Table of contents

Impact
Mandatory
application
date/ Date of
adoption by
group
The standard will affect primarily the
accounting for the group’s operating
leases. As at the reporting date, the
group has non-cancellable operating
lease commitments of EUR 1,067,704,
see note 40. However, the group has
not yet determined to what extent
these commitments will result in the
recognition of an asset and a liability for
future payments and how this will affect
the group’s profit and classification of
cash flows.
Some of the commitments may be
covered by the exception for shortterm
and low-value leases and
some commitments may relate to
arrangements that will not qualify as
leases under IFRS 16.
Mandatory for financial years
commencing on or after 1 January
2019. At this stage, the group does not
intend to adopt the standard before its
effective date.
There are no other standards that are not yet effective and
that would be expected to have a material impact on the
entity in the current or future reporting periods and on
foreseeable future transactions.
3. Risk management
The group’s activities expose it to several financial risks.
Taking risk is core to any financial services business. The
Group’s objective is to achieve an appropriate balance
between risk and return. The risk management policies
are designed to identify and analyses these risks, to set
appropriate limits and controls, and to monitor the risk
through reliable and up-to-date information systems. Risk
management is carried out by management, under policies
approved by the board. The Board approves principles for
overall risk management as well as policies covering specific
areas, such as foreign exchange risk, interest rate risk,
credit risk, use of derivative financial instruments and nonderivative
financial instruments. The most important types of
risk are credit risk, liquidity risk and market risk.
Market risk includes currency risk and interest rate risk.
The executive management of the group’s subsidiaries
are responsible to identify, monitor and mitigate risk at all
business levels under the policies approved by the Group’s
Board.
3.1 Financial risk management
3.1.1 Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument
fails to meet its contractual obligations and arises principally
from the Group’s loans and advances to customers. For risk
management reporting purposes, the Group considers
and consolidates all elements of credit risk exposure (such
as individual obligor default risk, employer default risk and
country risk).
The provision of unsecured loans to formally employed
individuals is the main activity of the Group’s business. As
such, exposure to credit risk and the management of this
risk is a key consideration.
Customer credit risk is mitigated by the utilisation of payroll
collection models. Employment of customers by vetted
employers effectively serve as security for loans provided
to such customers, since the employer recovers the Group
loan instalment directly from the customer’s salary.
This deduction at source lending model is used throughout
the Group apart from CashCorp (Proprietary) Limited -
Botswana, GetBucks Spain SL - Spain and GetBucks Poland
SP z.o.o – Poland and South Africa. These entities provide
direct lending to customers.
All cash and cash equivalent assets are placed with
reputable banks. If the banks credit rating recedes the risk
will be assessed and action taken. The group analyses the
return versus risk in these instances as some banks may
offer a higher return with a significant risk component. The
group utilises hard currency deposits as security to borrow
local currency funding to limit foreign exchange losses.
In terms of the Group’s derivative position, the Group
selects well-regulated, reputable, and financially
sound firms in the United Kingdom. The Group chose the
United Kingdom due to a strong regulatory and supervisory
framework which providers need to comply with.
In extending loans to related parties, shareholders and
third parties the Group completes a full credit
assessment. The Group reviews the financial statements,
operations, legal and tax status of the borrower. The group
also limits the tenure and size of the debt in which it never
poses a material risk to the Group. All loans are interestbearing
and recorded at fair value at initial recognition.
The Group bases its credit risk policies on the customers it
serves, their employers and method of collection.
a. Credit Committees and Credit Policies
The credit policy document governs each subsidiary’s credit
products. Credit committees meet on
a monthly basis. The credit policy is the output document
that the committee reviews and updates monthly.
Collection data at the subsidiary level is reviewed by the
committee and analysed. This information is used to
adjust the general and subsidiary specific policy in order
to reduce bad debt and maximise acceptable levels of
disbursements versus risk in the respective territories.
Legislative requirements on charges such as interest, fees,
number of loans and affordability are reviewed monthly
and are sourced via regular communication with regulating
authorities. The Group has representation on all subsidiary
credit committees to maintain consistency and provide
oversight. All the credit committees report to management
on a quarterly basis in terms of its charter.
b. Maximum loan per product
The tables below illustrate the rounded maximum
loan amounts advanced to customers in the respective
jurisdictions, determined by the credit committees
considering legislative affordability within these ranges.
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MyBucks Annual Report 2016 94
95 MyBucks Annual Report 2016