Financial Reporting Requirements for Microfinance Institutions Directive 2014

26th September, 2014 271

GOVERNMENT NOTICE NO. 43

FINANCIAL SERVICES ACT, 2010
(No. 26 OF 2010)

FINANCIAL SERVICES (FINANCIAL REPORTING REQUIREMENTS FOR MICROFINANCE INSTITUTIONS) DIRECTIVE, 2014

ARRANGEMENT OF PARAGRAPHS

PARAGRAPH

PART I—PRELIMINARY

1. Citation
2. Application
3. Interpretation

PART II—OBJECTIVES
4. Objectives

PART III—SUBMISSION OF RETURNS
5. Board and management responsibility
6. Weekly return
7. Monthly return
8. Quarterly return
9. Annual return
10. Verification of accuracy of returns

PART III—ENFORCEMENT
11. Monetary penalty

SCHEDULES
First Schedule:
Form—Weekly Statement of Liquidity
Second Schedule:
Form A—Monthly Statement of Financial Position Form B—Monthly Statement of Comprehensive Income Form C—Monthly Computation of Capital Adequacy Report Form D—Monthly Asset Classification Report Third Schedule:
Form A—Portfolio Quality Report
Form B—Statement of Deposits
Form C—Statement of off-Balance-sheet items

IN EXERCISE of the powers conferred by section 34(2)(n) of the Financial Services Act, 2010, I, CHARLES S. R. CHUKA, Registrar of Financial Institutions, issue the following Directive—

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PART I—PRELIMINARY

1. This Directive may be cited as the Financial Services (Financial Citation
   Reporting Requirements for Microfinance Institutions) Directive, 2014.

2. This Directive shall apply to— Application
   (a) deposit taking microfinance institutions; (b) prudentially regulated non-deposit taking microfinance institution; and (c) microfinance portfolios of other licensed financial institutions engaged in microfinance services.

3. In this Directive, unless the context otherwise requires— Interpretation

"annual return" means a set of annual financial reports in a prescribed format to be filed by an institution to the Registrar;

"core capital" consists of—
(a) issued and fully-paid shares;
(b) share premium;
(c) retained earnings;
(d) fifty per cent (50%) of current year to-date after tax profit or one hundred per cent (100%) of loss; (e) capital grants; or (f) any other distributable reserves, less investments in unconsoli- dated financial subsidiaries;

"monthly return" means a set of financial reports in a prescribed format to be filed by all licensed institutions to the Registrar on a monthly basis;

"institution" means a deposit taking microfinance institution, other prudentially regulated non-deposit taking microfinance institution or other licensed financial institutions engaged in microfinance services;

"quarterly return" means a set of financial reports in a prescribed format to be filed by an institution to the Registrar on a quarterly basis; and

"Registrar" means the Registrar of Financial Institutions appointed under the Act.

"supplementary capital" consists of—
(a) revaluation reserves on the assets of an institution that arise periodically from the independent valuation of those assets; (b) fifty per cent (50%) of current year to-date; or (c) any other form of capital as may be determined and approved by the Registrar from time to time; and (d) "total capital" means the sum of core capital and supplementary capital

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PART II—OBJECTIVES

Objectives 4. The objectives of this Directive are to ensure— (a) enhancement of off-site surveillance of institutions; (b) that institutions maintain a well developed accounting function and management information system; (c) monitoring, on a continuous basis, of the asset quality of the institutions; and (d) monitoring, on an on-going basis, the adequacy of capital and the attainability of the statutory liquidity requirements of institutions.

PART III—SUBMISSION OF RETURNS

Board and 5.—(1) The board of directors and management staff of an institution management shall— responsibility (a) be responsible for adherence and compliance with the requirements of this Directive; and (b) ensure that the institution has a robust management information system that generates accurate financial returns.

(2) The chief executive officer and the financial controller of an institution shall certify the accuracy of the returns.

Weekly 6.—(1) An institution shall submit to the Registrar on a weekly basis a return statement of liquidity for the institution as set out in the form of the First
Schedule to this Directive.

(2) The weekly return shall be submitted to the Registrar within five (5) days of the end of the week to which it refers.

Quarterly return 7.—(1) An institution shall submit to the Registrar a monthly return of each of the following— (a) monthly statement of financial position in the form prescribed as Form A of the Second Schedule to this Directive; (b) monthly statement of comprehensive income in the form prescribed as Form B of the Second Schedule to this Directive; (c) monthly computation of capital adequacy in the form prescribed as Form C of the Second Schedule to this Directive; and (d) asset classification report as prescribed in the form prescribed as Form D of the Second Schedule to this Directive.

(2) An institution shall submit to the Registrar all returns forming part of the monthly return within fifteen (15) days of the end of each month.

8.—(1) An institution shall submit to the Registrar a quarterly return of each of the following— (a) portfolio quality report as prescribed in the form prescribed as Form A of the Third Schedule to this Directive;

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(b) where applicable, a statement of deposits in the form prescribed as Form B of the Third Schedule to this Directive; and (c) a statement of off-balance sheet items in the form prescribed as Form C of the Third Schedule to this Directive.

(2) An institution shall submit to the Registrar all reports forming part of the quarterly return within fifteen (15) days of the end of each quarter.

9.—(1) An institution shall annually submit to the Registrar a set of Annual return audited financial statements prepared in line with international financial reporting standards and made up of the following components— (a) audited statement of financial position; (b) audited statement of comprehensive income; (c) statement of director's responsibility; (d) auditor's opinion; (e) audited statistical information; (f) statement of cash flows; (g) statement of changes in equity; and (h) disclosure of material amount written off.

(2) An institution shall submit to the Registrar all reports forming part of the annual return within four (4) months of the end of each financial year in accordance with the Act.

10.—(1) The Registrar may inspect an institution, in order to determine Verification the accuracy of the data or information disclosed in a return. of accuracy of returns

(2) An institution under inspection by the Registrar under subparagraph (1) shall produce all records, books and documents used in the preparation of such returns.

PART III—ENFORCEMENT

11.—(1) An institution that fails to submit weekly, monthly, quarterly or Monetary annual returns as stipulated in this Directive shall be liable to a monetary penalty penalty of fifty thousand Kwacha (K50,000.00) and five thousand Kwacha (K5,000.00) thereafter for each day that the institution remains in default.

(2) The penalty referred to in subparagraph (1) shall be debited from the concerned institution's main account maintained at the Reserve Bank of Malawi after prior written notification.

(3) Where the institution does not maintain an account with the Reserve Bank, the institution shall make good of the penalty through a bank certified cheque payable to the Reserve Bank of Malawi within ten (10) days of being notified by the Registrar to pay the penalty.

(4) In addition to the monetary penalties imposed in subparagraph (1), the Registrar may impose directions and administrative penalties as provided for under the Act and the Microfinance Act, 2010.

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FIRST SCHEDULE
FORM
LIQUIDITY STATEMENT

	Monday Amount (K000s)	Tuesday Amount (K000s)	Wednesday Amount (K000s)	Thursday Amount (K000s)	Friday Amount (K000s)	Average Amount (K000s)
1. AVAILABLE LIQUID ASSETS
a. Notes and coin, Malawi currency
b. Cheques in the course of collection
c. Balances at Reserve Bank of Malawi
d. Balances at other banks within Malawi
e. Short-term Investments
f. Bills of exchange, eligible for discount
g. Local Registered Stocks, maturing within 6 years issued or guaranteed by Malawi Government
h. Other eligible liquid assets
Total available liquid assets
i. DEDUCT: Suspense Account
Net liquid assets (a)
j. DEDUCT: Cheques in course of collection
Net liquid assets (b)
2. DEPOSITS AND SHORT-TERM LIABILITIES
a. Domestic deposits
b. Other borrowings and debt due in one year
Total deposits and short term liabilities
3. LIQUIDITY RATIO:

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SECOND SCHEDULE
FORM—A
MONTHLY STATEMENT OF FINACIAL POSITION

LIABILITIES AND EQUITY CAPITAL ( Amounts in thousands of Kwachas )
1. Domestic currency deposits
a. Residents of Malawi:
1. Demand deposits
2. Savings deposits
3. Time deposits
i. less than 30 days' notice
ii. fixed or notice of 30 days or over
4. Compulsory or collateral savings
b. Non-residents:
1. Demand deposits
2. Savings deposits
3. Time deposits
Total domestic deposits
2. Foreign currency deposits
a. Residents
b. Non-residents
Total foreign currency deposits
3. Liabilities to other banks
a. Reserve Bank of Malawi
b. Other banks in Malawi
c. Banks abroad in Malawi currency
d. Banks abroad in foreign currency
e. Suspense accounts in foreign currency
Total liabilities to other banks
4. Borrowed funds
a. Maturing in less than 1 year
b. Maturing in more than 1 year
c. Shareholder's loans
Total borrowed funds
5. Other liabilities
a. Accrued interest payable
b. All other liabilities
Total other liabilities
6. Subtotal (sum 1 through 5)

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LIABILITIES AND EQUITY CAPITAL ( Amounts in thousands of Kwachas )
7. Acceptances, endorsements, guarantees etc as per contra
8. Total liabilities ( sum 6 and 7 )
9. Equity capital
a. Share capital
1. Authorised
2. Shares paid up
b. Share premium
c. General Reserve
d. Revaluation reserves (fixed assets )
e. Retained earnings-prior years
f. Net income( loss)-for current period
Total equity capital
10. Total liabilities and equity capital (sum 8 and 9)
ASSETS
11. Cash
a. Domestic currency
1. Malawi notes
2. Malawi coins
Total domestic currency
b. Foreign currency
Total cash
12. Cheques in the course of collection
13. Balances with Reserve Bank of Malawi
a. Liquidity Reserve Requirement (LRR)
b. Main account
Total balances with Reserve Bank of Malawi
14. Balances with banks abroad
a. Nostro ( due from )
b. Customer foreign currency denominated accounts
Total balances with banks abroad
15. Balances with Banks in Malawi
16. Bills of exchange, etc. payable abroad
17. Investments and securities
a. Short term investments:
1. Treasury bills
2. Reserve Bank of Malawi bills
3. Money market deposits

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LIABILITIES AND EQUITY CAPITAL ( Amounts in thousands of Kwachas )
4. Inter-bank loans
5. All other short term investments
Total short term investments
b. Long- term securities:
1. Local registered stocks
2. Other securities
Total long-term securities
Total investments and securities (sum 17.a. and 17.b.)
18. Loans and Leases
a. Mortgages
b. Agriculture
c. Commercial & industrial
d. Individual & household loans
e. Government
f. Statutory bodies
g. World Bank /Reserve Bank Project Loans
h. Non-residents
i. Lease financing receivables
1. Gross receivables
2. LESS: Unearned income
3. Net lease financing receivables
j. Forex loans
k. All other
1. LESS: Provisions for losses ( general plus specific )
Net loans and leases
19. Premises and equipment
a. Premises
b. Equipment
Total premises and equipment
20. Other assets
a. Accrued interest receivable
b. All other assets
Total other asset
21. Subtotal
22. Customers' liability on acceptances, guarantees, indemnities, etc
23. Total assets (sum 21 and 22)

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FORM—B

MONTHLY STATEMENT OF COMPREHENSIVE INCOME

INCOME AND EXPENSES
1. Interest income:
a. Interest and fee income on loans and leases
1. Mortgages
2. Agricultural loans
3. Commercial and industrial loans
4. Individuals and household loans
5. Government & statutory bodies
6. Lease financing receivables
7. Forex loans
8. All other loans
Total interest and fee income on loans and leases
b. Interest income on balances with Reserve Bank of Malawi
c. Interest income on balances with other banks
1. Banks abroad
2. Domestic banks
Total interest income on balances with other banks
d. Income on investment and securities
2. Reserve Bank of Malawi Bills
3. Money market deposits
4. Inter-bank loans
5. Local registered stocks
6. All other securities
Total investment income
e. All other interest income
Total interest income (sum 1.a through 1.e)
2. Interest expense:
a. Interest expense on deposit accounts
1. Demand
2. Savings
3. Time

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INCOME AND EXPENSES
Total interest expense on deposit accounts
b. Interest expense on inter-bank loans
c. Interest expense on liabilities to banks abroad
d. Interest expense on borrowed funds
e. All other interest expense
Total interest expense (sum 2.a through 2.e)
3. Net interest income (item 1. minus 2.)
4. Provisions for loan and lease losses
a. General
b. Specific
Total provisions
5. Non-interest income:
a. Commissions and service charges on deposit accounts
b. Foreign exchange
1. Fees from foreign exchange transactions
2. Trading gains (losses) from foreign exchange holdings
c. All other non-interest income
Total non-interest income (sum 5.a through 5.c)
6. Non-interest expenses:
a. Salaries and employee benefits
b. Management fees
c. Expenses of premises and fixed assets
d. Depreciation
e. All other non-interest expense
Total non-interest expense (sum 6a through 6d)
7. Net non-interest income (5. minus 6.)
8. Income (loss) before taxes and extraordinary items (3 minus 4 plus 7)
9. Taxation
10. Income (loss) after taxes before extraordinary items (8 minus 9)
11. Dividends proposed
12. Extraordinary items
13. Net income (loss) (10 minus 11 and 12)

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FORM C
MONTHLY COMPUTATION OF CAPITAL ADEQUACY REPORT

1) LEVERAGE CAPITAL RATIO:
Share Capital (Paid Up)
Share premium
General reserve
Retained earnings-Prior years
Net income (loss )-Current period
Less: Investment in unconsolidated subsidiaries
Total equity
Total Assets-Book amount
Add: Provisions for loan losses ( general only)
Less: Revaluation reserves (fixed assets)
Total assets (adjusted)
2) RISK-BASED CAPITAL RATIOS:
Share premium
General reserve
Retained earnings- Prior years
Net income (loss)-Current period (60%)
Less: Investment in unconsolidated subsidiaries
Core Capital
Add: Revaluation reserves (fixed assets)
Provisions for loan losses ( general only)
Total Capital

RISK BASED ASSETS	Amount (MK'000)	Risk Weight	Risk Weighted Assets
Currency & coin (domestic and foreign)
Balances with Reserve Bank of Malawi
Balances with other banks (excl. resid. maturity > 1 yr)
Cheques in the course of collection
Malawi Government treasury bills
Other securities
Loans to or guaranteed by Malawi Government
Loans secured by cash deposits

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RISK BASED ASSETS	Amount (MK '000)	Risk Weight	Risk Weighted Assets
Loans guaranteed by OECD incorporated banks
All other loans
Fixed assets
All other assets
Contingent claims
Claims to or guaranteed by Government
Claims with cash collateral
Direct credit substitutes (guarantees, acceptances, etc.)
Transaction related contingency ( perf. bonds, standbys )
Documentary credits etc (trade related & self liquidating)
Other commitments with maturity of over 1 year
Similar commitments of up to 1 year or which can be conditionally cancelled
TOTAL RISK-BASED ASSETS
Risk-Based Capital Ratio
TOTAL Risk-Based Ratio

FORM—D
ASSET CLASSIFICATION REPORT

NAME OF INSTITUTION:..................................................................................................
MONTH ENDING:..............................................................................................................
CLASSIFIED ASSETS.......................................................................................................

Assets	Standard	Special Mention	Substandard	Doubtful	Loss	Total
	0%	20%	50%	75%	100%
Credit facilities
Securities
Real Estate Owned
Other Assets
Total Assets
Provision for Loan Loss
Net Assets

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Past-Due Assets: Report the total amount outstanding for each asset class.

Assets	Past Due 8-29 days (memo item) (1)	Past Due 30-59 days (2)	Past Due 60-89days (3)	Past Due 90 or more days (4)	Total Past Due ((2)+(3)+(4))
Credit Facilities
Other Assets
Total	—	—	—	—	—

Charge-offs and Recoveries

Asset	Charge-Offs	Recoveries	Net Position
Credit Facilities
Other Assets
Total	—	—	—

Changes in Allowance for Loan Loss

	Amount K'000
Balance from previous report
Recoveries	—
Charge-offs	—
Current provisions for losses	—
Prior period adjustments	—
Ending balance	—

THIRD SCHEDULE
FORM—A
PORTFOLIO QUALITY REPORT

NAME OF INSTITUTION:..................................................................................................
MONTH / QUARTER ENDING:.......................................................................................

PART I—PORTFOLIO AT RISK

	Current month	Previous month
CLIENT POPULATION
1. Number of new borrowers
2. Number of existing borrowers
3. Total number of borrowers
DEPOSITORS
4. No. of Savings Accounts
5. No. of Time Deposit Accounts
Total

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	Current month	Previous month
PORTFOLIO STATUS
6. No. of loans disbursed
7. Value of loans disbursed (K'000)
8. No. of loans outstanding
9. Value of outstanding loan portfolio (K'000)
10. Average loan amount
11. Average loan term (in weeks)
12. Loans written off (K '000)
13. Loans recovered (K '000)
14. Portfolio at risk *(K'000)
*Portfolio at risk is calculated as amount due not repaid for over 60 days or more divided by the value of loans outstanding

PART II—AGING REPORT

	Number of Loans	Outstanding Balance	Minimum Provision (%)	Provision Amount (Kwacha)	Compulsory Savings/LIF	Required Provision
Current	—	—	0%	—	—	—
Overdue for 30 days or more but less than 60 days	—	—	20%	—	—	—
Overdue for 60 days but less than 90 days	—	—	50%	—	—	—
Overdue for 90 days but less than 180 days	—	—	75%	—	—	—
Overdue for 180 days and above	—	—	100%	—	—	—
Rescheduled loans	—	—		—	—	—
Overdue for 30-59 days	—	—	20%	—	—	—
Overdue 60-89 days	—	—	50%	—	—	—
Overdue 90-179 days	—	—	75%	—	—	—
Overdue 180 days and above	—	—	100%	—	—	—
Total	—	—	—	—	—	—

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PART III—PROVISIONS
SPECIFIC PROVISIONS

A provision is established against a presently identified loan or probable loss. Should the loan improve in status, its provision may be eliminated or reduced. If a loan is classified as a loss it shall be written off from the books of the institution.

	Year to Date	Corresponding Quarter	Prior Year
Beginning balance
Transfer to provisions
Gross charge-offs (loan losses)
Recoveries on prior charge-offs
Other entries (describe)
Ending balance

PART IV—INTEREST IN SUSPENSE

For all value-impaired assets, including assets that are adversely-classified and assets that are 60 days or more past-due

	Year to Date	Corresponding Quarter	Prior Year
Opening Balance
Add: Current interest in suspense
Less: Write-offs
Ending balance

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PART V—CHARGE-OFFS AND RECOVERIES BY SECTOR

Show, in the schedule below, gross amounts charged-off and gross recoveries on such charge-offs by sector, for the year-to-date in the current financial year. The totals must agree with gross provisions established in the period and reductions due to improved status, again in the year-to-date column of the Specific Provisions in Part I of this Schedule. Year-to-date for the current financial year (K'000s)

Sector	Charge-off	Recoveries	Net Position
1. Agriculture	—	—	—
2. Manufacturing	—	—	—
3. Trade and Commerce	—	—	—
4. Transport and Utilities	—	—	—
5. Building and Construction	—	—	—
6. Others	—	—	—
7. Total	—	—	—

PART VI—SUPPLEMENTARY DATA ON NON-PERFORMING ADVANCES (K'000)

Sector	Total Outstanding	Non-performing as per definition	Percentage of Non-Performing
1. Agriculture	—	—	—
2. Manufacturing	—	—	—
3. Trade and Commerce	—	—	—
4. Transport and Utilities	—	—	—
5. Building and Construction	—	—	—
6. Others	—	—	—
7. Total	—	—	—

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	Demand	Call	Savings	Time	Certificate of Deposits	Total
	Total Amount	of which FCDAs	Total Amount	of which FCDAs	Total Amount	of which FCDAs	Total Amount	of which FCDAs	Total Amount	of which FCDAs	Total Amount	of which FCDAs
Deposits of Residents
1. Government
2. Parastatal
3. Private
4. Individuals and households
Total deposits of residents
Deposits of non-residents
Borrowed funds
Total Deposit of borrowed funds

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FORM—B para. 8(1)(b)
STATEMENT OF DEPOSITS

FORM—C para. 8(1)(c)
STATEMENT OF OFF BALANCE SHEET ITEMS

NAME OF DMFI:..................................................................................................................
FINANCIAL YEAR:...........................................................................................................
Statement of Off Balance Sheet Items
END DATE:.........................................................................................................................

1 Contingent Liabilities	AMOUNT IN K'000'
a. Guarantees
b. Letters of Credit
c. Assets pledged as collateral security
d. Other
Total Commitments
2 Commitments
a. Arising out of sale and option to repurchase transactions
b. Credit/Debit Cards
c. Foreign exchange and interest related contracts
d. Other
Total commitments
3 Unused commitments
a. Foreign guarantees
b. Local guarantees
c. Bankers acceptances
d. Other
Total unused commitments
4 Allowances for loan losses on acceptances and off balance sheet items included in other liabilities
5 Total off balance sheet items (Net of allowances for losses)

We declare that this return, to the best of our knowledge and belief is correct.
Name of Authorising Officer................................................................................................
sign......................................................date......................................................................
Name of Counter signing Officer.......................................................................................
sign......................................................date......................................................................

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Made this 21st day of July, 2014.

(FILE NO. ST/2/120)

C. S. R. CHUKA
Registrar of Financial Institutions

Printed and published by THE GOVERNMENT PRINTER, Lilongwe, Malawi—3766—(Price K2,500.00)