ANNUAL REPORT 2017 BRAC IN MYANMAR ANNUAL REPORT

Transcription

1 ANNUAL REPORT 2017 BRAC IN MYANMAR 2017 ANNUAL REPORT

2 If you were to describe this world, which one of the following would you pick? It is home to magic, art, beauty, and tens of thousands of years of human talent. Or would you say, even though it may be true, that our world is where we live, but it is a place that doesn t work for everyone? Our world is our playground, a platform for the creativity of all seven billion of us. Sometimes it s hard to believe that a world that works for all of us can be possible. But the opportunities are all around us. While we all hope for a better future for our world, many of us are building it. If you are a builder, we are betting on you. The changemaker The activist The hero The mentor 45 years ago, we started building a world we all want to live in. We started in Bangladesh. We listened and learnt, failed and got up again. We never stopped trying. And we never will. We trust in people, and we take on the impossible, every day. Changing systems of inequity. Turning potential into skill. Ready to go to the end of every last mile, where there are no other signs. It takes us all to build a world that works for us all. We listen, pilot, perfect and scale. Our DNA is to build. As the sun rose this morning, hundreds of thousands of builders rose with it. Teachers across eight countries opened the colourful doors of the world s biggest secular private education system. 65,000 artisans picked up their needles and started weaving traditional art into beautiful clothing. Credit officers in one of the world s largest microfinance institutions sat down with women in the remotest corners of seven countries. Whoever you are, wherever you are, doing good is everyone s business. We have never faced bigger challenges but we have never been more ready. Join the world s biggest family. Small is beautiful, scale is necessary.

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4 BUILDING A WORLD THAT WORKS FOR ALL OF US We act as a catalyst, creating opportunities for people living in poverty to realise their potential. We specialise in piloting, perfecting and scaling innovations to impact the lives of millions. We were born in Bangladesh, are almost completely self-sustainable through our own network of social enterprises and investments, and operate in 11 countries across Asia and Africa. VISION, MISSION AND VALUES A world free from all forms of exploitation and discrimination where everyone has the opportunity to realise their potential. Empower people and communities in situations of poverty, illiteracy, disease and social injustice. Our interventions aim to achieve large scale, positive changes through economic and social programmes that enable women and men to realise their potential. Integrity Innovation Inclusiveness Effectiveness SOCIAL DEVELOPMENT Eliminating extreme poverty, Expanding financial choices, Employable skills for decent work, Climate change and emergencies, Gender equality, Universal healthcare, Pro-poor urban development, Investing in the next generation. Country offices: Afghanistan, Bangladesh, Liberia, Myanmar, Nepal, Pakistan, Philippines, Sierra Leone, South Sudan, Tanzania, Uganda SOCIAL ENTERPRISES Solution for social challenges and surplus for greater impact: Initiatives that engage individuals, micro and small enterprises as suppliers, producers and consumers. INVESTMENTS Socially responsible companies that assist us in our mission. Our network of investments help us strive towards the goal of self-sustainability. BRAC UNIVERSITY An educational institution's goal is not only to provide the highest quality teaching, but also to inculcate the values essential for tomorrow's leaders. The journey starts by building a high calibre and supportive faculty and administration team who are capable of teaching the most challenging and up-to-date educational programmes, and empowering them with knowledge and life skills so that they can take on the challenges of building themselves and a better nation. STICHTING BRAC INTERNATIONAL HUMANITARIAN RESPONSE We have been providing life-saving services to forcibly displaced Myanmar nationals through a multi-sector response since the influx began in September We are working closely with the government, local and international NGOs and other stakeholders through the Inter Sector Coordination Group. AFFILIATES BRAC USA BRAC UK 4 Annual Report 2017 Annual Report

5 CONTENTS 07 Chairperson s foreword 08 Letter from the Executive Director 09 Message from the Country Representative 10 BRAC across the world 12 Emergency preparedness and response 14 Microfinance 16 Bamboo sisters 17 A baker s story 18 Building dreams 19 Governance and management: BRAC International 21 Governance, management: BRAC in Maynmar, Development partners 22 Country map 23 Financials CHAIRPERSON S FOREWORD Over recent years, significant investments have been made to ensure the survival and optimal development of children during the first decade of life. Globally, the under-five mortality rate has decreased significantly. Around 20,000 fewer children died every day in 2016 than in However, this progress has not been universal. Inequities in child mortality between highincome and low-income countries remain large. Reducing these inequities across countries and saving more children s lives by ending preventable child deaths are important priorities. We also need to focus on the second decade of children s lives. A safe, healthy passage from adolescence into adulthood is the right of every child. To fulfil this right, families and societies need to ensure that adolescents and youth acquire the knowledge and skills required to lead productive and fulfilling lives. Calls for investment in children and young people have increased dramatically in recent years. More and more countries agree that policies, which help young people fulfil their potential, also drive economic development. Challenges persist in both the education and skills sectors. We need to ensure that all children complete their primary schooling and go on to secondary school. Additional efforts are required to empower girls to believe that they are capable of doing everything boys can. The lack of improvement in the quality and outcomes of education is another concern. The global youth unemployment rate stands at 13 per cent, which is three times higher than the figure for adults. This lack of job opportunities is one of the issues of greatest concern. Globalisation and technology are reshaping the lives of young people worldwide. 85 per cent of jobs that today s learners will be doing in 2030 do not exist now. There is an urgent need to redesign curricula for secondary, vocational and higher education to develop skills and competences that will meet the needs of the future. Our goal should be to create adaptable learners who are capable of reengineering their own skills and capacities in disrupted economies. Attention must also be paid to developing children and young people s human qualities and values, such as empathy, cooperation and integrity. Political instability and conflict are leaving young people vulnerable to violence, disrupting their schooling and access to basic health services and, in many cases, inflicting psychological trauma. We must accelerate efforts to protect children and young people from violence, drug abuse, conflict and poverty, to enable them to lead more productive lives and contribute to society. Sir Fazle Hasan Abed, KCMG Founder and Chairperson Annual Report

6 LETTER FROM THE EXECUTIVE DIRECTOR MESSAGE FROM THE COUNTRY REPRESENTATIVE There are more young people today than at any other time in human history. Children and young people make up almost 40% of the world s population, with specific needs and aspirations for the future, which poses both immense opportunities and challenges. While we as a global community have made significant progress in ensuring a better life for all, there is always more work to be done. One in five children, adolescents and youth is out of school. That is 263 million children and youth across the world. Today s young people will be tomorrow s leaders - in our families, in our workplaces, in our communities. Over a third of the Sustainable Development Goal (SDG) targets highlight the role of young people and the importance of their empowerment, participation, and wellbeing. The SDGs highlight that young people are a driving force for development however they need to be provided with the skills and opportunities needed to reach their potential. Therefore we at BRAC International have shifted our strategy to focus on ensuring children and youth have better opportunities. and 15 million girls of primary-school age will never enter school. We are building schools only for girls in Afghanistan and Pakistan, places where it is extremely difficult for them to go to school. In Sub-Saharan Africa alone, 14.2% of the youth population is unemployed, representing massive untapped potential for growth. Everyone should be able to contribute and reap development dividends and our ELA programme ensures just that for our outof-school adolescent girls. With specialised skills and entrepreneurial lessons, our programme enables them to unlock their potential and contribute to society. We give our girls access to microloans so they can start their own enterprises. Our newly-launched Skills Development Programme in Nepal connects children and youth to apprenticeships and equips them with the skills needed to not only affect change in their own lives but also in the communities they are a part of. Our extraordinary strides in the field of development mean that we are ready to provide a better, more equitable life for our children. As our future change-makers, children hold incredible potential for innovation. It is our responsibility to give them what they deserve. We cannot let their potential go unrealised. The year 2017 has been an exciting year for BRAC team in Myanmar! I am enthusiastic of the great work done so far and for the new challenges ahead was a great year for our microfinance programme. We reached almost 63,000 women in 5 regions of Myanmar and our outstanding loan portfolio grew by 154% since 2016, reaching around USD 8.9 million. We are proud of the great results achieved and we are confident that our programme will continue to expand, serving an increasing number of women in need and offering credit to those left out from the formal financial sector. We are highly committed in promoting inclusive finance that could reach the most excluded segments of the society. For this reason, we launched two new initiatives aimed at including vulnerable groups. We also continued the implementation of our disaster risk reduction and resilience building programme to strengthen our organisational capacity for humanitarian response by building safer and more resilient communities in Myanmar. The project will be followed by further phases in 2018 to implement a local model of building disaster preparedness and emergency response capabilities of local actors, institutions, vulnerable communities. We designed a new strategy to expand our programmes to include agriculture, health, nutrition and youth. I look forward to continuing this incredible journey for realising, in Myanmar and all over the world, the dream that animates all of us, part of BRAC family: a world free from all forms of exploitation and discrimination where everyone has the opportunity to realize their potential. We have invested in Early Childhood Development programmes in Tanzania, Uganda and Liberia. A dollar invested in early childhood development yields a sevenfold return in the future. Having a strong foundation from an early age leads to more productive citizens in the future. We believe education is a universal right and no one, no matter the circumstance, should be left behind. 130 million girls between the age of 6 and 17 are out of school Faruque Ahmed Executive Director BRAC International First, we started a project using financial diaries to collect data from rural women with the aim of gathering insights of their financial needs and thus adapt our financial services. Second, we initiated a pilot project with customised credit to people with disabilities. We are poised to become the pioneer in targeting people with disabilities through truly inclusive microloans. ATM Tariqul Islam, Ph.D. Country Representative BRAC in Myanmar 8 Annual Report 2017 Annual Report

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8 EMERGENCY PREPAREDNESS AND RESPONSE WHAT WE DO Our main approach is to build local capacity. In partnership with the Bill & Melinda Gates Foundation, BRAC International and BRAC Myanmar are piloting a model for developing local emergency preparedness and response capacities. Through a participatory, community-based inclusive approach, our project will work with schools, communities and regional governments in Bago and Yangon to strengthen humanitarian localization. HIGHLIGHTS Monitored monthly country safety and security situations and developed 46 weekly safety and security reports Updated Country Risk Assessment and Multi Hazard Risk Assessment on quarterly basis Organized the thematic workshop on Myanmar Action Plan on DRR (MAPDRR) and People Most at Risk together with UNICEF and five other INGOs. Conducted a Safety and Security Risk Management training to 40 branch managers of BRAC Myanmar Microfinance Company Limited. We have provided basic first aid training to all branch managers with support from external first aid trainers. Myanmar is exposed to multiple natural hazards. The coastal regions are exposed to cyclones, storm surges, tsunami and strong wind while major parts of the country are at risk from earthquakes and fires. Heavy rainfall induced flooding is a recurring phenomenon across the country while some parts of the country are exposed to landslides and droughts. Cyclone Nargis in 2008 claimed 140,000 lives. We established an emergency preparedness and response programme in 2016 to strengthen our organisational capacity on emergency response in order to build safer and more resilient communitie Conducted workshop to draft the disaster preparedness plan for BRAC Myanmar with 30 representatives from UNs, INGOs and local NGOs. Contributed to the Myanmar version of the Core Humanitarian Standards Became a member of the Basic Education Sub Sector Working Group on Education in Emergency (EiE). Participated in key national workshops and provided technical inputs to: National Earthquake Preparedness and Response Plan, National WASH strategy, 4th Regional Moonson Forum, Calculating Costs and Benefits of Community Driven Resilience Programmes in Myanmar, Urban Disaster Risk Reduction (DRR). 12 Annual Report 2017 Annual Report

9 MICROFINANCE WHAT WE DO We operate with an integrated development approach for sustainable poverty reduction by combining both economic and social development. Our microfinance activities are therefore a part of a broader, holistic approach to development, called the microfinanceplus approach. We offer inclusive financing to people living in poverty in Myanmar through two different types of services: microfinance group loans and individual loans for small enterprises. Currently we are working to develop products related to disability inclusive microfinance and women enterprise development. Complementing to this, we provide financial literacy training and have instituted a range of client protection measures that distinguish us for our commitment towards client-centric financial service delivery. HIGHLIGHTS Operating 42 branches in five regions Expanded the microfinance programme in two regions (Sagaing Region and Nay Pyi Taw Council area) In 2017, disbursed microloan USD million and number of loans disbursed 65,085 Provided collateral free small enterprise loan USD 270,558 and number of loans disbursed among the entrepreneurs 168 Since 2016, increased principal loan outstanding by 58% and principal loan outstanding balance million as on December is USD 9 Launched the digital financial diaries project to explore microfinance product diversification. Started the people with disabilities project to address specific needs and offer customized social & financial services to people with disabilities. Initiated big data analysis, digital credit scoring and mobile money channel to small holder farmers Myanmar has some of the lowest levels of financial inclusion. More than 70% of adults do not have access to formal financial institutions (World Bank, 2016). We started our microfinance programme in 2014 to provide inclusive financial access to households living in poverty in both rural and urban Myanmar. We create employment and income opportunities for people living in poverty, with particular emphasis on women who have been left out of mainstream financial systems. Become the member of Job creation Sub Sector Working Group 14 Annual Report 2017 Annual Report

10 THE BAMBOO SISTERS A BAKER S STORY Daw Myint Kyi, lives in Htauk Kyant, located in the outskirts of Yangon region. She runs a bamboo baskets weaving enterprise. She lives with her family and she has two sons. The bamboo baskets enterprise is her family business which started over 50 years ago. The technique and skills of making baskets are part of the family treasure as Daw Myint Kyi s father taught her and her sisters how to make the baskets when the girls were very young. Now, the craft of bamboo basket weaving is handed down from one generation to another and the two sisters run the business together. The sisters buy the bamboo from Bayintaung market in Yangon and handcraft beautiful baskets that are sold at a market in Yangon. They usually collect and accept the orders, and then send the baskets to the markets. Her father said I started this business in It became a family business and my daughters didn t need to go outside for income. They can work from home and get an income that we can all survive on. The business is better now. Daw Myint Kyi said I am so happy about this business because I don t need to go outside and I can work with my family at home. My sons are not interested in this business. They want to work outside. The business generates around 10 lakhs (USD 740) per month. The flow of income is highly dependent on the number of baskets they can produce. Sometimes we cannot make too much because of health issues. However, having a business on our own is better because we are able to plan our work and take decision independently she said. Daw Myint Kyi invested and strengthened the business by borrowing from BRAC. Now she has received her third loan and she wants to get a fourth loan to invest in the purchase of higher quantity raw materials at a lower price for handcrafting the baskets. I am comfortable to take loan from BRAC Myanmar. We have good relationship and I am familiar with BRAC Myanmar. The staff is friendly and kind! Daw Myint Kyi said. My Name is Ma Khin Nwe Aye and I am from the Bago region. I never completed school and am not very educated. However, I always enjoyed baking and I did not let my lack of education stop me from pursuing my dreams. I started a small bakery business with my husband and I am doing well enough to be able to support my children. I have three children and they are all are in school. The eldest one is 12 years old, the second one is 8 years and the youngest one is 5 years old. I want to provide my children with education. Although I want them to be doctors and engineers, I will accept and support what they want to be. We started the business right after we got married. I am happy to say that we are doing so well that we need funding to expand our business. I want to attract more customers and I want to start producing packaged bakery. I want to extend my business with machine for packaging. When the business extends, it directly affects our children education and future. Initially, I borrowed 150,000 Kyats (USD 113) from BRAC in Now I borrowed 20 lakhs Kyats (USD 1,500). I have nine employees at my bakery business. I will extend my bakery business with the next loan by purchasing a machine for packaging which will reduce the time needed and human resource, and production will be high which will generate more profit. The organisation which provides loans with the low interest rate helps communities to develop their businesses. BRAC not only provides financial support but also indirectly supports other sectors like children s education, health and other essentials. 16 Annual Report 2017 Annual Report

11 BUILDING DREAMS GOVERNANCE AND MANAGEMENT In Myanmar, women are starting their own businesses and earning money for their family. I immediately joined my family business after graduating at 26. My family was in the wood selling and production business and I was always keen on joining. However, after a few years, I started my own business with my husband. My husband and I started selling materials for building houses three years ago. My neighbourhood was experiencing a boom and there are many factories nearby as well. We did really well in the first years but now we are thinking about expanding our business into selling construction materials as well. Unfortunately, it is extremely difficult for young entrepreneurs like my husband and I to get access loans for business expansion. My family has helped all they can but we needed additional funding to make the expansion happen. Luckily for us, that is around when BRAC started offering small enterprise loans. The terms were really good for us and the monthly instalments also worked for us. We borrowed 30 lakhs Kyats (USD 2,300) as a first loan and used this money to expand into selling construction materials. We are not planning on stopping there and am already planning another loan to expand the business further. I am extremely grateful organisations like BRAC who are helping our economy by letting entrepreneurs like us get access to credit. I believe thanks to loans like this, the economy in Myanmar will grow and we will spur innovation. BRAC INTERNATIONAL BRAC International is registered as Stichting BRAC International in the Netherlands. CORPORATE GOVERNANCE In line with the guidelines for corporate governance in the Netherlands, the Board decided to adopt a two-tier governance structure to create a clear division between executive and supervisory responsibilities from the end of SUPERVISORY BOARD Stichting BRAC International has a ten (10) member Supervisory Board. The Supervisory Board is charged with the overall supervision of the policies pursued by the Management Board and its associated institutions and/ or entities. The Supervisory Board members are appointed by co-optation. The period of membership is governed by the constitution and there is no board remuneration applicable for the Supervisory Board. The current members of the Supervisory Board are: Chairperson Sir Fazle Hasan Abed, KCMG Members Ms. Sylvia Borren Dr. Muhammad Musa Ms. Parveen Mahmud Dr. Ahmad Mastaqur Raza Chowdhury Dr. Debapriya Bhattacharya Ms. Shabana Azmi Mr. Shafiqul Hassan Ms. Irene Khan D r. Faw zi a R a s h e e d MANAGEMENT BOARD The Management Board is charged with the daily management, the preparation of the budget, the financial statements and the long-term strategy plan. The Supervisory Board has stipulated specific restrictions that require its approval. The Management Board is appointed by Supervisory Board and their performance is reviewed annually. The Management Board consists of the following members: Mr. Faruque Ahmed, Executive Director Mr. Saif Md Imran Siddique, Director Mr. Shameran Abed, Director Ms. Lamia Rashid, Director The gender diversity in the management board is 75/25. The Foundation is trying to bring in more female participation into its Management board. The management board meets on a weekly basis. BRAC INTERNATIONAL HOLDINGS BV BRAC International Holdings BV is a wholly owned subsidiary of Stichting BRAC International and was incorporated in BRAC International s microfinance programmes, social enterprises and investment companies are consolidated under this wing. The social programmes currently supporting the enterprises include seed production and training centres. 18 Annual Report 2017 Annual Report

12 BRAC International Holdings BV has the role to consolidate the financial results of all country operations in six countries. The consolidated financial statements include the financial data of the stand-alone parent organisation, its group companies and other legal entities over which the foundation has control. In line with the guidelines for corporate governance in the Netherlands, the Board decided to adopt a two-tier governance structure to create a clear division between executive and supervisory responsibilities from the end of SUPERVISORY BOARD The Supervisory Board is charged with the overall supervision of the policies pursued by the Management Board and its associated institutions and/or entities. The Management Board is charged with the daily management, the preparation of the budget, the financial statements and the long-term strategy plan. The Supervisory Board has stipulated specific restrictions that require its approval. The Supervisory Board exists out of the following members: Sir Fazle Hasan Abed KCMG, Chair Dr. Muhammad Musa, Member Ms. Parveen Mahmud, Member Ms. Sylvia Borren, Member MANAGEMENT BOARD The Management Board consists of the following members: Managing Director Mr. Faruque Ahmed Director Mr. Hans Eskes In the discharge of their duties, the Directors shall be guided by the interests of the Company and the business carried on by the Company. The Management Board may decide to appoint one or more authorised signatories and to determine their authority and title. GROUP FINANCE AND AUDIT COMMITTEE Composition of the present finance and audit committee is as follows: Ms. Parveen Mahmud, Chair Dr Muhammad Musa, Member Ms. Sylvia Borren, Member Mr. Faruque Ahmed, Member Mr. Hans Eskes, Member Mr. Saif Md Imran Siddique, Secretary of the Committee The primary function of the finance and audit committee is to assist the governing board in fulfilling its responsibilities on the: Financial reporting and budgeting processes System of internal controls and risk assessment Compliance with legal and regulatory requirements Qualifications, independence, and performance of the external auditors Qualifications, independence, and performance of the internal audit function LOCAL BOARDS Each country entity has a local board. We pursue microfinance and development activities through separate entities in countries where it is required. The local board members are appointed by Stichting BRAC International s board. The business of the local entities is managed by these local boards. Further details of the roles of the local board are available in the respective incorporation documents of these entities. ADVISORY COUNCIL In 2015, BI decided to form advisory councils to strengthen governance, support advocacy at the national level and enhance credibility. The council members, who are country nationals, provide the country leadership with advice and support on standards and policies, and the development and implementation of programmes. They advise on key external developments and trends nationally, and promote BRAC s mission through effective and strategic working relationships with key stakeholders and civil society partners in the countries. They also support information sharing and relevant advocacy on behalf of BRAC. ACCOUNTABILITY AND TRANSPARENCY The internal audit department conducts periodical audits at all our cost centres on a sample basis. Audits take place at least once a year and twice or more in locations and on programmes where a closer watch is warranted. In addition, special investigations are conducted in case of fraud or irregularities that may be detected. A whistle blower policy is in place and HR takes actions as and when required. External audit of Stichting BRAC International, BRAC International Holdings BV and all of our legal entities are undertaken annually. Financial transparency is ensured by BRAC International s finance and accounts division, which prepares financial statements following the International Financial Reporting Standards and the laws of relevant countries. The summary of all audits and investigations are submitted to the audit and finance committee on a half yearly basis. 20 Annual Report 2017 Annual Report

13 BRAC IN MYANMAR GOVERNANCE BRAC Myanmar Microfinance Company Ltd Shameran Abed Managing Director S N Kairy Director Faruque Ahmed Director ATM Tariqul Islam Ph.D- Country Representative MANAGEMENT ATM Tariqul Islam Ph.D- Country Representative Sharmin sultana - Head of Finance Md. Sazaduzzaman - General manager, Microfinance Lian Huai - Head of Human Resource and Training Md. Shariful Islam - Head of Internal Audit Aung Koko - Emergency Response Coordinator DEVELOPMENT PARTNERS BRAC IN MYANMAR 22 Annual Report 2017 Annual Report

14 FINANCIALS FINANCIAL HIGHLIGHTS Net Income BRAC Myanmar Microfinance Company Limited completed its fourth years of operation in Net profit before tax was USD 35,094 as against net loss before tax USD 206,702 in Interest income earned during the year is USD 2,151,248 as against USD 1,358,897 in Operating expenses Total operating expenses for the year was USD 2,071,585 as against USD 1,636,738 in 2016 showing an increase 27%. In 2017 an additional 7 branches were opened resulting the total number of branches to 41. Provisions for Impairment losses This year amount charged for impairment of loans is USD 66,450 as against 83,906 in 2016 showing an decrease of 21%. Total reserve as against impairment in 2017 was USD 161,508 and USD 109,831 in 2016 representing 1.78% of gross portfolio. Portfolio at Risk (PAR>30) is 0.79%. Financial Position In 2017 the company s total assets increased by 45% to USD 10,003,967. Loans and advances to customers increased by 59% and is now 89% of total assets. PERFORMANCE REVIEW Income Statement USD USD USD USD USD Operating Income 2,173,129 1,513, ,058 29,824 - Net profit/(loss) before tax 35,094 (206,702) (432,010) (363,346) (134,775) Financial Position USD USD USD USD USD Total Asset 10,003,967 6,908,676 3,497, ,478 90,907 Net Equity 5,568,553 5,196,844 2,645, ,612 (30,175) Loan to Customer (net) 8,951,932 5,644,011 2,178, ,042 - Cash at Bank 756,356 1,048,668 1,132, ,110 8,317 Contribution to Government Exchequer USD USD USD USD USD Income Taxes Withholding tax 66,974 23,757 9,930 2,185 - Social Security and pension 24,881 16, Annual Report

15 Returns and ratio Return on Asset 0.42% -4% -20% -48% - Cost to income 112% 120% 186% 1318% - BRAC MYANMAR MICROFINANCE COMPANY LIMITED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 GENERAL INFORMATION Operational Statistics Total Borrowers 50,977 38,270 16,837 2,433 - PAR> % 0.02% DIRECTORS Mr. Shameran Abed - Managing Director Mr. Faruque Ahmed - Director Mr. Shib Narayan Kairy - Director OPERATING INCOME VS NUMBER OF BORROWERS ADMINISTRATORS Mr. ATM Tariqul Islam - Country Representative (Appointed on 2 October 2017) Mr. Kazi Faisal Bin Seraj - Country Representative (Resigned on 27 May 2017) Operating Income Numbers of Borrowers PRINCIPAL PLACE OF BUSINESS 168. Kyun Shwe Myaing Lane 2 Bogyoke Ywa, Thuwunna Thingangyun Township Yangon Myanmar AUDITORS Khin Su Htay & Associates Limited Certified Public Accountants Building No. C 1, Room No. 005 (Ground Floor), Hninnsi Street Yuzana Highway Complex, Kamayut Township Yangon, Myanmar BANKERS KBZ BANK MYANMA ECONOMIC BANK No.33 to 49, Corner of Bank St & Branch (1) Mahabandoola Garden St Pansodan St. Kyauktada Township Kyauktada Township Yangon Yangon Myanmar Myanmar Annual Report Annual Report

16 BRAC MYANMAR MICROFINANCE COMPANY LIMITED DIRECTORS REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 BRAC MYANMAR MICROFINANCE COMPANY LIMITED DIRECTORS REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 The directors have pleasure in submitting their report and the audited financial statements of the company for the year ended 31 December 2017, which disclose the state of affairs of BRAC Myanmar Microfinance Company Limited. a) Registration BRAC Myanmar Microfinance Company Limited is a wholly owned subsidiary company of BRAC International Holdings B.V., a limited liability company registered under the laws of the Netherlands, with its registered office in The Hague. BRAC Myanmar Microfinance Company Limited was incorporated as a limited liability company under the company Act on 15 October 2013 with its registration number 559 FC/13-14 and registered office in Yangon, Myanmar. The objective of the company is to operate microfinance programme in Myanmar with a mandate to contribute towards alleviating poverty and attaining Sustainable Development Goals (SDGs) through promoting employment and income generating activities for the poor women. b) Vision A world free from all forms of exploitation and discrimination where everyone has the opportunity to realise their potential. c) Mission The Company s mission is to empower people and communities in situations of poverty, illiteracy, disease and social injustice. The interventions aim to achieve large scale, positive changes through economic and social programmes that enable men and women to realize their potential. d) Our values Innovation- the Company has been an innovator in the creation of opportunities for the poor to lift themselves out of poverty. We value creativity in programme design and strive to display global leadership in groundbreaking development initiatives. Integrity- the Company values transparency and accountability in all our professional work, with clear policies and procedures, while displaying the utmost level of honesty in our financial dealings. The Company holds these to be the most essential elements of our work ethic. Inclusiveness- the Company is committed to engaging, supporting and recognizing the value of all members of society, regardless of race, religion, gender, nationality, ethnicity, age, physical or mental ability, socioeconomic status and geography. Effectiveness- the Company values efficiency and excellence in all our work, constantly challenging ourselves to perform better, to meet and exceed programme targets, and to improve and deepen the impact of our interventions. e) Principal activities The Company provides Microfinance services to improve the livelihood of poor people in over 37 townships in Myanmar including extending loan facilities. The company started a new product called Small Enterprise Programme (SEP) giving individual loans to clients. f) Financial performance The Company's performance during the year ended 31 December 2017 is as follows: - Interest income on loans increased by around 74% from MMK 1,686 million in 2016 to MMK 2,927 million in Loans and advances to customers increased by 58% from MMK 7,704 million in 2016 to MMK 12,192 million in Loan disbursement increased by 70% from MMK 15,938 million in 2016 to MMK 27,021 million in Loan realisation increased by 103% from MMK 11,026 million in 2016 to MMK 22,478 million in Operating expenses increased by 39% from MMK 2,031 million in 2016 to MMK 2,819 million in Total asset increased by 44% from MMK 9,430 million in 2016 to MMK 13,625 million in During the year, the company had a net profit of MMK 49.5 million ( 2016-loss of MMK million). g) Results from operation The results for the Company's operation for the year ended 31 December 2017 are set out on Page 36. h) Composition of Directors The directors who served during the year and up to the date of this report are set out on Page 28. i) Directors' benefits No director has received or entitled to receive any benefits during the financial year. j) Corporate governance The directors are committed to the principles of good corporate governance and recognize the need to conduct the business in accordance with generally accepted best practice. In so doing the directors therefore confirm that: The Board of Directors met regularly throughout the year; They retain full and effective control over the Company; The Board accepts and exercises responsibility for strategic and policy decisions, the approval of budgets and the monitoring of performance; and They bring skills and experience from their own spheres of business to complement the professional experience and skills of the management team. In 2017 the company had three directors. The Board continued to carry out its role of formulating policies and strategies of the Company, reviewing the business plan, ensure that the accounting system is maintained in accordance with acceptable standards, the books of the Company are kept properly, and that accounts are checked by authorized auditors, as well as recruitment and development of key personnel. k) Risk management The board accepts the final responsibility for the risk management and internal control system of the Company. The management ensures 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 Company s assets; Compliance with applicable laws and regulations; The reliability of accounting records; Business sustainability under normal as well as adverse conditions; and Responsible behaviours towards all stakeholders. The efficiency of any internal control system is dependent on the strict observance of prescribed measures. There is always a risk of noncompliance of such measures by staff. Whilst no system of internal control can provide absolute assurance against misstatement or losses, the Company s system is designed to provide the Board with reasonable assurance that the procedures in place are operating effectively. l) Management structure The Company is under the supervision of the Board of Directors and the day to day management is entrusted to the Country Representative who is assisted by the heads of divisions, departments and units. The organization structure of the Company comprises of the following divisions: Annual Report Annual Report

17 BRAC MYANMAR MICROFINANCE COMPANY LIMITED DIRECTORS REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 BRAC MYANMAR MICROFINANCE COMPANY LIMITED DIRECTORS REPORT FOR THE YEAR ENDED DECEMBER 31, 2017 Micro Finance Program (MF) Finance & Accounts; Administration Internal audit; Monitoring Unit; IT and MIS; Human resources; Communications. Public Relations m) Related party transactions Related party transactions are disclosed in Note 13 and 26 to the financial statements. n) Future development plans Microfinance Program New 20 Microfinance branches shall be opened in 2018 and increasing the number of borrowers by approximately 28,000. Exploring new innovations such as mobile money to enhance service delivery. During 2018, a new disability friendly product will be designed meeting the need of people with disability. Finally, as in 2017 BRAC earned profit, very soon it will be eligible for taking voluntary savings as deposit taking institutions which would potentially help BRAC retain and attract more customers. o) Key achievement in 2017 The following are the Company s key achievements for the year: The Microfinance borrower size increased by 12,707 in 2017 (Total borrower as of 2017 is 50,977). Launched the new product named SEP, its portfolio as at 31 December 2017 is MMK 313 million. Staffs from different departments received total 38 trainings in various financial, operational and management competency issues. Training Training and development of staff capacity is one of the key priorities of the Company. This year all the Branch Accountants received hands-on training on their day to day responsibilities. All the program staffs received training as prescheduled. The Company will continue to train, re-train and develop its staff in order to improve service delivery and innovation. Medical assistance The Company reimburses medical expenses incurred by employees for medical treatment. Social security contribution All eligible employees re required to contribute National Social Security Scheme managed by Social Security Board at the rate 5% of salary maximum of MMK 15,000. As a employer BRAC pays 3% of this social security contribution on behalf of the employees. As a result of contribution to this security fund, employees get sickness benefits, maternity benefits and grant, paternity benefits and grant, medical benefits, funeral grant, and many more. s) Auditors The auditors, Khin Su Htay & Associates were appointed during the year. t) Approval of the financial statements The financial statements were approved by the directors at a meeting held on 09 March By order of the Board p) 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 Company has adequate resources to continue in operational existence for the foreseeable future. q) Gender parity In 2017, the company had a total staff of 389. The female staff are 327 and male 62. Director BRAC Myanmar Microfinance Company Limited Director BRAC Myanmar Microfinance Company Limited r) Employees' welfare Management/employee relationship There were continued good relation between employees and management for the year There were no unresolved complaints received by management from the employees during the year. New performance incentive schemes which were introduced in 2016 continued in The Company is an equal opportunity employer. It gives equal access to employment opportunities and ensures that the best available person is appointed to any given position free from discrimination of any kind and without regard to factors like gender, marital status, tribes, religion and disability which does not impair ability to discharge duties. Annual Report Annual Report

18 BRAC MYANMAR MICROFINANCE COMPANY LIMITED STATEMENT OF DIRECTORS RESPONSIBILITIES FOR THE YEAR ENDED DECEMBER 31, 2017 The company's directors are responsible for the preparation and fair presentation of the financial statements, comprising the statement of financial position at 31 December 2017, the statement of comprehensive income, the statement of changes in equity and statement of cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of Myanmar and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors' responsibilities include: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these 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. They are also responsible for safe guarding the assets of the company. Under the Companies Act of Myanmar, the directors are required to prepare financial statements for each year that give a true and fair view of the state of affairs of the company as at the end of the financial year and of the operating results of the company for that year. It also requires the directors to ensure the company keeps proper accounting records that disclose with reasonable accuracy the financial position of the company. The directors accept responsibility for the financial statements which have been prepared using appropriate accounting policies supported by reasonable and prudent judgment and estimates, in conformity with International Financial Reporting Standards and the Companies Act of Myanmar. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs and the profit and cash flow for the year ended 31 December The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. The directors have made an assessment of the company's ability to continue as a going concern and have no reason to believe the company will not be a going concern for the next twelve months from the date of this statement. The auditor is responsible for reporting on whether the annual financial statements are fairly presented in accordance with the International Financial Reporting Standards and Companies Act of Myanmar. Approval of the financial statements The financial statements, as indicated above, were approved by the board of directors on 09 March 2018 and were signed on its behalf by: INDEPENDENT AUDITOR'S REPORT To the members of BRAC Myanmar Microfinance Company Limited Opinion We have audited the financial statements of BRAC Myanmar Microfinance Company Limited ("BRAC" or also referred as "the Company"), which comprise the statement of financial position of the Company as at 31 December 2017, the statement of comprehensive income, statement of changes in equity and statement of cash flows of the Company for the year then ended and a summary of significant accounting policies and other explanatory notes. In our opinion, the financial statements of the Company are properly drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company as at 31 December 2017 and the results, changes in equity and cash flows of the Company for the year then ended. The accounting records required by the Company have been properly kept. 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 Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Myanmar, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management of the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standard (IFRSs) and for such internal control as management determines 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, management is 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 management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company s financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Director BRAC Myanmar Microfinance Company Limited Director BRAC Myanmar Microfinance Company Limited 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. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism 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 issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraudis higher than forone 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. Annual Report Annual Report

19 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s 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. BRAC MYANMAR MICROFINANCE COMPANY LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 Notes Kyats Kyats USD USD 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. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance 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 those charged with governance 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. Assets Property and equipment 4 176,531, ,658, , ,153 Intangible assets 5 86,706,537 29,866,095 63,661 21,880 Other assets 6 139,477,714 87,309, ,407 63,963 Loans to customer 7 12,192,530,997 7,704,075,269 8,951,932 5,644,011 Cash and cash equivalents 8 1,030,156,863 1,431,432, ,356 1,048,668 Total assets 13,625,403,271 9,430,342,502 10,003,967 6,908,676 Equity Share capital 9 7,332,540,000 6,696,660,000 5,383,656 4,905,978 Share money deposit ,885,345 1,320,765, , ,594 Donor grant ,747, ,612, , ,269 Retained earnings 12 (1,301,803,971) (1,351,345,357) (955,803) (989,997) Total equity 7,584,369,130 7,093,692,424 5,568,553 5,196,844 Than Tint CPA (P.A 103) Managing Director Khin Su Htay & Associates Limited 09 March 2018 Liabilities Term loan 13 3,261,228,785-2,394,441 - Related party payables 14 1,144,603, ,094, , ,209 Member savings payable 15 1,536,774,107 1,335,164,213 1,128, ,142 Other liabilities 16 98,428, ,390,958 72, ,481 Total liabilities 6,041,034,140 2,336,650,078 4,435,414 1,711,832 Total equity and liabilities 13,625,403,271 9,430,342,502 10,003,967 6,908,676 The accompanying notes form an integral part of these financial statements. Head of Finance BRAC Myanmar Microfinance Company Limited Country Representative BRAC Myanmar Microfinance Company Limited Director BRAC Myanmar Microfinance Company Limited Director BRAC Myanmar Microfinance Company Limited Annual Report Annual Report