CHAIRMAN’S STATEMENT

FOR THE SIXTEEN MONTHS ENDED 30 JUNE 2023

INTRODUCTION

Iam pleased to present the audited financial statements for InnBucks MicroBank Limited (“InnBucks”) for the sixteen months ended 30 June 2023.

MACRO-ECONOMIC ENVIRONMENT

Continued government implementation of monetary and fiscal policy measures meant to stabilise exchange rates and moderate inflation rates have been observed. The Central Bank expects year on year inflation to close the year at around 70% and with significant reductions as well on month on month trends, all due to the contractionary monetary and fiscal policy measures. This aligns to global trends as Major Central Banks maintained tight monetary and fiscal policy stances.

The introduction of the Wholesale Foreign Currency Auction for the banks, Payment of statutory obligations in local currency, Bank policy rate reviewed from 140 to 150%, Introduction of Zig (Zimbabwe Gold) as a means of payment and store of value, and the collection of fees and charges by the Government and its Agencies in local currency were some of the policy instruments introduced by the government during the period.

The policies have gone a long way and brought about some stability and the much-needed normalcy in the price and exchange rate dynamics. There are however, downside risks which remain in the operating environment including the slow global economic activity, inflationary pressures and geo-political conflicts. They may impact the Country’s balance of payments position.

In response the MicroBank continues to implement strategies with emphasis on hedging and business diversification.

OPERATIONAL RESULTS

The MicroBank reported a ZWL24.60 billion profit after tax in its inaugural reporting period. This significant performance is tied to ZWL32.89 billion cash having been generated from operations.

CAPITAL AND KEY AUDIT MATTERS

InnBucks’ core capital position closed at ZW14.84 billion as at 30 June 2023 translating to US$2 585 620, which is below the current minimum regulatory requirement of ZWL equivalent of US$5 million. This is mainly due to the fair value adjustments on the Savings Bond held with the Central Bank whereby ZWL16.93 billion has been written down. The Board and Management have put in place a plan to address the non-compliance with the minimum capital requirements.

The MicroBank holds investment securities relating to twenty year zero rated coupons of US$5 million with the Reserve Bank of Zimbabwe. The instruments are carried at face value in the financial statements. No impairment has been recognised on the instruments as the MicroBank believes that the face value represents adequate economic benefits. In particular, the instruments are applied as collateral towards funding lines which in turn generate significant net interest income that neutralises its zero-coupon status.

The MicroBank undertakes its transactions in various currencies per the multicurrency system in Zimbabwe. The functional currency has been determined as the United States of America Dollar (US$). Regulatory expectations include reporting financial statements on the basis of IAS 29 “Financial Reporting in Hyperinflationary Economies” which requires restatement of transactions and balances at period end in contravention of the requirements of IAS 29 paragraph 1, which states that IAS 29 shall be applied to the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy.

DIVIDEND

No dividend has been declared for the period under review.

DIRECTORATE

I would like to advise our stakeholders of the resignation of Mr. Lloyd Borerwe as the Chief Executive Officer of the MicroBank and Mr Petros Singano as the Chief Finance Officer of the MicroBank with effect from 9 December 2022 and 31 March 2023 respectively. I wish to thank both these executives for their exceptional contribution to the MicroBank during their time as Executive Directors. On behalf of all the Directors, I wish Mr. Borerwe and Mr. Singano only the best in their future endeavours.

OUTLOOK

The Board expects the operating environment to remain tight in the short to medium term. Investment in technology will continue to be the core focus of InnBucks’ strategy to deliver financial services. InnBucks continues to seek growth in its transactional revenue.

APPRECIATION

I would like to thank all our valued clients and stakeholders for their continued support to the MicroBank. I am grateful to my fellow Directors, Management and staff for their hard work and believe we will soldier through and grow the business.

Ralph Watungwa CHAIRMAN

DATE: 23 February 2024