Akiba Commercial Bank

AKIBA COMMERCIAL BANK LIMITED
REPORT OF THE DIRECTORS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2006
AKIBA COMMERCIAL BANK

HISTORY
ACB was founded in 1993 by a group of five publicly minded Tanzanians. At
that time, existing banks were not serving the needs of micro- and small-business
owners and there was a clear need for a bank that recognized the importance of
access to financial services for the low-income market. In 1997, ACB received
its operating license and was formally launched. ACB is now a full-service,
commercial bank in the Tanzanian capital city, Dar es Salaam, and in other
secondary cities in Tanzania
OWNERSHIP
The stock of Akiba Commercial Bank is privately owned by individuals and
corporate entities including the following
Akiba Commercial Bank Stock Ownership
Rank Name of Owner
1
ACCION Investments
2
ACCION International
3
Incofin
4
Netherlands Development Finance Company (FMO)
5
Stitching Hivos-Triodos Fonds
6
Stitching Triodos-Doen
7
InterConsult Limited of Tanzania
8
Parastatal Pension Fund of Tanzania
Nearly 70 Tanzanians
9
Branch Network
As of October 2010,Akiba Commercial Bank operates a network of eight (8)
branches, in the following locations
1. Main Branch - TDFL Building, Ali Hassan Mwinyi Road, Dar es
Salaam[7]
(1)

2. 2nd Dar es Salaam Branch - Dar es Salaam

3. 3rd Dar es Salaam Branch - Dar es Salaam
4. 4th Dar es Salaam Branch - Dar es Salaam
5. 5th Dar es Salaam Branch - Dar es Salaam
6. Arusha Branch - Arusha
7. Moshi Branch - Moshi
8. Mwanza Branc Mwanza
Governance
The Board of Directors of the bank comprises eight (8) individuals. The
Chairman is one of the seven (7) non-Executive Directors. The Managing
Director and Chief Executive Officer (CEO), is answerable to the Board.The
current CEO is John Lwande, appointed in 2008
Services
The services provided by this bank are as follows
The bank mainly deals with open account and provision of loans.
Market
The bank target market is personal individuals and cooperation

ANNUAL REPORT AND FINANCIAL STATEMENTS
(2)

(3)

TABLE OF CONTENTS
Report of the Directors

Statement of directors responsibilities
Report of the independent auditor
PAGE NO
1-3
4
5-6
Financial statements:
Profit and loss account
Balance sheet
Statement of changes in equity
Cash flow statement

1
10
Notes
11 34
The directors present their report and audited financial statements for the year ended
31 December 2006, which disclose the state of affairs of Akiba Commercial Bank Limited (the
Bank).
ACTIVITIES
The Bank is engaged in taking deposits on demand, providing short-term and medium term credit
facilities and other banking services and is licensed under the Banking and Financial Institutions
Act, 1991.
DIRECTORS
The directors of the Bank at the date of this report and who have served in office since
1 January 2006, except where otherwise stated, are:

Name
Nationality
Mr David Mosha
Tanzanian
(Chairman)
Mr John A. Lyale
Tanzanian
(Managing Director)
Mr Rashidi Mbuguni
Tanzanian
Ms Rose Lyimo
Tanzanian
Dr Steven Mworia
Tanzanian
Mr Marilou Van Golstein

Brouwers
Mr Frank Strappel
Dutch
Resigned in August 2006
Dutch
Appointed in August 2006
Prof William Lyakurwa
Tanzanian
Ms Rita Van Den Abbeel
Belgian
Mr Jean Pierre Imbert
France
Appointed in August 2006 (alternate to Rita)
RESULTS AND DIVIDENDS

During the year the Bank made a profit after tax of Shs 277 million. The amount required as
regulatory reserve decreased from Shs 870 million in 2005 to Shs 370 million in 2006 due to the
decrease in additional provision required in order to comply with the BoT regulations. The
decrease in this provision of Shs 467 million has been transferred back to retained earnings.
This resulted into a total increase of Shs 744 million in the retained profit for the year.
The directors propose a dividend of Shs 740 million which shall be distributed through the issue
of bonus shares.
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY REPORTING
Akibas mission is to provide appropriate financial services to the micro, small and medium size
enterprises in the most efficient manner always embracing the social and environmental interests
of all its stake holders. In our strategic plan for years 2006 to 2010, among our main focuses
include Efficiency and sustainability; Social and environmental impact and overall economic
development. Akiba has made a commitment to monitor and report on different aspects of its
sustainability performance. Information on these aspects will be included in Akibas annual
report. Akiba is involved in the Transparency and Sustainability in Finance (TSF) project that

assists micro financial institutions in the application of the Triple Bottom Line (people, planet,
profit) concept and sustainability reporting based on the Global Reporting Initiative (GRI)
Guidelines for Sustainability reporting.
CAPITAL ADEQUACY
The Bank monitors the adequacy of its capital using ratios established by the Bank of Tanzania
(BOT). These ratios measure capital adequacy by comparing the Banks eligible capital with its
balance sheet assets, off-balance-sheet commitments and market and other risk positions at a
weighted amount to reflect their relative risk.
The banks capital adequacy ratios as at 31 December 2006 are included below:
Nominal
Balance sheet
Amount
Shs000
Balance sheet assets (net of provisions)
Cash and balances with Bank of Tanzania
4,531,346
Risk weighted
Amount
Shs000
-
Treasury bills and bonds- Held to maturity
1,577,160
Loans and advances to banks
9,939,051
2,253,890
18,252,189
17,064,883
175,271
195,027
1,635,118
532,655
951,011
895,314
37,061,147
20,941,769
Credit related commitments
2,036,112
1,341,396
Total risk-weighted assets
39,097,259
22,283,165
Capital
Banks Ratios
3,218,160
3,218,160
14.4%
14.4%
Loans and advances to customers

Intangible assets
Other assets including tax
Premises and equipment
Off-balance sheet positions
Tier 1 capital
Tier 1 + Tier 2 capital

SOLVENCY
The Bank has met all the Bank of Tanzanias (BOT) liquidity and capital adequacy ratios and is
considered solvent by the Board of Directors.
AUDITOR
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office and are
eligible for re-appointment. A resolution proposing the re-appointment of PricewaterhouseCoopers as
auditors of the Bank for year ending 31 December 2007 will be put to the Annual General Meeting.
BY ORDER OF THE BOARD
_______________________
DAVID MOSHA
______________________
DATE


STATEMENT OF DIRECTORS RESPONSIBILITIES
The directors are required by the Companies Act, 2002 to prepare financial statements
for each financial year that 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 profit or loss of the Bank for the year.
The directors confirm that suitable accounting policies have been used and applied
consistently, and reasonable and prudent judgment and estimates have been made in the
preparation of the financial statements for the year ended 31 December 2006. The
directors also confirm that the International Financial Reporting Standards (IFRS) have
been followed and that the financial statements have been prepared on the going concern
basis.
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Bank and which enable
them to ensure that the financial statements comply with the Companies Act, 2002. The
directors are also responsible for safeguarding the assets of the Bank and, hence, for
taking reasonable steps for the prevention and detection of fraud, error and other
irregularities.
_______________________
DAVID MOSHA
_______________________
DATE
(6)

STATEMENT OF DIRECTORS RESPONSIBILITIES
(7)
REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF AKIBA COMMERCIAL BANK LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of Akiba Commercial Bank

Limited, which comprise the balance sheet as at 31 December 2006, and the profit and loss
account, statement of changes in equity and cash flow statement for the year then ended, and
a summary of significant accounting policies and other explanatory notes.
Directors responsibility for the financial statements
As described in the Statement of Directors Responsibilities, the Banks directors are

responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and with the requirements of
the Tanzanian Companies Act 2002. This responsibility includes: designing, implementing
and maintaining internal control 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.
Auditors responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit
to obtain reasonable assurance whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entitys preparation and fair presentation of the
financial statements 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
entitys internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis of our audit opinion.
(8)
REPORT OF THE INDEPENDENT AUDITOR

Opinion
In our opinion, the accompanying financial statements give a true and fair view of the state
of the Banks affairs as at 31 December 2006 and of its profit and cash flows for the year
then ended in accordance with International Financial Reporting Standards and have been
properly prepared in accordance with the Tanzanian Companies Act 2002.
(9)
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)

Report on Other Legal and Regulatory Requirements
This report, including the opinion, has been prepared for, and only for, the Banks
members as a body in accordance with the Tanzanian Companies Act 2002 and for no
other purposes.
As required by the the Tanzanian Companies Act 2002, we are also required to report
to you if, in our opinion, the Directors Report is not consistent with the financial
statements, if the Bank has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information
specified by law regarding directors remuneration and transactions with the Bank is
not disclosed.
Certified Public Accountants

DAR ES SALAAM
Signed by Michael M Sallu
----------------------------
Date
(10)

PROFIT AND LOSS ACCOUNT
Notes
2006
2005
Shs000
Shs000
Interest and similar income
5,811,061
5,979,945
Interest expense and similar charges
(737,048)
(939,149)
5,074,013
5,040,796
833,739
910,801
Foreign exchange income
88,278
40,189
Other operating income
429,300
178,610
362,771
23,265
6,788,101
6,193,661
Net interest income
Fee and commission income
Grants income
Operating income
Impairment charge for credit losses
14
(899,745)
(890,917)
Operating expenses
(5,296,849)
(4,229,731)
591,507
1,073,013
(314,136)
(329,846)
277,371
743,167
Profit before income tax
Income tax expense
Profit for the year
10
(11)

PROFIT AND LOSS ACCOUNT
The Notes on pages 11 to 34 form an integral part of these financial statements.
(12)

BALANCE SHEET
AS AT 31 DECEMBER 2006
Notes
2006
2005
Shs000
Shs000
ASSETS
Cash and balances with Bank of Tanzania
11
4,531,346
5,355,752
Government securities held to maturity
12
1,577,160
2,882,460
13
9,939,051
8,120,472
14
18,252,189
17,371,649
Intangible assets
16
175,271
171,023
Premises and equipment
17
951,011
969,856
67,641
137,115
1,567,478
859,279
37,061,147
35,867,606
1,264,612
932,801
28,648,625
28,443,099
2,169,874
2,174,954
92,678
48,329
32,175,789
31,599,183
2,943,425
2,793,425
Income tax receivable

Other assets
15
Total assets
LIABILITIES
Deposits from banks
Due to customers
Other liabilities
18
Deferred income tax liabilities
Total liabilities
SHAREHOLDERS EQUITY
Share capital
22
(13)

BALANCE SHEET
AS AT 31 DECEMBER 2006
Advance towards share Capital
339,564
Share premium
115,366
115,358
1,084,895
490,014
402,116
869,626
Total shareholders equity
4,885,358
4,268,423
Total equity and liabilities
37,061,147
35,867,606
Retained earnings
General banking risk reserve
The financial statements on pages 7 to 34 were approved for issue by the Board of
Directors on ____________________ and signed on its behalf by:
..
David Mosha (Chairman)
..
John Lyale (Managing Director)
(14)

STATEMENT OF CHANGES IN EQUITY
Year ended
Advance
towards
share
capital
Share
Shs000 Shs000
General
banking
Share
Shs000
Retained
Shs000
risk
Shs000
Shs000
(12,564
)
743,16
7
629,037
3,525,256
31 December 2005
At start of year
2,793,42
5
Profit for the year
115,358
-
743,167
Transfer to general
banking risk reserve
At end of year
(240,589)
240,589
2,793,42
5
115,358
490,014
869,626
4,268,423
2,793,42
5
115,358
490,014
869,626
4,268,423
277,371
339,564
339,564
150,000
(150,000)
467, (467,510
510
)
Year ended
31 December 2006
At start of year
Profit for the year
Advance towards
share capital
Bonus issue of shares

Transfer from general
banking risk reserve
277,371
(15)

STATEMENT OF CHANGES IN EQUITY
At end of year
2,943,42
5
339,564
115,358
1,084,895
402,116
(16)
4,855,358

NOTES TO THE FINANCIAL STATEMENTS
Notes
2006
2005
Shs000
Shs000
Cash flows from operating activities

Interest received
5,451,580
Interest payments
(634,681)
(781,438)
Net fee and commission receipts
833,739
950,990
Other income received
223,425
178,610
Recoveries on loans previously written off
200,275
Payments to employees and suppliers
5,707,910
(5,774,757)
(3,145,256)
Income tax paid
(315,000)
(323,400)
Cash flows used in operating activities before

changes in operating assets and liabilities
(15,419)
2,587,416
Changes in operating assets and liabilities:

-Net increase in loans and advances to
customers
(781,823)
(948,223)
-Net (increase)/decrease in other assets
(180,771)
60,591
-Net increase in deposits from other banks
312,320
-Net increase in cash reserve requirement
(350,000)
-Net increase in amounts due to customers
205,526
7,425,333
(810,166)
8,390,117
Net cash used in operating activities
(735,000)
Cash flows from investing activities
(17)

Investment in government securities
787,260
(1,713,630)
Purchase of property and equipment
(179,949)
(337,137)
(58,405)
(37,350)
Purchase of intangible assets

Proceeds from sale of property and equipment
5,600
Net cash from investing activities
596,736
1,451
(2,086,666)
Cash flows from financing activities
Cash received as advance payments towards share

capital
339,564
Net increase in cash and cash equivalents
126,133
6,303,451
Cash and cash equivalents at start of year
12,295,054
5,991,603
12,421,187
12,295,054
Cash and cash equivalents at end of year
19
The Notes on pages 11 to 34 form an integral part of these financial statements

These notes form an integral part of the financial statements.
GENERAL INFORMATION
The Bank is incorporated as a limited liability Company in Tanzania and is domiciled in

Tanzania. The address of its registered office is:
TDFL Building (Phase II), 1st Floor
PO Box 669
Dar es Salaam
Tanzania
(18)

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 years presented, unless
otherwise stated.
(a)
Basis of preparation
The financial statements are prepared in accordance with International Financial

Reporting Standards (IFRS). The measurement basis applied is the historical cost basis,
except where otherwise stated in the accounting policies below. The financial
statements are presented in Tanzania Shillings (Shs), rounded to the nearest thousand.
The preparation of financial statements in conformity with IFRS requires the use of
certain critical accounting estimates and assumptions. It also requires management to
exercise its judgement in the process of applying the Banks accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the financial statements, are disclosed in Note 4.
Adoption of new and revised standards
New and revised standards and interpretations which became effective for the first time in
2006 have been adopted by the Bank where relevant to its operations. The adoption of
these new and revised standards had no material effect on the Banks accounting policies
or disclosures.
(19)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Basis of preparation (continued)
Standards, interpretations and amendments to published standards that are not yet
effective
The following amendment to an existing standard and new standard will be mandatory for
the Banks accounting periods beginning on or after 1 January 2007, but which the Bank
has not early adopted:
- IAS 1 Amendment, Capital Disclosures. The amendment to IAS 1 introduces

disclosures about the level of the Banks capital and how it manages capital.
- IFRS 7, Financial Instruments: Disclosures. IFRS 7 introduces new disclosures to

improve the information about financial instruments. It requires the disclosure of
qualitative and quantitative information about exposure to risks arising from financial
instruments, including specified minimum disclosures about credit risk, liquidity risk
and market risk, including sensitivity analysis to market risk.
(b)
Interest income and expense

Interest income and expense are recognised in the profit and loss account for all interest
bearing instruments measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the interest income 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. The calculation includes all fees paid or
received between parties to the contract that are an integral part of the effective interest
rate, transaction costs and all other premiums or discounts.
When loans and advances become doubtful of collection, they are written down to their
recoverable amounts and interest income is thereafter recognised based on the rate of
interest that was used to discount the future cash flows for the purpose of measuring the
recoverable amount.
(20)

(c)
Fees and commission income

Fees and commissions are generally recognised on an accrual basis when the service has
been provided. Loan commitment fees for loans that are likely to be drawn down are
deferred (together with related direct costs) and recognised as an adjustment to the
effective interest rate on the loan.
(21)

(d)
Translation of foreign currencies
Transactions are recorded on initial recognition in Tanzania Shillings, being the currency
of the primary economic environment in which the Bank operates (the functional
currency). Transactions in foreign currencies during the year are converted into the
Tanzania Shillings using the exchange rates prevailing at the dates of the transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit and loss account.
(e)
Financial assets
The Bank classifies its financial assets into the following categories: financial assets at
fair value through profit or loss; loans, advances and receivables; held-to-maturity
financial assets; and available-for-sale financial assets. Management determines the
appropriate classification of its financial assets at initial recognition.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those
designated at fair value through profit or loss at inception. A financial asset is
classified in this category if acquired principally for the purpose of selling in the
short term or if so classifying eliminates or significantly reduces a measurement
inconsistency. Derivatives are also categorised as held for trading.
(ii) Loans, advances and receivables
Loans, advances and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise when the
Bank provides money, goods or services directly to a debtor with no intention of
trading the receivable.
(iii) Held-to maturity
(22)

Held-to-maturity assets are non-derivative financial assets with fixed or

determinable payments and fixed maturities that management has the positive
intention and ability to hold to maturity. Were the Bank to sell more than an
insignificant amount of held-to-maturity assets, the entire category would have to be
reclassified as available for sale.
(iv) Available-for-sale
Available-for-sale assets are those non-derivative financial assets that are not
classified under any of the categories (a) to (c) above.
(23)

(e)
Financial assets (continued)
Purchases and sales of financial assets at fair value through profit or loss, held-tomaturity and available-for-sale are recognised on trade-date the date on which the
Bank commits to purchase or sell the asset. Financial assets are initially recognised at
fair value plus, for all financial assets except those carried at fair value through profit or
loss, transaction costs. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or where the Bank has transferred
substantially all risks and rewards of ownership.
Loans, advances and receivables and held-to-maturity assets are carried at amortised
cost using the effective interest method. Available-for-sale financial assets and financial
assets at fair value through profit or loss are carried at fair value. Gains and losses
arising from changes in the fair value of financial assets at fair value through profit or
loss are included in the profit and loss account in the period in which they arise. Gains
and losses arising from changes in the fair value of available-for-sale financial assets are
recognised directly in equity until the financial asset is derecognised or impaired, at
which time the cumulative gain or loss previously recognised in equity is recognised in
the profit or loss account. However, interest calculated using the effective interest
method is recognised in the profit and loss account. Dividends on available-for-sale
equity instruments are recognised in the profit and loss account when the Banks right to
receive payment is established.
Fair values of quoted investments in active markets are based on quoted bid prices. Fair
values for unlisted equity securities are estimated using valuation techniques. These
include the use of recent arms length transactions, discounted cash flow analysis and
other valuation techniques commonly used by market participants. Equity securities for
which fair values cannot be measured reliably are recognised at cost less impairment.
(24)

(f)
Impairment of financial assets
The Bank assesses at each balance sheet 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. Objective evidence that a financial asset or group
of assets is impaired includes observable data that comes to the attention of the Bank
about the following loss events:
a) significant financial difficulty of the issuer or obligor;
b) a breach of contract, such as default or delinquency in interest or principal
repayments;
c) the Bank granting to the borrower, for economic or legal reasons relating to the
borrowers financial difficulty, a concession that the lender would not otherwise
consider;
d) it becoming probable that the borrower will enter bankruptcy or other financial
reorganisation;
e) the disappearance of an active market for that financial asset because of financial
difficulties; or
f) observable data indicating that there is a measurable decrease in the estimated future
cash flows from a group of financial assets since the initial recognition of those
assets, although the decrease cannot yet be identified with the individual financial
assets in the group, including: adverse changes in the payment status of borrowers
in the group; or national or local economic conditions that correlate with defaults on
the assets in the group.
(g)
Assets carried at amortised cost
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 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 an impairment loss is or continues to be recognised
are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans or held-to-maturity assets

carried at amortised cost has been incurred, the amount of the loss is measured as the
difference between the assets carrying amount and the present value of estimated future
(25)

cash flows (excluding future credit losses that have not been incurred) discounted at the
financial instruments 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. If a loan or held-to-maturity asset has a
variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a practical expedient, the Bank
may measure impairment on the basis of an instruments fair value using an observable
market price.
(26)

(g)
Assets carried at amortised cost (continued)
The calculation of the present value of the estimated future cash flows of a collateralised
financial asset reflects the cash flows that may result from foreclosure less costs for
obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on
the basis of similar credit risk characteristics (i.e. on the basis of the Banks grading
process that considers asset type, industry, geographical location, collateral type, past-due
status and other relevant factors). Those characteristics are relevant to the estimation of
future cash flows for groups of such assets by being indicative of the debtors ability to
pay all amounts due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for
impairment are estimated on the basis of the contractual cash flows of the assets in the
group and historical loss experience for assets with credit risk characteristics similar to
those in the group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect the period on
which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not exist currently.
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. Subsequent recoveries of
amounts previously written off decrease the amount of the provision for loan impairment
in the profit and loss account.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised (such
as an improvement in the debtors credit rating), the previously recognised impairment
loss is reversed by adjusting the allowance account. The amount of the reversal is
recognised in the profit and loss accounts.
(h)
Assets carried at fair value
In the case of equity investments classified as available for sale, a significant or

(27)

prolonged decline in the fair value of the security below its cost is considered in
determining whether the assets are impaired. If any such evidence exists for availablefor-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 recognised in profit or loss - is removed from equity and recognised in the
profit and loss account. Impairment losses recognised in the profit and loss account on
equity instruments are not reversed through the profit and loss account. If, in a
subsequent period, the fair value of a debt instrument classified as available-for-sale
increases and the increase can be objectively related to an event occurring after the
impairment loss was recognised in profit or loss, the impairment loss is reversed through
the profit and loss account.
(28)

(i)
Property and equipment
All properties and equipment are stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of these assets.
Depreciation is calculated on the straight line basis to write down their cost to their
residual values over their estimated useful lives, as follows:
Applicable rate
Leasehold Improvement
10%
Motor vehicles
25%
Furniture, fittings and equipments
20%
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An assets carrying amount is written down
immediately to its recoverable amount if the assets carrying amount is greater than its
estimated recoverable amount. The recoverable amount is the higher of the assets
fair value less costs to sell and value in use.
Gains and losses on disposals are determined by comparing proceeds with carrying
amount. These are taken into account in determining operating profit.
(j)
Intangible assets
Acquired computer software licences are capitalised on the basis of the costs incurred to
acquire and bring to use the specific software. These costs are amortised over their
estimated useful lives (five years).
Costs associated with developing or maintaining computer software programmes are
(29)

recognised as an expense as incurred.
(30)

(k) Income tax
Income tax expense is the aggregate of the charge to the profit and loss account in respect
of current income tax and deferred income tax.
Current income tax is the amount of income tax payable on the taxable profit for the year
determined in accordance with the Tanzanian Income Tax Act.
Deferred income tax is provided in full, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and their carrying values
for financial reporting purposes. However, if the deferred income tax arises from the
initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable
profit or loss, it is not accounted for. Deferred income tax is determined using tax rates
and laws that have been enacted or substantively enacted at the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that
future taxable profits will be available against which temporary differences can be
utilised.
(l)
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other
short term highly liquid investments with original maturities of three months or less,
including: cash and balances with Bank of Tanzania, Government Securities and
amounts due from other banks. Cash and cash equivalents excludes the cash reserve
requirement held with the Bank of Tanzania.
(m) Employee benefits
(i) Retirement benefit obligations
The Bank and its employees contribute to the Pension Fund, which is a defined
contribution scheme. Both employees and the Bank 10% of the employees salary to the
scheme.
(31)

The Banks contributions to the defined contribution schemes are charged to the profit
and loss account in the year to which they relate.
(32)

((n) Offsetting
Financial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to set off the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the liability simultaneously.
(o)
Dividends on ordinary shares
Dividends on ordinary shares are charged to equity in the period in which they are declared.
Proposed dividends are shown as a separate component of equity until declared.
(p)
Acceptances and letters of credit
Acceptances and letters of credit are accounted for as off-balance sheet transactions and
disclosed as contingent liabilities.
(q)
Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in
presentation in the current year.
(a)
FINANCIAL RISK MANAGEMENT
Strategy in using financial instruments
By their nature, the Banks activities are principally related to the use of financial instruments.
The Bank accepts deposits from customers at both fixed and floating rates, and for various
periods, and seeks to earn above-average interest margins by investing these funds in high-quality
assets. The Bank seeks to increase these margins by consolidating short-term funds and lending
for longer periods at higher rates, while maintaining sufficient liquidity to meet all claims that
might fall due.
(33)

The Bank also seeks to raise its interest margins by obtaining above-average margins, net of
allowances, through lending to commercial and retail borrowers with a range of credit standing.
Such exposures involve not just on-balance sheet loans and advances; the Bank also enters into
guarantees and other commitments such as letters of credit and performance, and other bonds.
(34)

FINANCIAL RISK MANAGEMENT (CONTINUED)
(b)
Credit risk
The Bank takes on exposure to credit risk, which is the risk that a counter party will be
unable to pay amounts in full when due. Impairment provisions are provided for losses that
have been incurred at the balance sheet date. Significant changes in the economy, or in the
health of a particular industry segment that represents a concentration of the Banks
portfolio, could result in losses that are different from those provided for at the balance
sheet date. Management therefore carefully manages its exposure to credit risk.
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 annual or more
frequent review. Limits on the level of credit risk by product, industry sector and by
country are approved quarterly by the Board of Directors.
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 managed through regular analysis of the ability of borrowers and
potential borrowers to meet interest and capital repayment obligations and by changing
lending limits where appropriate. Exposure to credit risk is also managed in part by
obtaining collateral and corporate and personal guarantees, but a significant portion is
personal lending where no such facilities can be obtained.
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, which represent irrevocable
assurances that he Bank will make payments in the event that a customer cannot meet its
obligations to third parties, carry the same credit risk as loans. Documentary and
commercial letters of credit, which are written undertakings by the Bank on behalf of a
customer authorising a third party to draw drafts on the Bank up to a stipulated amount
under specific terms and conditions, are collateralised by the underlying shipments of
goods to which they relate and therefore carry less risk than a direct borrowing.
(35)

Commitments to extend credit represent unused portions of authorisations 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. 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.
(36)

(c) Concentrations of risk
Economic sector risk concentrations within the customer loan and deposit portfolios
were as follows:
At 31 December 2006
Loans and
advances
%
Credit
Customer
commitments
deposits
Trade/commerce
43
22
20
Private individuals
25
10
54
Construction
11
50
Agriculture
11
Tourism, hotel and restaurants
14
11
100
100
100
Trade/commerce
20
22
24
Private individuals
33
10
23
Transport and communication
15
Construction
50
Agriculture
19
14
Transport and communication
Manufacturing
At 31 December 2005
Tourism, hotel and restaurants
(37)

Manufacturing
21
100
21
100
100
(d) Currency 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. The Board sets
limits on the level of exposure by currency and in total for both overnight and intraday positions, which are monitored daily.
The Bank had the following significant foreign currency positions (all amounts
expressed in thousands of Tanzania Shillings).
(38)

(d)
Currency risk (continued)
As at 31 December
2006
USD
EUR
O
GBP
Cash and balances with

Bank of Tanzania
236,418
2,605
10
4
,292,313
4,
531,346
Deposits and balances

due from banking
institutions
2,8
33,488
26,43
2
32,0
41
7
,047,090
9,
939,051
Government securities
1,577,16
0
1,577,160
1
7,531,00
5
18
,252,189
2,310,57
6
2
,761,401
SHS
TOTAL
In Shs 000
Assets
Loans, advances and

overdrafts
721,184
Other assets
450,825
Total Assets
4,241,
915
29,
037
32,0
51
32,758
,144
37,061,
147
Customer deposits
2,
984,718
25,663,9
07
28,
648,625
Deposits from banks

and financial
institutions
1,
001,972
262,640
1
,264,612
92,678
92,678
Liabilities
Deferred income tax
(39)

Other liabilities
40,513
310
2,129,05
1
2,
169,874
32,175
3,789
4,027,
203
310
28,148,2
76
214,
712
28,
727
32,0
51
4,609,86
8
Assets
2,
372,729
22,62
4
46,8
17
33,
425,436
35,867,
606
Liabilities
2,5
89,338
29,
009,845
31,599,
183
Net on balance sheet

position
(
216,609
)
4681
7
4,415,59
1
Total Liabilities
Net on balance sheet

position
As at 31 December
2005
2262
4
The off-balance sheet position represents the difference between the notional amounts of foreign
currency derivative financial instruments and their fair values.
(40)

(e) Interest rate risk
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 or create losses in the event that unexpected
movements arise. The Board of Directors sets limits on the level of mismatch of interest rate
repricing that may be undertaken, which is monitored daily.
The table below summarises the Banks exposure to interest rate risks. Included in the table
are the Banks assets and liabilities at carrying amounts, categorised by the earlier of
contractual repricing or maturity dates. The Bank does not bear an interest rate risk on off
balance sheet items. All figures are thousands of Tanzania Shillings.
Interest rate risk
As at 31
December 2006
Up to 1
month
1-3
months
3-12
month
s
months
month
s
Over 1
Nonint.
year
bearin
g
Total
Assets
Cash and balances
with Bank of
Tanzania (BOT)
Government
securities
Loans and
advances to banks
Loans and
advances to
customers
650,790
926,37
0
1,577,16
0
1,853,86 7,132,06
8
3
400,00
0
553,12 9,939,05
0
1
18,085,6
81
166,50
8
Other assets
Property and
equipment
4,531,3 4,531,34
46
6
18,252,1
89
1,567,4 1,567,47
78
8
951,01
1
951,011
(41)

1,853,86 25,868,5
8
34
1,492,8
78
Customers deposits
24,086,4 2,868,36
76
5
186,57 1,507,21
1
3
Deposits from
banks and financial
institutions
1,264,61
2
Total assets
7,602,9 37,061,1
55
47
Liabilities &
Shareholders'
funds
Deferred income
tax
Other liabilities
28,648,6
25
1,264,61
2
92,678
92,678
2,169,8 2,169,87
74
4
Total liabilities
25,351,0 2,868,36
88
5
186,57 1,507,21
1
3
2,262,5 32,175,7
52
89
Interest sensitivity
gap
23,497,2 23,000,1
20
69
1,306,3 1,507,21
07
3
5,340,4
03
Assets
25,492,1 1,168,83
21
0
1,713,6
30
7,493,0 35,867,6
25
06
Liabilities
3,946,35 5,310,00
4
8
5,719,2 14,400,2
57
81
6,491,7 35,867,6
06
06
Interest sensitivity
gap
21,545,7 4,141,17
67
8
4,005,6 14,400,2
27
81
1,001,3
19
As at 31
December 2005
-
(42)

(f) Liquidity risk
The Bank is exposed to daily calls on its available cash resources from overnight
deposits, current accounts, maturing deposits, and calls on cash settled contingencies.
The Bank does not maintain cash resources to meet all of these needs as experience
shows that a minimum level of reinvestment of maturing funds can be predicted with a
high level of certainty. The Board sets limits on the minimum proportion of maturing
funds available to meet such calls and on the minimum level of inter-bank and other
borrowing facilities that should be in place to cover withdrawals at unexpected levels
of demand.
The table below analyses assets and liabilities into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity date. All
figures are in millions of Tanzania Shillings.
Liquidity risk
As at 31
December 2006
1-3
Up to 1 months
month
3-12
months
months
months
1-5
Over 5
year
years
4,531,346
1,577,160
9,939,051
18,252,189
1,567,478
Total
Assets
Cash and
balances with
Bank of
Tanzania
Government
securities
4,531,346
-
Loans and
advances to
banks
9,939,051
Loans and
advances to
customers
16,953,71
2
Other assets
1,567,478
Premises and
650,790
1,131,969
-
926,370
166,508
-
1,031,638
1,031,638
(43)

equipment
Intangible assets
175,271
175,271
32,991,58
7
1,782,759
1,092,878
Customers
deposits
24,086,47
7
1,342,525
1,685,242 27,168 1,507,213 28,648,625
Deposits from
banks
1,264,612
Other liabilities
2,169,874
Total assets
0 1,206,909 37,061,147
Liabilities
1,264,612
2,169,874
92,678
Total liabilities
27,520,96
3
1,342,525
Liquidity gap
5,470,624
440,234
Deferred income
tax
1,685,242 27,168 1,599,891 32,175,789
-592,364 27,168
-392,982
(44)

Financial risk management (CONTINUED)
(f)
Liquidity risk (continued)
As at 31 December
2005
Assets
16,780,2
09
2,363,341
9,767,29
1
5,310,008
5,815,886
1,140,87
9
35,867,60
6
4,316,75
1
35,867,60
6
(3,175,8
72)
8,503,747
Liabilities
6,121,30
9
11,615,7
91
Net liquidity gap
10,658,9 (2,946,66
00
7)
(1,848,5
00)
(2,687,86
1)
The matching and controlled mismatching of the maturities and interest rates of assets and
liabilities is fundamental to the management of the Bank. It is unusual for banks ever to be
completely matched since business transacted is often of uncertain terms and of different types.
An unmatched position potentially enhances profitability, but can also increase the risk of losses.
The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interestbearing liabilities as they mature, are important factors in assessing the liquidity of the Bank and
its exposure to changes in interest rates and exchange rates.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING

ACCOUNTING POLICIES
The Bank makes estimates and assumptions that affect the reported amounts of assets and
liabilities within the next financial year. Estimates and judgements 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.
(45)

(a)
Impairment losses on loans and advances
The Bank reviews its loan portfolios to assess impairment at least on a quarterly basis. In
determining whether an impairment loss should be recorded in the profit and loss account, the
Bank makes judgements 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. This evidence may include
observable data indicating that there has been an adverse change in the payment status of
borrowers in a group, or national or local economic conditions that correlate with defaults on
assets in the group. Management uses estimates based on historical loss experience for assets
with credit risk characteristics and objective evidence of impairment similar to those in the
portfolio when scheduling its future cash flows. The methodology and assumptions used for
estimating both the amount and timing of future cash flows are reviewed regularly to reduce
any differences between loss estimates and actual loss experience.
(46)

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING

ACCOUNTING POLICIES (continued)
(b)
Held-to-maturity financial assets
The Bank follows the guidance of IAS 39 on classifying non-derivative financial assets with
fixed or determinable payments and fixed maturing as held-to-maturity. This classification
requires significant judgement. In making this judgement, the Bank evaluates its intention
and ability to hold such assets to maturity. If the Bank fails to keep these assets to maturity
other than for the specific circumstances for example, selling an insignificant amount close
to maturity it will be required to classify the entire class as available-for-sale. The assets
would therefore be measured at fair value not amortised cost.
(c)
Premises and equipments

Critical estimates are made by the directors in determining depreciation rates for premises
and equipments and their residual values. The rates are set out in note 1(i) above.
2006
2005
TShs'000
TShs'000
4,910,604
5,789,504
420,856
110,900
Government securities
479,601
79,541
5,811,061
5,979,945
737,048
939,149
INTEREST AND SIMILAR INCOME
INTEREST EXPENSE AND SIMILAR CHARGES
Banks and customers
(47)

OPERATING EXPENSES
Employees benefits (Note 8)
2,323,832
1,890,588
Administrative expenses
1,904,765
1,501,345
286,362
242,879
97,897
76,634
Directors' emoluments
129,226
69,415
Auditors' remuneration
18,930
26,525
Professional fees
92,395
85,242
Operating leases
443,442
337,103
5,296,849
4,229,731
Depreciation and amortisation

Training
(48)

EMPLOYEES BENEFITS
2006
2005
TShs'000
TShs'000
2,046,122
1,689,763
Social security costs
197,799
148,659
Leave days accrual
79,910
52,166
2,323,832
1,890,588
Wages and salaries
GRANTS INCOME
Grant received
362,771
23,265
Grant income comprise of amounts received from Stichting Hivos, Swiss Contact and
Incofin to finance part of the operating expenses and acquisition of hardware and software.
10 INCOME TAX EXPENSE
The tax charge for the year is arrived at as follows:

Current income tax
- Current year
- Prior year
Deferred income tax current year
384,474
359,115
(114,688)
(65,835)
(200,889)
245,239
36,566
314,136
329,846
(49)

The tax on the Banks profit before income tax differs from the theoretical amount that would
arise using the statutory income tax rate as follows:
Profit before income tax
591,507
1,073,013
Tax calculated at the statutory income tax rate of 30%
177,452
321,904
(149,588)
(12,217)
- Expenses not deductible for tax purposes
155,722
85,994
- Prior year tax adjustments
130,550
(65,835)
Income tax expense
314,136
329,846
Tax effect of:

- Tax allowance on statutory provision
11
CASH AND BALANCES WITH BANK OF TANZANIA
Cash in hand
2006
2005
Shs000
Shs000
1,020,300
1,689,346
2,700,000
2,350,000
Balances with the Bank of Tanzania:

Statutory Minimum Reserves (SMR)
(50)

Clearing account
811,047
1,316,406
4,531,3
46
5,355,752
The SMR deposit is not available to finance the banks day-to-day operations and is hence
excluded from cash and cash equivalents for the purpose of the cash flow statement (See
Note 19).
12
GOVERNMENT SECURITIES HELD-TOMATURITY
Treasury Bills:
Maturing within 91 days of the date of acquisition
650,790
1,168,830
Maturing after 91 days of the date of acquisition
926,370
1,713,630
1,577,1
60
2,882,
460
Treasury bills are debt securities issued by the Government of the United Republic of
Tanzania at an effective interest rate of 13%.
13
LOANS AND ADVANCES TO BANKS
Items in course of collection from other banks

Placement with other bank
553,120
2,095,274
9,385,931
6,025,198
9,939,051
8,120,4
72
(51)

14 LOANS AND ADVANCES TO CUSTOMERS
Advances to customers (gross)
2006
2005
Shs000
Shs000
18,793,967
17,920,892
(541,778)
(549,243)
18,252,189
17,371,649
Less:
Allowance for losses on loans and advances
Net loans and advances
Reconciliation of allowance account for losses on loans and advances are as follows:
Balance at 1 January
Provision no longer required under IFRS
Provision for loan impairment
Loans written off during the year as uncollectible
As at 31 December
15
549,243
-
739,254
(629,037)
899,745
890,917
(907,210)
(451,891)
541,778
549,243
185,385
139,131
OTHER ASSETS
Prepayments
Interest receivable and accrued income
Stationery stock
Inter branch
Others
Less: Provision for probable losses
632,483
371,720
24,095
19,139
455,879
188,503
360,116
(90,482)
321,475
(180,689)
(52)

16
1,567,478
859,279
171,023
177,150
Additions
58,405
37,350
Disposals
(14,759)
Charge for the year
(54,157)
(28,718)
Closing net book amount
175,271
INTANGIBLE ASSETS
Computer software
Opening net book amount
171,023
17 PREMISES AND EQUIPMENT

(53)

Office
furniture &
equipment
Leasehold
Motor
improvements
vehicles
TShs000
TShs000
TShs000
TShs000
At 1 January 2005
483,693
145,144
791,223
1,420,060
Additions
196,410
10,500
130,227
337,137
Disposals
(2,700)
(11,017)
(13,717)
Adjustment
(2,698)
(2,698)
680,103
150,246
910,433
1,740,782
At 1 January 2005
151,958
96,769
306,662
555,389
Charge for the year
73,344
23,488
132,422
229,254
(2,700)
(11,017)
(13,717)
225,302
117,557
428,067
770,926
454,801
32,689
482,366
969,856
Total
Cost
At 31 December 2005
Depreciation
Disposals
At 31 December 2005
Net book value
At 31 December 2005
Cost
(54)

At 1 January 2006
680,103
150,246
910,433
1,740,782
66,483
144,180
210,663
(46,604)
46,604
(50,616)
(50,616)
2,699
2,699
633,499
168,812
1,101,217
1,903,528
At 1 January 2006
225,302
117,557
428,067
770,926
Charge for the year
63,350
28,261
140,596
232,207
(50,616)
(50,616)
Transfer
(27,281)
27,281
At 31 December 2006
261,371
95,202
595,944
952,517
372,128
73,610
505,273
951,011
Additions
Transfer
Disposals
Adjustment
At 31 December 2006
Depreciation
Disposals
Net book value
At 31 December 2006
18 OTHER LIABILITIES
2006
2005
Shs000
Shs000
(55)

Bills payable
403,084
245,523
Interest payable
328,160
383,354
1,000,000
1,000,000
438,630
546,077
2,169,8
74
2,174,954
Loan from Hivos-Triodos Fonds (Note 23)

Other creditors
19 CASH AND CASH EQUIVALENTS
Cash and balance with Bank of Tanzania
1,831,346
3,005,752
Balances with other banks
9,939,051
8,120,472
650,790
1,168,830
12,421,187
12,295,054
Treasury bills (with maturities of 3 months or less)
For the purposes of the cash flow statement, cash and cash equivalents comprise balances
with less than 91 days maturity from the date of acquisition including: cash and balances with
central banks, government securities, and amounts due from other banks. Cash and cash
equivalents exclude the cash reserve requirement held with the Bank of Tanzania
20
DEFERRED INCOME TAX
Deferred income tax is calculated using the enacted income tax rate of 30% (2005: 30%).
The movement on the deferred income tax account is as follows:
2006
2005
Shs000
Shs000
48,329
11,763
44,349
36,566
At start of year
Profit and loss account/charge (Note 10)
(56)

At end of year
92,678
48,329
The deferred income tax asset, deferred income tax charge/(credit) in the profit and loss
account, and deferred income tax charge/(credit) in equity are attributable to the following
items:
(57)

20
DEFERRED
(continued)
INCOME
TAX
Charged/
(credited)
1 January
to P/L
31 December
Shs000
Shs000
Shs000
45,222
(12,320)
32,902
3,107
56,669
59,776
48,329
44,349
92,678
Deferred income tax liabilities

Property and equipment
Deferred income tax assets

Provisions
Net deferred income tax liability

21
OFF BALANCE SHEET FINANCIAL INSTRUMENTS, CONTINGENT

LIABILITIES AND COMMITMENTS
In common with other banks, the bank conducts business involving acceptances, letters of
credit, guarantees, performance bonds and indemnities. The majority of these facilities are
offset by corresponding obligations of third parties.
Unutilised facilities and other commitments

Guarantees
2006
2005
Shs000
Shs000
2,036,112
645,594
720,407
965,483
(58)

2,756,51
9
1,611,07
7
22 SHARE CAPITAL
The Banks authorised share capital comprises 10,000,000 ordinary shares of Shs 1,000
each, of which 2,943,425 have been issued and fully paid.
23
RELATED PARTY TRANSACTIONS
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.
A number of banking transactions are entered into with related parties in the normal course of
business. These include loans, deposits and foreign currency transactions. The volumes of
related party transactions, outstanding balances at the year end and relating expense and
income for the year are as follows:
Directors and key

management personnel
Related
companies
2006
Shs000
2005
Shs000
2006
Shs000
2005
Shs000
Loans outstanding at 1 January
112,750
134,381
15,704
679,585
Loans issued during the year
244,472
71,140
796,209
(320,303)
(92,771)
(210,793)
(679,585)
Loans
Loan repayments during the year
(59)

Loans outstanding at 31 December
36,919
112,750
601,120
6,001
4,980
101,613
15,704
Interest income earned
No provisions have been recognised in respect of loans given to related parties (2005: nil).
Directors and key

management personnel
Related
companies
2006
Shs000
2005
Shs000
2006
Shs000
2005
Shs000
27,987
31,446
1,335,888
1,263,607
870,414
2,511,929
39,524,930
23,030,940
(860,935)
(2,515,388)
(38,827,14
0)
(22,958,659)
Deposits as at 31 December
37,466
27,987
2,033,678
1,335,888
Interest expense on deposits
Deposits
Deposits at 1 January
Deposits received during the
year
Deposits repaid during the
year
(60)

23
RELATED PARTY TRANSACTIONS (CONTINUED)

Loan from related party
2006
2005
Shs000
Shs000
At beginning of the year

Received during the year
Repaid during the year
1,000,000
-
1,000,00
-
At the end of the year
1,000,000
1,000,00
The above loan, which was received from Hivos-Triodos Fonds, carried fixed interest at the
rate of 13% payable quarterly and was repaid subsequent to the year end.
Directors remuneration
Directors fees and Sitting allowances
123,068
69,415
A schedule detailing remuneration of each director will be annexed to these financial

statements for presentation to the annual general meeting.
Key management compensation

Salaries and other short-term employment benefits
298,856
177,974
(61)

Akiba Commercial Bank

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Akiba Commercial Bank

Uploaded by

Copyright:

Available Formats

AKIBA COMMERCIAL BANK LIMITED

REPORT OF THE DIRECTORS (CONTINUED)