registered their email addresses) to minimize costs and have timely delivery of the pack.

Implemented. We request Shareholders to indicate their email address to be used in the coming meetings.

Chairperson and directors’ accommodation and meal allowance (per diem) to be TZS 400,000/- instead of TZS 300,000/- within the country and USD 500 outside the country.

Ernest and Young were appointed as External Auditor for the year 2017 at a fee of Tzs 53.0 Million, VAT exclusive

Raise share capital through IPO The exercise to raise Capital through IPO was conducted starting on 18th September 2017 and results of it will be communicated by the relevant authority.


THE BOARD CHAIRMAN’S STATEMENTDear Shareholders,

Whenever I want to communicate something to you I would like to refer to four areas:

What I promised, what happened, challenges that we encountered and the way forward.

First and foremost I would like to thank God for enabling Maendeleo Bank PLC to prosper. We are now in

the fifth year of our operational existence, which will be fully attained on September 9, 2018. In several of

my previous statements I have been saying that we are in a very competitive business environment where

different players are operating. We intend to survive, grow and compete with other players.

I would also like to convey my very sincere gratitude to all of you Shareholders who are the reason for the existence of this

Bank. You made the idea of bank formation into a reality; you are the ones who bought the Initial Public Offer (IPO) shares that

were offered, without which the Bank would not have been licensed to operate. When the need to open new branches was

presented to you, you responded by subscribing to buy TZS 2.8 billion worth of shares; that action increased our share capital

to reach TZS 7.3 billion by the close of December 2017.

You will recall also that during the Annual General Meeting (AGM) of 2015 you gave your approval to the

Board’s recommendation for steps needed to increase share capital through the rights issue, followed by a

new IPO. That is why, as we were crossing into 2016 from 2015, we were able to mobilize additional shares

through the rights issue. And again, during the last quarter of last year we sold new shares through a new

IPO, and some of you did buy new shares, for which we are very grateful. The exercise was intended to

transform the Bank from being a Regional bank into becoming a bigger bank with a nation-wide network.

It is my expectation that the plan will be realized in the year 2019.

I would like also to convey my thanks to our operational staff who have demonstrated a high capability to perform with

efficiency to the extent that they have made it possible for the Bank to operate and make profits within the first two years

of operations, while surviving in an environment of high competition that has seen some banks being delicensed by the

Regulator. Rest assured that such regulatory action is an encouraging challenge that motivates us to excel instead of being

complacent. The Board alone would not have been able to make well informed decisions without the resilient help of our

Bank’s staff.

The secret behind the Bank’s success is the tremendous support that the leadership of the Evangelical

Lutheran Church in Tanzania–Eastern and Coastal Diocese (ELCT–ECD), under the Bishop Dr. Alex Gehaz

Malasusa, as you are all aware, has provided. The ELCT-ECD leadership has done this assiduously to the

extent that they are making it possible to move the Bank towards establishing a nationwide network of

branches in the near future.

There are positive developments that have taken place, including a growth in assets, deposits and branches;

better still is the fact that growth in assets has also led to an increase in income from an initial loss of TZS 281

million in 2014 through a profit of TZS 178 million (2015) followed by TZS 554 million (2016), before reaching

TZS 969 million (2017).

As is the case with all business undertakings, we encountered many challenges. One such challenge was the sudden drop

of deposits following a government directive that required the withdrawal of all government deposits from all Commercial

Banks. Concurrent with such a directive was the turbulent business environment which affected many businesses in such a


way that loans taken to fund such businesses could not make loan repayment promptly leading to low interest income and

in some incidences growth of Non Perfoming Loans.

During the 3rd AGM that was held in 2017 I promised that we shall have a good income that will allow us to

declare a dividend. This matter is under the mandate of the Board of Directors’ Report

We are bent on carrying out sustainable and efficient business operations that will ensure an ever increasing annual dividend.

We also aspire to become a large bank with a nationwide network of branches, and this is prompted by the interest that

nationwide organizations have expressed their desire to have the Bank establish branches or products which can cater for

the whole country. This, in fact, was the driving force behind the second IPO whose shares were floated from September 2017.

Let me now close by thanking all of you who are making use of this Bank’s services by depositing with

our Bank, taking loans from our Bank and by using Maendeleo Bank PLC to do all your normal and other

business transactions. I urge you to not only increase but to continue using our services and invite others to

make use of Mandeleo Bank’s services. I understand that there might be some areas of improvement in our

services. For that reason I am very thankful to all those of you who did not and do not hesitate to give us their

feedback on our performance. We have diligently made efforts to address all the areas of your expressed

concerns and it is such feedback that enables us to improve our services to you.

Finally, I would like to thank Shareholders, Customers, and members of the Board of Directors whose ingenuity and experience,

in their respective fields of expertise during Board and Committee meetings, provided invaluable guidance to Management

and all bank staff.

I wish you prosperity in your endevours.

Amulike S.K. Ngeliama

CHAIRMAN


Mr. Amulike Ngeliama (Chairman)B.A Hons-Economics, University of Dar es salaam

Mr. Amulike Ngeliama has had a long career in banking, business, administration and project management. He began his career in 1976 at TRDB which was later transformed to CRDB after which he has worked in the banking sector for more than 20 years. He also conducted numerous SACCOS sensitization and mobilization seminars at national and international level. He has worked as Treasurer and Chairman of Mtoni Lutheran Church SACCOS between 1994 and 2013. Retired board member of Oikocredit - Netherlands, Retired board member of UTT-MFI Tanzania; currently he is a member of the Intitute of Directors Tanzania (IoDT).

Ambassador Richard Mariki

(MSC Management Arthur D. Little Management Institute, Cambridge Mass1978; B.A University of

East Africa-Dar es salaam Campus-1969);

Ambassador Richard Mariki is a long serving public servant. Professionally, he has extensive experience and has held senior positions in banking, telecommunications, aviation insurance and the Mining industry. Ambassador Mariki is used to work with the Evangelical Lutheran Church in Tanzania - East and Coastal Diocese as the Church’s General Secretary. he has also occupied Board positions as Chairman or member in respected companies and government agencies like the Tanzania Communications Regulating Authority, Economic and Social Research Foundation, National Insurance Corporation, Air Tanzania Corporation, TAZARA, National Bank of Commerce, East African Development Bank and Tanzania Revenue Authority (TRA). He is currently Board member of Geita Gold Mines.

Ms. Dosca MutabuziMaster of Business Administration (MBA),

University of Wales - UK, Bachelor of Laws (Ll. B), University of Dar es salaam.

Mrs. Dosca Mutabuzi is an Advocate of the High Court of Tanzania and a Notary Public and Commissioner for Oaths. She is the managing partner of Mutabuzi & Co. Advocates. She has also worked as State Attorney Grade III at the Attorney General’s Chambers and at the Tanzania Legal Corporation - DSM

She is a member of Tanganyika Law Society (TLS); Tanzania Women Lawyers Association (TAWLA); the East Africa Law Society; and the Eastern & Coastal Diocese Tender Board - ELCT.

Reverend Ernest KadivaBachelor of Commerce and Management University of Dar-es-Salaam in 1993; Bachelor of Divinity, Makumira University in 2002,

Master of Theology and Ecumenical Studies (Geneva University 2011)Reverend Ernest Kadiva is currently working with the Evangelical Lutheran Church in Tanzania - East and Coastal Diocese as the Church’s Deputy General Secretary Administration, Operations and Estate Affairs. He has attended numerous courses and seminars in Church leadership and Management Skills in Singapore at the Haggai Institute; Senior Managers Course in “Governance and Accountability in Tanzania: an Overview of Civil Society” organized by the University of Dar-es-Salaam in 2000. He has written professional papers and research works that were presented in different forum and workshop in Tanzania and overseas.

Board of Directors


Mr. Felix MlakiB.A (Economics, MBA - Finance)

Mr. Felix Mlaki is the Executive Director of the Economics & Business Foundation (T) Ltd. Prior to that, he worked at KCB Bank Tanzania Ltd as Head of Retail Banking; and Standard Chartered Bank Tanzania as General Manager - Shared Distribution. He has attended various courses and seminars such as Global Banking Services and Product Pricing - India; A Talented Manager - Kenya; Profit Management - USA; International Financial Leadership - USA; Service Excellence - Ghana; Global Wealth Management - UK; Building Value Leadership - Singapore; and Leadership for Growth - Indonesia. He is a member of Tanzania Institute of Bankers and is registered as an International Business Executive.

Mr. Naftal Nsemwa

Postgraduate Diploma in Project Appraisal and Analysis (Institute of Social Studies, The Hague - Netherlands) ; Bachelor of Arts (Economics) (University of Dar es Salaam), Certificate in Investment Appraisal and Management (University of Harvard)

Mr. Naftal Nsemwa has worked with national institutions at the highest levels, including that of Director General - PPF Pensions Fund. Before his appointment as DG in PPF, Mr. Nsemwa worked in the Tanzania Investment Bank (TIB) in different capacities including Director of Planning and Development.

Mr Nsemwa is currently Board Member of Sanlam Insurance Tanzania Limited and Kioo Limited and was a Member of Board of Directors of several institutions and companies. He is a past Chairman of the Azania Bancorp Ltd.’s Board of Directors, Vice Chairman of the Tanzania Re-insurance Ltd. Board of Directors and a member of the Board of Directors of PTA - Reinsurance Ltd - a Regional re-insurance company based in Nairobi, Kenya. He is also the Managing Director of INTERFINi Consultants Limited.

Mrs. Anna Mzinga MBA - Finance, Open University of Tanzania (2009); Professional Savings and Credit Societies Management Course, Moshi University College of Cooperatives and Business Studies; Advanced Diploma in Accountancy - Institute of Finance Management (2000); Certified Public Accountant, CPA (T).

Mrs. Anna Mzinga is a professionally qualified accountant with senior-level experience in accounting, finance and project management. She is currently working with Benjamin William Mkapa HIV/AIDS Foundation as Director of Finance and Grants. Prior to holding that position, she worked with the Higher Education Student Loans Board as Senior Accountant; with Dunduliza Company Limited in partnership with Desjardins International Development as a Director of Finance and worked with the Open University of Tanzania as Assistant Accountant.

Mr. Ibrahim Mwangalaba ( Managing Director )Masters in Business Administration (MBA) in Finance, Bachelor of Commerce & Management - both from the University of DSM.Mr. Ibrahim Mwangalaba is the Managing Director of the Bank. Before his appointment at Maendeleo Bank PLC, he worked at the KCB Bank Tanzania Ltd as Head of Operations &Technology. He also worked with CRDB and Mbeya Cement Company Limited for over 6 years in each. He holds an associateship diploma in banking of the Tanzania Institute of Bankers and is a Certified Director by the Institute of Directors (Tanzania). He is a professional member of Tanzania Institute of Bankers.

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PRODUCT FEATURES


Executive Savings Account

Opening balance of Tsh 100,000 or Usd 100

Free statements- monthly, quarterly

Unlimited withdrawals

Minimum operating balance Tsh 50,000 or USD 50

24 hours access to funds through the bank’s countrywide Umoja Switch ATM’s

Access to special cheque books


MANAGING DIRECTOR’S REPORTDear Investors,

On behalf of the Management and Staff of Maendeleo Bank Plc, I am delighted to report that during financial

year 2017, we further improved our performance, despite a volatile operating environment marked by low business

growth coupled by low loan repayment trend leading to increasing non-performing loans. Given these challenges,

we maintained a balanced approach to growth, profitability and risk management.

During 2017, the Bank continued to execute its strategic goals enlightened by the vision “‘To be the premier bank

in Tanzania which is customer need driven with competitive returns to the Shareholders’. Throughout its existence,

Maendeleo Bank successfully lived this vision by providing quality customer service to its customers and this has

enabled the bank to improve its performance.

In the year under review, our performance improved significantly in terms of deposits, loans, customer growth and

profitability hence proving to our Shareholders that they made a right decision to invest in this bank. We are pleased

with the bank’s continued progress that led to solid results and this aligns well with our vision and our proven track

record of sustained growth and profitability over the four years of our existence. In this context, I would like to share

with you some of our key performance highlights for the year 2017:

2017 Key Financial Results

The bank continued its growth drive in all fronts particularly profitability and total assets. This

growth has been maintained due to continued focus on strategy execution. The bank posted

75% growth in profit after tax to close at Tzs.969.9 Million compared to Tzs.555.0 million during

the year 2016. Total income went up by 14.2% to reach Tzs.9.6 billion up from Tzs. 8.4 billion

the previous year, mainly driven by growth in loans and advances to customers and increase

in transaction volumes. Net interest income rose by 45% to Tzs. 5.8 billion from Tzs. 4.0 billion

the previous year. However, interest expense decrease by 23% from TZS 3.4 billion in 2016 to

TZS 2.6 billion translating into a financial spread growth of 11% in the year. The decrease in

interest expense was attributed to aggressive deposit mobilisation campaign on savings and

current accounts.

Total expenses increased by 47% to Tzs 5.0 billion from Tzs 3.4 billion mainly attributed to

the bank’s expansion – whereby we opened one branch, improvements in staff welfare and

increased investments in technology.

During the year, the balance sheet grew impressively with total assets reaching Tzs. 64.9

billion from Tzs. 41.6 billion sustained in the previous year, representing a 56% increase. This

impressive growth was reflected in the net loan book that grew to Tzs. 36.1 billion up from

Tzs. 24.9 billion the previous year, representing a growth of 45%. Despite of this growth, the

bank maintained a high quality asset portfolio with an average non-performing loan book of

4.6%, which is slightly above last year’s figure of 3.8% and below the industry average of about

11%. Customer deposits grew from Tzs. 29.1 billion to Tzs. 42.1 billion, representing a growth of

44.6% from the previous year. The bank continued to attract new customers and closed the

year with 21,000 customers compared to 15,000 the previous year which is increase 40%.

↑ 75% Profitability

↑ 14.2% Total Income

↓ 23% Interest Expense

↑ 47% Total Expense

↑ 56% Total Assets

↑ 45% Loan Book

↑ 44.6% Deposit

↑ 40% Customer


Key Business development and innovations during 2017With regard to business development and innovation, the bank closed 2017 with 3 branches and the established

mobile banking platform. The bank is the member of UMOJA Switch ATM services which has over 270 ATMs across

the country. As a way of embracing technology, the bank is an active member of Tanzania Automated Clearing

House since its establishment, we are also among few registered banks with automated tax payment system ‘Tax

Banking’ under TRA.

As a means of creating one stop center, the bank has established insurance services to

serve as one stop center for our customers. The services offered includes life and non-

life insurance services, where in 2017 we registered a premium of Tzs. 900.0mn with

Tzs. 128.0mn commission to the bank which is an increase of 40% from that of previous

year, where we registered a premium of Tzs. 600.0mn with commission of Tzs. 91.0mn

to the bank.

Through innovation as a way to go, the bank established mobile phone based savings and loan product branded as ‘Timiza Vikoba’

in partnership with Airtel Tanzania. The service targets low income society engaging in informal sector to access financial services

to support their businesses. People in groups of 5 to 50 join together and open account with Maendeleo Bank without visiting the

physical branch and save any amount of money agreed by members for three consecutive weeks before they apply for loans through

their mobile phones. The loans are disbursed and repaid through their mobile phones. We are targeting to touch life of about 1,000,000

Tanzanians in three years.

Due to the growing customer base and needs, the bank will continue to roll out more convenient channels such as

agent banking, internet banking and further improve its Mobile Banking platform during the year 2018.

Partnerships and collaborationsThe Bank continues to respond to some of the challenges that agribusiness sector, women and youth faces in

accessing credit facilities for their agribusiness projects. The bank partnered with Agricom Tanzania Ltd which is a

farm inputs supplier in the country with presence in Dar es Salaam, Dodoma, Mbeya, Mwanza and Tabora. The bank

partnered with Agricom in order to support agribusiness in the country by providing loans to purchase good quality

farm inputs from Agricom. The farmer will visit the show room and select farm machinery which can be either; a

tractor, combined harvester, etc where the bank will pay for the equipment to enable the farmer paying for the

equipment on instalments to the bank.

The bank plans to increase the number of partners in the year 2018 in order to achieve its Financial Inclusion objective. The bank

continues to attract, develop and retain the right talent to drive its business strategy through good leadership.

Strategic Focus for 2018The bank will continue to execute a forward-looking strategy that combines financial inclusion and technology driven service delivery.

This will result into taking advantage of technological growth in banking industries also manage the ever changing customer needs,

preferences and behavior. We expect that the performance trend will be sustained by maintaining efficient operations, prudent

lending and risk management culture.

Corporate Social Responsibilities (CSR) It’s our policy that the bank shall provide grants through CSR in the following programme areas only; Education, Health,

Environment and Humanitarian aid. Programmes must be within the Regions where the bank operates.

↑ 40% Insurance Commission


The bank participated actively in community activities all over the period. The bank touched the lives of

needy society through community activity which includes; donation of different items to Cancer Insititute -

Magogoni, Church Dispensary, Chama cha Wasio ona Tanzania and Purchase of Books Mmbwawa Secondary

School. The total costs for the entire donations were Tzs. 9.135 mn.

The bank will continue to implement an engaging strategy that focuses on delighting customers, enhancing

productivity and efficiency and come up with innovations based on technology. The Bank will rollout agent banking

and internet banking in the course of the year 2018.

The bank started preparations for core banking system upgrade; this will enhance operations and customer services

through improved turnaround time and efficiency. In order to manage the emerging industry frauds, the bank has

migrated to a more secure ATM card system which is based on PIN and Chip technology.

AppreciationWe are grateful to our valued customers for the support, trust and confidence you placed in us over the past four

years, and to our shareholders for the trust and confidence to our bank leading to their investment decisions. I

would also like to thank the Board of Directors for their ongoing service and valuable support. I am appreciative to

the management and staff of the bank for their dedication and sacrifice that enabled delivery of this good financial

performance.

We are thankful to the Government and to the Bank of Tanzania, CMSA and DSE in particular for the great initiatives

and transformation that Tanzania’s banking and financial sector is undergoing to which we are committed to be

part in contributing significantly to this exciting journey.

I believe we have the right strategy, vision, capabilities and people to deliver on our strategical commitments towards

achieving our goals.

May God Bless You All.

Ibrahim Mwangalaba

Managing Director.


Principal ActivitiesThe main activity of the bank is the provision of banking and related services as stipulated by the Banking and

Financial Institutions Act, 2006. There has been no significant change in the principal activities of the bank during

the period ended 31st December, 2017.

Capital structureThe bank’s capital structure for the year under review is as shown below:

Authorized Share Capital:60,000,000 Ordinary shares of TZS. 500 each.

Called up and fully paid:The total number of shares issued and paid for is 14,590,691 ordinary shares. These shares of the bank are held as follows

Directors shares

None of the Directors own more than 2% of total issued share capital.

Company SecretaryThe Bank’s Secretary as at 31st December 2017 was Mr. Ibrahim Mwangalaba who is also the Managing

Director of the bank.

Corporate GovernanceMaendeleo Bank embraces best corporate governance practices and their implementation is considered

fundamental to its growth and sustainability. The Board is therefore consistent in its commitment to keep

abreast with new corporate governance initiatives unfolding constantly on both the international, regional

and local scenes to uplift corporate governance for the benefit of the company and for all its stakeholders.

Name No Shares % sharesUnited Evangelical Mission 2,808,815 19%

Diocese Institutions 1,797,816 12%ELCT - Eastern & Coast Dioceses

1,389,216 10%

Companies & Saccos 817,558 6%

Hans Macha 426,783 3%Other Individual 7,350,503 50%Total 14,590,691 100%

Names No Of shares Held in 2016

No of shares Held in 2017

Amulike S K Ngeliama 892 892 Ms. Dosca K Mutabuzi 29,608 29,608 Amb. Richard E. Maliki 10,000 10,000 Mr. Naftal M. Nsemwa 39,608 39,608 Rev. Ernest W.Kadiva 400 400 Mr. Felix H. Mlaki 14,5255 14,5255Mrs. Anna T. Mzinga 30,000 30,000 Ibrahim A. Mwangalaba

Total Directors Share 267,646 267,646

11,883 11,883

BANK`S ACTIVITIES


Names Clasification MBM

Mr. Amulike S.K. Ngeliama Non-Executive 8

Ms. Dosca K. Mutabuzi Non-Executive 8

Amb. Richard E. Mariki Non-Executive 8

Mr. Naftal M. Nsemwa Non-Executive 8

Rev. Ernest W. Kadiva Non-Executive 8

Mr. F elix H. Mlaki Non-Executive 8

Mrs. Anna T. Mzinga Non-Executive 8

Mr. Ibrahim A. Mwangalaba Executive Director 8

Notes:

MBM - Main Board Meeting

The Board has a charter to govern the roles and responsibilities as well as efficiency and effectiveness of Board performance.

The Directors also recognize the importance of integrity, transparency and accountability. During the year the Board had

two sub-committees to ensure a high standard of corporate governance. These sub - committees include Board Audit &

Risk Committee and Board Credit Committee of the Board.

Meetings of Committees of the Board

As at 31 December 2017 the Board had two Committees namely the Audit and Risk Committee and the

Credit Committee.

Members of each Committee are as shown below

Board Audit and Risk Committee (BARC):

Board Credit Committee (BCC):

S/n Name Position Total MeetingsConducted

Meetings Attended

1 Mr. Naftal M. Nsemwa Chairman 5 4 2 Mr. Felix H. Mlaki Member 5 4 3 Mrs. Anna T. Mzinga Member 5 4 4 Ibrahim Mwangalaba Member 5 5

S/n Name Position Total MeetingsConducted

Meetings Attended

1 Amb. Richard Mariki Chairman 9 9 2 Mr. NaftalNsemwa Member 9 8 3 Ms. Dorsca Mutabuzi Member 9 9 4 Mr. Ibra him Mwangalaba Member 9 9


Management TeamDuring the period under review the Management of the Bank was under the Managing Director, assisted by five Senior Managers:-

Mr. Ibrahim Mwangalaba

Managing Director“We will continue to build on our momentum in offering Innovative and cost efficiency products and services as an important aspect of the customer exprience”.

Mr. Richard Mashiku

Head of Human Resources“Human capital is the scarcest and critical resource for any serious organization, Maendeleo Bank PLC is one such organisation; therefore we commit to create a strong culture that help employees to perfom”.

George Wandwalo

Head of ICT & Operations

“Technological innovation is the heart and blood of the banking industry, We at Maendeleo Bank PLC make every effort to embrace technological innovations through offering value for money products and services”

Mumi Philip

Head of credit

We do the best in risk management and credit quality; that’s why we are here”!

Peter Tarimo

Head of Finance

Financial year 2017 was marked by a volatile operating environment marked by low business growth coupled by low loan repayment trend leading to increasing non-performing loans. Despite these challenges, we maintained a balanced approach to growth, profitability and risk management”.

Newton Mathew

Head of Internal Audit.

“Internal auditing, being an independent function, we help Maendeleo Bank PLC accomplish its objectives by bringing systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance process”.


Branch Network and Outreach

The Bank has three outlets mainly located within Dar es salaam, has follows 1. Luther Branch which is located in Luther House, Sokoine Drive, city centre 2. Mwenge Branch which is located in Mwenge, Coca cola road / Tumaini Univercity 3. Kariakoo Branch which is located in Kariakoo, Masasi / Likoma street

Future Developments The bank will continue to focus on business opportunities arising in the economy especially in lending and insurance businesses. The bank has the following plans for the year 2018. • To mobilize to reach 65.0 Billion by 31st December 2018. • To intensify lending to reach TZS. 54.0 Billion. • To grow Total assets of the bank to reach TZS. 74 Billion • To introduce Agency banking • Raise Capital through IPO by Tzs. 10.0 billion. • To record a profit of 1.1 billion by the end of the financial year 31st December, 2018. • Launch Microhousing Loans

Principal Risks and Uncertainties As the bank continues to scale up operations, it ensures that the resultant commercial and operational risks are mitigated through enforcement of appropriate policies and procedures. The bank is exposed into various financial risks including Credit, Liquidity, Marketing, Operational, strategical and compliance Risks. The bank’s overall risk management policies are set out by the Board of Directors for implementation by the Management.

Key Performance Indicators The following Key Performance Indicators (KPIs) are effective in measuring the delivery of the Bank’s strategy and managing the business.

Key performance Bank's ratio Key performance indicators Definition and calculation method 2017 2016

Return on equity Net profit/total equity 8.65% 7.61% Return on assets Net profit/total assets 1.49% 1.33% Cost to income ratio Total cost/Net income 87.26% 83%

Non interest to gross income Non-Non - interest /total income 17% 12%

Loans to deposit ratio 69.80% 79.65%

Non-performing loans to gross loans 4.64% 4.98%

Growth on total assets 55.92% -23.50%

Growth on loan and advances to customers 44.89% 42.32%

Growth of customer deposits 59.37% 33.40%

Tier 1 capital 15.46% 23.61%

Tier 2 capital 16.12% 24.55%

Total loans to customers /total deposits from customersTotal non-performing loans/gross loans and advances

Increase in assets for the year/total assets opening balance

Increase in loans and advances/opening balances of loans and advances

Increase in customer deposits/opening balance of customer deposits

Core capital/risk weighted assets including o� balance sheet items

Total capital/risk weighted assets including o� balance sheet items


Risk Management and Internal Control

The Board accepts responsibility for the risk management and internal control systems of the bank. It’s therefore the task of the Directors to ensure that adequate internal financial and operational control systems are developed and maintained on an ongoing basis in order to provide reasonable assurance regarding:

• The effectiveness and efficiency of operations • The safeguarding of the Bank’s assets • Compliance with applicable laws and regulations • The reliability of accounting records • Business sustainability in both normal and adverse conditions.

The efficiency of any internal control system is dependent on the strict observance of prescribed measures. There is always a risk of non-compliance of such measures by staff. While no system of internal control can provide absolute assurance against misstatement or losses, the bank’s system is designed to provide the Board with reasonable assurance that the procedures in place are operating effectively. The Board assessed the internal control systems throughout the financial year ending 31st December 2017 and is of opinion that they met accepted criteria.

Serious Prejudicial Matters. In the opinion of the Directors, there are no serious prejudicial matters that can affect the bank.

Solvency The Board of Directors confirms that applicable accounting standards have been followed and that the financial statements have been prepared on a going concern basis. The Board of Directors has reasonable expectation that the bank has adequate resources to continue in operational existence for the foreseeable future.

Related Party Transactions The bank has complied with regulatory requirements on related party transactions.

Relationship with stake holders The bank continued to maintain a good relationship with all stakeholders including the regulators.

Auditors

A resolution proposing an appointment of the Bank’s auditors for the year ending 31st December, 2018 will be put to this Annual

General Meeting.

DividendDividends are not recognized as a liability until they have been ratified at the Annual General Meeting. The Bank made a profit after tax of TZS 969,911,000 (2016: Profit TZS 554,541,000) during the year ended 31 December 2017, however the Board of Directors does recommend payment of dividends to shareholders. Since the Bank managed to get a profit much in excess of the accumulated negative retained earnings the Board recommends a cash dividend of TZS 21 per share.


Statement of Directors’ Responsibilities The Tanzania Companies Act No.12 of 2002 requires the Directors to prepare financial statements for each

financial year which give a true and fair view of the state of affairs of the Bank as at the end of the financial

year and of the operating results of the Bank for that year. It also requires the Directors to ensure that the

Bank keeps proper accounting records which disclose with reasonable accuracy at any time the financial

position of the Bank. They are also responsible for safeguarding the assets of the Bank.

The Directors are responsible for the preparation and fair presentation of these financial statements in

accordance with International Financial Reporting Standards. This responsibility includes: designing,

implementing and maintaining internal controls relevant to the preparation and fair presentation of financial

statements that are free from material misstatement, whether due to fraud or error, selecting and applying

appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

The Directors accept responsibility for the annual financial statements, which have been prepared using

appropriate accounting policies supported by reasonable and prudent judgments and estimates, in

conformity with International Financial Reporting Standards and in the manner required by the Companies

Act, 2002. The Directors are of the opinion that the financial statements give a true and fair view of the state

of the financial affairs of the Bank and of its operating results.

The Directors further accept responsibility for the maintenance of accounting records which may be relied

upon in the preparation of financial statements, as well as adequate systems of internal financial control.

Nothing has come to the attention of the Directors to indicate that the Maendeleo Bank PLC will not remain

a going concern for at least the next twelve months from the date of this statement.


Board Director’s

Senior Management Team

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Kariakoo BranchStaff

Mwenge BranchStaff

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EXTERNAL AUDITOR’S REPORT AND FINANCIAL STATEMENTS OF THE BANK

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

FOR THE YEAR ENDED 31 DECEMBER 2017

The Tanzania Companies Act No.12 of 2002 requires the Directors to prepare financial statements for each

financial year, which give a true and fair view of the state of affairs of the Bank as at the end of the financial

year and of the operating results of the Bank for that year. It also requires the Directors to ensure that the

Bank keeps proper accounting records, which disclose with reasonable accuracy at any time the financial

position of the Bank. They are also responsible for safeguarding the assets of the Bank.

The Directors are responsible for the preparation and fair presentation of these financial statements in

accordance with International Financial Reporting Standards. This responsibility includes: designing,

implementing and maintaining internal controls relevant to the preparation and fair presentation of

financial statements that are free from material misstatement, whether due to fraud or error, selecting and

applying appropriate accounting policies, and making accounting estimates that are reasonable in the

circumstances.

The Directors accept responsibility for the annual financial statements, which have been prepared using

appropriate accounting policies supported by reasonable and prudent judgments and estimates, in

conformity with International Financial Reporting Standards and in the manner required by the Companies

Act, 2002. The Directors are of the opinion that the financial statements give a true and fair view of the state

of the financial affairs of the Bank and of its operating results. The Directors further accept responsibility for

the maintenance of accounting records, which may be relied upon in the preparation of financial statements,

as well as adequate systems of internal financial control.

Nothing has come to the attention of the Directors to indicate that the Maendeleo Bank PLC will not remain

a going concern for at least the next twelve months from the date of this statement.

Approved byBoard of Directors for issue in 12th April 2018 and signed on its behalf by:

Date 12th March 2018

Amulike S. K. NgeliamaChairperson


DECLARATION OF HEAD OF FINANCE


The National Board of Accountants and Auditors (NBAA) according to the power conferred, under the

Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires

financial statements to be accompanied with a declaration issued by the Head of Finance responsible for

the preparation of financial statements of the entity concerned.

It is the duty of a Professional Accountant to assist Maendeleo Bank Plc to discharge the responsibility of

preparing financial statements showing true and fair view of the entity’s financial position and performance

in accordance with applicable International Financial Reporting Standards and statutory financial reporting

requirements. Full legal responsibility for the preparation of financial statements rests with the Board of

Directors of Maendeleo Bank Plc as indicated under the statement of directors’ responsibilities.

I, Peter B. Tarimo, being the Head of Finance of Maendeleo Bank Plc, hereby acknowledge my responsibility

of ensuring that financial statements for the year ended 31 December 2017 have been prepared in compliance

with applicable accounting standards and statutory requirements.

I, thus confirm that the financial statements give a true and fair view position of Maendeleo Bank Plc as on

that date and that they have been prepared based on properly maintained financial records.

Signed by:

Position: Head of Finance

NBAA Membership No: ACPA 3270

Date 12th March 2018


INDEPENDENT AUDITOR’S REPORT

To the shareholders of Maendeleo Bank PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of Maendeleo Bank PLC (‘the Bank’) set out on pages 24 to 86,

which comprise the statement of financial position as at 31 December 2017, and the statement of profit

or loss and other comprehensive income, statement of changes in equity and statement of cash flows for

the year then ended, and notes to the financial statements, including a summary of significant accounting

policies.

In our opinion, the financial statements present fairly, in all material respects, the financial position of

Maendeleo Bank PLC as at 31 December 2017, and its financial performance and its cash flows for the year

then ended in accordance with International Financial Reporting Standards and the requirements of the

Companies Act, 2002 and Banking and Financial Institutions Act, 2006 of Tanzania.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities

under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial

Statements section of our report. We are independent of the Bank in accordance with the International

Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together

with the ethical requirements that are relevant to our audit of the financial statements in Tanzania, and we

have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provided the basis for our audit opinion on the accompanying financial statements.


INDEPENDENT AUDITOR’S REPORT (Continued)


REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (Continued)

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial

Statements section of our report, including in relation to this matter. Accordingly, our audit included the

performance of procedures designed to respond to our assessment of the risks of material misstatement of

the financial statements. The results of our audit procedures, including the procedures performed to address

the matter below, provided the basis for our audit opinion on the accompanying financial statements.

No. Key audit matter How our audit addressed the key audit matter

1. Credit risk and impairment of loans and advances to customers

Impairment is a subjective area due to the level of judgement applied by management in determining provisions. The Bank is required to calculate impairment of loans and advances to customers in accordance with both the Bank of Tanzania regulations and IFRSs as disclosed in note 8 in the financial statements.

We focused on the identification of impairment events, which differs based upon the type of lending product and customer. Judgement is required in determining whether a loss has been incurred.

We also focused on the measurement of impairment, including the assessment of whether historical experience is appropriate when assessing the likelihood of incurred losses in respect to loans. Judgement is applied in determining the appropriate parameters and assumptions used to calculate impairment. For example, the assumption of customers that will default, the valuation of collateral for secured lending and the estimated future cash flows of loans.We also considered the disclosures on the impairments of loans and advances and credit risk to be important to the users of the financial statements.

Significant judgement were made in respect of loans and advances to customers and placements with other as disclosed in note 3.1.

1. Our audit procedures included the assessment of key controls over the approval, recording and monitoring of loans and advances.

2. We evaluated the methodologies, inputs and assumptions used by the Bank in calculating collectively assessed impairment losses, and assessed the adequacy of impairment allowances for individually assessed loans and advances in accordance with both IFRS and Bank of Tanzania requirements.

3. We compared the Bank's assumptions for impairment allowances to externally available industry, financial and economic data and our own assessments in relation to key inputs.

4. On sample basis, we assessed the consistency of judgement applied in the determination of the amount and timing of expected future cash flows, and consideration of economic factors and historical default rates.

5. We evaluated whether the Bank's assumptions on the estimated future cash flows from the value of realisable collateral was based on up to date valuations and available market information.

6. We evaluated whether the Bank’s computations for the regulatory impairment allowances were based on the Bank of Tanzania regulations. This included assessing whether the classification of loans and the percentages applied were in accordance with the Bank of Tanzania regulations.

7. We also assessed whether the financial statements disclosures in Note 4 appropriately reflect the Bank's exposure to credit risk.





2. Compliance with tax and banking laws and regulations Operating in the banking sector

presents increased regulatory risks due to the need to comply with multiple regulatory and legislative requirements, including legislation relating to banking and tax laws.

We focused on compliance with banking laws and regulations and tax laws because breaches of compliance could have a significant effect on the results and financial position of the Bank.

Bank of Tanzania regulations require external auditors of banks to specifically report on the Bank’s capital adequacy and therefore, this was a key focus area.

We also considered there to be a risk that the capital adequacy disclosures in Note 20 in the director’s report which are significant to the understanding of the Bank’s capital management, are not complete.

Our audit procedures included:

1. Assessing of key controls over the identification, evaluation and measurement of potential obligations arising from legal and regulatory matters.

2. Inspecting reports on litigations from in-house legal counsel and where appropriate, the Bank's external legal advisers, and appropriate documentation considered necessary to understand the position and conclusions made by the Bank. We also obtained external confirmations from legal counsel on significant litigation.

3. Considering the exposure to breaches of

legislation by making appropriate enquiry of the Bank’s management in relation to compliance with laws and regulations and the existence and status of any significant regulatory and legal matters.

4. Where significant matters were identified, we

considered whether an obligation exists, the appropriateness of provisioning and/or disclosure based on the facts and circumstances available.

5. Evaluating whether the capital adequacy ratios

of the Bank disclosed in Note 20 in the director’s report were computed in accordance with the Bank of Tanzania regulations.





Other Information included in the Company’s 2017 Annual Report

The other information comprises the Company Information, Directors’ Report, Statement of Directors’ Responsibilities and the Declaration by the Head of Finance. The other information does not include the financial statements and our auditor’s report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act, 2002 and Banking and Financial Institutions Act, 2006 of Tanzania, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.


Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.








Auditor’s Responsibilities for the Audit of the Financial Statements (Continued)

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

This report, including the opinion, has been prepared for, and only for, the Company’s members as a body in accordance with the Companies Act, 2002 of Tanzania and for no other purposes.

As required by the Companies Act, 2002 of Tanzania, we report to you, based on our audit, that:

• We have obtained all the information and explanations which, to the best of our knowledge

and belief, were necessary for the purpose of our audit;• In our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books; • The Directors’ Report is consistent with the financial statements;• Information specified by law regarding directors’ remuneration and transactions with the Company is disclosed; and,• The Company’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.

As required by the Banking and Financial Institutions (External Auditors) Regulations, 2014 of Tanzania, we report to you, based on our audit, that;

• In our opinion, the capital adequacy ratios as presented in Note 20 in the director’s report have been computed in accordance with the Banking and Financial Institutions Act, 2006, and the Banking and Financial Institutions (Capital Adequacy) Regulations, 2014 of Tanzania.

The engagement partner on the audit resulting in this independent auditor’s report is Neema Kiure-Mssusa.

Ernst & YoungCertified Public Accountants

Dar es SalaamSigned by: CPA Neema Kiure-Mssusa (FCPA 1227)

Date: 13th March 2018


STATEMENT OF PROFIT AND LOSS AND COMPREHENSIVE INCOME


2017 2016

Notes TZS TZS Revenue Interest Income 22 8,426,022 7,438,888 Interest expenses 23 (2,631,662) (3,408,632) Net Interest income 5,794,360 4,030,256 Written off bad loans - (282,298) Loan and advances impairment charges 7&9 (689,029) (599,357) Net Interest income after Impairment 5,105,331 3,148,602

Fees, commission and other income 24(a) 1,194,401 1,036,141 Fees and commission expenses 24(b) (38,788) (47,027) Net fees, commission and other income 1,155,613 989,113

Net operating income 6,260,944 4,137,715

Foreign exchange gain 25 160,113 26,213 Employee benefit expenses 26 (2,081,173) (1,407,946) General and administration costs 27 (2,578,648) (1,727,380) Depreciation and amortization 28 (546,481) (267,703) Operating expenses (5,046,189) (3,376,816)

Profit for the year before tax 1,214,755 760,899 Income tax 29 (244,844) (206,358) Profit for the year 969,911 554,541 Other comprehensive income - - Total comprehensive income for the year 969,911 554,541

Basic and diluted earnings per share 30 66.4 37.9

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 2017 2016

Note TZS’000’ TZS’000’ ASSETS Cash and balances with Bank of Tanzania 6 4,634,320 5,302,308 Placements and balances with other banks 7 20,007,882 8,777,313 Government securities 8 188,610 - Loans and advances to customers 9 36,097,419 24,913,340 Inventories 10 55,318 10,484 Other assets 11 1,665,952 958,505 Intangible assets 12 158,100 171,647 Property and equipment 13 646,481 518,952 Leasehold improvements 14 952,159 767,019 Deferred tax 17 582,962 260,134 Total assets 64,989,203 41,679,702

EQUITY AND LIABILITIES EQUITY Share capital 19 7,350,962 7,350,962 Advance towards share capital 20 2,965,534 - Regulatory reserves 21 37,031 General Reserve 276,312 216,779 Retained earnings 626,471 (320,938) Total equity 11,219,279 7,283,834 LIABILITIES Deposits 15 51,715,747 32,451,132 Other liabilities 16 1,771,306 1,797,667 Income tax payable 18 282,871 147,069

53,769,924 34,395,868

Total Equity and Liabilities 64,989,203 41,679,702 These financial statements were approved by the Board of Directors for issue on ______________ 2018 and were signed on its behalf by:

Name: Ibrahim Mwangalaba Title: Managing Directors Signature:

Name: Amulike Ngeliema Title: Board Chairman Signature:


2017 2016

Notes TZS TZS Revenue Interest Income 22 8,426,022 7,438,888 Interest expenses 23 (2,631,662) (3,408,632) Net Interest income 5,794,360 4,030,256 Written off bad loans - (282,298) Loan and advances impairment charges 7&9 (689,029) (599,357) Net Interest income after Impairment 5,105,331 3,148,602

Fees, commission and other income 24(a) 1,194,401 1,036,141 Fees and commission expenses 24(b) (38,788) (47,027) Net fees, commission and other income 1,155,613 989,113

Net operating income 6,260,944 4,137,715

Foreign exchange gain 25 160,113 26,213 Employee benefit expenses 26 (2,081,173) (1,407,946) General and administration costs 27 (2,578,648) (1,727,380) Depreciation and amortization 28 (546,481) (267,703) Operating expenses (5,046,189) (3,376,816)

Profit for the year before tax 1,214,755 760,899 Income tax 29 (244,844) (206,358) Profit for the year 969,911 554,541 Other comprehensive income - - Total comprehensive income for the year 969,911 554,541

Basic and diluted earnings per share 30 66.4 37.9

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 2017 2016

Note TZS’000’ TZS’000’ ASSETS Cash and balances with Bank of Tanzania 6 4,634,320 5,302,308 Placements and balances with other banks 7 20,007,882 8,777,313 Government securities 8 188,610 - Loans and advances to customers 9 36,097,419 24,913,340 Inventories 10 55,318 10,484 Other assets 11 1,665,952 958,505 Intangible assets 12 158,100 171,647 Property and equipment 13 646,481 518,952 Leasehold improvements 14 952,159 767,019 Deferred tax 17 582,962 260,134 Total assets 64,989,203 41,679,702

EQUITY AND LIABILITIES EQUITY Share capital 19 7,350,962 7,350,962 Advance towards share capital 20 2,965,534 - Regulatory reserves 21 37,031 General Reserve 276,312 216,779 Retained earnings 626,471 (320,938) Total equity 11,219,279 7,283,834 LIABILITIES Deposits 15 51,715,747 32,451,132 Other liabilities 16 1,771,306 1,797,667 Income tax payable 18 282,871 147,069

53,769,924 34,395,868

Total Equity and Liabilities 64,989,203 41,679,702 These financial statements were approved by the Board of Directors for issue on ______________ 2018 and were signed on its behalf by:

Name: Ibrahim Mwangalaba Title: Managing Directors Signature:

Name: Amulike Ngeliema Title: Board Chairman Signature:

12th, April


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MAENDELEO BANK PLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017

Note 2017 2016

TZS`000 TZS`000 Cash flows from operating activities Profit for the year before tax 1,214,755 760,899 Adjustments for: Amortization of intangible assets 12 53,920 15,527 Impairment on Loans and Advances 689,029 599,357 Provision for written off loans and advances - 282,298 Depreciation of property and equipment 13 359,558 183,062 Amortization of leasehold improvements 14 133,004 84,773

2,450,266 1,925,915 Changes in operating assets and liabilities Increase in loans and advances (11,573,326) (7,685,288) (Increase)/Decrease in inventories (44,834) 3,810 (Increase)/Decrease in placements with other banks (6,786,173) 18,688,971

Decrease in other assets (729,592) (294,087) Increase/(Decrease) in customer's deposits 19,264,616 (16,271,703) Movement in statutory minimum reserve 215,171 1,471,908

Increase in other liabilities (26,361) 1,435,479 Cash generated from/(used in) operating activities 2,769,767 (724,995)

Income tax paid (431,870) (196,650) A.Net cash generated/(used in) operating activities

2,337,897

(921,645)

Cash flows from investing activities Purchase of government securities 8 (188,610) - Sale of government securities - 994,364 Acquisition of intangible assets 12 (40,373) (14,032) Acquisition of property and equipment 13 (487,086) (257,031) Leasehold improvements costs incurred 14 (318,134) (307,589) B.Net cash (used in)/generated from investing activities

(1,034,203)

415,712

Cash flows from financing activities Paid up share capital/right Issue 2,965,534 1,374,957 C.Net cash generated from financing activities 2,965,534 1,374,957

Net increase in cash and cash equivalents (A+B+C) 4,269,229 869,024

Cash and cash equivalents 1 January 9,969,760 9,100,736 Cash and cash equivalents 31 December 34 14,238,989 9,969,760


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 1. REPORTING ENTITY

Maendeleo Bank PLC is a public limited company established under Companies Act No. 2 of 2002 with Certificate of Incorporation No. 81006 and domiciled in the United Republic of Tanzania. The shareholding structure comprises various church institutions, Individuals, ELCT-Eastern and Coastal Diocese and United Evangelical Mission. The Bank is engaged in the business of banking and provision of related services. The address of the registered office is as follows: Luther House Sokoine Drive PO Box 216 Dar es Salaam The Bank`s shares are listed on the Dar es Salaam Stock Exchange (DSE) under Enterprise Growth Market (EGM). The Bank`s financial statements for the year ended 31 December 2017 have been approved for issue by the Board of Directors on ………………… Neither the entity`s owners nor others have the power to amend the financial statements after issue.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. 2.1 Statement of compliance These financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS). 2.2 Basis of preparation The Bank‟s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). Additional information required by the Tanzania Companies Act 2002 and the Banking and Financial Institution Act, 2006 was included where appropriate. The financial statements comprise statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and the notes. The measurement basis applied in the preparation of these financial statements is the historical cost basis, except where otherwise stated in the accounting policies below. The financial statements are presented in Tanzania shillings (TZS) and the amounts are rounded to the nearest thousand shillings except where otherwise indicated. The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Bank‟s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate and that the Bank‟s financial statements therefore present the financial position and results fairly.

12th, April


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 1. REPORTING ENTITY

Maendeleo Bank PLC is a public limited company established under Companies Act No. 2 of 2002 with Certificate of Incorporation No. 81006 and domiciled in the United Republic of Tanzania. The shareholding structure comprises various church institutions, Individuals, ELCT-Eastern and Coastal Diocese and United Evangelical Mission. The Bank is engaged in the business of banking and provision of related services. The address of the registered office is as follows: Luther House Sokoine Drive PO Box 216 Dar es Salaam The Bank`s shares are listed on the Dar es Salaam Stock Exchange (DSE) under Enterprise Growth Market (EGM). The Bank`s financial statements for the year ended 31 December 2017 have been approved for issue by the Board of Directors on ………………… Neither the entity`s owners nor others have the power to amend the financial statements after issue.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated. 2.1 Statement of compliance These financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS). 2.2 Basis of preparation The Bank‟s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). Additional information required by the Tanzania Companies Act 2002 and the Banking and Financial Institution Act, 2006 was included where appropriate. The financial statements comprise statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and the notes. The measurement basis applied in the preparation of these financial statements is the historical cost basis, except where otherwise stated in the accounting policies below. The financial statements are presented in Tanzania shillings (TZS) and the amounts are rounded to the nearest thousand shillings except where otherwise indicated. The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Bank‟s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate and that the Bank‟s financial statements therefore present the financial position and results fairly.

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

2.2 Basis of preparation (Continued) The areas involving a higher degree of judgement, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

2.3 Changes in accounting policy and disclosures (i) New and amended standards and interpretations The new and amended standards and interpretations that became effective during the year did not have significant impact on the accounting policies, financial position or performance of the Bank. The nature of each amendment is described below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The amendment had no impact on the bank. Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. . Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, apply to an entity‟s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. The amendment had no impact on the bank. (ii) New standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Bank Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2017 reporting periods and have not been early adopted by the Bank. The Bank‟s assessment of the impact of these new standards and interpretations is set out below.


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 2. SUMMARY OF SIGNIFICA;NT ACCOUNTING POLICIES(Continued)

2.3 Changes in accounting policy and disclosures (Continued) IFRS 9 Financial Instruments IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement with effect from 1 January 2018. IFRS 9 includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. The impairment requirements will lead to significant changes in the accounting for financial instruments. The Bank will not restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed transitional disclosures in accordance with the amended requirements of IFRS 7 Financial Instruments: Disclosures. Any change in carrying amounts from the initial application of IFRS 9 will be recognised in equity. Based on analysis performed, the effects of the new classification and measurement requirements under IFRS 9 will not have a significant impact. Impairment IFRS 9 introduces a revised impairment model which requires entities to recognize expected credit losses based on unbiased forward-looking information. This replaces the existing IAS 39 incurred loss model which only recognizes impairment if there is objective evidence that a loss has already incurred and measures the loss based on the most probable outcome. The IFRS 9 impairment model will be applicable to all financial assets at amortized cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial guarantee contracts. This presents a change from the scope of the IAS 39 impairment model which excludes loan commitments and financial guarantee contracts (these were covered by IAS 37: Provisions, Contingent Liabilities and Contingent Assets). The measurement of expected loss will involve increased complexity and judgment including estimation of probabilities of default, loss given default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in credit risk. Exposures would be divided into 3 stages as follows:

• Stage 1: Exposures for which a significant increase in credit risk has not occurred since origination. For these exposures a 12 month expected credit loss will be recognized.

• Stage 2: Exposures for which a significant increase in credit risk has occurred since origination. The Bank will assess whether a significant increase in credit risk has occurred based on qualitative and quantitative drivers; as well as exposures that are more than 30 days past due contractual payment date. Lifetime expected credit losses will be recognized for these assets.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



2.3 Changes in accounting policy and disclosures (Continued) IFRS 9 Financial Instruments IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement with effect from 1 January 2018. IFRS 9 includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. The impairment requirements will lead to significant changes in the accounting for financial instruments. The Bank will not restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed transitional disclosures in accordance with the amended requirements of IFRS 7 Financial Instruments: Disclosures. Any change in carrying amounts from the initial application of IFRS 9 will be recognised in equity. Based on analysis performed, the effects of the new classification and measurement requirements under IFRS 9 will not have a significant impact. Impairment IFRS 9 introduces a revised impairment model which requires entities to recognize expected credit losses based on unbiased forward-looking information. This replaces the existing IAS 39 incurred loss model which only recognizes impairment if there is objective evidence that a loss has already incurred and measures the loss based on the most probable outcome. The IFRS 9 impairment model will be applicable to all financial assets at amortized cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial guarantee contracts. This presents a change from the scope of the IAS 39 impairment model which excludes loan commitments and financial guarantee contracts (these were covered by IAS 37: Provisions, Contingent Liabilities and Contingent Assets). The measurement of expected loss will involve increased complexity and judgment including estimation of probabilities of default, loss given default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in credit risk. Exposures would be divided into 3 stages as follows:

• Stage 1: Exposures for which a significant increase in credit risk has not occurred since origination. For these exposures a 12 month expected credit loss will be recognized.

• Stage 2: Exposures for which a significant increase in credit risk has occurred since origination. The Bank will assess whether a significant increase in credit risk has occurred based on qualitative and quantitative drivers; as well as exposures that are more than 30 days past due contractual payment date. Lifetime expected credit losses will be recognized for these assets.


2.3 Changes in accounting policy and disclosures (Continued) Impairment (Continued)

• Stage 3: Exposures which meet the definition of default. The Bank has aligned its definition of default with Regulatory Capital CRR Article 178, which considers exposures that are more than 90 days past due, forbearance, as well as indicators that an exposure is unlikely to pay. Lifetime expected credit losses will be recognized for these assets.

As Per IFRS 9 principles, the gross carrying amount of an exposure is the contractual amount owing from the counterparty; whereas the amortised cost reflects the expected cash flows discounted using the original effective interest rate. Hence the expected credit loss provision, which is the difference between the gross carrying amount and amortised cost, would reflect the expected cash shortfalls discounted by the original effective interest rate.

Consequently, the expected credit loss provision per IFRS 9 includes contractual interest in respect of stage 3 assets; where previously such interest was excluded from the gross carrying amount presented.

The revised impairment model is expected to have a material financial impact on the existing impairment provisions previously recognised in terms of the requirements of IAS 39, as well as increase volatility in the recognition of impairment losses going forward. It is estimated that the increase on IAS 39 impairment stock (including contractual interest not recognized per the principles above) will be in the region of 50% to 70% on a pre-tax basis.

The reasons for the change in impairment provisions are as follows: • The removal of the emergence period that was necessitated by the incurred loss

model of IAS 39. All stage 1 assets will carry a 12 month expected credit loss provision. This differs from IAS 39 where unidentified impairments were typically measured with an emergence period of between three to twelve months.

• The provisioning for lifetime expected credit losses on stage 2 assets; where some of these assets would not have attracted a lifetime expected credit loss measurement as per IAS 39.

• The inclusion of forecasted macroeconomic scenarios into the expectation of credit losses;

• The inclusion of expected credit losses on items that typically would not have been impaired under IAS 39, such as loan commitments.



2.3 Changes in accounting policy and disclosures (Continued) Classification and measurement IFRS 9 will require financial assets to be classified on the basis of two criteria: 1) The business model within which financial assets are managed, and 2) Their contractual cash flow characteristics (whether the cash flows represent solely payments of principal and interest). Financial assets will be measured at amortized cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest. Other financial assets are required to be measured at fair value through profit and loss if they are held for the purposes of trading, if their contractual cash flows do not meet the „solely payments of principal and interest' criterion, or if they are managed on a fair value basis and the Bank maximizes cash flows through sale. IFRS 9 allows an entity to irrevocably designate a financial asset as at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (that is, an accounting mismatch). An entity is permitted to make an irrevocable election for non-traded equity investments to be measured at fair value through other comprehensive income, in which case dividends are recognised in profit or loss, but gains or losses are not reclassified to profit or loss upon derecognition, and impairment is not recognised in profit or loss. The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at fair value through profit and loss. Gains and losses on such financial liabilities arising from changes in the Bank's own credit risk are presented in other comprehensive income rather than in profit and loss.



2.3 Changes in accounting policy and disclosures (Continued) Classification and measurement IFRS 9 will require financial assets to be classified on the basis of two criteria: 1) The business model within which financial assets are managed, and 2) Their contractual cash flow characteristics (whether the cash flows represent solely payments of principal and interest). Financial assets will be measured at amortized cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest. Other financial assets are required to be measured at fair value through profit and loss if they are held for the purposes of trading, if their contractual cash flows do not meet the „solely payments of principal and interest' criterion, or if they are managed on a fair value basis and the Bank maximizes cash flows through sale. IFRS 9 allows an entity to irrevocably designate a financial asset as at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (that is, an accounting mismatch). An entity is permitted to make an irrevocable election for non-traded equity investments to be measured at fair value through other comprehensive income, in which case dividends are recognised in profit or loss, but gains or losses are not reclassified to profit or loss upon derecognition, and impairment is not recognised in profit or loss. The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at fair value through profit and loss. Gains and losses on such financial liabilities arising from changes in the Bank's own credit risk are presented in other comprehensive income rather than in profit and loss.


2.3 Changes in accounting policy and disclosures (Continued)

IFRS 9 Financial Instruments (continued) An assessment of potential changes to financial assets has been conducted,

including an assessment of business models across various portfolios, and a review of contractual cash flow features for complex financial assets.

An explanation of these reclassifications is provided:

• Certain debt securities are held by the Bank in a separate portfolio to meet everyday liquidity needs. These were classified as available for sale under IAS 39.The Bank seeks to minimise the cost of managing those liquidity needs and therefore Treasury actively manages the return on the portfolio. That return consists of collecting contractual cash flows as well as gains and losses from the sale of financial assets. This investment strategy may result in sales activity. The Bank considers that under IFRS 9 these securities are held within a business model in which the objective is achieved by both collecting contractual cash flows and selling financial assets. These instruments have therefore been classified as measured at FVOCI under IFRS 9.

•

In October 2017, the IASB issued an amendment to IFRS 9 Prepayment Features with Negative Compensation. Under the current IFRS 9 requirements, the SPPI condition is not met if the lender has to make a settlement payment in the event of termination by the borrower (also referred to as early repayment gain). The amendment clarifies how a company would classify and measure a debt instrument if the borrower was permitted to prepay the instrument at an amount less than the unpaid principal and interest owed. Such a prepayment amount is often described as including 'negative compensation'. Under the amendments, the sign of the prepayment amount is not relevant. The calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of an early repayment gain. This amendment is effective on 1 January 2019 and is not expected to have a significant impact on the Bank. IFRS 16 Leases The scope of the new standard includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. The key features of the new standard are: The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions) in a similar way to finance leases under IAS 17. Lessees recognise a liability to pay rentals with a corresponding asset, and recognise interest expense and depreciation separately.



2.3 Changes in accounting policy and disclosures (Continued) IFRS 16 Leases (Continued) The new standard includes two recognition exemptions for lessees – leases of ‟low-value‟ assets (e.g., personal computer) and short-term leases (i.e., leases with a lease term of 12 months or less). Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee is required upon certain events. Lessor accounting is substantially the same as today‟s lessor accounting, using IAS 17‟s dual classification approach. The new standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. The new standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. The new standard‟s transition provisions permit certain reliefs. The new standard requires lessees and lessors to make more extensive disclosures than under IAS 17. The impact of the new standard is being assessed by the Bank. IFRS 17 Insurance Contracts IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. The main features of the new accounting model for insurance contracts are, as follows:

The measurement of the present value of future cash flows, incorporating an explicit risk adjustment, remeasured every reporting period (the fulfilment cash flows)

A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the fulfilment cash flows of a group of contracts, representing the unearned profit of the insurance contracts to be recognised in profit or loss over the service period (i.e., coverage period)

Certain changes in the expected present value of future cash flows are adjusted against the CSM and thereby recognised in profit or loss over the remaining contractual service period

The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice. The presentation of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period

Amounts that the policyholder will always receive, regardless of whether an insured event happens (non- distinct investment components) are not presented in the income statement, but are recognised directly on the balance sheet

Insurance services results (earned revenue less incurred claims) are presented separately from the insurance finance income or expense

Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts



2.3 Changes in accounting policy and disclosures (Continued) IFRS 16 Leases (Continued) The new standard includes two recognition exemptions for lessees – leases of ‟low-value‟ assets (e.g., personal computer) and short-term leases (i.e., leases with a lease term of 12 months or less). Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee is required upon certain events. Lessor accounting is substantially the same as today‟s lessor accounting, using IAS 17‟s dual classification approach. The new standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. The new standard permits a lessee to choose either a full retrospective or a modified retrospective transition approach. The new standard‟s transition provisions permit certain reliefs. The new standard requires lessees and lessors to make more extensive disclosures than under IAS 17. The impact of the new standard is being assessed by the Bank. IFRS 17 Insurance Contracts IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. The main features of the new accounting model for insurance contracts are, as follows:

The measurement of the present value of future cash flows, incorporating an explicit risk adjustment, remeasured every reporting period (the fulfilment cash flows)

A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the fulfilment cash flows of a group of contracts, representing the unearned profit of the insurance contracts to be recognised in profit or loss over the service period (i.e., coverage period)

Certain changes in the expected present value of future cash flows are adjusted against the CSM and thereby recognised in profit or loss over the remaining contractual service period

The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice. The presentation of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period

Amounts that the policyholder will always receive, regardless of whether an insured event happens (non- distinct investment components) are not presented in the income statement, but are recognised directly on the balance sheet

Insurance services results (earned revenue less incurred claims) are presented separately from the insurance finance income or expense

Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts


2.3 Changes in accounting policy and disclosures (Continued) IFRS 17 Insurance Contracts (Continued)

IFRS 17 is effective for reporting periods starting on or after 1 January 2021, with comparative figures required. Early application is permitted; provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17.

(ii) New standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Bank (continued) IFRS 15 Revenue from contracts with customers: The standard is effective on 1 January 2018. The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. A new five-step process must be applied before revenue can be recognised:

identify contracts with customers identify the separate performance obligation determine the transaction price of the contract allocate the transaction price to each of the separate performance obligations,

and Recognise the revenue as each performance obligation is satisfied.

Entities will have a choice of full retrospective application, or prospective application with additional disclosures. However, the Bank has no significant revenue generating contracts with customers that are not within the scope of IFRS 9. Other starndards, interpretations and amendments that are yet to be effective but will have no impact on the bank are listed below:

IFRIC Interpretation 22 Foreign Currency Transactions and Advance

Consideration (Effective 1 January 2018) IFRIC Interpretation 23 Uncertainty over Income Tax Treatments (Effective 1

January 2019): The Company currently has no uncertain tax positions. IFRS 2 Classification and Measurement of Share-based Payment Transactions –

Amendments to IFRS 2 (Effective for annual periods beginning on or after 1 January 2018).

IFRS 3 Business Combinations – Previously held interests in a joint operation (Effective from 1January 2019)

IFRS 11 Joint Arrangements - Previously held interests in a joint operation (Effective from 1January 2019)

IAS 12 Income Taxes – Income tax consequences of prepayments on financial instruments classified as equity (Effective from 1January 2019)

IAS 23 Borrowing Costs – Borrowing costs eligible for capitalisation (Effective from 1January 2019)




Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts -

Amendments to IFRS 4 Transfers of Investment Property – Amendments to IAS 40 (Effective for annual periods beginning on or after 1 January 2018).

IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (In December 2015, the IASB decided to defer the effective date of the amendments until such time as it has finalised any amendments that result from its research project on the equity method. Early application of the amendments is still permitted).

IAS 40 – Transfers of Investment Property (Effective from annual periods beginning on or after 1 January 2018)

IAS 28 – Amendments on long-term interests in associates and joint ventures( Effective for annual periods beginning on or after 1 January 2019)

IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters

IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment - by -investment choice

2.4 Interest income and expense Interest income and expenses are recognized in the statement of profit or loss and other comprehensive income for all interest bearing instruments on an accrual basis using the effective interest method, based on the actual purchase price. The effective interest rate method is a method of calculating the amortized cost of financial assets or a financial liability and of allocating the interest or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Interest on loans and advances is recognized in the statement of profit or loss on accrual basis. Once a financial asset or a group of similar financial assets have been written down as a result of impairment loss interest income is recognized using the rate of interest that was used to discount the future cash flows for the purpose of measuring the impairment loss.




Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts -

Amendments to IFRS 4 Transfers of Investment Property – Amendments to IAS 40 (Effective for annual periods beginning on or after 1 January 2018).

IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (In December 2015, the IASB decided to defer the effective date of the amendments until such time as it has finalised any amendments that result from its research project on the equity method. Early application of the amendments is still permitted).

IAS 40 – Transfers of Investment Property (Effective from annual periods beginning on or after 1 January 2018)

IAS 28 – Amendments on long-term interests in associates and joint ventures( Effective for annual periods beginning on or after 1 January 2019)

IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion of short-term exemptions for first-time adopters

IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment - by -investment choice

2.4 Interest income and expense Interest income and expenses are recognized in the statement of profit or loss and other comprehensive income for all interest bearing instruments on an accrual basis using the effective interest method, based on the actual purchase price. The effective interest rate method is a method of calculating the amortized cost of financial assets or a financial liability and of allocating the interest or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Interest on loans and advances is recognized in the statement of profit or loss on accrual basis. Once a financial asset or a group of similar financial assets have been written down as a result of impairment loss interest income is recognized using the rate of interest that was used to discount the future cash flows for the purpose of measuring the impairment loss.


2.5 Fees and commission income Fees and commissions are generally recognized on an accrual basis when the service has been provided or significant act has been performed. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognized as adjustment to the effective interest rate on the loan. Commission and fees arising from negotiating or participating in the negotiation of, a transaction for a third party -such as arrangement of the acquisition of shares or other securities or the purchase or sale of business are recognized on completion of the underlying transaction. 2.6 Foreign currency translations (i) Functional and presentation currency Items included in the Bank‟s financial statements are measured using the currency of the primary economic environment in which the entity operates, Tanzania Shillings (“the functional currency”). The financial statements are presented in Tanzania Shillings (TZS) rounded to the nearest thousand shilling, which is the bank`s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into Tanzania Shilling, the functional currency, using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currency are retranslated into the functional currency at the closing rate as at the reporting date. Non-monetary items measured at historical cost denominated in a foreign currency are translated with the exchange rate as at the date of initial recognition; non-monetary items in a foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Changes in the fair value of monetary assets denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security.



2.7 Financial assets Financial assets are any assets that is cash, a contractual right to receive cash or another financial asset from another financial institution, a contractual right to exchange financial instrument with another institution under conditions that are potentially favourable or equity instrument of another enterprise. The Bank classifies its financial assets in the following categories: - Financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its investments at initial recognition. i. Financial asset at fair value through profit or loss This category has two sub categories; financial asset held for trading and those designated at fair value through profit or loss at inception. Financial asset is classified in this category if acquired primarily for the purpose of selling in the short term or if so designated by management. Derivatives are also categorized as held for trading unless they are designated as hedges.

ii. Loans and receivables Loans and receivables are non- derivative financial assets with fixed or determinable payments that are not quoted on the stock exchange. They arise when the Bank advances money to borrowers, or provides services directly to a debtor with no intention of trading the receivables. Government securities and bonds are also included in these classifications. iii. Held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank‟s management has the positive intention and ability to hold to maturity. Where the Bank decides to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as available for sale. Held-to-maturity securities are carried at amortized cost using the effective interest method less impairment loss. Interest calculated using the effective interest method is recognized in profit or loss. iv. Available-for-sale Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Available-for-sale financial assets are subsequently carried at fair value based on amounts derived from cash flow models.

Gains and losses arising from changes in the fair value of available- for-sale financial assets are recognized other comprehensive income until the financial asset is derecognized or impaired at which time the cumulative gain or loss previously recognized in equity should be recognized in profit or loss. The fair values of quoted investments in active markets are based on current bid prices. Unlisted equity securities for which fair values cannot be measured reliably are recognized at cost less impairment loss. Dividends on available-for-sale equity instruments are recognized in the profit or loss when the Bank‟s right to receive payment is established.



2.7 Financial assets Financial assets are any assets that is cash, a contractual right to receive cash or another financial asset from another financial institution, a contractual right to exchange financial instrument with another institution under conditions that are potentially favourable or equity instrument of another enterprise. The Bank classifies its financial assets in the following categories: - Financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its investments at initial recognition. i. Financial asset at fair value through profit or loss This category has two sub categories; financial asset held for trading and those designated at fair value through profit or loss at inception. Financial asset is classified in this category if acquired primarily for the purpose of selling in the short term or if so designated by management. Derivatives are also categorized as held for trading unless they are designated as hedges.

ii. Loans and receivables Loans and receivables are non- derivative financial assets with fixed or determinable payments that are not quoted on the stock exchange. They arise when the Bank advances money to borrowers, or provides services directly to a debtor with no intention of trading the receivables. Government securities and bonds are also included in these classifications. iii. Held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank‟s management has the positive intention and ability to hold to maturity. Where the Bank decides to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as available for sale. Held-to-maturity securities are carried at amortized cost using the effective interest method less impairment loss. Interest calculated using the effective interest method is recognized in profit or loss. iv. Available-for-sale Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Available-for-sale financial assets are subsequently carried at fair value based on amounts derived from cash flow models.

Gains and losses arising from changes in the fair value of available- for-sale financial assets are recognized other comprehensive income until the financial asset is derecognized or impaired at which time the cumulative gain or loss previously recognized in equity should be recognized in profit or loss. The fair values of quoted investments in active markets are based on current bid prices. Unlisted equity securities for which fair values cannot be measured reliably are recognized at cost less impairment loss. Dividends on available-for-sale equity instruments are recognized in the profit or loss when the Bank‟s right to receive payment is established.


2.8 Recognition and initial measurement of financial assets Financial assets with the exception of loans and advances to customers, are initially recognised on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are transferred to the customers‟ account. All financial assets are measured initially at their fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. 2.9 Loans and provisions for loan impairment Loans originated by the Bank by providing money directly to the borrowers are categorized as originated loans and are stated at amortized cost less provision for impairment. A loss provision is established when there is doubt about the Bank‟s ability to recover all amounts due. The amount of the provision is the difference between the estimated recoverable amount and the carrying amount, but also takes into account the requirements of Management of Risk Assets Regulations, 2014 issued by the Bank of Tanzania. In the event that the provision required under the BOT Regulations exceeds that required by IFRS, the excess provision would be treated as a general banking provision and accounted for in reserves. 2.10 Financial liabilities Financial liabilities, with the exception of due to customers, are initially recognised on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument. The Bank recognises due to customer balances when funds reach the Bank. All financial liabilities are measured initially at their fair value plus transaction costs, except in the case of financial liabilities recorded at fair value through profit or loss. 2.11 Derecognition of financial assets and liabilities A financial asset is derecognised when the rights to receive cash flows from the asset have expired. The Bank also derecognises the assets if it has both transferred the asset, and the transfer qualifies for derecognition. The Bank has transferred the asset if, and only if, either: • The Bank has transferred its contractual rights to receive cash flows from the asset or • It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party. A transfer only qualifies for derecognition if either: • The Bank has transferred substantially all the risks and rewards of the asset or • The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset In relation to the above, the Bank considers the control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer.



2.11 Derecognition of financial assets and liabilities (Continued) When the Bank has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Bank‟s continuing involvement in it. In that case, the Bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay. Bank also derecognises a financial asset, in particular, a loan to customer when the terms and conditions have been renegotiated to the extent that it substantially became a new loan, with the difference recognised as an impairment in the income statement. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where 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 a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss. 2.12 Classes of financial instruments The Bank classifies the financial instruments into classes that reflect the nature of information and take into account the characteristics of those financial instruments. The classification made can be seen on the table below:

Item on balance sheet Financial assets Cash and cash equivalents Loans and receivables Loans and advances to banks Loans and receivables Loans and advances to customer Loans and receivables Placements in other banks Loans and receivables Other assets Loans and receivables Financial liabilities Deposits from banks Financial liabilities at amortized cost Deposits from customers Financial liabilities at amortised cost Other liabilities Financial liabilities at amortised cost

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.13 Impairment of financial assets The Bank assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:

Significant financial difficult of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principle payment; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions; Initiation of bankruptcy proceedings; Deterioration of the borrower‟s competitive position; and Deterioration in the value of collateral.

The estimated period between losses occurring and its identification is determined by management for each identified portfolio. In general, the periods used vary between three months and twelve months; in exceptional cases, longer periods are warranted.

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset‟s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit and loss account. When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor‟s credit rating), the previously recognized impairment loss is revised by adjusting the allowance account. The amount of the reversal is recognized in the profit and loss account in impairment charge for credit losses.



2.13 Impairment of financial assets The Bank assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:

Significant financial difficult of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principle payment; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions; Initiation of bankruptcy proceedings; Deterioration of the borrower‟s competitive position; and Deterioration in the value of collateral.

The estimated period between losses occurring and its identification is determined by management for each identified portfolio. In general, the periods used vary between three months and twelve months; in exceptional cases, longer periods are warranted.

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset‟s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit and loss account. When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor‟s credit rating), the previously recognized impairment loss is revised by adjusting the allowance account. The amount of the reversal is recognized in the profit and loss account in impairment charge for credit losses.



2.13 Impairment of financial assets (Continued) ii. Assets classified as available-for-sale The Bank assesses at each reporting date whether there is objective evidence that an investment is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. If any such evidence exists for available-for-sale financial assets, the cumulative loss -measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss - is removed from equity and recognized in the profit and loss account. Impairment losses recognized in the profit and loss account on equity instruments are not reversed through the profit and loss account; increase in fair value after impairment are recognised in other comprehensive income. In the case of debt instruments classified as available-for-sale, the Bank assesses individually whether there is objective evidence of impairment such as: Observable data regarding a decline in estimated future cash-flows and or a decline in underlying collateral impacting the Bank‟s ability to recover all cash flows The amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of interest and similar income. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to a credit event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement. iii. Renegotiated loans The Bank sometimes makes concessions or modifications to the original terms of loans as a response to the borrower‟s financial difficulties, rather than taking possession or to otherwise enforce collection of collateral. The Bank considers a loan forborne when such concessions or modifications are provided due to the borrower‟s present or expected financial difficulties and the Bank would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include defaults on covenants, significant arrears for 30 days or more in a three-month period, or concerns raised by the Credit Risk Department. Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms. It is the Bank‟s policy to monitor forborne loans to ensure that future payments continue to be likely to occur and that the Bank is not expecting to incur a loss if it were to discount future cash flows using the original EIR. If these procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired forborne asset until it is collected or written off.

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.14 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position if and only if there is there is a currently enforceable legal right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. 2.15 Impairment of non-financial assets The Bank assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Bank estimates the asset‟s recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The impairment test also can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. No non-financial assets were impaired.



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.14 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position if and only if there is there is a currently enforceable legal right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. 2.15 Impairment of non-financial assets The Bank assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Bank estimates the asset‟s recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The impairment test also can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. No non-financial assets were impaired.



2.16 Income tax Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to items recognized directly to equity or other comprehensive income. (i) Current tax Current income tax is the expected amount of income tax payable or receivable on the taxable profit income or loss for the year determined in accordance with the Tanzanian Income Tax Act and any adjustment to the tax payable or receivable in respect of the previous years. It is measured using tax rates enacted or substantially enacted at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (ii) Deferred tax Deferred income tax is provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities used for tax purposes and their carrying values for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss • In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future Deferred tax assets recognized for the unutilized tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax asset are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related benefit will be realized. Unrecognized deferred tax are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profit will be available against which they can be used. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank expects at the reporting date, to recover or settle the carrying amount of its assets and liabilities. The Bank only off-sets its deferred tax assets against liabilities when there is both a legal right to offset and it is the Bank‟s intention to settle on a net basis.


2.17 Provisions Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

2.18 Property and equipment

i. Recognition and measurement Items of property and equipment are stated at cost less any accumulated depreciation and less any accumulated impairment loss. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Cost includes expenditure that is directly attributable to the acquisition of the items The cost of self-constructed includes cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the initial estimate of costs of dismantling and removing the items and restoring the site on which they are located (as obligation arises) and capitalized borrowing costs, finance costs that may arise if credit price is greater than cash price.

ii. Subsequent costs 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 item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.



2.17 Provisions Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

2.18 Property and equipment

i. Recognition and measurement Items of property and equipment are stated at cost less any accumulated depreciation and less any accumulated impairment loss. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Cost includes expenditure that is directly attributable to the acquisition of the items The cost of self-constructed includes cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the initial estimate of costs of dismantling and removing the items and restoring the site on which they are located (as obligation arises) and capitalized borrowing costs, finance costs that may arise if credit price is greater than cash price.

ii. Subsequent costs 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 item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.



2.18 Property and equipment (Continued) iii. Depreciation Depreciation is recognised on a straight-line basis to write down the cost of property and equipment to their residual values over the estimated useful lives of the assets The principal rates to be used per annum for the purpose of depreciation shall be as follows: Assets Particulars Annual Rate (%) ATM and Generator 20 Motor vehicles 25 Office machines and equipment (including CCTV cameras) 25 Furniture and fittings 25 Computer equipment 33.3 Leasehold improvements 10 Depreciation charge starts when property and equipment is ready for use. Depreciation charge ceases when the property and equipment is disposed off or derecognized. Depreciation method, the asset‟s residual values and useful lives are reviewed and adjusted if appropriate, at each statement of financial position date. Changes in the expected useful life are accounted for by changing the amortisation period or methodology, as appropriate, and treated as changes in accounting estimates. In practice, the residual values of assets are insignificant and, therefore, immaterial in the calculation of the depreciable amount. Assets that are subject to amortization 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.

iv. Derecognition Property and equipment is derecognised on disposal or when no future economic benefits are expected from its use. The gain or loss on disposal is determined by comparing proceeds from the disposal with carrying amount of the item of property and equipment. Any gain or loss arising on derecognition of the asset are recognised net within other income in statement of profit or loss and other comprehensive in the year the asset is derecognised.

2.19 Leasehold improvements Leasehold improvements are stated at cost, less accumulated amortization and accumulated impairment in value. Leasehold improvements amortizations are calculated on straight line basis at annual rates estimated to write down the carrying values of the assets to their residual value over their expected useful lives.


2.20 Intangible assets - software costs An intangible asset is recognized only when its cost can be measured reliably and it‟s probable that the expected future economic benefits that are attributable to it will flow to the bank. Costs associated with maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated with the production or procurement of identifiable and unique software products controlled by the bank, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized on a straight line basis over the expected useful life of three years (at the rate of 33.3% per year). Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. 2.21 Employee benefits (i) Retirement benefit obligations The Bank has a statutory requirement to contribute to the pension fund preferred by employees, which is a defined contribution scheme. The Bank contributes 10% of the required 20% of gross emoluments to the scheme and the contributions are recognised as an expense in the period to which they relate. The remaining 10% is deducted from employees‟ emoluments. The Bank has no legal or constructive obligation to pay further contributions if pension fund does not hold sufficient assets to pay all employees the benefit relating to the employees service in the current and prior periods. (ii) Other emoluments Entitlements to annual leave are recognized when they accrue to employee. Outstanding days at year end are forfeited and therefore no provision is made for leave allowance. 2.22 Share capital Ordinary shares are classified as „share capital‟ in equity. Any premium received over and above the par value of the shares is classified as „share premium‟ in equity. Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.



2.20 Intangible assets - software costs An intangible asset is recognized only when its cost can be measured reliably and it‟s probable that the expected future economic benefits that are attributable to it will flow to the bank. Costs associated with maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated with the production or procurement of identifiable and unique software products controlled by the bank, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized on a straight line basis over the expected useful life of three years (at the rate of 33.3% per year). Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. 2.21 Employee benefits (i) Retirement benefit obligations The Bank has a statutory requirement to contribute to the pension fund preferred by employees, which is a defined contribution scheme. The Bank contributes 10% of the required 20% of gross emoluments to the scheme and the contributions are recognised as an expense in the period to which they relate. The remaining 10% is deducted from employees‟ emoluments. The Bank has no legal or constructive obligation to pay further contributions if pension fund does not hold sufficient assets to pay all employees the benefit relating to the employees service in the current and prior periods. (ii) Other emoluments Entitlements to annual leave are recognized when they accrue to employee. Outstanding days at year end are forfeited and therefore no provision is made for leave allowance. 2.22 Share capital Ordinary shares are classified as „share capital‟ in equity. Any premium received over and above the par value of the shares is classified as „share premium‟ in equity. Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.



2.23 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the statement of profit or loss and other comprehensive income on a straight-line basis over the period of the lease. The leases entered into by the bank are operating leases. The total payments made under operating leases are charged to other operating expenses in the statement of profit or loss and other comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset. 2.23.1 Bank as a lessee Leases that do not transfer to the Bank substantially all of the risks and benefits incidental to ownership of the leased items are operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. 2.23.2 Bank as a lessor Leases where the Bank does not transfer substantially all of the risk and benefits of ownership of the asset are classified as operating leases. Rental income is recorded as earned based on the contractual terms of the lease in other operating income. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. 2.24 Determination of fair value In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below: • Level 1 financial instruments −Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Bank has access to at the measurement date. The Bank considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date. • Level 2 financial instruments−Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrument‟s life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads. In addition, adjustments may be required for the condition or location of the asset or the extent to which it relates to items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire measurement, the Bank will classify the instruments as Level 3. • Level 3 financial instruments −Those that include one or more unobservable input that is significant to the measurement as whole.


2.25 Contingencies and commitments Transactions are classified as contingencies where the bank‟s obligations depend on uncertain future events. Items are classified as commitments where the bank commits itself to future transactions if the items will result in the acquisition of assets. i. Financial guarantees Financial guarantees are initially recognized in the financial statements at fair value on the date the financial guarantee was given. The fair value of a financial guarantee at the time of signature is zero because all guarantees are agreed at arm`s length and the value of premium agreed corresponds to the value of the guarantee obligation. ii. Acceptances and letters of credit Acceptances and letters of credit are accounted for as off the balance sheet transactions and disclosed as contingent liabilities. 2.26 Inventories Inventories are valued at the lower of cost and net realizable value. Cost is determined on a first in first out basis. Any obsolete items are provided for in full in the year they are detected. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. 2.27 Cash and cash equivalents For the purposes of statement of cash flows, cash and cash equivalents comprise of cash in hand (notes and coins on hand), highly liquid financial assets with original maturity of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair values and are used by the Bank in the management of its short-term commitments, and unrestricted balances held with the Bank of Tanzania. Cash and cash equivalents excludes the cash reserve requirement held with Bank of Tanzania. 2.28 Dividends The dividend distribution to the Bank‟s shareholders shall be recognized as a liability in the Bank‟s financial statements in the period in which the dividends are approved by Bank‟s shareholders. Proposed dividends are not recognized until ratified at the Annual General Meeting (AGM). Payment of dividend is subject to withholding tax at the enacted rate of 5% (2016: 5%). 2.29 Earnings per share The Bank presents basic and diluted Earnings Per Share (EPS) in its financial statements. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Bank by the weighted average number of shares outstanding during the year. Diluted EPS is calculated by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares outstanding during the year for the effect of all dilutive potential ordinary shares.



2.25 Contingencies and commitments Transactions are classified as contingencies where the bank‟s obligations depend on uncertain future events. Items are classified as commitments where the bank commits itself to future transactions if the items will result in the acquisition of assets. i. Financial guarantees Financial guarantees are initially recognized in the financial statements at fair value on the date the financial guarantee was given. The fair value of a financial guarantee at the time of signature is zero because all guarantees are agreed at arm`s length and the value of premium agreed corresponds to the value of the guarantee obligation. ii. Acceptances and letters of credit Acceptances and letters of credit are accounted for as off the balance sheet transactions and disclosed as contingent liabilities. 2.26 Inventories Inventories are valued at the lower of cost and net realizable value. Cost is determined on a first in first out basis. Any obsolete items are provided for in full in the year they are detected. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. 2.27 Cash and cash equivalents For the purposes of statement of cash flows, cash and cash equivalents comprise of cash in hand (notes and coins on hand), highly liquid financial assets with original maturity of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair values and are used by the Bank in the management of its short-term commitments, and unrestricted balances held with the Bank of Tanzania. Cash and cash equivalents excludes the cash reserve requirement held with Bank of Tanzania. 2.28 Dividends The dividend distribution to the Bank‟s shareholders shall be recognized as a liability in the Bank‟s financial statements in the period in which the dividends are approved by Bank‟s shareholders. Proposed dividends are not recognized until ratified at the Annual General Meeting (AGM). Payment of dividend is subject to withholding tax at the enacted rate of 5% (2016: 5%). 2.29 Earnings per share The Bank presents basic and diluted Earnings Per Share (EPS) in its financial statements. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Bank by the weighted average number of shares outstanding during the year. Diluted EPS is calculated by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares outstanding during the year for the effect of all dilutive potential ordinary shares.


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next period. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank‟s accounting policies. 3.1 Impairment losses on loans and advances to customers and placement with banks The Bank reviews its loan portfolio on quarterly basis to assess impairment. In determining whether an impairment loss should be recorded in the statement of profit or loss and other comprehensive income, the Bank makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. Judgments may also change with time as new information becomes available. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or economic conditions that correlate with defaults on assets in the Bank. The nature and carrying values of the loans and advances are disclosed in the Note 8 to the financial statements. The Bank has interbank placement of Tzs.500M with Covenant Bank which its licence was revoked on 4 January 2018 by Bank of Tanzania (BoT) due to capital deficit. Management is waiting liquidation which is being carried out by Deposit Insurance Board. Management has made a provision of TZS 299,780,821 to the financial statements as the remaining balance expected to be recovered from liquidation. 3.2 Fair value of financial instruments The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate assumptions. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of those that sourced them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as credit risk (both own credit Risk and counterparty risk), volatilities and correlations require management to make estimates. 3.3 Held to maturity investments The Bank follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the Bank evaluates its intention and ability to hold such investments to maturity. If the Bank fails to keep these investments to maturity other than for the specific circumstances - for example, selling an insignificant amount close to maturity - it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value not amortised cost.


3.4 Income taxes Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 3.5 Deferred tax assets The recognition of a deferred tax asset relies on an assessment of the probability and sufficiency of future taxable profits, future reversals of existing taxable temporary differences and ongoing tax planning and strategies. The deferred tax asset recognized on the Bank‟s statement of financial position in year 2017 amounted to TZS 582,962,000 (2016: TZS 260,134,462). The judgments take into consideration the effect of both positive and negative evidence, including historical financial performance, projections of future taxable income, and future reversals of existing taxable temporary differences. 3.6 Property, equipment and intangible assets Critical estimates are made by the directors in determining the useful lives of property, equipment and intangible assets as well as their residual values. The Bank reviews the estimated useful lives of property, equipment and useful lives at the end of each reporting period. 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. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within `Other (losses)/gains - net' in profit or loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.

4. FINANCIAL RISK MANAGEMENT The Bank`s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are inevitable consequence of being in business. The Bank‟s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Bank‟s financial performance. The Bank`s risk management policies are designed to identify and analyse these risks, set appropriate risk limits and controls and to monitor the risks and adherence to limits by means of reliable and up to date information systems. The Bank regularly reviews its risk management policies and systems to reflect the changes in markets, products and emerging best practices. The Board of Directors has overall responsibility for the establishment and oversight of the Bank‟s risk management framework. As part of its governance structure, the Board of Directors has embedded a comprehensive risk management framework for identifying, measuring, controlling (setting risk mitigations) and monitoring of the Bank‟s risks. The policies are integrated in the overall management information systems of the Bank and supplemented by a management reporting structure. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered, and emerging best practice.



3.4 Income taxes Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 3.5 Deferred tax assets The recognition of a deferred tax asset relies on an assessment of the probability and sufficiency of future taxable profits, future reversals of existing taxable temporary differences and ongoing tax planning and strategies. The deferred tax asset recognized on the Bank‟s statement of financial position in year 2017 amounted to TZS 582,962,000 (2016: TZS 260,134,462). The judgments take into consideration the effect of both positive and negative evidence, including historical financial performance, projections of future taxable income, and future reversals of existing taxable temporary differences. 3.6 Property, equipment and intangible assets Critical estimates are made by the directors in determining the useful lives of property, equipment and intangible assets as well as their residual values. The Bank reviews the estimated useful lives of property, equipment and useful lives at the end of each reporting period. 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. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within `Other (losses)/gains - net' in profit or loss. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.

4. FINANCIAL RISK MANAGEMENT The Bank`s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are inevitable consequence of being in business. The Bank‟s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Bank‟s financial performance. The Bank`s risk management policies are designed to identify and analyse these risks, set appropriate risk limits and controls and to monitor the risks and adherence to limits by means of reliable and up to date information systems. The Bank regularly reviews its risk management policies and systems to reflect the changes in markets, products and emerging best practices. The Board of Directors has overall responsibility for the establishment and oversight of the Bank‟s risk management framework. As part of its governance structure, the Board of Directors has embedded a comprehensive risk management framework for identifying, measuring, controlling (setting risk mitigations) and monitoring of the Bank‟s risks. The policies are integrated in the overall management information systems of the Bank and supplemented by a management reporting structure. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered, and emerging best practice.


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 4. FINANCIAL RISK MANAGEMENT (Continued)

The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees / stakeholders understand their roles and obligations. The Board‟s Credit Committee, and Audit Committee are responsible for monitoring compliance with the Bank‟s risk management policies and procedures, and review of the adequacy of risk management framework in relation to the risks faced by the bank. These committees are assisted in these functions by various management committees which undertake both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Board. The most important type of risks are: • Credit risk • Liquidity risk • Market risk The notes below provide detailed information on each of the above risks and the Bank‟s objectives, policies and processes for measuring and managing risk, and the Bank`s management of capital. 4.1 Credit risk The Bank faces on exposure to credit risk, which is the risk that the counterparty will cause a financial loss to the Bank by failing to discharge an obligation. Credit risk is the most important risk for the Bank`s business. Management therefore, carefully manages its exposure to the credit risk. Credit exposures arise principally in lending activities that lead to loans and advances, and investment activities that bring debt securities and other bills into the Bank`s asset portfolio. There is also credit risk in off-balance sheet financial instruments, such as loans commitments. The credit risk management and control are centralized in the credit risk management team of the Bank and reported to the Board of Directors and heads of department regularly. 4.2.1 Credit risk measures

a. Loans and advances In measuring credit risk of loans and advances to customers and banks at a counterparty level, the Bank reflects three components: (i) the „probability of default‟ by the client or counterparty on its contractual obligations; (ii) current exposures to the counterparty and its likely future development, from which the Bank derive the „exposure at default‟; and (iii) the likely recovery ratio on the defaulted obligations (the „loss given default‟). These credit risk measurements, which reflect expected loss (the „expected loss model‟), required by Basel Committee on Banking Regulations and the supervision of Banks (the Basel Committee) and are embedded in the Bank‟s daily operational management. The operational measurements can be contrasted with impairment allowances required under IAS 39, which are based on losses that have been incurred at the balance sheet date (the „incurred loss model‟) rather than expected losses. The Bank assesses the probability of default of individual counterparties using internal rating tools tailored to various categories of counterparty in line with the Bank of Tanzania guidelines. For regulatory purposes and for internal monitoring of the quality of the loan portfolio, all customers are segmented into five rating classes as shown below:


Traditional loans (loans other than microfinance loans) 4.2.1 Credit risk measures (Continued)

a. Loans and advances (Continued)

Traditional Past due Provisioning rate Classification (Days) Current 0-30 1% Especially mentioned 31-90 3% Substandard 91-180 20% Doubtful 181-360 50% Loss 361- 100%

b. Debt securities Debt securities are Treasury Bills issued by the Government of the United Republic of Tanzania. These investments are internally graded as current. Exposure at default is based on the amounts the Bank expects to be owed at the time of default. For example, for a loan it is the face value. For a commitment, the Bank includes any amount already drawn plus the further amount that may have been drawn by the time of default, should it occur. 4.1.2 Risk limit control and mitigation policies The Bank manages limits and controls concentrations of credit risk wherever they are identified, in particular, to individual counterparties and groups, and to industries. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. The exposure to any one borrower including banks is further restricted by sub-limits covering on and off balance sheet exposures. Actual exposures against limits are monitored daily. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specific control and mitigation measures are outlined below.

Microfinance Loans Past due Provisioning Classification (Days) rate Current 0-5 1% Especially mentioned 6-30 5% Substandard 31-60 25% Doubtful 61-90 50% Loss 91- 100%



Traditional loans (loans other than microfinance loans) 4.2.1 Credit risk measures (Continued)

a. Loans and advances (Continued)

Traditional Past due Provisioning rate Classification (Days) Current 0-30 1% Especially mentioned 31-90 3% Substandard 91-180 20% Doubtful 181-360 50% Loss 361- 100%

b. Debt securities Debt securities are Treasury Bills issued by the Government of the United Republic of Tanzania. These investments are internally graded as current. Exposure at default is based on the amounts the Bank expects to be owed at the time of default. For example, for a loan it is the face value. For a commitment, the Bank includes any amount already drawn plus the further amount that may have been drawn by the time of default, should it occur. 4.1.2 Risk limit control and mitigation policies The Bank manages limits and controls concentrations of credit risk wherever they are identified, in particular, to individual counterparties and groups, and to industries. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. The exposure to any one borrower including banks is further restricted by sub-limits covering on and off balance sheet exposures. Actual exposures against limits are monitored daily. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specific control and mitigation measures are outlined below.

Microfinance Loans Past due Provisioning Classification (Days) rate Current 0-5 1% Especially mentioned 6-30 5% Substandard 31-60 25% Doubtful 61-90 50% Loss 91- 100%



i. Credit related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit carry the same credit risks as loans. Documentary and commercial letters of credit - which are written Undertakings by the Bank up to a stipulated amount under specific terms and conditions - are collateralized by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan. Commitments to extend credit represent unused portions of authorization to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. 4.1.2 Risk limit control and mitigation policies i. Credit related commitments However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Bank monitors the term to maturity of credit commitments because longer term commitments generally have a greater degree of credit risk than shorter-term commitments. ii. Collateral The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advanced, which is common practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are:

Mortgages over residential properties; Charges over business assets such as premises, inventory and accounts receivable; Charges over financial instruments such as debt securities and equities.

Corporate, small and medium enterprise and micro enterprise loans are generally secured while salaried workers loans are unsecured. In order to minimize the credit loss the Bank will seek additional collateral from the counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances. iii. Lending limits (for derivatives and settlement risk) The Bank maintain strict control limits on net derivative positions (i.e. difference between purchases and sales contracts), by both amount and term. At any one time, the amount subject to credit risk is limited to the current fair value of instruments that are favourable to the Bank (i.e. assets where their fair value is positive), which in relation to derivatives is only a small fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments, except where the Bank requires margin deposits from counterparties. Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a corresponding receipt in cash, securities or equities. Daily settlement limits have been established for each counterparty to cover the aggregate of all settlement risk arising from the Bank‟s market transactions on any single day.


4.1.3 Impairment and provisioning policies Impairment provisions are recognized for the financial reporting purposes only for losses that have been incurred at the end of the reporting period based on objective evidence on impairment. 4.1.2 Risk limit control and mitigation policies 2017 2016 Categories Loans and

advances to customers

Impairment provision

Loans and advances to

customers Impairment

provision TZS'000 TZS'000 TZS'000 TZS'000

Solidarity Group Loan 1,523,825 52,900 1,635,899 36,220

Micro Enterprise Loan

1,532,450 251,273 2,067,496 172,494

Small Medium Enterprise Loan

15,930,096 714,146 8,509,570 497,133

Salary Workers Loans

9,922,615 66,125 2,129,392 44,540

Other loans 8,510,924 238,048 11,504,227 182,857 37,419,910 1,322,492 25,846,584 933,244

In assessing the level of impairment, management determines whether objective evidence of impairment exists under IAS 39, based on the criteria detailed in Note 2.13. The Bank‟s policy requires the review of individual financial assets that are above materiality thresholds at least annually or more regularly when individual circumstances require. Impairment allowances on individually assessed accounts are determined by an evaluation of the incurred loss at statement of financial position date on a case-by-case basis, and are applied to all individually significant accounts. The assessment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts for that individual account. The regulatory provision is derived from each of the five rating classes as shown below: 2017 2016 Categories Loans and

advances to

customers



customers


TZS'000 % TZS'000 % Current 31,039,567 0 22,750,111 0 ESM 4,613,951 8 2,163,098 0.97 Sub-standard 543,433 24 229,284 21.99 Doubtful Loss 508,653 58 460,348 49.36 Loss 714,306 100 243,743 27.98 37,419,910 25,846,584



4.1.3 Impairment and provisioning policies Impairment provisions are recognized for the financial reporting purposes only for losses that have been incurred at the end of the reporting period based on objective evidence on impairment. 4.1.2 Risk limit control and mitigation policies 2017 2016 Categories Loans and




customers Impairment

provision TZS'000 TZS'000 TZS'000 TZS'000

Solidarity Group Loan 1,523,825 52,900 1,635,899 36,220

Micro Enterprise Loan

1,532,450 251,273 2,067,496 172,494

Small Medium Enterprise Loan

15,930,096 714,146 8,509,570 497,133

Salary Workers Loans

9,922,615 66,125 2,129,392 44,540

Other loans 8,510,924 238,048 11,504,227 182,857 37,419,910 1,322,492 25,846,584 933,244

In assessing the level of impairment, management determines whether objective evidence of impairment exists under IAS 39, based on the criteria detailed in Note 2.13. The Bank‟s policy requires the review of individual financial assets that are above materiality thresholds at least annually or more regularly when individual circumstances require. Impairment allowances on individually assessed accounts are determined by an evaluation of the incurred loss at statement of financial position date on a case-by-case basis, and are applied to all individually significant accounts. The assessment normally encompasses collateral held (including re-confirmation of its enforceability) and the anticipated receipts for that individual account. The regulatory provision is derived from each of the five rating classes as shown below: 2017 2016 Categories Loans and

advances to

customers



customers


TZS'000 % TZS'000 % Current 31,039,567 0 22,750,111 0 ESM 4,613,951 8 2,163,098 0.97 Sub-standard 543,433 24 229,284 21.99 Doubtful Loss 508,653 58 460,348 49.36 Loss 714,306 100 243,743 27.98 37,419,910 25,846,584



4.1.4 Maximum exposure to credit risk before collateral held or other credit enhancements Financial instruments whose carrying amounts represent the maximum exposure to credit risk without taking account of any collateral held or other credit enhancements has been shown below:

2017

2016

Credit exposure on balance sheet items

TZS'000 % TZS'000 % Cash and bank with bank of Tanzania

3,406,529

5.67

4,375,051

11.49

Placements and balance with other banks

20,307,663

33.85

8,777,313

23.06

Government securities 188,610 0.32 - - Loans and advances to customers

36,097,418

60.16

24,913,340

65.45

60,000,220 100.00 38,065,704 100.00 Off balance sheet items Guarantees 608,196 100 198,273 100

*Other assets (excludes prepayments, stock as they are not financial assets) The total maximum exposure for the group is derived from loan and advances to customers at 57.4% (2016:62.62%). The directors are confident in the ability to continue to control and sustain minimal exposure of credit risk to the Bank resulting from the loan and advances portfolio as corporate loans which represents the greatest group in the portfolio are backed by collaterals. 4.1.5 Loans and advances Loans and advances are summarized as follows:

2017 2016

Loans and



customers TZS`000 TZS`000 Neither past due nor impaired 29,542,771 21,528,331 Past due but not impaired 1,496,796 1,045,529 Impaired 6,380,343 3,272,724 Gross 37,419,910 25,846,584 Less: Allowance for impairment (Note 8) (1,322,492) (933,244) Net 36,097,418 24,913,340 Portfolio allowance 39,675 25,675 Individually impaired 1,282,817 907,569

1,322,492 933,244


4.1.5 Loans and advances (Continued) The total impairment provision for loans and advances is TZS.1, 322, 492, 412. (2016: TZS 933,243,810). This amount represents individually impaired loans. Further information of the impairment allowance for loans and advances to customers is provided in Note 8. During the year ended 31 December 2017, the Bank‟s total loans and advances increased by 45% (2016: 42%) as a result of the expansion of the lending business. When entering into new markets or new industries, the Bank focused more on the business with small and medium corporate enterprises with good performance records or retail customers providing sufficient collateral in order to contain the level of delinquency. a) Loans and advances neither past due nor impaired The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal system adopted by the Bank. Loans and advances that were neither past due no impaired can be analysed as follows:

2017 2016 TZS`000 TZS`000

Solidarity Group Loan 1,105,050 694,987 Small Medium Enterprises Loans 9,010,115 6,923,186 Salary Workers Loans 6,845,778 3,505,768 Personal Staff Loan 1,373,190 914,746 Micro Enterprise 819,403 322,277 Other loans 10,389,235 9,167,367

29,542,771 21,528,331

Amounts due from banks 20,307,663 8,777,313 All of the loans and advances that were neither past due nor impaired fall under the top grade of the internal rating system known as current. Placements and balances with other banks include balances and placements with local banks. The local banks are highly rated banks nationally. b) Loans and advances past due but not impaired The loans and advances less than 30 days past due are not usually considered impaired unless other information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past due but not impaired are as follows:

2017 2016 TZS`000 TZS`000

Solidarity Group Loan 90,400 18,462 Small Medium Enterprises Loans 759,550 512,466 Salary Workers Loans 587,423 258,270 Personal Staff Loan - 34,535 Micro Enterprise 59,423 - Other loans - 221,796 1,496,796 1,045,529



4.1.5 Loans and advances (Continued) The total impairment provision for loans and advances is TZS.1, 322, 492, 412. (2016: TZS 933,243,810). This amount represents individually impaired loans. Further information of the impairment allowance for loans and advances to customers is provided in Note 8. During the year ended 31 December 2017, the Bank‟s total loans and advances increased by 45% (2016: 42%) as a result of the expansion of the lending business. When entering into new markets or new industries, the Bank focused more on the business with small and medium corporate enterprises with good performance records or retail customers providing sufficient collateral in order to contain the level of delinquency. a) Loans and advances neither past due nor impaired The credit quality of the portfolio of loans and advances that were neither past due nor impaired can be assessed by reference to the internal system adopted by the Bank. Loans and advances that were neither past due no impaired can be analysed as follows:

2017 2016 TZS`000 TZS`000

Solidarity Group Loan 1,105,050 694,987 Small Medium Enterprises Loans 9,010,115 6,923,186 Salary Workers Loans 6,845,778 3,505,768 Personal Staff Loan 1,373,190 914,746 Micro Enterprise 819,403 322,277 Other loans 10,389,235 9,167,367

29,542,771 21,528,331

Amounts due from banks 20,307,663 8,777,313 All of the loans and advances that were neither past due nor impaired fall under the top grade of the internal rating system known as current. Placements and balances with other banks include balances and placements with local banks. The local banks are highly rated banks nationally. b) Loans and advances past due but not impaired The loans and advances less than 30 days past due are not usually considered impaired unless other information is available to indicate the contrary. Gross amount of loans and advances by class to customers that were past due but not impaired are as follows:

2017 2016 TZS`000 TZS`000

Solidarity Group Loan 90,400 18,462 Small Medium Enterprises Loans 759,550 512,466 Salary Workers Loans 587,423 258,270 Personal Staff Loan - 34,535 Micro Enterprise 59,423 - Other loans - 221,796 1,496,796 1,045,529



4.1.5 Loans and advances (Continued) c) Loans and advances individually impaired The breakdown of the gross amount of individually impaired loans and advances by class is as follows:

2017 2016 TZS`000 TZS`000

Solidarity Group Loan 337,000 45,004 Small Medium Enterprises Loans 1,679,338 987,617 Salary Workers Loans 968,667 699,203 Personal Staff Loan 645,000 1,281,905 Micro Enterprise 70,998 14,862 Other loans 2,679,340 244,133 6,380,343 3,272,724

d) Amounts due from banks The total gross amount of impaired amounts from banks as at 31 December 2017 was Nil (2016: Nil). No collateral is held by the Bank, and no impairment provision has been provided against the gross amount. 4.1.6 Debt securities The only investment securities held by the Bank is the Treasury Bills issued by the Government. At the end of the reporting period, these investments were not impaired. There are no credit ratings for these investments. 4.1.7 Repossessed collateral During the year, the bank did not obtain any asset by taking possession of collateral held as security. Repossessed properties are usually sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness. 4.1.8 Concentration of loans and advances Industry sectors The following table breaks down the Bank‟s main credit exposure at their gross carrying amounts, as categorized by the industry sectors of its counterparties:


4.1.8 Concentration of loans and advances (Continued)

4.2 Market risk The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate and currency, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, and foreign exchange rates. The Bank separates exposures to market risk into either trading or non-trading portfolios. The market risks arising from trading and non-trading activities are concentrated in the Bank‟s treasury department and monitored regularly. Trading portfolios include those positions arising from market-making transactions where the Bank acts as principal with clients or with the market. Non-trading portfolios primarily arise from the interest rate management of the Bank‟s retail and corporate banking assets and liabilities. a. Market risk measurement techniques The objective of market risk measurement is to manage and control market risk exposures within acceptable limits while optimizing the return on risk. The Bank Finance department is responsible for the development of detailed risk management policies while Treasury is responsible for day-to-day implementation of those policies. The Bank applies stress testing analysis in measuring exposure to market risk for the purpose of managing and controlling market risk exposures within acceptable limits while optimizing the return on investment.

2017 2016 Required Actual Required Actual

Sector Agriculture, fishing, forestry and Animal Keeping

6% 5% 8% 7%

Finance, Insurance and Business Services

1% 1% 1% 1%

Financial Services, Cooperatives and Associations(SACCOS, Women Groups,)

0% 0% 2% 1%

Manufacturing 0% 0% 0% 0% Real Estate and Construction 12% 13% 10% 13% Transport and communication 1% 1% 4% 3% Trade and commerce 42% 38% 40% 37% Tourism, hotel and restaurants 2% 3% 2% 1% Personal including employee loans 18% 18% 18% 19% Education 8% 10% 4% 5% Others 10% 11% 11% 13% Total 100% 100% 100% 100%



4.1.8 Concentration of loans and advances (Continued)

4.2 Market risk The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate and currency, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, and foreign exchange rates. The Bank separates exposures to market risk into either trading or non-trading portfolios. The market risks arising from trading and non-trading activities are concentrated in the Bank‟s treasury department and monitored regularly. Trading portfolios include those positions arising from market-making transactions where the Bank acts as principal with clients or with the market. Non-trading portfolios primarily arise from the interest rate management of the Bank‟s retail and corporate banking assets and liabilities. a. Market risk measurement techniques The objective of market risk measurement is to manage and control market risk exposures within acceptable limits while optimizing the return on risk. The Bank Finance department is responsible for the development of detailed risk management policies while Treasury is responsible for day-to-day implementation of those policies. The Bank applies stress testing analysis in measuring exposure to market risk for the purpose of managing and controlling market risk exposures within acceptable limits while optimizing the return on investment.

2017 2016 Required Actual Required Actual

Sector Agriculture, fishing, forestry and Animal Keeping

6% 5% 8% 7%

Finance, Insurance and Business Services

1% 1% 1% 1%

Financial Services, Cooperatives and Associations(SACCOS, Women Groups,)

0% 0% 2% 1%

Manufacturing 0% 0% 0% 0% Real Estate and Construction 12% 13% 10% 13% Transport and communication 1% 1% 4% 3% Trade and commerce 42% 38% 40% 37% Tourism, hotel and restaurants 2% 3% 2% 1% Personal including employee loans 18% 18% 18% 19% Education 8% 10% 4% 5% Others 10% 11% 11% 13% Total 100% 100% 100% 100%



4.2 Market risk (Continued) b. Stress tests Stress tests provide an indication of the potential size of losses that could arise in extreme or worst case conditions. The Bank applies risk factor stress testing, where stress movements are applied to each risk category. The Bank carries out stress testing quarterly to determine whether it has enough capital to withstand adverse developments. This is for the purpose of alerting the Bank‟s Management to unfavourable unexpected outcomes related to various risks and provides an indication of how much capital might be needed to absorb losses should large shocks occur. The results are meant to indicate weak spots in the risks tested at an early stage and to guide preventative actions by the Bank. Stress testing is done to supplement the Bank‟s other risk management approaches and measures. 4.2.1 Foreign exchange risk The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. ALCO sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are monitored daily. The table below summarizes that Bank`s exposure to foreign currency exchange rate risk at 31 December 2017. Included in the table are the Bank`s financial instruments at carrying amounts, categorized by currency (all amounts expressed in thousands of Tanzanian Shillings). The following table shows the concentration of currency risk on and off the balance sheet financial instruments:

USD EUR Others Total TZS’ 000 TZS’000 TZS‘000 TZS ‘000 Assets Cash and balances with Bank of Tanzania 418,350 73,703 13,991 506,044

Balances with other banks 13,582,250 - - 13,582,250 Loans and advances to customers - - - -

Inventories - - 55,319 55,319 Other assets 113 - - 113 Total financial assets 14,000,713 73,703 69,310 14,143,726 Liabilities Deposits from customers 2,408,326 16,392 11,492 2,436,210 Deposits from banks 4,490,000 - - 4,490,000 Other liabilities 898 - - 898 Total financial liabilities 6,899,224 16,392 11,492 6,927,108 Net on-balance sheet position 7,101,489 57,311 57,818 7,216,618


4.2 Market risk (Continued) 4.2.1 Foreign exchange risk (Continued) TZS USD EUR Others Total TZS’000 TZS’ 000 TZS’000 TZS‘000 TZS ‘000 Assets Cash and balances with Bank of Tanzania

661,163

64,058

14,064

739,285 Balances with other banks 3,188,151 278,323 - 3,466,474 Other assets 41,324 - - 41,324 Total financial assets 3,890,638 342,381 14,064 4,247,083 Liabilities Deposits from customers 3,302,071 81,652 12,193 3,395,916 Other liabilities 2,991 - - 2,991 Total financial liabilities 3,305,062 81,652 12,193 3,398,907 Net on-balance sheet position 585,576 260,729 1,871 848,176

Foreign exchange sensitivity analysis At December 2017, if the Tanzania Shilling (TZS) had weakened /strengthened by 10%(2016:10%) against US dollar, with all other variables held constant, Bank`s post tax profit for the year would have been TZS 710,148,900 (2016: TZS 58,975,000) Higher/lower mainly as a result of foreign exchange losses on transaction of US Dollar denominated cash and balances with the Bank of Tanzania, placements and balances with other banks and customers and deposits from customers and other banks. 4.2.2 Price risk The Bank is not exposed to equity securities price risk as it currently has no investment in listed shares. 4.2.3 Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce profit in the event that unexpected movements arise. The Bank‟s Asset and Liability Committee (ALCO) sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored regularly by the Bank.



4.2 Market risk (Continued) 4.2.1 Foreign exchange risk (Continued) TZS USD EUR Others Total TZS’000 TZS’ 000 TZS’000 TZS‘000 TZS ‘000 Assets Cash and balances with Bank of Tanzania

661,163

64,058

14,064

739,285 Balances with other banks 3,188,151 278,323 - 3,466,474 Other assets 41,324 - - 41,324 Total financial assets 3,890,638 342,381 14,064 4,247,083 Liabilities Deposits from customers 3,302,071 81,652 12,193 3,395,916 Other liabilities 2,991 - - 2,991 Total financial liabilities 3,305,062 81,652 12,193 3,398,907 Net on-balance sheet position 585,576 260,729 1,871 848,176

Foreign exchange sensitivity analysis At December 2017, if the Tanzania Shilling (TZS) had weakened /strengthened by 10%(2016:10%) against US dollar, with all other variables held constant, Bank`s post tax profit for the year would have been TZS 710,148,900 (2016: TZS 58,975,000) Higher/lower mainly as a result of foreign exchange losses on transaction of US Dollar denominated cash and balances with the Bank of Tanzania, placements and balances with other banks and customers and deposits from customers and other banks. 4.2.2 Price risk The Bank is not exposed to equity securities price risk as it currently has no investment in listed shares. 4.2.3 Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce profit in the event that unexpected movements arise. The Bank‟s Asset and Liability Committee (ALCO) sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored regularly by the Bank.

LOREM IPSUM“We are accoutable for our own action and decisions”

ACCOUNTABILITY:

CARING FORCOMMUNITY:

We encourage our employees to be

innovative

EMPOWERMENT:

“We create new ways of life to our customers”

INNOVATION:

“We act with honesty and honor without

compromising the truth”

INTEGRITY:

“We are responsive to our community

in which we operate”

“We value diversity and unique contributions”

RESPECT FOR THE INDIVIDUAL:

PRODUCT FEATURES


Maendeleo Junior Account

Designed for children within the age group 0-18 years

Minimum account opening balance Tsh 10,000 or USD. 10

One bankers cheques at no cost cost for each school term

Free statements – monthly , quarterly

No Monthly Maintenance fee

Junior Maendeleo account card with photograph of child and parent


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4.3 Fair value of financial assets and liabilities 4.3.1 Financial instruments not measured at fair value The fair value of financial assets and liabilities not measured at fair value approximate carrying amounts. Loans and advances to customers Loans and advances are net of charges for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value. Investment securities The fair value for held-to-maturity assets is based on market prices. Where this information is not available, fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics. Deposits due to customers The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. The estimated fair value of interest-bearing deposits not quoted in an active market is based on discounted cash flows using interest rates for new debts with similar remaining maturity. The carrying amount is a reasonable approximation of fair value. Off-balance sheet financial instruments The estimated fair values of the off-balance sheet financial instruments are based on market prices for similar facilities. When this information is not available, fair value is estimated using discounted cash flow analysis. The following table summarizes the carrying amounts and fair values of those off statement of financial position financial assets and liabilities as at 31 December 2017(2016: Nil).

At 31 December 2017 Carrying amount Fair Value

TZS`000 TZS`000 Guarantee and performance bonds 608,196 608,196 Undrawn credit lines and other commitments to lend 1,308,125 1,308,125

1,916,321 1,916,321


4.3.1 Financial instruments not measured at fair value (Continued) 4.3.2 Fair value hierarchy and measurement

IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank‟s market assumptions. These two types of inputs have created the following fair value hierarchy:

Carrying Amount Fair Value

At 31 December 2017 TZS`000 TZS`000

Financial assets Cash and balances with Bank of Tanzania 4,634,319 4,634,319 Placements and balances with other banks 20,307,663 20,307,663 Loans and advances to customers 36,097,418 36,097,418 Other assets 1,665,952 1,665,952

62,705,352 62,705,352 Liabilities Deposits from customers 42,125,747 42,125,747 Deposits from banks 9,590,000 9,590,000 Other liabilities 1,771,306 1,771,306

53,487,053 53,487,053

Carrying Amount Fair Value At 31 December 2016 TZS`000 TZS`000

Financial assets Cash and balances with Bank of Tanzania 5,302,308 5,302,308 Placements and balances with other banks 8,777,313 8,777,313 Loans and advances to customers 24,913,340 24,913,340 Other assets 958,502 958,502


34,248,798 34,248,798



4.3.1 Financial instruments not measured at fair value (Continued) 4.3.2 Fair value hierarchy and measurement

IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank‟s market assumptions. These two types of inputs have created the following fair value hierarchy:

Carrying Amount Fair Value

At 31 December 2017 TZS`000 TZS`000

Financial assets Cash and balances with Bank of Tanzania 4,634,319 4,634,319 Placements and balances with other banks 20,307,663 20,307,663 Loans and advances to customers 36,097,418 36,097,418 Other assets 1,665,952 1,665,952


53,487,053 53,487,053

Carrying Amount Fair Value At 31 December 2016 TZS`000 TZS`000

Financial assets Cash and balances with Bank of Tanzania 5,302,308 5,302,308 Placements and balances with other banks 8,777,313 8,777,313 Loans and advances to customers 24,913,340 24,913,340 Other assets 958,502 958,502


34,248,798 34,248,798



4.3 Fair value of financial assets and liabilities (Continued) 4.3.2 Fair value hierarchy and measurement (Continued) The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable market prices in its valuations where possible.

31 December 2017 Level 1 Level 2 Level 3 Total Financial assets TZS`000 TZS`000’ TZS`000’ TZS`000 Cash and balance with Bank of Tanzania - 4,634,319 - 4,634,319

Placements and Balances with other banks - 20,307,663 - 20,307,663

Loans and advances - 37,419,910 - 37,419,910 Other assets - 1,665,952 - 1,665,952

64,027,844 64,027,844 Financial liabilities Deposits from customers - 42,125,747 - 42,125,747 Deposits from banks - 9,590,000 - 9,590,000 Other liabilities - 1,771,306 - 1,771,306

- 53,487,053 - 53,487,053

Level 1 Level 2 Level 3 Total 31 December 2016 TZS`000 TZS`000’ TZS`000’ TZS`000 Financial assets Cash and balances with Bank of Tanzania - 5,302,308 - 5,302,308

Placements and Balances with other banks - 8,777,313 - 8,777,313

Loans and advances - 24,913,340 - 24,913,340 Other assets - 958,502 - 958,502

- 39,951,463 - 39,951,463 Financial liabilities Deposit from customers - 29,151,131 - 29,151,131 Deposit from banks - 3,300,000 - 3,300,000 Other liabilities - 1,797,667 - 1,797,667

- 34,248,798 - 34,248,798


4.3 Fair value of financial assets and liabilities (Continued) 4.3.2 Fair value hierarchy and measurement (Continued)

a. Financial instruments in level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the bank is the current bid price of debt securities from the most current Bank of Tanzania auction results. Instruments included in Level 1 comprise primarily available-for-sale Treasury Bonds. b. Financial instruments in level 2 The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Specific valuation techniques used to value financial instruments include:

Quoted market prices or dealer/Bank of Tanzania quotes for similar instruments; Quoted prices for identical or similar assets or liabilities in markets that are not active.

4.3.3 Categories of the financial instruments

Loans and

receivables Held to

maturity Total 31 December 2017 TZS`000 TZS`000’ Financial assets Cash and balances with Bank of Tanzania 4,634,320 - 4,634,319

Balances with other banks - current and call accounts 479,419 - 479,419

Balances with other banks - Time deposits 19,828,244 - 19,828,244

Loans and advances 37,419,910 - 37,419,910 Other assets 1,665,952 - 1,665,952

64,027,845 64,027,845

Financial liabilities at

amortized cost TZS`000 Financial liabilities Deposits from customers 42,125,747 Deposits from banks 9,590,000 Other liabilities 1,771,306

53,487,053



4.3 Fair value of financial assets and liabilities (Continued) 4.3.2 Fair value hierarchy and measurement (Continued)

a. Financial instruments in level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the bank is the current bid price of debt securities from the most current Bank of Tanzania auction results. Instruments included in Level 1 comprise primarily available-for-sale Treasury Bonds. b. Financial instruments in level 2 The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Specific valuation techniques used to value financial instruments include:

Quoted market prices or dealer/Bank of Tanzania quotes for similar instruments; Quoted prices for identical or similar assets or liabilities in markets that are not active.

4.3.3 Categories of the financial instruments

Loans and

receivables Held to

maturity Total 31 December 2017 TZS`000 TZS`000’ Financial assets Cash and balances with Bank of Tanzania 4,634,320 - 4,634,319

Balances with other banks - current and call accounts 479,419 - 479,419

Balances with other banks - Time deposits 19,828,244 - 19,828,244

Loans and advances 37,419,910 - 37,419,910 Other assets 1,665,952 - 1,665,952

64,027,845 64,027,845


amortized cost TZS`000 Financial liabilities Deposits from customers 42,125,747 Deposits from banks 9,590,000 Other liabilities 1,771,306

53,487,053



4.3 Fair value of financial assets and liabilities (Continued) 4.3.3 Categories of the financial instruments

31 December 2016

Loans and

receivables Held to

maturity Total

TZS`000 TZS`000’ Financial assets Cash and balances with Bank of Tanzania 5,302,308 - 5,302,308 Balances with other banks - current and call accounts

1,119,738

-

1,119,738

Balances with other banks - Time deposits 7,657,575 7,657,575 Loans and advances 24,913,340 - 24,913,340 Other assets 958,502 - 958,502

39,951,463 -- 39,951,463


amortized cost

TZS`000 Financial liabilities Deposits from customers 29,151,131 Deposits from banks 3,300,000 Other liabilities 1,944,737

34,395,868 4.4 Liquidity risk Liquidity risk is the risk that a Bank is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfil commitments to lend.

4.4.1 Liquidity risk management process The Bank‟s liquidity management process, as carried out within the Bank and monitored by the Asset and Liability Committee (ALCO) of the Bank, include:

Day-to-day funding, managed by monitoring future cash flows to ensure that requirements

can be met. These include replenishment of funds as they mature or are borrowed by customers. The Bank maintain an active presence in money markets to enable this to happen;

Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow;

Monitoring balance sheet liquidity ratios against internal and regulatory requirements; and

Managing the concentration and profile of debt maturities.


4.4 Liquidity risk (Continued) 4.4.1 Liquidity risk management process Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. 4.4.2 Funding approach The Bank‟s major source of funding is customer deposits. To this end, the Bank maintain a diversified and stable funding base comprising current/demand, savings and time deposits. The Bank places considerable importance on the stability of these deposits, which is achieved through the Bank`s retail banking activities and by maintaining depositor confidence in the Bank‟s business strategies and financial strength. The Bank borrows from the interbank market through transactions with other Banks for short term liquidity requirements. As part of the contingency funding plan, the Bank has funding lines with both local banks for short term funding requirements. 4.4.3 Non derivatives cash flows The table below presents cash flow payable by the Bank under non-derivative financial liabilities by remaining contractual maturities at the end of financial reporting period. The amounts disclosed in the table below are the contractual undiscounted cash flows, as the Bank manage the inherent liquidity risk based on expected undiscounted cash flows.



4.4 Liquidity risk (Continued) 4.4.1 Liquidity risk management process Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. 4.4.2 Funding approach The Bank‟s major source of funding is customer deposits. To this end, the Bank maintain a diversified and stable funding base comprising current/demand, savings and time deposits. The Bank places considerable importance on the stability of these deposits, which is achieved through the Bank`s retail banking activities and by maintaining depositor confidence in the Bank‟s business strategies and financial strength. The Bank borrows from the interbank market through transactions with other Banks for short term liquidity requirements. As part of the contingency funding plan, the Bank has funding lines with both local banks for short term funding requirements. 4.4.3 Non derivatives cash flows The table below presents cash flow payable by the Bank under non-derivative financial liabilities by remaining contractual maturities at the end of financial reporting period. The amounts disclosed in the table below are the contractual undiscounted cash flows, as the Bank manage the inherent liquidity risk based on expected undiscounted cash flows.


MAE

ND

ELEO

BAN

K P

LC

NO

TES

TO T

HE

FIN

ANC

IAL

STAT

EMEN

TS (C

ontin

ued)

FO

R TH

E YE

AR E

ND

ED 3

1 D

ECEM

BER

201

7

4.

FIN

ANC

IAL

RIS

K M

ANAG

EMEN

T (C

ontin

ued)

4.

4 Li

quid

ity ri

sk (C

ontin

ued)

4.

4.3

Non

der

ivat

ives

cas

h flo

ws

(Con

tinue

d)

Liqu

idity

risk

ana

lysi

s 1-

3

4-6

7-

12

1-

3

Tota

l

Mon

ths

M

onth

s

Mon

ths

Ye

ars

31 D

ecem

ber 2

017

TZS`

000

TZ

S`00

0

TZS`

000

TZ

S`00

0

TZS`

000

Fina

ncia

l ass

ets

C

ash

and

bala

nces

with

Ban

k of

Tan

zani

a

1,79

6,89

0

-

-

-

1,

796,

890

Plac

emen

ts a

nd b

alan

ces

with

oth

er

bank

s

12,4

42,0

99

1,30

0,00

0

6,

565,

564

20,3

07,6

63

Loan

s an

d ad

vanc

es to

cus

tom

ers

1,51

0,87

9

2,81

2,49

8

4,00

9,67

8

27,7

64,3

64

37

,419

,910

O

ther

ass

ets

1,66

5,95

2

-

-

-

1,66

5,95

2 To

tal

17,4

15,8

20

4,

112,

498

10

,575

,242

27,7

64,3

64

61

,190

,415

Fi

nanc

ial l

iabi

litie

s

Dep

osits

from

cus

tom

ers

21,3

90,0

18

13

,337

,238

7,39

8,49

1

42,1

25,7

47

Dep

osits

from

ban

ks

6,69

0,00

0

2,40

0,00

0

500,

0000

9,59

0,00

0 O

ther

liab

ilitie

s 1,

771,

306

-

-

-

1,

771,

306

Tota

l 20

,556

,877

15,7

37,2

38

7,

898,

491

-

53

,487

,053

M

atur

ity g

ap a

s at

31

Dece

mbe

r, 20

17

3,14

1,05

7

(11,

624,

740)

2,67

6,75

1

27,7

64,3

64

7,

703,

362


MAE

ND

ELEO

BAN

K P

LC

NO

TES

TO T

HE

FIN

ANC

IAL

STAT

EMEN

TS (C

ontin

ued)

FO

R TH

E YE

AR E

ND

ED 3

1 D

ECEM

BER

201

7

4.

FIN

ANC

IAL

RIS

K M

ANAG

EMEN

T (C

ontin

ued)

4.

4 Li

quid

ity ri

sk (C

ontin

ued)

4.

4.3

Non

der

ivat

ives

cas

h flo

ws

(Con

tinue

d)

Liqu

idity

risk

ana

lysi

s 1-

3

4-6

7-

12

1-

3

Tota

l

Mon

ths

M

onth

s

Mon

ths

Ye

ars

31 D

ecem

ber 2

017

TZS`

000

TZ

S`00

0

TZS`

000

TZ

S`00

0

TZS`

000

Fina

ncia

l ass

ets

C

ash

and

bala

nces

with

Ban

k of

Tan

zani

a

1,79

6,89

0

-

-

-

1,

796,

890

Plac

emen

ts a

nd b

alan

ces

with

oth

er

bank

s

12,4

42,0

99

1,30

0,00

0

6,

565,

564

20,3

07,6

63

Loan

s an

d ad

vanc

es to

cus

tom

ers

1,51

0,87

9

2,81

2,49

8

4,00

9,67

8

27,7

64,3

64

37

,419

,910

O

ther

ass

ets

1,66

5,95

2

-

-

-

1,66

5,95

2 To

tal

17,4

15,8

20

4,

112,

498

10

,575

,242

27,7

64,3

64

61

,190

,415

Fi

nanc

ial l

iabi

litie

s

Dep

osits

from

cus

tom

ers

21,3

90,0

18

13

,337

,238

7,39

8,49

1

42,1

25,7

47

Dep

osits

from

ban

ks

6,69

0,00

0

2,40

0,00

0

500,

0000

9,59

0,00

0 O

ther

liab

ilitie

s 1,

771,

306

-

-

-

1,

771,

306

Tota

l 20

,556

,877

15,7

37,2

38

7,

898,

491

-

53

,487

,053

M

atur

ity g

ap a

s at

31

Dece

mbe

r, 20

17

3,14

1,05

7

(11,

624,

740)

2,67

6,75

1

27,7

64,3

64

7,

703,

362

MAE

ND

ELEO

BAN

K P

LC

NO

TES

TO T

HE

FIN

ANC

IAL

STAT

EMEN

TS (C

ontin

ued)

FO

R TH

E YE

AR E

ND

ED 3

1 D

ECEM

BER

201

7

4.

FIN

ANC

IAL

RIS

K M

ANAG

EMEN

T (C

ontin

ued)

4.

4 Li

quid

ity ri

sk (C

ontin

ued)

4.

4.3

Non

der

ivat

ives

cas

h flo

ws

(Con

tinue

d)

Li

quid

ity ri

sk a

naly

sis

1-

3

4-6

7-

12

1-

3

Tota

l

Mon

ths

M

onth

s

Mon

ths

Ye

ars

TZ

S`00

0

TZS`

000

TZ

S`00

0

TZS`

000

TZ

S`00

0 Fi

nanc

ial a

sset

s

Cas

h an

d ba

lanc

es w

ith B

ank

of T

anza

nia

5,30

2,30

8

-

-

5,30

2,30

8 Pl

acem

ents

and

bal

ance

s w

ith o

ther

ban

ks

7,72

0,05

3

1,05

7,26

0

2,18

7,14

4

10,9

64,4

57

Loan

s an

d ad

vanc

es to

cus

tom

ers

2,30

3,33

1

1,89

5,79

7

4,13

3,92

7

16,5

80,2

85

24

,913

,340

O

ther

ass

ets

958,

502

-

-

-

95

8,50

2 To

tal

16,2

84,1

94

2,

953,

057

6,

321,

071

16

,580

,285

42,1

38,6

07

Fina

ncia

l lia

bilit

ies

D

epos

its fr

om c

usto

mer

s 15

,342

,014

10,5

28,1

66

3,

280,

951

-

29

,151

,131

D

epos

its fr

om b

anks

3,

000,

000

-

30

0,00

0

-

3,30

0,00

0 O

ther

liab

ilitie

s 1,

944,

737

-

-

-

1,

944,

737

Tota

l 20

,286

,751

10,5

28,1

66

3,

580,

951

-

34

,395

,868

M

atur

ity g

ap a

s at

31

Dece

mbe

r, 20

16

(4,0

02,5

57)

(7

,575

,109

)

2,74

0,12

0

16,5

80,2

85

7,

742,

739



4.4 Liquidity risk (Continued) 4.4.3 Non derivatives cash flows (Continued) The table below shows the liquidity position of the bank as at the end of the year 31 December 2016.

2017 2016 TZS`000 TZS`000 Total Liability 53,487,053 34,395,868 Total liquid assets held 15,331,544 19,972,372 Liquidity ratio 29% 58% Regulatory requirement 20% 20%

4.4.4 Assets held for managing liquidity risk The Bank assets held for managing liquidity risk are as follows:

Cash and balances held with Bank of Tanzania (excluding SMR) Treasury bills Placements with other banks. In normal course of business, a proportion of customers‟ loans contractually repayable

within one year will be extended. The Bank will also be able to meet unexpected net cash flows by selling securities and accessing additional funding sources such as asset backed market.

5. CAPITAL MANAGEMENT The Bank's objectives when managing capital, which is a broader concept than the 'equity' on the face of statement of financial position, are:

to comply with the capital requirements set by the regulator, Bank of Tanzania to safeguard the Bank‟s ability to continue as a going concern, so that it can continue

to provide returns for shareholders and benefits for other stakeholders to maintain a strong capital base to support the development of its business.

The Bank`s management monitors the adequacy of its capital and use of regulatory capital are monitored on a quarterly basis by management using the ratios established by the Bank of Tanzania (BOT) which rates are broadly in line with those for Basel Committee. The ratio measures capital adequacy by comparing the Bank`s eligible capital with its statements of financial position assets, off balance sheet component and market and other risk position at weighted amounts to reflect their relative risk. The required information is filed with Bank of Tanzania on a quarterly basis. The Bank manages its capital to meet Bank of Tanzania requirements listed below:

Hold the minimum level of the regulatory capital of TZS 2 billion; Maintain regulatory reserve of not less than 8% of total deposit liabilities; and Maintain a ratio of total regulatory capital of not less than the internationally agreed

12% of risk-weighted assets (Basel ratio) plus risk-weighted off-balance sheet items.

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 6. 5. CAPITAL MANAGEMENT

The Bank regulatory capital as established by the Bank of Tanzania is divided into two tiers:

Tier 1 capital which includes ordinary share capital, retained earnings and reserves created by appropriations of retained earnings deduct prepaid expenses and deferred charges

Tier 2 capital (supplementary capital) which includes the general provisions.

The risk weighted assets are measured by means of a hierarchy, classified according to the nature and reflecting an estimate, of the credit risk associated with each assets and counter party. A similar treatment is adopted for off balance sheet exposure, with some adjustment to reflect the more contingent nature of the potential losses. During the year, the Bank has complied with all the imposed capital requirements of Bank of Tanzania to which the Bank is subject.

REGULATORY CAPITAL 2017 2016 TZS ‘000’ TZS ‘000’ Tier 1 Capital Share capital 7,350,962 7,350,962 Retained earnings 626,470 (320,938) Prepaid expenses (714,149) (228,810) Differed tax asset (582,962) (260,134) Intangible assets (158,100) (171,647) Total qualifying Tier 1 Capital 6,522,222 6,369,433

Tier 2 Capital Regulatory reserve 0 37,031 General provision reserve 276,313 216,779 Total qualifying Tier 2 Capital 276,313 253,810

Total regulatory capital 6,798,535 6,623,243 Risk - weighted assets On balance sheet position 42,891,864 26,753,961 Off balance sheet position 608,196 226,073 Total risk - weighted assets 43,500,060 26,980,034

Bank's Bank's

Required ratios ratio ratio 2017 2016 2017 2016

Tier 1 Capital 12.5% 12.5% 15.46% 23.61% Tier 1 + Tier 2 Capital 14.5% 14.5% 16.12% 24.55%


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 6. 5. CAPITAL MANAGEMENT

The Bank regulatory capital as established by the Bank of Tanzania is divided into two tiers:

Tier 1 capital which includes ordinary share capital, retained earnings and reserves created by appropriations of retained earnings deduct prepaid expenses and deferred charges

Tier 2 capital (supplementary capital) which includes the general provisions.

The risk weighted assets are measured by means of a hierarchy, classified according to the nature and reflecting an estimate, of the credit risk associated with each assets and counter party. A similar treatment is adopted for off balance sheet exposure, with some adjustment to reflect the more contingent nature of the potential losses. During the year, the Bank has complied with all the imposed capital requirements of Bank of Tanzania to which the Bank is subject.

REGULATORY CAPITAL 2017 2016 TZS ‘000’ TZS ‘000’ Tier 1 Capital Share capital 7,350,962 7,350,962 Retained earnings 626,470 (320,938) Prepaid expenses (714,149) (228,810) Differed tax asset (582,962) (260,134) Intangible assets (158,100) (171,647) Total qualifying Tier 1 Capital 6,522,222 6,369,433

Tier 2 Capital Regulatory reserve 0 37,031 General provision reserve 276,313 216,779 Total qualifying Tier 2 Capital 276,313 253,810

Total regulatory capital 6,798,535 6,623,243 Risk - weighted assets On balance sheet position 42,891,864 26,753,961 Off balance sheet position 608,196 226,073 Total risk - weighted assets 43,500,060 26,980,034

Bank's Bank's

Required ratios ratio ratio 2017 2016 2017 2016

Tier 1 Capital 12.5% 12.5% 15.46% 23.61% Tier 1 + Tier 2 Capital 14.5% 14.5% 16.12% 24.55%


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 5. CAPITAL MANAGEMENT (Continued)

31 December 2017

Statement of Financial Position

Nominal statement

of financial position

Risk Weighted

Risk

Assets(Net) TZS`000 % TZS`000 Cash and balances with Bank of Tanzania 4,634,319 - - Balances with other banks 20,307,663 20 4,061,533 Cheques and items for clearing 3,181 50 1,590 Government securities - 100 - Loans, advances and overdrafts 37,419,910 100 37,419,910 Other assets 308,355 100 308,355 Property and equipment 646,481 100 562,688 Leasehold improvements 952,150 - - Sundry receivables(Staff adv.& imp rests) 537,788 100 537,788 Prepaid expenses (Deduction from core capital) 714,149 - - Intangible assets (Deduction from core capital) 158,861 - - TOTAL 65,682,857 42,891,864

31 December 2016

Statement of Financial Position

Nominal statement

of financial position

Risk Weighted

Risk

Assets(Net) TZS`000 % TZS`000 Cash and balances with Bank of Tanzania 5,302,308 - Balances with other banks 707,564 141,513 Cheques and items for clearing 412,174 206,087 Government securities 994,364 Loans, advances and overdrafts 24,913,340 24,913,340 Other assets 958,502 958,502 Property and equipment 518,952 518,952 Leasehold improvements 767,020 - Sundry receivables(Staff adv.& imp rests) 15,567 15,567 Prepaid expenses (Deduction from core capital) 228,810 - Intangible assets (Deduction from core capital) 171,647 - TOTAL 33,995,884 26,753,961


2017

2016

6 CASH AND BALANCES WITH BOT

TZS’000’

TZS’000’

Cash in hand

1,227,790

927,257

Clearing account s with Bank of Tanzania

569,100

1,322,450

Statutory minimum reserve*

2,837,430

3,052,601

4,634,320

5,302,308

*Section 44 of the Bank of Tanzania Act of 2006 and Sections 4 and 71 of the Banking and Financial Institution Act of 2006 requires the Bank to maintain a statutory minimum reserve (SMR) on its total deposits and liabilities and funds borrowed from general public. Minimum reserve requirement was 8% (2016:10%) of the average deposits. The Statutory Minimum Reserve (SMR) deposit is not available to finance the Bank‟s day-to-day operations and is hence excluded from cash and cash equivalents for the purpose of the cash flow statement (See Note 33). The cash on hand and balances with Bank of Tanzania are non-interest bearing

7 PLACEMENTS AND BALANCES WITH OTHER BANKS

Placements with local banks 19,825,063 7,657,575

Balances with local banks 479,419 707,564

Cheques and items for clearance with other banks 3,181 412,174 Less: Provision for probable losses (299,781)

20,007,882 8,777,313

Maturity analysis Redeemable on demand -Balances with local banks 479,419 707,564

-Cheques and items for clearing with other banks 3,181 412,174

-Maturity within 3 months from acquisition 11,959,500 6,600,315

-Maturity within 6 months from date of acquisition 1,300,000 1,057,260

-Maturity after 6 months from date of acquisition 6,565,563 - Less: Provision for probable losses (299,781)

20,007,882 8,777,313 8 GOVERNMENT SECURITIES Treasury bills 188,610 -

Treasury bills are debts securities issued by the Government of the United Republic of Tanzania. As at 31 December 2017 the bank had treasury bills of TZS.188, 610,000 (2016: Nil).

Maturity analysis of Government securities is as follows: Maturity after 3 months from date of acquisitions Treasury bills 188,610 -

188,610 - There were no Government securities maturing within 3 months from date of acquisition which form part of Bank cash and cash equivalent for the purpose of statement of cash flows (Note 33)



2017

2016

6 CASH AND BALANCES WITH BOT

TZS’000’

TZS’000’

Cash in hand

1,227,790

927,257

Clearing account s with Bank of Tanzania

569,100

1,322,450

Statutory minimum reserve*

2,837,430

3,052,601

4,634,320

5,302,308

*Section 44 of the Bank of Tanzania Act of 2006 and Sections 4 and 71 of the Banking and Financial Institution Act of 2006 requires the Bank to maintain a statutory minimum reserve (SMR) on its total deposits and liabilities and funds borrowed from general public. Minimum reserve requirement was 8% (2016:10%) of the average deposits. The Statutory Minimum Reserve (SMR) deposit is not available to finance the Bank‟s day-to-day operations and is hence excluded from cash and cash equivalents for the purpose of the cash flow statement (See Note 33). The cash on hand and balances with Bank of Tanzania are non-interest bearing

7 PLACEMENTS AND BALANCES WITH OTHER BANKS

Placements with local banks 19,825,063 7,657,575

Balances with local banks 479,419 707,564

Cheques and items for clearance with other banks 3,181 412,174 Less: Provision for probable losses (299,781)

20,007,882 8,777,313

Maturity analysis Redeemable on demand -Balances with local banks 479,419 707,564

-Cheques and items for clearing with other banks 3,181 412,174

-Maturity within 3 months from acquisition 11,959,500 6,600,315

-Maturity within 6 months from date of acquisition 1,300,000 1,057,260

-Maturity after 6 months from date of acquisition 6,565,563 - Less: Provision for probable losses (299,781)

20,007,882 8,777,313 8 GOVERNMENT SECURITIES Treasury bills 188,610 -

Treasury bills are debts securities issued by the Government of the United Republic of Tanzania. As at 31 December 2017 the bank had treasury bills of TZS.188, 610,000 (2016: Nil).

Maturity analysis of Government securities is as follows: Maturity after 3 months from date of acquisitions Treasury bills 188,610 -

188,610 - There were no Government securities maturing within 3 months from date of acquisition which form part of Bank cash and cash equivalent for the purpose of statement of cash flows (Note 33)



2017 2016 9 LOAN AND ADVANCES TO CUSTOMERS TZS TZS

Term loans 26,377,349 20,655,987

Overdrafts 6,036,788 3,160,454

Staff loans and advances 1,087,863 739,053

Interest receivable 3,917,911 1,291,090

Gross loan and advances 37,419,911 25,846,584

Less: Provision for probable losses (1,322,492) (933,244)

Gross loan and advances 36,097,419 24,913,340

Maturity analysis The maturity analysis is based on the remaining period to contractual maturity from 31 December.

Maturing within 1 year 8,333,055 8,333,055 Maturing after 1 year but within 3 years 27,764,364 16,580,285 Net loans and advances 36,097,419 24,913,340

Credit impairment for loans and advances to customers The movements in provisions for impairment losses on loans and advances as per International Financial Reporting Standards (IFRS) are as follows:

At 1 January 933,244 447,092

Increase in allowances for loan impairment 389,248 555,522

Write Off of Bad Loans - (69,370)

At 31 December 1,322,492 933,244

10 INVENTORY

ATM cards 24,122 10,484

Stationery 31,196 -

55,318 10,484

11 OTHER ASSETS

Prepayments 714,149 228,810

Staff salary advances 537,788 15,567

Withholding tax receivable 105,670 95,533

Other assets 308,345 618,595

Gross receivables 1,665,952 958,505

Provision other receivables - -

1,665,952 958,505 All other assets are current and no provision for impairment was made (2016: Nil).

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 2017 2016

12 INTANGIBLE ASSET TZS TZS

At 1 January 2017 358,033 344,001

Additions 40,373 14,032

At 31 December 2017 398,406 358,033

Accumulated amortization At 1 January 2017 (186,386) (170,859)

Charge for the year (53,920) (15,527)

At 31 December 2017 (240,306) (186,386)

Net carrying amount 158,100 171,647

The intangible assets represent the computer software acquired by the Bank. No intangible assets have been pledged as security for liabilities (2016: Nil). There are no restrictions on the software other than those outlined in the software license. As at 31 December 2017, there were no significant intangible assets controlled by the entity which have not been recognized as assets.



12 INTANGIBLE ASSET TZS TZS

At 1 January 2017 358,033 344,001

Additions 40,373 14,032

At 31 December 2017 398,406 358,033

Accumulated amortization At 1 January 2017 (186,386) (170,859)


At 31 December 2017 (240,306) (186,386)


The intangible assets represent the computer software acquired by the Bank. No intangible assets have been pledged as security for liabilities (2016: Nil). There are no restrictions on the software other than those outlined in the software license. As at 31 December 2017, there were no significant intangible assets controlled by the entity which have not been recognized as assets.


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14 LEASEHOLD IMPROVEMENT TZS TZS

At 1 January 962,275 654,686

Additions 318,134 307,589

At 31 December 1,280,409 962,275

Amortization At 1 January (195,256) (110,483)


At December (328,260) (195,256)


15 DEPOSITS FROM CUSTOMERS

Current accounts 9,284,309 8,937,864

Savings accounts 6,569,445 4,659,850

Time deposit accounts 26,271,994 15,553,418

Borrowings from bank's 9,590,000 3,300,000

51,715,747 32,451,132 Savings and time deposits are interest bearing accounts. The interest bearing customer deposits accounts carry variable interest rates.

Maturity analysis

Repayable on demand 15,853,754 13,597,714

Maturing within three months 6,690,000 5,422,581

After 3 months but within one year 29,171,994 13,430,837

Maturing after one year - -

51,715,747 32,451,132

16 OTHER LIABILITIES

Accrued expenses 113,030 44,827

Insurance payables 126,494 24,870

Others 1,531,782 1,727,970

1,771,306 1,797,667

Maturity analysis Maturity within 3 months 1,771,306 1,797,667



17 DEFERRED INCOME TAX TZS TZS

At 1 January (260,134) (122,773)

Credit to statement of profit and loss and other comprehensive income (Note 28) (322,828) (137,361)

At 31 December (582,962) (260,134)

Deferred income tax asset and deferred income tax credit to the statement of profit or loss and other comprehensive income are attributed to the following items

Deferred income tax

Accelerated capital allowance (74,126) 11,975

Provisions (486,682) (279,973)

Unrealized exchange gains 22,155 7,864 582,963 260,134

18 INCOME TAX PAYABLE/(RECEIVABLE)

At January 147,069 -

Tax charge to income statement (Note 29) 567,672 343,719

Tax paid during the year (431,870) (196,650)

282,871 147,069

19 CAPITAL AND RESERVES

Share capital Authorized 60,000,000 shares of TZS 500 each 30,000,000 30,000,000

Called up and fully paid up 14,590,691 shares of TZS 500 each 7,350,962 7,350,962

20 ADVANCE TOWARDS SHARE CAPITAL

The shareholders approved Public offer issue at the Annual General Meeting. The Public offer exercise commenced on 18 September 2017 and was closed on 4 December 2017.As at 31 December 2017, a total of TZS 2,965,534,000 had been paid by shareholders for purpose of acquiring additional shares.

21 REGULATORY RESERVE Regulatory reserves represent an amount set aside to cover additional provision for losses over and above the impairment of loans advances required in order to comply with the requirements of the Bank of Tanzania. This reserve is not available for distribution. Provision for non-performing assets is computed using both IAS 39 approach and BOT regulatory approach. IAS 39 provision is charged to the statement of profit or loss and other comprehensive income. Where the IAS 39 provision is less than BOT provision, then the excess over IAS 39 provision is taken to a non-distributable reserve known as Regulatory Risk Reserve. During the year under review the provisions using both approaches were as follows


2017 2016 21 REGULATORY RESERVE (Continued) TZS’000’ TZS’000’ Provision per Bank of Tanzania approach 1,071,215 970,275 Provision per IAS 39 (Note 8) (1,322,492) (933,244) Excess over IAS provision taken to regulatory risk reserve - 37,031 The regulatory reserve is not part of the bank`s core capital.

22 INTEREST INCOME

Loans and advances to customers 7,370,334 4,898,115

Placements and balances with other banks 1,055,688 2,440,144

Interest on Government securities - 100,629

8,426,022 7,438,888 23 INTEREST EXPENSES

Deposits from customers: -Time deposits 2,250,870 3,287,927

-Borrowing from banks 325,163 61,060

-Savings deposits 55,629 59,645

2,631,662 3,408,632

24 NET FEES, COMMISSION AND OTHER INCOME a Fees and commission and other income

Commission received from insurance services 114,447 127,587

Commission received from other services 249,007 208,870

Application fee 224,199 212,342

Management fee 356,891 322,411

Payroll processing fee 19,753 16,716

Other fee 147,007 116,362

Penalties 83,096 31,853

1,194,401 1,036,141

b Fees and commission expense Financial charges 38,788 47,027 25

NET FOREIGN EXCHANGE GAIN

Exchange gain on trading 34,373 84,370

Exchange gain/(loss) on revaluation 125,739 (58,157)

160,113 26,213



2017 2016 21 REGULATORY RESERVE (Continued) TZS’000’ TZS’000’ Provision per Bank of Tanzania approach 1,071,215 970,275 Provision per IAS 39 (Note 8) (1,322,492) (933,244) Excess over IAS provision taken to regulatory risk reserve - 37,031 The regulatory reserve is not part of the bank`s core capital.

22 INTEREST INCOME

Loans and advances to customers 7,370,334 4,898,115

Placements and balances with other banks 1,055,688 2,440,144

Interest on Government securities - 100,629

8,426,022 7,438,888 23 INTEREST EXPENSES

Deposits from customers: -Time deposits 2,250,870 3,287,927

-Borrowing from banks 325,163 61,060

-Savings deposits 55,629 59,645

2,631,662 3,408,632

24 NET FEES, COMMISSION AND OTHER INCOME a Fees and commission and other income

Commission received from insurance services 114,447 127,587

Commission received from other services 249,007 208,870

Application fee 224,199 212,342

Management fee 356,891 322,411

Payroll processing fee 19,753 16,716

Other fee 147,007 116,362

Penalties 83,096 31,853

1,194,401 1,036,141

b Fees and commission expense Financial charges 38,788 47,027 25

NET FOREIGN EXCHANGE GAIN

Exchange gain on trading 34,373 84,370

Exchange gain/(loss) on revaluation 125,739 (58,157)

160,113 26,213



26 EMPLOYEE BENEFITS COST TZS TZS

Salaries and allowances 1,722,059 1,171,581

Pension costs- defined contribution plan 168,361 117,696

Skills and Development Levy 90,153 59,041

Leave allowance 83,469 49,084

Workman‟s compensation 17,132 10,544

2,081,173 1,407,946

27 GENERAL AND ADMINISTRATIVE EXPENSES

Office expenses 1,553,552 983,199 Deposit mobilization fees 137,963

Annual general meeting 62,499 61,149

Legal fees 183,647 23,843

Directors remuneration 11,843 19,739

Board expenses 79,091 93,451

Auditors` remuneration 55,787 42,301

Accounting fees 58,598 27,687

Rent expense 345,756 200,449

Property and equipment maintenance cost 102,803 39,684

Fuel cost 73,046 48,500

Staff welfare 28,467 21,698

Other expenses 23,558 27,717

2,578,648 1,727,380

28 DEPRECIATION AND AMORTIZATION Depreciation of property and equipment (Note 12) 359,558 183,062

Amortization of intangible (Note 12) 53,920 15,527

Amortization of leasehold assets (Note 14) 133,004 69,114

546,481 267,703

29 INCOME TAX EXPENSE Current income tax (Note 18) 567,672 343,719

Deferred tax (Note 17) (322,828) (137,361)

244,844 206,358 The tax on the Bank‟s profit differs from the theoretical amount that would arise using the statutory income tax rate as follows: Profit for the year before tax 1,214,755 760,899 Tax expense (calculated at the statutory income tax rate of 30% (2016: 30%) 364,426 228,269

Tax effect of: Expenses not deductible for tax purposes 9,755 - Non-taxable income (10,312) (21,911) Prior year overstatement of taxes (119,025) - Income tax expense 244,844 206,358

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 30. BASIC AND DILUTED EARNINGS PER SHARE

The calculation of the basic earnings per share was based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding at the close of the year, calculated as follows:

2017 2016 TZS`000 TZS`000 Profit attributable to shareholders 969,911 554,541 Weighted average number of share in issue (Note 16) 14,591 14,596 Basic and diluted earnings per share 66.4 37.99 There being no dilutive or potentially dilutive ordinary share outstanding as at 31 December 2017 (2016: Nil), the basic and diluted earnings per share are the same.

31. DIVIDEND PER SHARE

Dividends are not recognized as a liability until they have been ratified at the Annual General Meeting. The Bank made a profit after tax of TZS 969,911,000 (2016: Profit TZS 554,541,000) during the year ended 31 December 2017, however the Board of Directors does recommend payment of dividends to shareholders.

32. EFFECTIVE INTEREST RATES OF FINANCIAL ASSETS AND LIABILITIES The effective interest rates for the principal financial assets and liabilities at 31December 2017 and 2016 were as follows:

2017 2016 Placements with other banks 11% 24% Government securities - 11% Loans and advances to customers 20% 19% Deposits from customers (savings accounts) 5% 1% Fixed deposit 9% 16%

33. RELATED PARTY TRANSACTIONS AND BALANCES Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In the normal course of business, a number of banking transactions are entered into with related parties i.e. key management personnel and directors. These include loans and deposits. The volume of related party transactions for the year and the outstanding amounts at the year-end were as follows:

2017 2016 (a) Loans and advances to related parties TZS`000 TZS`000 (i) Directors At 1 January 150,833 54,210

Advanced during the year 7,755,636 121,916

Repayment during the year (2,345,057) (25,293)

At 31 December 5,561,412 150,833


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 30. BASIC AND DILUTED EARNINGS PER SHARE

The calculation of the basic earnings per share was based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding at the close of the year, calculated as follows:

2017 2016 TZS`000 TZS`000 Profit attributable to shareholders 969,911 554,541 Weighted average number of share in issue (Note 16) 14,591 14,596 Basic and diluted earnings per share 66.4 37.99 There being no dilutive or potentially dilutive ordinary share outstanding as at 31 December 2017 (2016: Nil), the basic and diluted earnings per share are the same.

31. DIVIDEND PER SHARE

Dividends are not recognized as a liability until they have been ratified at the Annual General Meeting. The Bank made a profit after tax of TZS 969,911,000 (2016: Profit TZS 554,541,000) during the year ended 31 December 2017, however the Board of Directors does recommend payment of dividends to shareholders.

32. EFFECTIVE INTEREST RATES OF FINANCIAL ASSETS AND LIABILITIES The effective interest rates for the principal financial assets and liabilities at 31December 2017 and 2016 were as follows:

2017 2016 Placements with other banks 11% 24% Government securities - 11% Loans and advances to customers 20% 19% Deposits from customers (savings accounts) 5% 1% Fixed deposit 9% 16%

33. RELATED PARTY TRANSACTIONS AND BALANCES Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In the normal course of business, a number of banking transactions are entered into with related parties i.e. key management personnel and directors. These include loans and deposits. The volume of related party transactions for the year and the outstanding amounts at the year-end were as follows:

2017 2016 (a) Loans and advances to related parties TZS`000 TZS`000 (i) Directors At 1 January 150,833 54,210

Advanced during the year 7,755,636 121,916

Repayment during the year (2,345,057) (25,293)

At 31 December 5,561,412 150,833


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 33. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) (a) Loans and advances to related parties (Continued) (i) Directors (Continued)

2017 2016 TZS`000 TZS`000 Interest earned 8,605 14,294

There were no deposits from companies controlled by Directors or their families (2016: Nil)

(ii) Key management At 1 January 124,871 242,319

Advanced during the year 436,589 180,260

Repayment during the year (137,498) (297,708)

At 31 December 423,962 124,871

Interest earned 31,142 15,834

(iii) Shareholders At 1 January 599,657 509,417

Advanced during the year 5,224,450 1,155,000

Repayment during the year (2,246,546) (1,064,760)

At 31 December 3,577,561 599,657

Interest earned 936,603 217,858

No provision has been made in respect of loans given to related parties (2016: Nil). Loans to key management personnel were issued at off market interest rate of 7% per annum as per company policy. Loans to directors were issued on commercial terms. These loans are payable on demand As at 31 December 2017 there were no loans issued to companies controlled by Directors or their families (2016: Nil).

(d) Directors compensation

Allowances 71,778 59,150

Annual fees 8,500 8,500

80,278 67,650

Sitting allowances paid to directors of the Bank during the year amounted to TZS 80.28million (2016: TZS 59.15 million). The fees were approved by the Annual General Meeting

MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 33. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(d) Directors compensation (Continued) Directors` attendance and remuneration list for the year 2017 is shown in the table below:

Directors Board Meeting

Board Audit & Risk Committee

Attendance

Board Credit

Committee

Directors Sitting

Allowance (TZS`000) Amulike S.K Ngeliama 8 - - 5,778 Dosca K. Mutabuzi 8 - 9 11,333 Anna T. Mzinga 4 4 - 5,333 Felix Mlaki 5 4 - 6,000 Reverend Ernest. Kadiva 7 - - 5,333 Naftal M. Nsemwa 7 4 9 13,333 Amb. Richard Mariki 7 - 8 10,667 Ibrahim Mwangalaba 8 5 9 14,000 Total 71,777

34. CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flow cash and cash equivalents comprise the following balances

2017 2016

TZS`000 TZS`000 Cash in hand (Note 6) 1,227,790 927,257 Balances with Bank of Tanzania (Note 6) 569,100 1,322,450 Placements and balances with other banks (Note 7) 12,442,099 7,720,053

14,238,989 9,969,760

Cash and cash equivalents exclude TZS 2,837,429,866 (2016: TZS 3,052,600,867) cash reserve requirement held with the Bank of Tanzania.

35. OFF SHORE BALANCE SHEET ITEMS

There were no off - shore balance sheet items as at the reporting date.

36. COMMITMENTS AND CONTINGENT LIABLITIES

(a) Contingent liabilities and commitment

There was a contingent liability amounting to TZS 1,916,321,000 (2016: TZS 1,194,314,000) on guarantees and performance bonds and on account of undrawn overdraft balances as shown below.


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 33. RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

(d) Directors compensation (Continued) Directors` attendance and remuneration list for the year 2017 is shown in the table below:

Directors Board Meeting

Board Audit & Risk Committee

Attendance

Board Credit

Committee

Directors Sitting

Allowance (TZS`000) Amulike S.K Ngeliama 8 - - 5,778 Dosca K. Mutabuzi 8 - 9 11,333 Anna T. Mzinga 4 4 - 5,333 Felix Mlaki 5 4 - 6,000 Reverend Ernest. Kadiva 7 - - 5,333 Naftal M. Nsemwa 7 4 9 13,333 Amb. Richard Mariki 7 - 8 10,667 Ibrahim Mwangalaba 8 5 9 14,000 Total 71,777

34. CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flow cash and cash equivalents comprise the following balances

2017 2016

TZS`000 TZS`000 Cash in hand (Note 6) 1,227,790 927,257 Balances with Bank of Tanzania (Note 6) 569,100 1,322,450 Placements and balances with other banks (Note 7) 12,442,099 7,720,053

14,238,989 9,969,760

Cash and cash equivalents exclude TZS 2,837,429,866 (2016: TZS 3,052,600,867) cash reserve requirement held with the Bank of Tanzania.

35. OFF SHORE BALANCE SHEET ITEMS

There were no off - shore balance sheet items as at the reporting date.

36. COMMITMENTS AND CONTINGENT LIABLITIES

(a) Contingent liabilities and commitment

There was a contingent liability amounting to TZS 1,916,321,000 (2016: TZS 1,194,314,000) on guarantees and performance bonds and on account of undrawn overdraft balances as shown below.


MAENDELEO BANK PLC NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2017 36. COMMITMENTS AND CONTINGENT LIABLITIES (Continued)

(a) Contingent liabilities and commitment (Continued) 2017 2016 TZS`000 TZS`000 Guarantee and performance bonds 608,196 226,073 Undrawn credit lines and other commitments to lend 1,308,125 968,241

1,916,321 1,194,314 Guarantees are generally written by a Bank to support performance by a customer to third parties. The Bank will only be required to meet these obligations in the event of the customer's default. Commitments to lend are agreements to lend to customers in future subject to certain conditions. Such commitments are normally made for a fixed period. The bank may withdraw from its contractual obligation for the undrawn portion of agreed facilities by giving reasonable notice to the customer.

(b) Operating lease commitments The Bank has a 3 year operating lease for office space effective from the 1st June 2016 and ending on the 31 May 2019. The lease may be renewed after consent of both parties for a similar or other period. The future minimum lease payments under non-cancellable operating leases are as follows:

2017 2016 TZS`000 TZS`000 Not later than 1 year 11,657 17,485 Later than 1 year and not later than 5 years - - Later than 5 years - -

11,657 17,485 The Directors are of the view that these commitments will be sufficiently covered by future net revenues and funding.

(c) Legal claims There are no pending legal claims against the Bank (2016: None). The Board of Directors are not aware of any potential legal claims against the Bank (2016: Nil).

(d) Capital commitments The Management certifies that there was no capital commitment authorized as at 31 December 2017. (2016 Nil) The 2016 funds were used for financing the opening of two new branches in Dar es Salaam and purchasing software for insurance agency management.

37. EVENTS AFTER REPORTING DATE

The Bank opened its third branch at Masasi/Likoma Street Kariakoo on 23rd January 2017 and launched Chama mobile product in the year 2017. Management is not aware of any subsequent event that will require adjustment in the financial statements.

38. COMPARATIVES

Wherever considered necessary comparative figures have been reclassified to conform to changes in presentation in the current year

Maendeleo Bank PLC, Head OfficeP. O. Box 216 Dar es Salaam - Tanzania

Telephone: +255 22 2110518Fax: +255 22 211 0595

Email: [email protected]

www.maendeleobank.co.tz Des

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