Jaiz Bank: Annual Report 2020

Transcription

1. RC : 476637 Annual Report Accounts & Positioned for PROFITABLE GROWTH www.jaizbankplc.com
2. A SC N TO PAY Enhance Payment experience Ease Payment with smartphone Flexible and reliable payment platform Instant Value Instant Banking Download JaizMobile App *773# Corporate Head Office No. 73 Ralph Shodeinde Street Central Business District. P.M.B. 31 Garki Abuja, Nigeria For more information: customercare@jaizbankplc.com +234 708 063 5500 +234 708 063 5555 www.jaizbankplc.com TWITTER @JaizBankNG FACEBOOK/LINKEDIN/INSTAGRAM @jaizbankplc
3. Annual Report Accounts & Allah says: “O you who believe! When you deal with each other in contracting a debt for a fixed time, then write it down; and let a scribe write it down between you with fairness; and the scribe should not refuse to write as Allah has taught him …” Suratul-Baqrah verse 282 PAGE - 001
4. Annual Report Accounts & CONTENTS 01 3 4 5 6 8 10 14 About Us Vision, Mission.... Directors, Officers & Professional Advisers Location & Offices Business & Financial Highlights Chairman's Statement Chief Executive's Statement 18 28 32 Sustainability Report Our People and Cultural Diversity Risk Management Report 03 42 48 49 53 62 73 74 75 76 77 The Board Advisory Committee of Experts Management Team Directors' Report Corporate Governance Statement of Directors Responsibilities Board Evaluation Report Statutory Audit Committee Report Whistleblowing Report Advisory Committee of Experts Report 05 Financial Statements 80 85 86 87 88 89 90 91 Report of Independent Auditor Statement of Profit and Loss and other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash flows Statement of Sources & Uses of Qard Funds Statement of Sources and Uses of Charity Fund Notes to Financial Statements 06 126 127 Value Added Statements Five Year Financial Summary 07 130 132 133 135 Notice of Annual General Meeting Notes e-Dividend Form Proxy Form Overview 02 Business Review Governance Other National Disclosures Shareholders Information PAGE - 002
5. 52 Annual Report Accounts & ABOUT US J aiz Bank PLC – the premier Non-Interest Bank in Nigeria commenced operations on the 6th of January, 2012 on a foundation of trust, professionalism and excellence to deliver innovative financial solutions and exceptional customer experience. The Bank started with a Regional License obtained from the Central Bank of Nigeria to operate in the Northern part of the country and therafter metamorphosed into a National Bank on the 12th of May 2016 with key presence in virtually all the geopolitical zones of the country. The Bank's core values are built on 7 principles with the acronym RESPECT; Responsibility, Entrepreneurship, Simplicity, Partnership, Excellence, Customer Focus and Trust. These core values drive the Bank towards achieving its vision to be the clear leader in ethical Banking in Sub-Saharan Africa. Jaiz Bank is publicly quoted on the Nigerian Stock Exchange (NSE) with a balance sheet size of N233 billion (as at December 31st 2020) from N12 billion in 2012. Financing and Investment assets also grew from over N30 billion in 2012 to N166billion (as at December 31st 2020). Other critical parameters such as customer deposits, branch network and profitability have all been growing year – on – year since inception. PAGE - 003
6. Annual Report Accounts & About Islamic Banking Non-Interest Banking is a growing global phenomenon practiced in nearly 80 countries across the world including the United Kingdom, Canada, the United States of America, the United Arab Emirates, Malaysia, China, Singapore, South Africa, Kenya etc. Global Banks like HSBC, Citibank, Barclays Bank, Standard Chartered etc. are also offering non-interest banking products and services. portion of Nigerian population is desirous of ethical banking services which Non-Interest Banking is poised to deliver. In a nutshell, Non-Interest Banking is real-economy oriented where profit and loss sharing arrangement, mark-up, leasing and partnership are mostly the mode of financing . It is an alternative financial service offering which is open to all, irrespective of race or religion. It is based on the ethical principles of fairness, transparency and objectivity. NonInterest Banking offers almost all the services of conventional banks. The difference is that Islamic Banks do not give or receive interest, nor finance anything that is harmful to the society like alcohol, tobacco, gambling etc. They also avoid ghararspeculation, extreme uncertainty and deception. A significant Our VISION - To be the clear leader in Ethical Banking in Sub-Saharan Africa Our MISSION - Making life better through Ethical Finance Our BUSINESS PHILOSOPHY Our philosophy is to deliver world class Sharia compliant financial services to our clientele irrespective of class, creed, race or religious belief and to contribute to the socio-economic development of the society. Our CORE VALUES Responsibility PAGE - 004 Entrepreneurship Simplicity Partnership Excellence Customer Focus Trust
7. 52 Annual Report Accounts & DIRECTORS, OFFICERS & PROFESSIONAL ADVISERS Directors Alh. (Dr.) Umar Abdul Mutallab, FCA, CON - Chairman Alh. (Dr.) Aminu Alhassan Dantata, CON - Non-Executive Director Alh. (Dr.) Musbahu Muhammed Bashir - Non-Executive Director Alh. Mukhtar Danladi Hanga - Non-Executive Director H.R.H. Engr. Bello Muhammad Sani, OON - Non-Executive Director Mall. Falalu Bello, FCIB, OFR - Non-Executive Director Mr. Mohammed Seedy Njie - Non-Executive Director Alh. (Dr.) Umaru Kwairanga, F.IoD, FCS, FCIP - Non-Executive Director Alh. (Dr.) Muhammadu Indimi, OFR - Non-Executive Director Alh. Mamun Ibrahim Maude - Non-Executive Director Mrs. Aisha Waziri Umar - Independent Director Dr. Abdullateef Bello - Independent Director Mallam Hassan Usman, FCA, FCIB - Managing Director Alhaji Mahe Mahmud Abubakar - Deputy Managing Director* Mr. AbdulFattah Olanrewaju Amoo, FCA - Executive Director/Chief Financial Officer Dr. Sirajo Salisu - Executive Director, Business Development ** * Retired with effect from February 16, 2021 ** Appointed with effect from January 1, 2021 Company Secretary Registered Office: Mrs. Rukayat O. Dahiru FRC/2014/NBA/00000009649 No 73 Ralph Shodeinde Street, Central Business District, Abuja. Jaiz Bank Plc. Kano House No 73 Ralph Shodeinde Street, Central Business District, Abuja. Registrar and Transfer Office: Independent Auditor Africa Prudential Plc. (Formerly UBA Registrars Plc.) 220B Ikorodu Road, Lagos. Ahmed Zakari & Co. 22B Oladipo Diya Crescent, 2nd Avenue, Dolphin Estate, Ikoyi, Lagos. Tax Advisors Abdulazeez & Co. No. 26, Cotonou Street, Wuze Zone 6, Abuja Oladele Konsulting (Chartered Tax Practitioner & Management Consultants) Suite C11 Othini Plaza, Plot 1528, Nouakchott Street Wuse Zone 1, Abuja. PAGE - 005
8. Annual Report Accounts & OUR BRANCHES Head Office: Kano House, 73 Ralph Shodeinde Street, Central Business District, P. M.B 31Garki, Abuja, Nigeria. Tel: +234 9 460 (JAIZ) 5249, e-mail: info@jaizbankplc.com, website: www.jaizbankplc.com Abuja Branch Ground Floor, Kano House, 73 Ralph Shodeinde Street CBD, FCT- Abuja. Apapa No. 17 Wharf Road, Apapa, Lagos State. ATBU Branch Abubakar Tafawa Balewa University, Bauchi State. Banex Branch Bannex Plaza, Wuse, FCT Abuja. Bauchi No. 2 Mohammed Bello Kirfi Road, Off Ahmadu Bello Way, Bauchi State. PAGE - 006 Dugbe Branch No.3 Fajuyi Road, Dugbe Ibadan, Oyo State. Funtua Branch No. 69, Sokoto Road, Funtua, Katsina State. Gombe Branch No. 8 New Market Road, Commercial Area Gombe State. Gusau Branch No. 21 Canteen Road, Opposite CBN Gusau, Zamfara State. Gwarimpa Branch 1st Avenue, DBB Plaza, Gwarimpa, FCT - Abuja. Ikeja Branch De Plazaville Shopping Complex, 119 Awolowo Way, (Allen Round About) Ikeja, Lagos State. Ikoyi Branch 39, Awolowo Road, Ikoyi, Lagos State. Ilorin Branch No.11 Unity Road, (beside Kasmag Transport) Ilorin, Kwara State. Iwo Road Branch S7/264, Iwo Road, Ibadan – Oyo State. Jos Branch No 25, Ahmadu Bello Way, Jos, Plateau State.
9. 52 Annual Report Accounts & Kano 1 Branch No. 55 Tafawa Balewa Way, Off Murtala Muhammad Way, Kano, Kano State. Kaduna 1 Branch 11A Ali Akilu Road, Kaduna, Kaduna State. Kaduna 2 Branch Farida Ventures Building, Kano Road, Kaduna, Kaduna State. Kano 2 Branch No. 13E Bello Road Kano, Kano State. Kano 3 Kabuga Shopping Complex, Along BUK/ Gwarzo Road, Kano 4 Branch Opposite Trade Fair Complex, Zoo Road, Kano, Kano State. Kano 5 Branch Plot 140, Opposite NNPC Depot, Maiduguri Road, Hotoro, Kano, Kano State. Katsina Branch No 109B IBB Way, Kofar Kaura, Katsina, Katsina State. Kebbi Branch Plot 20 Ahmadu Bello Way, Birnin-Kebbi, Kebbi State. Lokoja Branch No. 4 John Holt Road, Along Paparanda Square, Lokoja, Kogi State. PZ-Zaria Branch No. 2 Crescent Road, Sabon Gari, Zaria, Kaduna State. Maiduguri Branch No. 18 Shehu Laminu Way, Maiduguri, Borno State. Samaru Branch Ahmadu Bello University Road, Opposite Main Gate, Samaru, Zaria,Kaduna State. Mararaba Branch Plot 664 Cadastral Zone A11, Mararaba Gurku, Karu, Nasarawa State Shaki Branch Oke-Dio Junction, Secretariat Road, Shaki, Oyo State. Marina Branch No. 2/4 Davies Street, Kingsway Building, Marina, Lagos, Lagos State. Sokoto Branch No 5 Ahmadu Bello Way, Former Finbank Building, Sokoto, Sokoto State. NASS Branch National Assembly Complex, 3 Arms Zone Abuja. Unilorin Branch Main Campus University of Ilorin, Ilorin, Kwara State. NNPC Branch Ground Floor, Block B Room 16, NNPC Towers, Abuja. Wuse Branch No 36 Douala Street Off Herbert Macaulay Way, Erisco Bompet Plaza, Zone 5 Abuja. Osogbo Branch No. 4, Gbongan Road, Osogbo, Osun State./ Yola Branch No 14, Mohammed Mustapha Way Opposite Jimeta Modern Market Yola, Adamawa State. Port Harcourt Branch 186 Abba Road, (Opposite Water Line) Port Harcourt, River State. PAGE - 007
10. Annual Report Accounts & BUSINESS & FINANCIAL HIGHLIGHTS 40% 38% TOTAL ASSETS DEPOSIT 19% PROFIT AFTER TAX 300 250 200 150 100 Prot Before Taxation (PBT) Financing & Investment Assets 50 Total Assets Deposits 0 2015 PAGE - 008 2016 2017 2018 2019 2020 Gross Earnings
11. 52 Annual Report Accounts & Total Assets (N’Million) 233,596 Total Equity (N’Million) 17,845 PBT (N’Million) Statement of Financial Position 3,066 31-Dec-2020 N'Million 233,596 165,995 175,513 14,732 17,845 31-Dec-2019 N'Million 167,273 107,775 127,193 14,732 15,552 Changes (%) 40% 54% 38% 0% 15% 19,614 3,066 (163) 2,903 14,715 2,110 333 2,443 33% 45% (149%) 19% Ratios Cost to Income Return on Assets Return on Equity Capital Adequacy Liquidity 31-Dec-2020 76.04% 1.31% 17.18% 20.02% 43.06% 31-Dec-2019 80.21% 1.26% 13.57% 16.44% 33.60% Changes 5% 4% 27% 22% 28% Others 31-Dec-2020 Number 9.85 kobo 3kobo 40 609 29,464 31-Dec-2019 Number 8.29 kobo 3kobo 38 562 29,464 Changes (%) 19% 0% 5% 9% 0% Total Assets Financing & Investment Assets Deposits Share Capital Total Equity Income Statement Gross Earnings Profit Before Taxation (PBT) Taxation Profit After Taxation (PAT) Earning Per Share Proposed Dividend Number of Branches/Offices Number of Staff Number of Shares in Issue (Million) PAGE - 009
12. Annual Report Accounts & The year 2020 was quite eventful, as we were faced with the COVID-19 pandemic , a nationwide civil unrest, increased tide of insecurity, economic recession among others. However, we remain grateful to Almighty Allah for the bountiful gift of life and for giving us the ability to keep our heads above waters. Alhaji (Dr.) Umaru A. Mutallab, FCA,CON Chairman, Board of Directors PAGE - 010
13. 52 Annual Report Accounts & CHAIRMAN’S STATEMENT Overview Assalamu Alaikum Wa Rahmatullah Wa Barakatuhu! My Dear Shareholders, It is my greatest pleasure to extend my warmest welcome to you all at this 9th Annual General Meeting of the Bank and it is further an honour and privilege to lead the Board through a year that has been adjudged the most turbulent in recent history. The year 2020 was quite eventful, as we were faced with the COVID-19 pandemic, a nationwide civil unrest, increased tide of insecurity and economic recession, among others. However, we remain grateful to Almighty Allah for the bountiful gift of life and for giving us the ability to keep our heads above waters. As a bank, we have learnt quite a lot over the course of the year and have devised succinct strategies to navigate the future. persist, whilst new financial institutions will boost Sukuk issuance in the sector. Ÿ The Takaful market is expected to expand steadily in the next two to three years in newly penetrated markets Global Islamic Finance Landscape Global Islamic finance industry (which includes Islamic banking, Sukuk, and Takaful) is expected to continue to grow in 2021, having increased 14% year-on-year in 2019 to USD 2.88 trillion, as reported by Moody's Investors Service (Moody's). The global Islamic Finance industry is expected to reach USD 3.69 trillion by 2024 in terms of assets, after its growth slow down to 10.6 percent in 2020, according to S&P Global Ratings. Key factors contributing to the expected growth include robust demand, government support as well as the likelihood of increased mergers within the Gulf Cooperation Council (GCC). supported by a moderate rise in premiums, with digitisation and regulatory improvements also supporting growth. Ÿ Global Islamic funds under management would continue to grow, likely at an annual rate of four per cent to five per cent in 2021-2022, boosted by the growth of Shariah capital markets and resilient demand for Shariahcompliant investments. Results Much of 2020 was spent tackling COVID-19 as governments focused on implementing measures to contain the ravaging pandemic. But key rating agency estimates indicate that the global Islamic finance industry is expected to start picking up from 2021 (S&P puts it at 12 percent) after a significant slowdown in core Islamic finance economies in 2020. Therefore, the anticipated growth in 2021 brings a welcomed relief to industry participants, as Moody's states that there are several opportunities to expand, given that the industry remains under represented in Muslim-majority countries. Such growth factors include: Ÿ Global Sukuk issuance will stabilise this year to around USD 190-200 billion compared to USD 205 billion in 2020. Ÿ GCC sovereigns are expected to turn to Sukuk issuance given high financing needs caused by moderate oil prices and wide fiscal deficits. Ÿ Corporate Sukuk issuance, is anticipated to remain limited as more attractive conventional market opportunities Last year was truly a challenging one for our national economy as well as for most economic agents due to the headwind occasioned by the pandemic. Notwithstanding the challenges, Jaiz Bank was resilient enough to weather the storm and offered positive returns to its Shareholders in 2020. Your Bank delivered record results of double-digit performance over the prior year (2019). This is an affirmation of our sustainable and organic growth. Financing & Investment Assets grew by 54% from N107.78billion in 2019 to N166.00billion in 2020. Profit Before Tax (PBT) increased to N3.066billion for the year, against N 2.110billion reported in the corresponding period of 2019 representing an impressive growth of 45%. Similarly, Customer Deposits grew to N175.51billion in 2020, from N127.193billion in 2019, while Total Assets hit N233.5billion in 2020, compared to N167.27billion in the corresponding period of 2019 representing a growth of 40%. PAGE - 011
14. Annual Report Accounts & Importantly, the Directors' drive for sustainable growth does not focus solely on financial metrics, the Board equally considers critical the monitoring and responding to broader issues of sustainability, including environmental and social impact, so that the Bank is well positioned to succeed in the years ahead. Fellow Shareholders, from our performance trajectory over the years, you will agree with me that our Bank is gaining more financial buoyancy year-after-year and the Board shall not rest on its oars in pushing the institution to its full potentials. Board Developments There have been some changes to the composition of the Board during the year. We had the pleasure of adding the following Directors, namely: Ÿ Hajia Aisha Waziri Umar, as an Independent Director Ÿ Dr. Abdulateef Bello, as an Independent Director Ÿ Dr. Sirajo Salisu, as an Executive Director While the following highly resourceful Independent Directors respectively retired from the Board as they completed their tenure: Ÿ Alhaji Nafiu Baba-Ahmed Ÿ Prof. Tajudeen Adebiyi On behalf of the Shareholders, I appreciate the out-going Directors for their immense contribution to the Bank over the years, while anticipating fresh perspectives from the new members of the Board. PAGE - 012 Dividend For the financial year 2020, we have worked assiduously toward ensuring that the Bank makes dividend payment in line with the Shareholders' aspiration. We very much appreciate the understanding of the regulators for approving our proposal to pay 30 Kobo per share as dividend for the year, subject to the approval of the Shareholders. Outlook Encouragingly, the year 2021 began with lots of positivity and aspirations both internationally and locally as economies reopen and medical science makes advancement in tackling the pandemic. The Bank will accelerate its strides in delighting customers with technologically-driven services, relevant financing and empowerment in impact-making sectors. We remain resolute in making indelible footprints in delivering socially responsible banking services and actualizing our vision, to be the Clear Leader in Ethical Banking in Sub-Saharan Africa. Thank you and God bless you all. Alhaji (Dr.) Umaru A. Mutallab, FCA, CON Chairman
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16. Annual Report Accounts & It’s clear that the world is digital, and we are equipped to move with the trend for a digitalized operation and model, with new avenues of growth for our corporate and retail clients. Hassan Usman, FCA, FCIB Managing Director/Chief Executive Officer PAGE - 014
17. 52 Annual Report Accounts & MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S STATEMENT A ll praise be to Allah whose grace made us through another year, Alhamdulillah we have ended the year successfully with satisfactory result. Despite the turbulent and challenging economic atmosphere, we continued to excel, grow, and sustain a profitable business. Finance Awards (GIFA) as the “Most Improved Islamic Bank” in the world in 2020. I thank most sincerely our hard working and committed staff and supportive Board for these achievements. The Board and Management of the Bank have proactively responded to the difficult circumstances occasioned by the Covid-19 pandemic and the associated economic recession which affected the world in general and Nigeria in particular. We sympathize with the families who have suffered or still suffering from loss and incapacitation of loved ones. While the pandemic has redefined our ways of doing things, it nonetheless, taught us a great deal about our strengths, our values, and our resilience. The challenges posed by it have reaffirmed our commitment to align our business with our customer's requirements as well as to the global economy. Clearly, we need to be focused on three things; the need to preserve our financial strength, maximize our support for the economy and society during these challenging times, and maintaining a strong and profitable business. Furthermore, we continued to be responsive to our customers and clients, hence the roll-out of robust e-channels to help them cope with the new normal. We are equally working with our partners to deliver programs to help small businesses weather the storm and build enduring institutions. Performance Review I am delighted that we have demonstrated our financial resilience by remaining profitable during a tumultuous year. We have delivered a Profit Before Tax (PBT) of N3.1bn (2020FY) in comparison to the corresponding period of 2019FY (N2.1bn). Our Financing & Investment Assets grew by 54% from N107.8bn in 2019 to N166.0bn in 2020. Customer Deposits grew to N175.5bn in 2020, from N127.19bn in 2019, while Total Assets hit N233.6bn in 2020, compared to N167.3bn in the corresponding period of 2019 representing a growth of 40%. Our Capital Adequacy Ratio (CAR) as of 31 December 2020 was 20.02% which signifies a great improvement while our liquidity ratio (43.06%) was higher than the regulatory threshold. This sterling performance is reassuring and gives us confidence to pursue our vision to be the clear leader in ethical banking in sub-Saharan Africa. Happily, these successes were noted as your Bank was recognized by Global Islamic Our Transformative Model Our Bank’s dynamic banking model remains core to our strategy for success, providing us with the diversification that has been critical to our performance. At the same time, we are accelerating our technological transformation to stay abreast with competition by investing more in technology and ensuring that our payment channels are well positioned to better compete with fintech, online platforms and other banks. Sustaining a position of resilience, strong and sustained profitability is our principal mandate. In furtherance to this, we 233,596 Total Assets (N’Million) 17,845 Total Equity (N’Million) PBT (N’Million) 3,066 PAGE - 015
18. Annual Report Accounts & are constantly improving our systems and processes to deliver a better, more robust digital bank for consumers and small businesses; improving our cost base and intensifying our engagements with our customers. I am encouraged by the progress we have already made on this front, but there is more to do in 2021and beyond. Support in challenging times In 2020, when it mattered most, the Bank was there for our customers and clients, and with the communities where we operate. We took significant steps to relieve financial pressures faced by our customers through reduction in financing cost and forbearance to those businesses challenged by the pandemic, insecurity, and unstable economic outlook. Growing our Company Our model gives us balance and financial resilience, but we are also ambitious to grow the business organically, and strategically we have priority areas of focus in this regard. First, our Shareholders are committed to maintaining a highly solvent bank to support the growth of our Balance Sheet. To this effect, we are at the verge of completing our private placement which will increase the Shareholders’ Fund, support future risk assets growth, and increase the confidence of customers on the Bank. Likewise, we are investing in our infrastructure to aid banking, e-banking, and payment channels for a sustainable customerfriendly environment and to deliver that exceptional experience desired by both potential and existing customers who interact steadily with our digital platforms. It’s clear that the world is digital, and we are equipped to move with the trend for a digitalized operation and model, with new avenues of growth for our corporate and retail clients. In line with our mission in making life better, we encouraged our youths to ideate, experiment and build products/solutions to help address the COVID-19 crisis in the country through an innovation challenge titled “Fightback COVID -19 Innovation Challenge”. The laudable response from the respective techstartups that participated cut across healthtech, eductech, agritech, social, renewable energy, logistics & fintech spheres. We are working with the winning teams to implement their solutions while ensuring widest social impact. In 2021, we will continue our path to becoming our customers’ strategic advisors, broadening our product and value-added service range, and accelerating the digitalization of our business in a robust and controlled environment. The need for social distancing canvassed during the pandemic spurred us to offer free Telemedicine services to our customers and staff through MyClinic.NG, where subscribers received medical diagnosis from qualified doctors across the globe from the comfort of their homes. Swapping the traditional banking model with this new digital approach is the new focus of banks, this will deepen client relationship and improve service offerings. The year 2021 will witness a change and maximization of available opportunities while delivering desired growth. In furtherance of its corporate social responsibility, the Bank in collaboration with the CANs Foundation (an eco-friendly technology hub) and other philanthropic donors rolled out Project RISE (an acronym which stands for Relief, Intervention and Symptoms Evaluation). Through the Project, we were able to provide relief materials including food items, home essentials, and medical supplies to six hundred and six (606) households (mostly in indigent communities) across Nigeria within a span of three months. Conclusion The Bank found the Project impactful and will continue to make similar social footprints in its environs. In conclusion, I want to thank my colleagues for their unwavering commitment, teamwork and service to the Bank, and our customers. I am privileged to lead such a devoted and remarkable team while acknowledging the stewardship and support of our Chairman and the entire Board. As we look to 2021, we remain, above all, committed to Jaiz Bank Plc. while continuing to support and deliver set goals for all our stakeholders. Thank you. Hassan Usman, FCA, FCIB Managing Director/Chief Executive Officer PAGE - 016
19. 52 Annual Report Accounts & BUSINESS PAGE - 017
20. Annual Report Accounts & SUSTAINABILITY REPORT T his year 2020 Sustainability Report reects the scope of work done by the Bank toward discharging its sustainability obligation as a signatory to UNEP FI and the Nigeria Sustainable Banking Principles (NSBP). The report has been prepared using the Global Reporting Standard (GRI Standards: Core option). We have also referred to other guidelines, including the GRI G4 Financial Services Sector Disclosures and the United Nations Global Compact (UNGC) principles, which regulate sustainable business practices globally. Chairman's Statement on Sustainability It is with great honor that I present to you, the year 2020 Sustainability Report of Jaiz Bank Plc. As an ethical Non-Interest Financial Institution, we play a pivotal role in providing innovative solutions to the signicant social, economic and environmental challenges the world faces through our business transactions and business operations, especially in the locations where we operate. We understand the vital importance of nding ways to support sustainable growth that benets economies, the environment and society through our products and services, as well as the need to uphold good governance. Because we appreciate the collaborative efforts towards achieving common goals, we are partnering with other banks and nancial institutions within the country to drive the successful implementation of CBN- Nigerian Sustainable Banking Principles. We are also strengthening our international alliances on this sustainability journey with global institutions such as the United Nation Environment Programme Finance Initiative (UNEP FI) and The Islamic Finance Council UK (UK-IFC) forum. Jaiz Bank Plc in fullling our commitment to reducing our environmental and social footprints introduced the Green Initiative through recycling of items internally, and in partnerships with recycling companies to roll out the Green Account Initiative. The initiative, which is encouraging recycling, while addressing waste management aims to not only improve upon the environment, but also to positively impact the social and economic spheres through decent job creation, and economic empowerment. With these initiatives, we have continued to address a number of the UN Sustainable Development Goals. We remain focussed on delivering sustainable values to our shareholders, and all our stakeholders through our conscious efforts to implementing the Principles that we have signed on to. Thank you. Alh. (Dr.) Umar Abdul Mutallab, FCA, CON Chairman, Board of Directors PAGE - 018
21. 52 Annual Report Accounts & Sustainability Report Chief Executive Officer's Statement on Sustainability B eing a key player in the banking industry, specically the Islamic banking sector with Shariatic lters as our base standards, sustainability is an integral part of our business, and we understand that sustainable nance is the key for a long-term success. At Jaiz Bank Plc, we continue to run our businesses and operations in a responsible manner, by enhancing the positive impacts to the Social, Environmental and Economic spheres of the communities where we operate, while ensuring that we minimize the negative impacts. We are fully committed to promoting sustainability practices in our day-to-day business transactions and business operations. Our Mission; “Making life better through ethical nance” centers on treating all our stakeholders fairly and justly. In line with this, our business strategy is aligned with the Sustainable Development Goals (SDGs), with some of our products such as our Jaiz Financial Inclusion Centers (JAFIC), targeted to providing nancing and other benets such as health insurance to women and vulnerable groups, and the One-Farmer-One-Hectare project to support small holder farmers with nancing, access to market and extension services to improve yield. These and other projects are specically designed to drive sustainability, and form part of the vital steps we are taking to effectively align every aspect of our business including our operations to the SDGs. Our strength towards achieving our targets is driven from a strong governance structure, an encouraging Board of Directors, and dedicated employees. As we progress on this sustainability journey, we promise to keep building a strong culture that will create the positive impact we desire not just for today but for the future generations. Yours Faithfully. Hassan Usman, FCA, FCIOB Managing Director/Chief Executive Officer PAGE - 019
22. Annual Report Accounts & Sustainability Report Jaiz Bank Key Highlights 654,334 Customers 40 Branches and 167 ATMs 8,349 Rural Women empowered 250 Green Jobs supported 1,268 Green Accounts created 102,650 Financially included 606 Employees 726 Credit facilities subjected to E&SG Commitment to UNEP FI Principles for Responsible Banking United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the Global Financial Sector to mobilize private sector nance for sustainable development. Amongst the frameworks established or co-created by the UNEP FI is the Principles for Responsible Banking (PRB), which was launched with more than 130 banks collectively holding USD 47 trillion in assets, or one third of the global banking sector, on 22 September 2019. In December 2020, UNEP FI alongside other Signatory Member Banks celebrated 200th Bank Signatory Members. In line with our commitment to sustainability practices, and to continue to collaborate globally, in April 2019, we became a Signatory to the Statement of Commitment by Financial Institutions on Sustainable Development, and thus, a member of UNEP FI global community of banks, insurers, and investors. As a Signatory Member, we were among the more than 130 banks that launched the Principles for Responsible Banking. The Principles for Responsible Banking (PRB) requires that we align our business strategy to Sustainable Development Goals & other frameworks, to analyse our transactions and operations with the goal of creating more positive impacts, while minimizing identied negative impacts. As an institution, we deem it essential to continuously work with our clients & customers, engage other stakeholders for successful collaborations, have a governance structure, while building a culture of sustainability across board, and ultimately ensure that we are transparent on the journey with clear accountability of progress on our journey. PAGE - 020
23. 52 Annual Report Accounts & PRINCIPLE 1: ALIGNMENT We w i l l a l i g n o u r business strategy to be consistent with and contribute to individuals needs and society's goals, as expressed in the Sus t ainable Development Goals, the Paris Climate Agreement, and relevant national and regional frameworks. We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products, and services. To this end, we will set and publish targets where we can have the most significant impacts. PRINCIPLE 4: STAKEHOLDERS We will proactively and responsibly consult, engage, and partner with relevant stakeholders to achieve society's goal. PRINCIPLE 3: CLIENTS & CUSTOMERS PRINCIPLE 2: IMPACT & TARGET SETTING We w i l l wo r k responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations. PRINCIPLE 6: TRANSPARENCY & ACCOUNTABILITY PRINCIPLE 5: GOVERNANCE & CULTURE We will implement our commitment to these principles through effective governance and a culture of responsible banking. We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society's goals. As a requirement, we have started acting in line with the three key steps designed to ensure the effective implementation of the Principles: Step 1: Impact Analysis Step 2: Target Setting & Implementation Step 3: Accountability. The Principles will assist us in embedding sustainability at the strategic, portfolio and transactional levels, and across all our business areas. Our Implementation Progress on the Principles for Responsible Banking include: 1. 2. 3. 4. Alignment of the Bank's Business Strategy to the Principles Setting up a Governance Structure to drive implementation. First impact analysis conducted for major nancing and transactions that we have offered to our customers, and set rst-level targets of awareness to customers regarding both the positive and negative impacts identied. We successfully improved on our positive impacts by kick-starting ve different initiatives: Ÿ Decent Employment: The Bank is continually conducting recruitment for competent hands, contributing its quota to providing decent employment directly to its employees. Simultaneously, through our Green Account Initiative in partnership with Chanja Datti (a Recycling Company), we have provided decent jobs with over 250 women employed as pickers and sorters. Our Jaiz Financial Inclusion Centers (JAFIC) have also aided in creating self-employment schemes for mostly women beneciaries in remote communities. Ÿ Gender: As part of our deliberate efforts towards promoting gender equality, the Bank added to the Board of Directors, the rst female Non-Executive Director. Our Management has also been mandated to engage and employ more women both at the Management level and lower cadre. In line with this, our Human Resource Department is developing a plan to encourage and bring onboard, more female employees. PAGE - 021
24. Annual Report Accounts & Sustainability Report Ÿ Resource Efficiency: In ensuring that we efficiently manage our resources, the Bank deployed a robust elearning platform that has successfully been used to train and assess staff. A number of trainings have so far been conducted on this platform such as the mandatory AML/CFT training and assessment of all employees, Ethics, and other soft skill trainings. Other areas where we have managed our resources include drastic reduction in physical meetings including the Monthly Performance Review sessions, changes made to the bank's eet by replacing older vehicles consuming more fuel to newer ones. These are some of the areas that have not only reduced cost of operations for the Bank, but also increased productivity. Ÿ Financial Inclusion: Our Financial Inclusion Centres are dedicated for women entrepreneurs in rural and semi-urban communities, with the following objectives: (i) Extend investment facilities to micro entrepreneurs (women and disabled persons) (ii) Build a saving culture among the women micro entrepreneurs (iii) Finance self-employment and income generating activities of women entrepreneurs in nancially excluded communities. (iv) Provide nancial services (account opening, BVN enrolment, and agency banking) to rural women who are otherwise excluded (v) Provide health care services through community approach to its nancing customers. The Centres also focus on nancial literacy, providing the knowledge and skills that will empower attendees to make well-informed decisions regarding the use of nancial services and the management of their private and business nances. Ÿ Stakeholders Engagement: Engagement with stakeholders including participation as a working group member at the UNEP FI Principles for Responsible Banking Monitoring & Evaluation Committee. Jaiz Bank's Sustainability Governance Structure PAGE - 022 Chief Executive liaison Implementation and reporting by all key Business Units
25. 52 Annual Report Accounts & Sustainability Report Commitment to the Nigerian Sustainable Banking Principles (NSBP) The Nigerian Sustainable Banking Principles aim to foster positive development impacts to society while protecting the communities and environment in which financial institutions and their clients operate. The nine Principles encompass commitments to both environmental sustainability and respect for human rights, and require banks to respect human rights in their business activities, to promote financial inclusion and women's economic empowerment, and to integrate environmental and social considerations into all bank's decision-making processes. PRINCIPLE 1 Our Business Activities: Environmental and Social Risk Management PRINCIPLE 3 Human Rights PRINCIPLE 5 Financial Inclusion PRINCIPLE 7 Capacity Building 03 05 07 01 02 04 PRINCIPLE 2 Our Business Operations: Environmental and Social Footprint PRINCIPLE 4 Women's Economic Empowerment 06 PRINCIPLE 9 Reporting 09 08 PRINCIPLE 6 Environment and Social Governance PRINCIPLE 8 Collaborative Partnerships Nigerian Sustainable Banking Principles (NSBP) Our commitment to the nine Principles entails that we put in place actionable, implementable plans, and strategically collaborate with all stakeholders - employees, clients, customers, other banks, and governmental bodies. We remain committed to implementing these Principles through the following: We will continue to develop and improve upon our E&S procedures and put in place appropriate E&S reporting criteria Principle 1 We will continue to respect customers’ rights in our Business Operations & Activites; Integrate human rights due diligence into our E&S procedures, and; Invest in training of staff on right issues. Principle 2 Principle 3 We shall continue to encourage environmental management programs to address the following: Water Efficiency, Waste Management & Environmentalfriendly Facilities; Design & Implement Community Programs; and apply E&S Standard to relevant third parties We are committed to providing development and growth support to SMEs; Improving nancial literacy and provide institutional practice, and; Granting access to bank’s facilities and services. Principle 4 Principle 5 We s h a l l b u i l d a n d implement robust policies, initiatives & programs that will continue to promote & celebrate Women Empowerment We are focused on developing appropriate institutional capacity building from top le vels of Management to all employees, and create practical E&S training tools and resources. Principle 6 Principle 7 We remain dedicated to our E&S g o v e n a n c e r e s p o n s i b i l i t y, w h i l e promoting institutional E&S governance practices. We will actively support key industry initiatives that aim to address E&S governance with clients operating in sensitive sectors, and implement E&S performance performance - linked compensation and incentive schemes. We will be accountable in our commitment to setting clear targets and ensure the necessary systems are in place to collect data. We will continue to report our implementation progress. Principle 8 Principle 9 We will constantly engage and collaborate with other stakeholders f or collecti ve progress, and participate in sector-wide initiati ves and programs. We are committed to internatonal standard and best practice. PAGE - 023
26. Annual Report Accounts & Sustainability Report Our Sustainability journey covers the three (3) core elements of sustainability, i.e. Social, Environmental, and Economic: Social Sustainability: At Jaiz Bank Plc, our Social Sustainability strategically focuses on expanding opportunities for our stakeholders today and in the future. It is about creating more inclusiveness for stakeholders, enhancing empowerment, and fostering opportunities for employees and community to thrive. As part of our effort towards delivering on our social impact targets, the Bank has achieved the following: Ÿ Operational Creche for Nursing Mothers: We operate a conducive creche within our Head Office premises to ensure that employees that are nursing mothers can care for their babies while working without worry. This has fostered bonding for the parents while also ensuring productivity on the job. Ÿ Financial Literacy Programs: Financial literacy is a key element of promoting financial inclusion across the nation and especially for the challenged communities. As part of our engagement towards ensuring financial inclusion across board, the Bank organized Financial Literacy workshops for SMEs and communities, and a total number of 7,300 participants benefited from these programs. Ÿ Women Financial Empowerment: The Bank through its Jaiz Financial Inclusion Centers (JAFIC) caters for women in the remotest communities, by providing them with access to credit as a financial leaver for economic empowerment. Through this dedicated product and channel, a total number of 5,120 women were financially empowered. Ÿ SME Financing & Support Program: Through our MSME Department, a total number of 6,607 Small and Medium Enterprises (SMEs) have been supported in the areas of financial inclusion and literacy, promoting decent work, and providing credit facilities and guidance to build up their businesses. Ÿ One-Farmer-One Hectare Project: Delivering on sustainable agriculture, our One-Farmer-One Hectare Project targets farmers in the remote communities, and through the value-chains. With this project, 400 farmers were empowered thus encouraging poverty and hunger reduction, while promoting decent work growth. Environmental Sustainability: An environment that is not only fit and safe for today’s use but for future generations is the foundation for successful business. Since we understand the key role the Bank plays in ensuring a safe and fit environment, we have adopted more environmentally sustainable workplace practices, not just for our business operations but also for our business activities. Ÿ Sustainable Waste Management: Jaiz Bank has continued to ensure that we manage the waste from our business operations and around the environment where we operate. In line with this, we introduced the recycling program where wastes such as papers, cans, plastics are recycled, with dedicated recycling bins placed at strategic points around our work environment. We also kick-started the Green Account initiative in partnership with recycling companies to engage waste pickers who go around to pick wastes that are recycled by this companies. This initiative has not only reduced the wastes in the environment but has created over 250 jobs, while promoting a culture of trash-to-wealth. A total number of 1268 Green accounts were also opened. This initiative which started with Abuja has extended to other locations such as Kano and Bauchi. Ÿ Alternative Energy: Promoting the use of alternative energy to protect and sustain our environment is a key element that has been taken up by the Bank through the replacement of all the lightbulbs to energy-efficient bulbs; switching off all electricals, installation of solar energy in 3 pilot branches of the Bank, awareness and sensitisation on reduction of energy consumptions. PAGE - 024
27. 52 Annual Report Accounts & Sustainability Report Ÿ Resource Efficiency: Our resource efficiency strategy includes ensuring that we introduce structures and processes that enable us function more effectively while minimizing wastes. These include: Enforcing paperless communication across Bank, continuous process automation such as the: Ÿ Performance Management Module – A system for highlighting performances at various levels Ÿ The Management Report Module – A reporting tool for Management reports Ÿ The Budget Module – A tool for budget creation and monitoring Ÿ Expenditure Management and Control Platform- A solution for processing the Bank’s operating expenses Ÿ Learning Management System – A platform for Employee e-learning Ÿ E & S Risks Assessment & Monitoring: The assessment and monitoring of our business transactions for Environmental & Social Risks remains fundamental criteria to providing facilities to our customers. This is because we understand that achieving success on this journey entails engagement with our clients and customers, and promoting sustainable businesses. Due to this, a total number of 1,345 transactions were subjected to E&S Risk Assessment during the year. Economic Sustainability: Jaiz Bank Plc in promoting a healthy sustainable economic growth has introduced diverse products to cater for its Corporate, Retail and SMEs customers. It is by addressing the needs of these customers through our products that we create economic value for our stakeholders. For our stakeholders, we have continued to sustain the thrust, ensuring economic growth, and delivering on expected values with our year 2020 results: Ÿ Dividend payment to shareholders (3kobo) Ÿ Increased Total Assets to N233.596billion Ÿ Grew Total Deposit to N175.513billion Ÿ Increased Total Equity to N17.845billion Ÿ Generated Profit Before Tax (PBT) of N3.066billion Ÿ Declared Profit After Tax (PAT) of N2.903billion PAGE - 025
28. 26 Annual Report Accounts & Sustainability Report Listening to our Stakeholders It is our responsibility to create value for all our stakeholders at every opportunity. We make it an absolute priority to engage our stakeholders within our business processes in a systematic and frequent manner. Doing this enables us to reflect on our practices and introduce improvements wherever possible. We identify our stakeholders as individuals or organizations that can impact or be impacted by our existence. We engage with different types of stakeholders using various methods. This is illustrated in the table below which lists the Bank's different stakeholder groups, and explains the engagement methods, their frequency, and the feedback we received from them throughout 2020. Stakeholder Group Investors Engagement Method & Frequency • • • • • Quarterly nancial results Quarterly investors meeting Annual report Press releases The Annual General Meeting Dedicated “Investor Relations” section on our website Board of Directors • • • Employees • • • • • • • • • • • • Suppliers • • • PAGE - 026 Quarterly Board meetings Annual Board strategy retreat Annual General Meeting • • • • • • • • • • • • • • Customers Reflections & Feedback For 2020 Quarterly trainings and Capacity Building Monthly sensitization through the Bank's internal platforms. Annual Strategy Session Quarterly engagement forums Bi-annual Inter-departmental surveys Bi-Annual Customer satisfaction surveys Daily in-branch interaction 24/7 Contact Centre interaction One-on-one account relationship management SMS and email blasts Social media real-time interaction Annual report releases Periodic awareness and workshops Pre-tendering meetings One-on-one meeting with the standing Procurement Committee Post-project debrieng • • • • • • • • • • • • • • • • Focus on non-performing assets Dividend payout Strategy implementation Cost reduction Raising capital buffers Compliance with Financial Reporting Council Corporate Governance Code Strategic succession planning Digital transformation Capital injection Improved nancial results Strategy implementation Strategic cost management Management Leadership Succession planning Legal and regulatory compliance Business Continuity Management IT Tranformation Increase training for all employees Initiatives and activities to create more Social Impact Improve awareness across platforms Need to maintain market competitive compensation and benets Wellbeing More awareness programs. Digital transformation Seamless access to credit facilities High up-time on all customer touch points Information security and condentiality Product & service pricing Cost negotiations Automation of the tendering process to allow for ease of tracking by vendors
29. 52 Annual Report Accounts & Sustainability Report Stakeholder Group The Government and Regulators Engagement Method & Frequency • • • • • • The Local Community • • • Reflections & Feedback For 2020 Annual Central Bank Risk-based Examination. Daily, Quarterly and Semi-annual & Annual Returns to the Central Bank and the Nigeria Deposit Insurance Corporation (NDIC) ·Annual Federal Inland Revenue tax audit and meeting Quarterly reports to the Securities and Exchange Commission and the Nigeria Stock Exchange (NSE) NSE Issuer Portal NSE investor facts behind the gure. • • • • • • • Financial performance Regulatory compliance Corporate Governance Social and environmental impact Adequacy of deposit insurance Investor protection Annual Financial Literacy Day lecture RISE Project: Collaboration with the CANs Foundation (an eco-friendly technology hub) and other philanthropic donors to roll out Project RISE (Relief, Intervention and Symptoms Evaluation) for COVID-19 and beyond, providing relief to households mostly in indigent communities across Nigeria. COVID-19 Innovation Challenge: An initiative that was introduced to encourage social enterprise for startup entrepreneurs by bridging gaps including nancing and capacity building through f unding and accelerator programs designed to build these entrepreneurs, while developing and enhancing their skills. • • • • • Empowerment of youth Promotion of social entrepreneurship Financial inclusion Sponsorships and donations Feedback from the 2020 Project RISE revealed that out of the total relief, 63.3% was accounted for food, 31.7% for home essentials and 5.0% for medical supplies. The Bank will continue to use this avenue and more to make positive sociable footprints in the environs. PAGE - 027
30. 26 Annual Report Accounts & OUR GENDER AND DIVERSITY POLICY J aiz Bank is committed to and recognizes the benefit of diversity. The Bank aspires to provide equal opportunities, fair and equal treatment for every single one of its workforce, regardless of age, gender, ethnicity, physical ability, religion, and belief within the extent permitted by the Law. The Bank’s Gender and Diversity Policy ensures that every Board member and indeed every staff of the Bank can participate in the Bank’s activities, without any identity-based discrimination or marginalisation. It is the desire of the Board to ensure the main-streaming of the gender and diversity principles set forth in other policies/processes and procedures of the Bank and to complement key aspects of the Bank’s Board Selection Procedure and Policy, Code of Conduct, Staff Handbook and Human Capital Policy, particularly in respect of staff recruitment, reward and compensation. To the extent practicable, therefore, the Policy addresses the recommendations and commentary provided in the Nigerian Corporate Governance Code while supporting the commitment to diversity in general. The Board Governance, Remuneration and Nomination Committee prescribes steps to ensure that the best candidates sought as members of its Board and workforce will be people who have a good combination of experiential, demographic and personal attributes. Objectives We recognize that diversity at the top almost certainly trickles down and runs throughout the rest of the organization. We further recognize that diverse backgrounds set the stage for tackling the same ideas from many different angles thereby building an adaptable Bank. It is our desire therefore to not only evolve a knowledgeable and dynamic workforce, but to be seen by our staff, shareholders, customers and other stakeholders to be accommodative to a broad spectrum of people. In furtherance of the above, the Diversity Policy provides a framework for the Bank to achieve: a) b) A diverse and skilled Board, that would engender productive board deliberations with a breadth of perspective that is also broad; A diverse and skilled workforce, that would PAGE - 028 c) d) e) f) 2. contribute to continuous improvement in service delivery and achievement of corporate goals; A workplace culture characterised by inclusive practices and behaviours for the benefit of all staff; Improved employment and career development oppor tunities for women and people with disabilities; A work environment that values and utilises the contributions of employees with diverse backgrounds, experiences and perspectives through improved awareness of the benefits of workforce diversity and successful management of diversity; and Awareness of all staff of their rights and responsibilities with regards to fairness, equity and respect for all aspects of diversity. Policy Statement The Bank will not tolerate any form of discrimination and is committed to: i) Promoting a culture characterised by mutual respect and appreciation of every single individual who works in Jaiz Bank ; ii) Ensuring that management structures and processes consistently serve the Bank’s commitment to promoting diversity and gender balance; iii) Endeavouring to use the Bank’s diversity in a way to enhance the quality of deliberations at Board meetings and quality of work carried out by staff; iv) Ensuring that everybody can contribute to and benefit from the Bank’s programmes without discrimination. 3. Key Definitions a) Diversity refers to the acceptance and inclusion of different types of people in a group or organisation. Individual differences can be related to race, gender, ethnicity, age, socio-economic status, physical abilities and religious beliefs. b) Gender refers to the state of being male or female in relation to the social and cultural roles that are considered appropriate for men and women. 4. Scope This policy applies to the Board, Management and Staff of Jaiz Bank, including all employees working under any form of contract as well as interns. The Bank’s advisors and paid consultants are also expected to observe the spirit of this Policy.
31. Annual Report Accounts & Our People and Cultural Diversity 5. Benefits of Diversity b) Embracing diversity will contribute to the Bank in achieving its corporate objectives and enhance its reputation, while enabling it to: (a) (b) (c) 6. Appoint/recruit skillful Board members, Executive Management and staff from a diverse pool of experienced and talented candidates; Create an inclusive workplace culture that embraces diversity; and Better represent the diversity of all of the Bank’s stakeholders. Responsibilities The Bank is committed to ensure workplace diversity, with a particular focus on supporting the representation of women in the composition of the Board and Executive Management Team. The Board, assisted by Management, is responsible for developing strategies to meet the objectives of the Gender and Diversity Policy, and monitoring the progress of achieving the objectives through measuring, monitoring, evaluating and reporting mechanisms as set forth below. The Board through the Governance Remuneration and Nomination Committee will conduct all Board appointments and Senior Staff recruitments in a manner that promotes gender, skill and experiential diversity. 7. Diversity Strategies The Bank’s diversity strategies include: a) Recruiting from a diverse pool of candidates for female positions; b) Reviewing succession plans to ensure an appropriate focus on gender, ethnicity, age, socio-economic diversity, including physical abilities and religious beliefs. c) Identifying specific factors to take into account the recruitment and selection processes to encourage gender diversity; d) Establish programs to develop a broader pool of skilled and experienced senior management and b o a rd c a n d i d a t e s , i n c l u d i n g , wo r k p l ac e development programs, mentoring programs and targeted training and development; and e) Any other strategies the Board develops from time to time. 8. c) d) e) f) g) 9. Awareness and Communication a) The Human Capital Management and Development Team shall provide Gender and Diversity sensitivity training for all staff from time to time. b) The Corporate Communications Team shall issue periodic publications to staff, showing diversity and its benefits. The Team shall also showcase Jaiz Bank’s affirmations on diversity around the Banking halls and offices. 11. Occupational Health and Safety a) The Bank shall establish a Health & Safety Management System including access to external experts (including Occupational Health and Safety Specialists) who can advise on ergonomics, health and safety in the workplace and, medical conditions related to the working environment. b) Quiet rooms shall be provided to support nursing mothers, facilitate praying/meditation or other related activities. Processes and Measures To pursue the objectives of diversity, the Board would take into consideration the following measures: a) The Board Governance, Remuneration and Nomination Committee is responsible in ensuring that gender diversity objectives are adopted in Board Selection, Staff recruitment and Succession Planning processes. The Committee will shortlist the potential women candidates based on the following criteria: - skills, knowledge, exper tise and experience; professionalism; - integrity; and - in the case of the candidates for the position of Independent NonExecutive Directors, the Committee would also evaluate the candidates’ ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors; The Bank shall adopt an accommodating boardroom culture and environment that is free from intimidation, harassments and discriminations, in order to attract and retain women participation on the Board and Executive Management. To avoid mismatch and ineffective appointment of the female Directors, the Bank does not set any specific target for female Directors in this Policy and will actively work towards having more female Directors on the Board. Board members and staff induction programmes shall include sessions on Ethics and Code of Conduct. The Bank’s Absence & Leave Policy shall include maternity and paternity leave, additional days of leave, special leave, unpaid leave, extended annual leave for nursing mothers and disabled persons, as well as leave to care for sick children. The Human Capital Management and Development Team shall provide individual support on demand to nursing mothers, staff with special needs or disabilities, and sick staff among others. PAGE - 029
32. 26 Annual Report Accounts & Our People and Cultural Diversity c) Diversity checklist shall be developed and used when developing, monitoring and evaluating programmes. 12. Monitoring and Evaluation a) The Board through its Governance, Remuneration and Nomination Committee will monitor the scope and applicability of this policy, from time to time. The Management is responsible for implementing, monitoring and reporting on the progress of achieving the Objectives. b) An annual Employee Engagement Survey which includes questions on the working environment, discrimination and other relevant areas shall be conduc ted to gauge the impac t of the implementation of this policy. 13. Reporting In accordance with the provision of the Nigerian Code of Corporate Governance on the disclosure of Corporate Governance Statements, the Bank will disclose in the Annual Report its gender and diversity policies and the proportion of women participation at Board level. 14. Review Process This policy will be reviewed every two years by the Human Capital Management and Development Department in consultation with the Company Secretary, taking into account different needs, changes within the organisation/structure and changes in legislation. GENDER 80% 70% 60% 50% 40% 30% 20% 10% 0% Male Female AGE CATEGORY Millennials (18-34 Yrs) Generation X (35-50 Yrs) Baby Boomers (51-69 Yrs) 0% PAGE - 030 10% 20% 30% 40% 50% 60%
33. PAGE - 031
34. Annual Report Accounts & RISK MANAGEMENT REPORT J aiz Bank Plc has continued to pioneer an Enterprise Risk Management (ERM) culture and practice uniquely suited to its position as the rst Non-Interest Banking Institution in Nigeria. As the bank matures in this respect, it has successfully upheld the pre-eminence of avoiding Shari'ah non-compliance risk, in addition to upholding leading practice in pre-empting and addressing all risks that confront the enterprise, leading to the elimination of non-compliant practices and income in all its operations. The risk management framework of the bank incorporates a wholistic view of the enterprise in all its activities, and recognises the importance of knowledge and process by investing resources in the training of its human capital, as well as the retention of leading authorities to review and recommend the best marriage of risk and its management that is suited to its business model. This entails the implementation of risk management processes to determine the potential for divergence from expected outcomes, while formulating the right responses to ensure the full exploitation of opportunities and strategic objectives. The ERM framework of the bank is guided by the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), its Advisory Committee of Experts, the Islamic Financial Services Board (IFSB), the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) as well as NIFI-compliant leading practice. The major risks facing Jaiz Bank are segregated as: Shari'a Non-Compliance risk (this includes Fiduciary risks), Credit risk, Operational risk, Market & Liquidity risks, Legal risk, Information Security risk, Displaced Commercial risk and Reputational risk. The ERM framework and policies of Jaiz Bank are structured to address the above highlighted risks, and 'The Bank' ensures the relevance of the framework and policies to the risk environment by undertaking comprehensive revisions where such are indicated and required. The Risk Management Environment and Risk Perception Outlook The year 2020 has been an extreme test on a global scale and will forever be dened by the effects of the Covid-19 pandemic on economies, businesses, and households. For almost 10 months globally, the prevailing situation had been PAGE - 032 of lockdowns and reduced or non-existent travel, including restrictions on social interactions and personal liberty. As expected, the effect on businesses and households was brutal leading to business failure and job loss. Nigeria was affected to a lesser degree than most, but the FGN nevertheless had to formulate and provide varied policy and welfare initiatives to aid the survival of the populace and save the economy from a prolonged recession. The most devastating effects have been on certain key e co n o m i c s e c t o r s s u ch a s a v i a t i o n , e d u c a t i o n , entertainment and logistics, while the lower level of the MSME segment and households had to be bailed out with grants and forbearance on facility obligations by the CBN, through banks. Following from that, Jaiz Bank is naturally affected by the external environment, and it has revamped its monitoring and recovery mechanisms so that the effects of the pandemic on the bank's business will be at a level within its capacity to bear. The primary indicators of this as we battle a second phase of the pandemic will partly be through the ratio of provisioning as a percentage of total credit, including the rate of foreclosure on collaterals. While the projected perception of risks is still pessimistic in the new year, there are hopeful signs of recovery from the GDP gures released from Q3, which indicate that the country is likely to exit the recession in Q1, 2021. Even at that, certain sectors such as mining, telecommunications, nancial services, agriculture and healthcare showed resilience and growth, indicating that there is an upside to risk for the bank that does its homework strategically. Jaiz Bank intends to fully exploit the opportunities in its environment using its unique business model, while utilizing its risk management framework in mitigating the effect on its books of those sectors that are badly affected. Risk Management Philosophy a. b. The Bank implements a sound, ethical and Shari'ahbased risk management system, complying with regulatory authorities to build the foundation of a resilient nancial institution focused on ethical banking. The Bank has adopted a holistic and integrated approach to risk management as is required by the nature of Sharia'h-based nancial contracts viz–aviz its operations and therefore, brings all risks together under one or a limited number of oversight functions.
35. 52 Annual Report Accounts & Risk Management Report c. d. e. f. g. h. .i. Risk officers are empowered to perform their duties professionally, ethically, and independently, free of interference. Risk management is governed by well-dened policies that are clearly communicated across the Bank. Risk management is a shared responsibility; therefore, the Bank aims to build a shared perspective on risks that is grounded in consensus. The Bank's risk management governance structure is clearly dened. There is a clear segregation of duties between risktaking business units and risk-managing functions. Risk related issues are taken into consideration in all business decisions. The Bank shall continue to strive to maintain a conservative balance between risk and revenue considerations and in consonance with the import of Islamic Jurisprudence Risks are reported openly and fully to the appropriate levels once they are identied Risk Culture The overall risk culture in the bank is based on the elimination of potential risks that can affect its duciary responsibility as a Non-Interest-Financial-Institution (NIFI). The Board of Directors is fully responsible for risk management and it has designed the risk management framework to permit it fully discharge its role. The Bank is rst and foremost conscious of complying 100% with Shari'ah standards to eliminate non-compliant income from its business. It is guided in this by the Advisory Committee of Experts. All products, markets, businesses, and practices with internal and external stakeholders are assessed objectively on this criterium rst, before all others. The culture is anchored by the following considerations a. b. c. d. e. Minimization of potential risks that can jeopardize its duciary responsibility as a Non-Interest Financial Institution (NIFI) operating under Islamic nancial principles while expanding the Bank's market share. The responsibility for risk management in the Bank is fully vested in the Board of Directors, which in turn delegates such to executive management. The Bank pays attention to both quantiable and unquantiable risks with pre-eminence for Shari'ah Non-Compliance risks. The Bank's management promotes awareness of risk and risk management across the Bank. The Bank avoids products, markets, and businesses where it cannot objectively assess and manage the associated risks in line with both the Shari'ah and environment perspectives. Jaiz Bank implements the 'Three Lines of Defense' model of risk ownership, monitoring and review. Depending on the assigned role, the three lines are – i. The owners and managers of risk – the rst line of contact and assessment ii. The monitors of the management of risk – the stage of monitoring the management of risks iii. The providers of independent assurance to the BOD – the stage of reviewing and independent reporting to the BOD Risk Appetite The Bank's risk appetite is set by the Board of Directors at a level that minimizes erosion of earnings or capital due to avoidable losses - including income loss from noncompliance with Shari'ah standards - in its overall asset and liability portfolio in the banking and trading books, or from fraud or operational inefficiencies. The broad objective of the banks risk appetite is to be among the industry leaders with respect to performing investments and the reduction of the cost of risk, while maintaining a zero tolerance for income loss from Shari'ah violations. The Bank strives to maintain a ratio that ensures that there are adequate provisions for all non-performing assets based on their levels of classication. Shari'ah screening is enshrined to make transactions Shari'ah compliant before disbursement. To avoid losses from nanced contracts, strict monitoring and investment supervision mechanisms are strictly followed in the postdisbursement phase, up to collections and / or recovery. Risk Governance Structure Board of Directors (BOD) The Board of Directors is ultimately responsible for overall risk management of the Bank and for establishing and monitoring the effectiveness of its Risk Management and Corporate Governance frameworks. (Shari'ah) Advisory Committee of Experts (ACE) This independent committee of scholars sits quarterly, and it endorses risk management processes and reviews accounts, validates products and services in line with Shari'ah principles, and their decision is binding , subject to the nal authority of the Financial and Regulatory Advisory Committee of Experts (FRACE) of the CBN. Board Risk Committee (BRC) The Board Risk Committee (BRC) is responsible for all material risks, other than credit risk, which isl principally managed by the Board Investment Committee. The purpose PAGE - 033
36. Annual Report Accounts & Risk Management Report of the committee is to assist the BOD in formulating strategies for enterprise-wide risk management, evaluating overall risks faced by the bank, aligning risk policies with business strategies, determining the level of risk which will be in the best interest of the bank, and capital planning. Board Investment Committee (BIC) The Board Investment Committee (BIC) is responsible for credit and investment risks. It is established as a standing committee with the primary role to effectively manage credit risk faced by the Bank, and report to the BOD at regular intervals while effectively implementing the BOD's strategy for credit risk management In addition to the BRC, the following Board committees are also directly or indirectly responsible for reviewing and guiding risk management functions. i. ii. Statutory Board Audit Committee (BAC) Board Governance/Remunerations Committee The following executi ve and senior management committees are also directly or indirectly responsible for examining and recommending risk management functions: i. Executive Committee (ExCo) ii. Asset & Liability Committee (ALCO) iii. Management Investment Committee (MIC) iv. Criticized Assets Committee (CAC) v. IT Steering Committee Risk Management Department The Chief Risk Officer leads the Risk Management Department (RMD) and reports directly to the Board Risk Committee, with a dotted line to the MD/CEO. The CRO is responsible for the establishment and maintenance of a framework geared towards the enhancement of capacity to provide greater value to stakeholders while effectively dealing with the risks and uncertainties associated with the business to protect the Bank from losses, thereby enhancing its competitive advantage. The RMD is broadly arranged into the following units – i. ii. iii. iv. V. Investment (Credit) Risk Unit Investment Monitoring Unit Market and Liquidity Risk Unit Operational Risk Unit Documentation and Other Unique Risks (including Shari'ah Non-Compliance) Unit Credit Risk Credit Risk is the risk of economic loss from default or changes in ratings or other credit events. In a typical NIFI, it is PAGE - 034 dened as 'the potential that a counterparty fails to meet its obligations in accordance with agreed terms under a nancial contract'. It arises principally from – i. Financing in Bai' (sale) e.g. Murabaha, promising to buy, or deliver in Istisna' and Salam; ii. leasing in Service Ijarah for rentals and leasing-toown in Ijarah wa Iqtina' Iii. Investing in business performance on PLS (prot & loss sharing) in the Musharakah and Mudarabah contracts. Iv. Credit risk can also arise because of the crystallization of any off-balance sheet transaction such as Kafalah and Wakalah contracts. The peculiarities of Credit Risk in a Non -Interest Financial Institution are as follows. The role of the Bank can be that of nancier, supplier, Mudarib (fund manager to Investment Account Holders) and Musharakah partners. The bank principally concerns itself with the risk of counterparties' failure to meet their obligations in terms of receiving a deferred payment and making or taking delivery of an asset. A failure could relate to a delay or default in payment, or in delivery of the goods/assets of Salam or Parallel Istisna`, entailing a potential loss of income and even capital. i. Due to the unique characteristics of each nancing instrument, such as the non-binding nature of some contracts, the commencement stage involving credit risk varies. Therefore, credit risk is assessed separately for each nancing instrument to facilitate appropriate internal controls and risk management systems. ii. The Bank also considers other types of risks that give rise to credit risk. For example, during the contract's life, the risk inherent in a Murabaha contract is transformed from market risk to credit risk; the invested capital in a Mudarabah or Musharakah contract will be transformed to debt in case of proven negligence or misconduct of the Mudarib or the Musharakah's managing partner. iii. Adequate collateral with a minimum coverage requirement is taken in line with the peculiarities of each transaction, as well as adequate covenants and protections embedded in the applicable and transaction-specic agreements. iv. Adequate risk transfer policies are in place to protect the investments and collaterals that are the subject of contracts. For the bank's assets and liabilities, we are restricted to the use of Takaful policies, while contracts with 3rd parties are further helmed by Takaful or conventional insurance, subject to the customers' choice.
37. 52 Annual Report Accounts & Risk Management Report v. vi. In case of default in certain instances, the Bank does not impose a penalty except in the case of deliberate procrastination, which increases the probability of default. As a matter of fact, the Bank is prohibited from using the amount of any penalty for its own benet or taking it into income; it must donate any such amount to charity. This increases the cost of default and discourages bad behaviour. The Bank's credit risk unit veries and manages the credit process from origination to collection and recovery; monitoring and controlling all such risks by adhering to sound policies and processes that have been laid down to guard against their (risks) manifestation in compliance with the Shari'ah contracts' specic risk as per leading practice. Collateral Policy to Mitigate Credit Risk To mitigate all credit risks associated with our investment activities, we employ a series of policies to cushion those risks. One of the most common of these policies that is also Shari'ah compliant is accepting collateral in respect of nancing to our customers. As part of its overall risk management, the Bank uses various methods to manage exposures resulting from changes in credit risks, liquidity risks, market risks (including prot rate risk, foreign exchange risk, and equity price risk), and operational risks. The Bank seeks to manage its credit risk exposures through diversication of nancing and investing activities to avoid undue concentration of risk with individuals and groups of customers in specic locations or businesses. The portfolio allocation plan, and the minimum risk asset acceptance criteria are reviewed annually as part of the budgeting process, and are inuenced by the budgeting and strategic goals of the bank. To guard against liquidity risk, the bank has diversied funding sources and assets are managed with a view on overall liquidity in consideration of maintaining a healthy balance of liquid assets (i.e. cash and cash equivalents). The market risks are managed based on predetermined asset allocation across various asset categories and continuous appraisal of market conditions for movement and expectation of foreign currency rates, benchmark prot rates and equity exposures. To manage all other risks, the Bank has developed a detailed risk management framework to identify and apply resources to mitigate the risks. We have carefully selected and accredited some professional valuers that assist us in determining values of the collateral we accept. We take into consideration the Open Market Value (OMV), Forced Sale Value (FSV) and Rental Value. In general, collateral types for our consideration are as shown below. i. ii. iii. iv. v. vi. vii. Cash-backed transactions Guarantees from other Financial Institutions. Legal Mortgage over properties and Mortgage Debentures Equitable Mortgage Inventory warehousing/Stock Hypothecation Corporate Guarantees/Negative Pledge Domiciliation of Receivables (at the bank's discretion) IFRS9 Methodology Jaiz Bank has adopted IFRS9 for the computation of Expected Credit Loss on its nancial instruments. A model that is compliant with Shari'ah standards and products is implemented and reported to the CBN as regulated. The credit models and nancial policies in use have been developed. In developing the ECL models, we adopted the following steps: Data Preparation The rst step was to prepare the available data based on IFRS 9 requirements. Activities in this step included but not limited to the exclusion of bank charges from the investment book and allocation of shared collateral values for the same obligor based on exposure amounts. Portfolio Segmentation Based on shared credit risk characteristics, exposures in the Bank's credit portfolio were grouped into 3 segments for which separate models were developed: Corporate, Retail and Off-balance sheet. Stage Transfer Criteria Assumptions for assessing Signicant Increase in Credit Risk were developed and utilized in classifying different exposures into Stage 1, Stage 2 and Stage 3 buckets. Estimation of Probability of Default A robust model for the estimation of Lifetime PDs was developed by assessing ratings transition using historical data of ve (5) years per investment product type. Forward looking information was incorporated using a regression model that simulates the expected PD term structure under three distinct macroeconomic scenarios. Estimation of Exposure at Default The EAD model estimates the expected outstanding balance at each point in time based on the outstanding balance at the reporting date, nature of the products, contractual PAGE - 035
38. Annual Report Accounts & Risk Management Report repayment structures, foreign currency exposure, prepayment rates, and moratorium concessions. For revolving facilities such as Murabahah line contracts and similar products, the undrawn portion is treated under the off-balance sheet portfolio. Estimation of Recoverable Amount The recoverable amount per exposure was obtained at each point in time by segmenting the collaterals by type (with home nance (mortgages) further segmented based on location, and projecting future values per collateral type based on historical growth rates, forced sale haircuts, perfection status, expected time to recovery and direct costs of recovery (including additional cost for unperfected collateral). The model also includes unsecured recoveries based on estimated historical recovery rates Estimation of Loss Given Default The LGD at each point was estimated as a function of the EAD and the recoverable amount. Assumptions were made for the LGD for unsecured exposures based on the BASEL convention and peculiarities of the Nigerian operating environment. Estimation of ECL Probability-Weights The probability weights of each macroeconomic scenario were determined by analysing the NSE All-Share Index volume over a select period. The probability of the upturn and downturn scenarios were determined by considering periods of outlying index values outside of a specied base threshold. Final ECL Computation The resultant ECL is a product of the EAD, LGD and PD calculated based on the probability weights of each macroeconomic scenario. To account for the time value of money( subject to the nal guidelines of AAOIFI and the IFSB), the ECL was also discounted to present value using the Effective Rate of Return of each exposure. Portfolio Segmentation In measuring impairment under the IFRS9 standard, facilities with shared credit characteristics may be grouped and assessed in distinct portfolios. To achieve this, all the Bank's nancial assets under the scope of IFRS9 have been segmented into three categories namely: i. Corporate: This segment of the portfolio contains nancing to Corporate, Commercial and Public Sector entities, grouped based on internally dened thresholds for turnover and balance sheet size. ii. Retail: This segment of the portfolio contains nancing to individuals and entities classied by the Bank as non-corporate. PAGE - 036 iii. Off-balance sheet: This segment of the portfolio contains investments resulting from Guarantees, Letters of Credit and undrawn commitments under Murabahah facilities Default Definition In accordance with the IFRS9 standard, the Bank considers default for the purpose of stage classication. Facilities that are more than 90 days past due are classied as being in default. The implication of this is that, if there is at least one default event for a client on one of their exposures, all other exposures to the client are in default. Development of Staging Criteria In applying the IFRS9 standard, it is critical to ascertain whether the credit risk of a facility or receivable has increased signicantly relative to the credit risk at the date of initial recognition. This is the basis with which an entity may change its calculation of impairment from 12-month ECLs to Lifetime ECLs. To determine whether such an increase has occurred, an entity must consider reasonable and supportable information that is available without undue cost or effort, including information about the past and forwardlooking information. Additionally, the CBN Guidance Note on IFRS9 implementation advises banks to consider quantitative, qualitative and 'backstop' indicators in assessing signicant increase in credit risk. Four different indicators are implemented in this model, and they are based on: a) Days past due b) Prudential classication c) Forbearance (Restructured) Credit rating migration While IFRS9 allows the assessment of signicant increase in credit risk to be carried out individually or collectively for nancial assets with homogeneous risk characteristics, this model adopts an individual assessment method to enable a granular view of the loss allowance across the portfolio. Each indicator is explained in detail below. Days Past Due (DPD) This classication is based on the number of days from a contractual repayment date after which the obligor had not paid the contractual repayment amount. In deriving this classication, the following thresholds were applied: Stage Classification Stage1 Stage2 Stage 3 Days Past Due Less than 30 days Between 30 – 90 days Above 90 days The Bank has put in place adequate systems to accurately compute days past due of investments.
39. 52 Annual Report Accounts & Risk Management Report a) Prudential Classication: In staging its nancial assets, the Bank also considers the CBN prudential classications as shown below: Stage Classification I. Stage1 ii. Stage 2 iii. Stage 3 Prudential Classification Performing Watchlist Substandard, Doubtful, Lost b) Forbearance Flag: The stage classication is also dened based on whether a facility has been restructured due to forbearance at any point since initial recognition. In deriving this classication, the following was applied: Stage Classification I. Stage 1 ii. Stage 2 Forbearance Flag No Forbearance Forbearance granted This classication indicates the obligor's credit rating and it takes into consideration the initial credit rating and the credit rating as at the reporting date. ii. Stage 2 iii. Stage 3 The Bank maintains sufficient capital resources to support its investment credit business and general business growth. Capital adequacy is reviewed periodically alongside the monitoring and reporting of changes to the capital forecasts. The Board will consider the need to change its capital forecasts and capital plans based on these reviews. The Bank holds capital at a level that the Board considers necessary, and the assessment of minimum capital requirements is a combination of regulatory requirements, and sound judgment exercised by the Board. In assessing the adequacy of its capital, the Bank considers its risk appetite, the material risks to which the Bank is exposed, and the appropriate management strategies for each of the material risks, including whether or not capital provides an appropriate buffer. Market and Liquidity Risks Credit Rating Stage Classification I. Stage 1 Capital Management Credit Rating Migration Rating downgrade of not more than 2 notches since initial recognition Rating downgrade of more than 2 notches since initial recognition Default Model Classification The model classication is the resultant stage classication based on the four indicators outlined above The maximum stage classication value is determined to be the model classication of each obligor. Classification Override There are specic instances where the Bank may possess alternate information that denes an exposure's stage classication, despite the resultant model classication. For such instances, an option has been provided in the model to provide a stage classication based on the Bank's expert judgement that will be assigned to the exposure irrespective of the classication based on the model's indicators. Final Stage Classification In instances where the Bank provides a classication override, that becomes the nal stage classication. Otherwise, the model classication is the nal stage classication. The Market & Liquidity Risk unit monitors disciplined risk taking within a framework of the well-dened risk appetite that enables the Bank to enhance shareholders' wealth while retaining its competitive advantage. As a NIFI, the Bank is exposed to the rate of return risk in the context of its overall balance sheet exposures. An increase in industry benchmark rates may result in Investment Account Holders' (IAHs) having expectations of a higher rate of return on their deposits, failure of which can turn to a Displaced Commercial Risk (DCR). In consideration, the Bank analyses the Rate of Return Risk and has developed a reporting format to the ALCO to identify, measure and mitigate the risk of DCR to protect the interest of Investment Account Holders. The Bank has also developed a policy on income smoothing through a Prot Equalization Reserve (PER) to treat the interest of shareholders and IAHs, as well as approved the setting up of an Investment Risk Reserve (IRR) exclusively to subsidize potential future losses. Liquidity Risk is the risk that the Bank does not have sufficient nancial resources to meet its obligations as they fall due or will have to meet the obligations at excessive cost. This risk arises from mismatches in the timing of cash ows. Funding risk (a form of liquidity risk) arises when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required. PAGE - 037
40. Annual Report Accounts & Risk Management Report As a protective measure against liquidity risk, the Bank solicits and attracts various sources of funds to channel to its nancing and investment activities in Shari'ah compliant instruments from the money and capital markets, where available. The Bank, in conjunction with other window-NIFIs and the regulators, has worked on the development of additional compliant instruments, which are now in use. Rate of Return Risk A greater portion of investment funds raised by NIFIs is based on the Mudarabah contract, which is a partnership between 'work' and 'capital' in which the capital provider (Rabb-ul-Mal) is exposed to losses of their capital, while the provider of work (Mudarib) is exposed to losing its time and effort. The contract thus involves prot-sharing for both partners and loss-bearing for the provider of capital. Under the Mudarabah contract, the IAHs agree to participate as Rabb-ul-Mal in the nancial activities undertaken by the NIFI as the Mudarib, and to share the prots generated from nancing and investment activities based on a contractually predetermined prot-sharing ratio. As capital owners, IAHs are liable to bear the losses arising from the assets funded by their deposits, except in the case of fraud, misconduct, negligence, or breach of contracted terms and conditions by the NIFI. Under the Mudarabah contract, the IAHs therefore bear the commercial risk associated with the investment nanced by the funds provided by them. Concurrently, the Bank is responsible for managing the investment of assets and is under a duciary obligation to safeguard the interests of the IAHs through the establishment of sound and prudent policies in the management of the investments funded by IAHs. As the non-interest space continues to expand, there are more instruments utilized while managing funds provided by the IAHs. The Central Bank/monetary authorities have in place the CBN Non-Interest Note. Equally important is the coverage of the Nigerian Deposit Insurance Scheme for Prot-Sharing Investment Accounts (PSIA). The Federal Government has deepened the Sukuk offering since the rst issuance in 2017, with a serviceable secondary market for trading. These issuances have greatly aided the bank in placing its idle funds in a Shari'ah-compliant instrument. The bank is actively engaged in deepening of the secondary market to serve as an additional window for managing liquidity. There is still a need for diversied offering so that liquidity management by NIFIs is eased and the need to hold huge idle funds which generate no income is eliminated. PAGE - 038 The absence of compliant instruments may result, at times, in the returns earned on its IAH funds being uncompetitive compared to those being offered by its competitors. This leads to the Rate of Return Risk, which is a particular problem with respect to funds of Unrestricted Investment Account Holders (UIAH), who typically may withdraw their funds at short notice subject to loss of prot share. In such a scenario, the rate of return risk exposes the NIFI to withdrawal risk – namely, the risk that their UIAH may withdraw their funds at short notice and place them with other Banks that offer better expected or actual rates of return. If unmitigated, UIAH withdrawals can reach systemic proportions and become a cause for concern on the part of both the NIFI and supervisory authorities Displaced Commercial Risk(DCR) refers to the risk (i.e. volatility of the stream of prots) arising from assets managed on behalf of IAHs which is effectively transferred to the NIFI's own capital because the NIFI may follow the practice of forgoing part, or all of its Mudarib's share of the prot on such funds, and/or making a transfer to UIAHs out of the shareholders' investment prot as a hibah (gift), when it considers this necessary. In the absence of stabilizing mechanisms, the rate of return paid to the UIAHs may thus be streamlined at the expense of the prots attributable to the NIFI's shareholders. Non-Interest Financial Institutions (NIFIs) have three main types of funding as summarized below: i. Equity ii. Demand deposits based on “Qard Hassan” which receives no return, and are repayable in full on demand, and iii. Investment accounts which are mainly based on Mudarabah principles. These are divided into two types: a. Unrestricted Investment Accounts (UIA) b. Restricted Investment Accounts (RIA). In managing UIAs, a NIFI has full discretion to utilize the funds for the provision of nance and/or investments as UIAHs provide funds without specifying any restrictions as to where, how or for what purpose the funds should be invested, provided that they are Shari'ah compliant and are within the standards of banking prudential and due diligence guidelines. A common practice in NIFIs is to hold UIAs on Mudarabah basis and RIAs on Wakalah basis, which is off-balance sheet by its nature and known as a Wakalah Investment Deposit (WID). Qard-based current deposits which are by nature demand deposits, do not concern prot pay-outs, thus are excluded from the income smoothing group.
41. 52 Annual Report Accounts & Risk Management Report In principle, smoothing applies to both UIAs and shareholders' equity, but in practice, it is generally found in connection with UIAs since they are considered a Shari'ahcompliant substitute for conventional deposits. I. ii. iii. iv. ISO27001:2013 ISO22301 ISO20000 Payment Card Industry Data Security Standard – (PCIDSS) Operational Risk Operational Risk is dened as a risk of loss arising from failure in internal processes, people, systems, or external events. This includes legal risk but excludes reputational and strategic risks. The responsibility of the operational risk unit in Jaiz Bank is to prevent the occurrence and /or crystallization of such losses and/or to reduce the impact and severity when they occur. The unit achieves this by implementing appropriate policies and platforms to reduce the occurrence of such incidences. Some of the objectives of operational risk are attained by ensuring that trained and competent people – and appropriate infrastructure, controls, and systems – are in place to ensure the identication, assessment and management of all substantial risks. An operational risk policy is in place to guide the governance and implementation of operational risk. The objectives are: i. ii. iii. iv. minimize or eliminate losses attributable to operational risk ensure operational risk awareness and effective control of operations improve performance measurement and feedback embed early warning signals when exceptions occur. The bank is in full compliance with the Covid-19 protocols as advised by the Presidential Task Force on Covid-19, as well as implementing its Business Continuity Planning framework in response to the pandemic to ensure the health and safety of its stakeholders and ensure minimal disruption to its business. Documentation and Other Unique Risks Shari'ah Non-Compliance risk is the risk that arises from failure to comply with the rules of Shari'ah and its principles as determined by the Bank's Advisory Committee of Experts (ACE) and the Central Bank's Financial Regulatory Advisory Council of Experts (FRACE). Shari'ah compliance is critical for a NIFIs' operations and such compliance requirements must permeate throughout the organization's products and activities. The Bank is strictly determined to comply with Islamic commercial jurisprudence in all its activities. Other unique risks are exclusively associated with NIFIs, which the Bank manages through effective monitoring and complying with pre- and post-disbursement modalities – i. The bank is also exposed to risks relating to its duciary responsibilities towards fund providers. Fiduciary risk arises from the failure to perform in accordance with explicit and implicit standards applicable to an Islamic bank's duciary responsibilities, leading to losses in investments or failure to safeguard the interests of the investment account holders. The appropriate mechanisms are in place to safeguard the interests of all fund providers. Where investment account holders' funds are commingled with the bank's own funds, it is ensured that the basis for asset, revenue, expense and prot allocations are established, applied and reported in a manner consistent with the bank's duciary responsibilities as approved by the regulatory authorities. The basic tools of operational risk management i.e. the Risk Register, Risk Control Self-Assessment (RCSA), Key Risk Indicator (KRI), Issues & Action Plan reporting and Loss Trend reporting have been incorporated in order to lead to seamless reporting, analysis, mitigation and eventual prevention of operational risk losses that may be inherent in the system. The Bank is ISO-certied for business continuity; for information security; and payment card security as follows. ii. iii. iv. Risk of continuity of usufruct in Ijarah; since a fundamental ethical axiom in Ijarah is that “rent is a price of usufruct; it is due as long as usufruct exists”. Reputational risk due to breach of Shari'ah compliance which may result to loss of shareholders' and IAHs' condence. Ownership Risk, which is that risk associated with owning a property, asset, or commodity especially in the Murabaha and Ijarah modes. Legal, duciary, regulatory and strategic risks are also managed appropriately. Stress Testing The Bank has in place a stress testing policy and conducts stress tests on its capital adequacy and liquidity position on a quarterly basis under a range of scenarios. The scenarios are agreed by the ALCO and reviewed by the ExCo, and regularly updated to reect the Bank's risk prole and external risks, including risks associated with the economic cycle. Where applicable, the stress tests cover all relevant risks to which the Bank is exposed, for example, capital adequacy stress tests based on macro-economic scenarios would be PAGE - 039
42. Annual Report Accounts & Risk Management Report geared towards analysing the impact on both credit and market risk exposures. Liquidity stress tests are performed monthly and capital adequacy stress tests yearly. In addition, periodic ad-hoc stress tests are performed as required by the BOD, Executive Management or the ALCO. Detailed results of stress tests are presented to the ALCO, including the impact of the stress scenario on the Bank's capital requirement, its capital resources, and its protability; summary results are presented to the ExCo. Stress testing is used to determine the Bank's capital adequacy, the adequacy of its liquidity position and to inuence strategy and mediumterm planning. The bank prepares and presents to the CBN the Internal Capital Adequacy Assessment Process (ICAAP) on an annual basis, based on the preceding year's nancial information as approved by the CBN. Write-Off and Recoveries After full evaluation of a non-performing exposure, if either one or all the following conditions apply, such exposure shall be recommended for write-off: i. continued contact with customer is impossible. ii. recovery cost is expected to be higher than the outstanding debt. iii. amount obtained from realisation of investment collateral security leaves a balance of the debt. iv. it is reasonably determined that no further recovery on the facility is possible. All investment facility write-offs require endorsement at the appropriate level as dened by the Bank. Similarly, Investment write-off approval shall be documented in writing and properly signed by the approving authority. Whenever amounts are recovered on previously writtenoff investment exposures, such amount recovered is recognized as income on a cash basis only. Musa M. Potiskum, IRMCert. Ag. Chief Risk Officer PAGE - 040
43. Annual Report Accounts & CORPORATE Governance PAGE - 041
44. Annual Report Accounts & BOARD OF DIRECTORS The Board of the Bank is made up of veteran professionals who possess the requisite skills, knowledge and experience to bring to bear independent judgement on their deliberations and decisions. The Board, headed by the Chairman, consists of 15 members made up of 12 Non-Executive Directors and 3 Executive Directors. Two of the Non-Executive Directors are Independent Directors appointed based on criteria laid down by the Central Bank of Nigeria's (CBN) Guideline on Independent Directors of Banks in Nigeria. The position of the Managing Director and Chairman are held by separate persons with clearly defined roles. 1 2 3 PAGE - 042 4 5
45. 52 Annual Report Accounts & Board of Directors 6 7 8 9 10 11 12 13 14 15 16 PAGE - 043
46. Annual Report Accounts & Board of Directors 1.Alhaji (Dr.) Umaru Abdul Mutallab, FCA, CON Chairman Prominent business leader and former Minister of the Federal Republic of Nigeria, Chartered Accountant and Banker; former Executive Vice Chairman and Managing Director of United Bank for Africa (UBA). Also former Chairman of First Bank of Nigeria Plc, the oldest and biggest bank in Nigeria. He is a holder of one of the highest national awards in Nigeria – Commander of the Order of the Niger (CON). Abdul Mutallab has also been conferred with the Fellowship of both the Association of Chartered Certified Accountants (ACCA) of UK and the Institute of International Bankers Association (FIBA) of the United States of America. 2. Hassan Usman, FCA, FCIB. - Managing Director/CEO A trained Accountant, Mr. Hassan Usman graduated with a first class degree in Accounting in 1985 from Ahmadu Bello University, Zaria, Nigeria and became an associate Member of ICAN in 1989. He obtained a Post Graduate Diploma in Management in 1995 from Maas tricht School of Management, Netherlands. Mr. Usman also attended the Oxford University Advanced Management Programme in 2002. He worked as the Financial Controller of New Nigerian Development Company Limited, Kaduna until he joined NAL Merchant Bank PLC where he served as the Financial Controller and Treasurer respectively between1996-2001. Mr. Usman had a stint with Inland Bank where he served as General Manager, Banking Services before re-joining NAL Bank as Deputy General Manager and Head, Business and Financial Advisory Group. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN). He was appointed as the Managing Director of Jaiz Bank Plc by the Board of Directors in May 2016. Born in the ancient city of Kano, Mahe obtained both Bachelor and Master's of Science Degrees in Business Administration from Ahmadu Bello University in 1984 and1987 respectively. He attended several trainings in and outside Nigeria including Wharton School, Pennsylvania, USA; London Business School; and Lagos Business School. He was appointed as the Deputy Managing Director by the Board of Directors in May 2016. Mahe retired with effect from February 16, 2021 after attaining retirement age. 4.Abdulfattah O. Amoo, FCA - Executive Director Operations/CFO AbdulFattah Amoo is a shrewd professional banker, astute strategic planner and executor. He is well versed in both Islamic and Conventional banking business models. He possesses almost 3 decades cognate experience which cuts across professional Accounting practice, Banking and Finance, out of which almost 17 years has been spent at senior management/executive positions. He joined Jaiz Bank PLC in 2017 as an Executive Director, Operations and Chief Finance Officer (CFO), a role which included providing strategic direction in Information Technology (IT) and driving the digital transformation of the Bank until his recent redeployment as Executive Director, Business Development, South. He holds a B.Sc. in Economics and Masters in Business Administration from Edo State University (now Ambrose Alli University) and has attended several local and international courses in strategic management, leadership, Senior Management Programme (SMP), Leading change, Sustainable Business Strategy, The CFO programme, etc. at prestigious institutions such as Harvard Business School, Euromoney – UK, VISA International – US, Phillips Consulting – South Africa, Lagos Business School, among others. 3. Mahe Abubakar - Deputy Managing Director A seasoned banker of standing repute with over 20 years cognate banking experience, Abubakar Mahe currently steers the business development drive of Jaiz Bank Plc. Prior to joining Jaiz Bank, Mahe was the Group Zonal Head of Zenith Bank Plc in charge of the Northwest region. Before joining the banking sector in 1994, Mahe worked with the Nigerian International Securities Limited (NISEL), a member of Nigerian Stock Exchange and a subsidiary of Continental Merchant Bank Plc from 1991 to 1994 having qualified as a dealing clerk of the Nigerian Stock Exchange. Between 1990 and 1991, he worked as the dealing clerk/branch head of the Lagos office of the Gidauniya Investment & Securities Limited. PAGE - 044 AbdulFattah is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and a member of Chartered Institute of Taxation (CITN) and Chartered Institute of Bankers of Nigeria. Salisu Sirajo Ph.D - Executive Director, Business Development Sirajo is a Certified Risk Manager (CRM), Fellow Institute of Credit Administration (FICA) and Honorary Senior Member Chartered Institute of Bankers of Nigeria (CIBN) Sirajo is a 1991 B.Sc. Economics graduate from Bayero University Kano, Msc Monetary Economics (University of Port Harcourt) and Ph.D Agricultural Economics from Abubakar Tafawa Balewa University Bauchi. Sirajo also
47. 52 Annual Report Accounts & Board of Directors obtained his second Masters Degree on Islamic Banking and Finance from Bayero University Kano. Sirajo started his banking career in 1992 with Inland Bank Plc as a Supervisor and rose to Assistant General Manager in 2009 with First Inland Bank Plc, where he held various Managerial Positions in both Operations, Credit Administration and Business Development including Regional Manager FCT Abuja in 2007. In 2009, he was appointed Managing Director/CEO Arab Gambian Islamic Bank (AGIB), a position he held for Six (6) years till January 2015. Sirajo has attended several Management and Islamic Banking Courses in and outside Nigeria as a participant and/or a speaker. He is also an Alumnus of the prestigious Lagos Business School (SMP 33) and Madinah Institute for Leadership and Entrepreneurship (PALM 11) Kingdom of Saudi Arabia. 5. Alh. (Dr.) Aminu Alhassan Dantata, CON - Non-Executive Director A renowned business man, he began his career as produce buyer in 1949 in the family business of Alhassan Dantata and Sons Limited. He became the Chairman and Managing Director of the Company, in 1960, a position he holds till date. Dr. Dantata was a member of the Steering Committee of the Nigerian Industrial Development Bank (now Bank of Industry, BOI), and served as a Director of the Bank between 1962 and 1966. He has led several trade missions to several countries across the world. He is a holder of one of the highest national awards in Nigeria – Commander of the Order of the Niger (CON). 6.Alhaji (Dr.) Muhammadu Indimi, OFR - Non-Executive Director He is a distinguished and highly successful businessman. Dr. Indimi is the sole Founder and Chairman of Oriental Energy Resources Limited. He has over 20 years experience in the Nigerian Upstream Oil and Gas sector. Dr. Indimi is an astute business man with notable presence in the international business arena. He also serves as the Chairman of M & W Pump Nigeria Limited; which has partnered with MWI Corp of Deerfield Beach, Florida. He also sits on the Boards of Arab Contractors (OAO) Nigeria Ltd and Julius Berger Nigeria PLC. 7. Alhaji Mukthar Sani Hanga - Non-Executive Director He is a renowned businessman and an administrator with great wealth of experience in the Business World. Known for his strategic methodologies for turning businesses around in the simplest but strategic way towards achievement of corporate goals. He was formerly the Managing Director of Hanga Line Limited. With his wealth of experience as a transformative leader, he was appointed as the Special Adviser to the former Governor of Kano State, Mal. Kabiru Gaya on Sports and Youth Development. A Board member of Nigerian Institute of Social and Economic Research (NISER), Ibadan, Chairman of NYSC Committee, Kano and Director of Northern Nigeria Investment Limited, Kaduna. 8. Alhaji (Dr.) Musbahu Mohammad Bashir - Non-Executive Director He is the Chairman of Althani Group of Companies, and Cobalt International Services Limited since 2004. He is also a Direc tor in Bento Drill Nigeria Limited, Offshore Technologies International Limited, and Resource capital group. Cobalt International Services Limited is a pre-shipment inspection agent for dry goods and bulk liquid cargoes. They are currently inspection agents for oil and gas exports in the country. Earlier on, Alhaji Bashir worked with Hammad Development Facilities in 1987 and Jadai Diversified Services in 1989. He obtained a BBA in Business Management from the American University in 2002 , an Advanced Diploma in Business Management in 1998 from Tafawa Balewa University, Abuja campus, and a National Diploma in Irrigation Engineering from the Kaduna Polytechnic 1987. He was recently conferred with a Honourary Doctorate Degree by the Igbinedion University, Okada, Edo State, Nigeria. 9. HRH, (Engr.) Bello Muhammad Sani, OON - Non-Executive Director He is a holder of Bachelor's Degree in Engineering from the prestigious Ahmadu Bello University, Zaria, Nigeria. He is also a holder of M.Sc (Civil Engineering) from the University of Dundee Scotland – 1977. HRH is a fellow of Nigerian Society of Engineers (FNSE), Council for the Regulation of Engineers in Nigeria (COREN) and an Officer of the Order of the Niger (OON) conferred upon him by the former President Olusegun Obasanjo on the 10th of December 2003 in recognition of his achievements. He is currently the Emir of Bakura, Zamfara State, Nigeria. Prior to becoming the Emir, HRH held several notable positions such as; Ÿ Public Engineer in the defunct North Western State Ministry of Works, Transport and Housing, Sokoto in 1974 – 1975, PAGE - 045
48. Annual Report Accounts & Board of Directors Principal Engineer of Ministry of Works and Transport Sokoto in 1979-1980 Ÿ Acting Permanent Secretary of Ministry of Works and Housing, Sokoto in 1981. Ÿ Chief Civil Engineer and the Chief Building Engineer in 1981-1983 Ministry of Works and Transport Sokoto. Ÿ He held positions in some of the most prestigious corporate, private and public organizations in Nigeria, including Director, Building and Engineering Services, Central Bank of Nigeria (CBN) between 1989 -1996, Senior Assistant General Manager, Union Bank of Nigeria (formerly Barclays Bank). 10. Mallam Falalu Bello, FCIB, OFR - Non-Executive Director A1978 law graduate from Ahmadu Bello University, Zaria, Nigeria. He started his legal career with the Kaduna State Government as Magistrate II and subsequently moved to Northern Nigeria Investment Company Limited as Senior Executive/Acting Company Secretary. He was later appointed Kaduna State Government Commissioner for Trade and Industry. He was appointed Managing Director /CEO of Habib Nigeria Bank Limited in 1994 until 1998 when he was appointed Managing Director/CEO of Intercity Bank Plc. He resigned as Vice Chairman/Managing Director in 2001. In 2001, he was appointed as Managing Director of Nigerian Agricultural Development Bank Limited and subsequently, Managing Director of Unity Bank. He also served as the Chairman of Mainstreet Bank. Mallam Bello holds the National honour of the Officer of the Federal Republic (OFR). 11.Alhaji (Dr.) Umaru Kwairanga F.IoD, FCS, FCIP He is also on the Council of the Certified Pension Institute of Nigeria (President); and Chartered Institute of Stockbrokers. He was a former Chairman of Ashaka Cement Plc; and former Director of Central Securities Clearing System Plc. Alhaji Kwairanga has attended several courses and training programs in fields relating to Finance, Investment and Money Market in reputable institutions including Harvard Business School, New York, Institute of Finance and Euro Money. He is a Professional Certificate holder of the Chartered Institute of Stockbrokers, Certified Pension Institute of Nigeria and the Abuja Securities and Commodity Exchange. He has been Managing Director of a top notch stockbroking firms for over a decade and a Director in several blue-chip organisations. He was a member of the Nigerian Vision 20:2020, National Technical Working Group (NTWG) on Public sector Thematic Area. He has an extensive senior level management experience and impeccable ethics and integrity. 12. Mr. Seedy Mohammed Njie - Non-Executive Director Mr. Seedy Mohammed Njie holds a Masters' degree in Business Administration from the School of Oriental & African Studies, University of London. He is a fellow of the Association of Chartered Certified Accountant – UK as well as an Associate Professional Risk Manager amongst other professional certifications. Mr. Njie started his career in 1999 as an Assistant Audit Manager at Deloitte & Touche, the Gambia. He continued his career with Islamic Development Bank, Jeddah, Saudi Arabia in 2005, where he had served in different capacities of the Bank till date - Non-Executive Director Umaru Kwairanga (Sarkin Fulanin Gombe) holds a B. Sc. (Hons) in Business Administration, MBA from the University of Maiduguri, M. Sc. Finance & Governance from Liverpool John Moores University U. K. (LTMU) Liverpool United Kingdom and an Honorar y Doc torate Degree by IgbinedionUniversity, Okada, Edo State Nigeria. 13.Alhaji Ibrahim Mamun Maude He is a fellow of the Institute of Directors (IoD), Certified Pension Institute of Nigeria (CPIN) and Chartered Institute of Stockbrokers of Nigeria. He is a well travelled executive with vast knowledge of corporate governance practices with over 20 years cognate experience in banking, corporate finance, as well as an active player in the Capital Market. - Non Executive Director Alhaji Maude holds a Master's degree in Banking and Finance from the Bayero University Kano. He started his career after NYSC in 1979 as a Principal Accountant at the Kaduna State Water Board. In 1985, he worked as the Chief Accountant and Company Secretary of Funtua Cottonseed Crushing Co. Ltd, Funtua. He is Chairman of the Board of Axa Mansard Pensions and serves a director on the boards of Microfinance Bank Ltd, Waila, Kano Electricity Distribution Company (KEDCO) and the Nigeria Exchange Group Plc. He is currently the MD/CEO of Finmal Finance Services Limited. PAGE - 046 He has had 20 years work experience in Audit & Advisory services as well as Banking services. He also had versed knowledge of Islamic Finance having worked with the Islamic Development Bank for a period not less than 15 years. Between 1989 and 2008. He served in various capacities at the Central Bank of Nigeria, including Banking Services and Banking Supervision.
49. 52 Annual Report Accounts & Board of Directors He is currently the Special Adviser to the Chairman of Oriental Energy Resources Limited. He has had over 40 years work experience in Public Civil Service, Banking & Insurance, and Oil & Gas sectors. He also has appreciable knowledge of Islamic Finance having travelled locally and internationally to deliver lectures and papers on the subject. 14. Mrs.Aisha Waziri Umar - Independent Director Mrs. Aisha Waziri Umar is a Legal Practitioner & Notary Public with over 23 years' experience across multiple sectors including law, banking, finance, public sector policy and administration. She is the founder of Inara Foundation, a nongovernmental organization assisting victims of violence in the northeast of Nigeria. Mrs. Umar is an advocate and promoter of special education in Nigeria and the proprietor of the Centre for Children with Special Needs in Abuja, a special school that caters for the learning needs of children and adolescents with physical and/or learning difficulties. She is a partner at Prodiverse Global, a legal and business advisory firm in Abuja. Mrs. Umar is a 1987 graduate of Law from the University of Buckingham, England, Master of Laws Degree (University of London) and Post-Graduate Diploma in Global Business from Oxford University, Said Business School England. She is currently a student at the University of West Scotland, researching Nigeria's engagement with the WTO (World Trade Organization) Dispute Settlement system. 15. Dr.Abdullateef Bello - Independent Director Dr. Abdullateef Bello obtained his Master's and Doctor of Philosophy (D.Phil.) degrees in Applied Statistics from the University of Oxford, UK. He was awarded the prestigious international Rhodes Scholarship for exceptional ability, academic excellence, and performance that enabled him to complete his studies at Oxford and became the 10th Rhodes Scholar from Nigeria. He also attended the Management Development Programme of the Centre for Management Development, London Business School, UK. As an international development banker, Dr. Bello served in different capacities including treasury (dealing room), operations, and research departments at the Islamic Development Bank (IDB), where he worked for over 24 years on various initiatives and themes including Islamic finance, data analytics, capacity development, strategies, policies, and emerging development issues facing member countries of IDB. At IDB, he occupied three senior managerial positions simultaneously: Director of Economic Research and Policy; Director of Data Resources and Statistics; and the IDB Group Chief Librarian. He also attained the highest professional and technical position at the Bank. He began his career as a lecturer with the Federal University of Technology, Akure (Nigeria), and later became a software developer with the Numerical Algorithms Group (NAG), Oxford, UK. In 2003, he won the highest and most coveted “IDB Award for Excellence in Performance”, and authored, among others, “The role of Islamic finance in achieving Sustainable Development Goals (SDGs)”. As an international scholar, he served as a board member of several international bodies and initiatives including the boards of the Global Strategy to improve Agricultural and Rural Statistics (FAO), and Par tnership in Statistics for Development in the 21st Century (PARIS21) as well as a member of IFSB's Taskforce on Prudential Islamic Finance Database. Dr. Bello has travelled extensively to more than 40 countries representing IDB at various conferences and initiatives. PAGE - 047
50. Annual Report Accounts & ADVISORY COMMITTEE OF EXPERTS (ACE) 1 1. 2 Prof. Monzer Kahf - Chairman, He is a leading scholar, Professor and a Consultant in Islamic banking and finance. He has been drafting and reviewing Shari'ah contents of finance agreements, by-laws and operational systems for Islamic financial institutions in many countries around the world including USA, Canada, Switzerland, Saudi Arabia and Trinidad. Prof. Kahf is currently a professor of Islamic Finance and Economics at Qatar Faculty of Islamic Finance, Hamad University. He served as a senior research economist at the Islamic Research and Training Institute of the Islamic Development Bank (IDB), in Jeddah from 1985 to 1999. He has written 38 books and published over 91 articles in English and Arabic on Trusts, Awqaf, Zakah, Islamic Finance and Banking and other areas of Islamic economics. He speaks English, Arabic and a little of French. 2. Dr. Muhammad Alhaji Abubakar - Member Dr. Muhammad Alhaji Abubakar has over 20 years' experience in Islamic Scholarship. He obtained his degree, M.A and Ph.D (in Islamic jurisprudence) from Islamic University of Madinah, Saudi Arabia. He has published articles on Islamic commercial jurisprudence and other areas of Islamic law in academic journals (local and international). He also published articles in some local dailies in Hausa language. He attended conferences within and outside Nigeria, and actively engage in propagating Islam. Dr. Muhammad speaks Arabic, English, Kanuri and Hausa. He is currently a lecturer at the Department of Sharia, Faculty of Law, University of Maiduguri. 3. Sheikh Abdulwahab - Member Sheikh Abdulwahab is a renowned Islamic Scholar and Preacher who has spent major part of his life in teaching and PAGE - 048 3 4 preaching about Islam. Together with Late Sheikh Ja'afar Mahmud Adam, they have contributed immensely in creating Islamic awareness within and outside the country. He is a graduate of Darul Hadith in Makkah and Islamic University of Madinah, Kulliyatul Hadith Wa Darasat al Islamiyya (Faculty of Hadith and Islamic Knowledge). He is the Chairman of Bin Baz Foundation, Member, Shari'ah Commission of Zamfara State and member, National Supreme Council for Islamic Affairs (NSCIA). As part of his efforts towards propagation and development of Islam, Sheikh Abdulwahab has written several books on various topics including but not limited to Fatwa on Marriage and Divorce. 4. Dr. Ahmad Bello Dogarawa - Member Dr. Ahmad Bello Dogarawa is an Associate Professor with the Department of Accounting, Ahmadu Bello University, Zaria, Nigeria. He is an alumnus of Al-Azhar University, Cairo and belongs to several professional bodies. He has published more than 35 articles in academic journals (local and international), presented over 50 papers at local and international conferences and published 6 Islamic books in Hausa and English Languages. He is a member, ABUTH Health Research Ethics Committee; and Member, League of Imams, Scholars and preachers in the Sahel with headquarters at Algiers, Algeria.
51. 52 Annual Report Accounts & MANAGEMENT TEAM Hassan Usman, FCA, FCIB - Managing Director/CEO A trained accountant, Mr. Hassan Usman graduated with a first class degree in Accounting in 1985 from Ahmadu Bello University, Zaria, Nigeria and became an associate member of ICAN in 1989. He obtained a Post Graduate Diploma in Management in 1995 from Maas tricht School of Management. Mr. Usman also attended the Oxford University Advanced Management Programme in 2002. He worked as the Financial Controller of Nigerian Development Company Limited, Kaduna until he joined NAL Merchant Bank PLC where he served as the Financial Controller and Treasurer respectively between1996-2001. Mr. Hassan had a brief stint with Inland Bank where he served as General Manager, Banking Services before re-joining NAL Bank as Deputy General Manager and Head, Business and Financial Advisory Group. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN). He was appointed as the Managing Director of Jaiz Bank Plc by the Board of Director effective 1st June 2016. Abubakar Mahe - Deputy Managing Director A seasoned banker of standing repute with over 20 years cognate banking experience, Abubakar Mahe is steering the business development drive of Jaiz Bank Plc. Prior to joining Jaiz Bank, Mahe was the Group Zonal Head of Zenith Bank Plc. in charge of the Northwest region. He also worked with the Nigerian International Securities Limited (NISEL), a member of Nigerian Stock Exchange and a subsidiary of Continental Merchant Bank Plc. from 1991 to 1994 and the Lagos office of the Gidauniya Investment & Securities Limited as the Dealing Clerk/Branch Head (19901991). A qualified Dealing Clerk of the Nigerian Stock Exchange, Mahe born in the ancient city of Kano obtained both B.Sc. and M.Sc. Degrees in Business Administration from Ahmadu Bello University in 1984 and 1987 respectively. He attended several training in and outside Nigeria including High Potential Leader: Accelerating Your Performance at Wharton School, Pennsylvania, USA; High, Performance People Skills, London Business School; and Senior Management Programmes, Lagos Business School. Abdulfattah O. Amoo He possesses almost 3 decades cognate experience which cuts across professional Accounting practice, Banking and Finance, out of which almost 16 years has been spent at senior management positions. AbdulFattah was instrumental to setting up of the Financial Control function of CSL Group; managed the Operations, of the South-South/South-East regions, e-Business Group, Retail Banking and Non-Interest Banking (Sales) business group of Sterling Bank PLC. He is skilled in Talent Management, Strategic Networking and People Management, among others. AbdulFattah is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and an Associate member of the Chartered Institute of Taxation (CITN). He holds a B.Sc. in Economics and Masters in Business Administration from Edo State University (now Ambrose Alli University) and has attended several local and international courses in strategic management, leadership, etc. AbdulFattah joined Jaiz Bank on 6th November 2017. Salisu Sirajo Ph.D - Executive Director, Business Development Sirajo is a Certified Risk Manager (CRM), Fellow Institute of Credit Administration (FICA) and Honorary Senior Member Chartered Institute of Bankers of Nigeria (CIBN) Sirajo is a 1991 B.Sc. Economics graduate from Bayero University Kano, Msc Monetary Economics (University of Port Harcourt) and Ph.D Agricultural Economics from Abubakar Tafawa Balewa University Bauchi. Sirajo also obtained his second Masters Degree on Islamic Banking and Finance from Bayero University Kano. Sirajo started his banking career in 1992 with Inland Bank Plc as a Supervisor and rose to Assistant General Manager in 2009 with First Inland Bank Plc, where he held various Managerial Positions in both Operations, Credit Administration and Business Development including Regional Manager FCT Abuja in 2007. In 2009, he was appointed Managing Director/CEO Arab Gambian Islamic Bank (AGIB), a position he held for Six (6) years till January 2015. Sirajo has attended several Management and Islamic Banking Courses in and outside Nigeria as a participant and/or a speaker. He is also an Alumnus of the prestigious Lagos Business School (SMP 33) and Madinah Institute for Leadership and Entrepreneurship (PALM 11) Kingdom of Saudi Arabia. FCA - Executive Direc tor Operations/CFO AbdulFattah Amoo is a shrewd professional banker, astute strategic planner and executor. He is well versed in both Islamic and Conventional banking business models. Dr. Nuruddeen A. Liman - Regional Manager – North West Dr. Nuruddeen Ahmad Liman is an astute banker of several years and an academician of reputable standing. His experience cut across both public and private sectors. He has PAGE - 049
52. Annual Report Accounts & Management Team received trainings and attended workshops within an outside Nigeria and he is a member of several reputable and recognized bodies and organizations. Dr. Liman started his banking career in 1998 with the then Bank of the North and rose to the position of a Principal Manager, heading the New Sector Development Department of the Bank. When the Bank merged with other banks to form Unity Bank in 2006, Dr. Liman was made the Head, Training & Development. He left Unity Bank in 2010 as the Assistant General Manager, Human Capital Management Department. Dr. Liman moved to Igbinedion University, Okada in 2010 as an Assistant Professor to lecture Business Administration and he was made the Head of the Department in 2012, and Dean, Sanusi Lamido Sanusi College of Business & Management Studies. He joined Jaiz Bank Plc in 2013 as the Divisional Head, Corporate Services, to oversee Human Capital Management Department, Corporate Communications Department, and General Services Department. He is now in the Business Development Division of the Bank. Ahmed A. Hassan - Chief Compliance Officer Ahmed is a Fellow of the Institute of Chartered Accountants of Nigeria, a Fellow of the Chartered Institute of Taxation of Nigeria and an Associate of the Pension Institute of Nigeria, as well as an Alumnus of Bayero University, Kano and the University of Lagos. He has over twenty-six (26) year's cognate Banking, Industrial and Academic experience. He started his career as a Lecturer of Accounting & Finance at Bayero University, Kano before joining the Banking/ Finance Industry. A consummate Banker, he has at various times worked in Securities & Exchange Commission, former New Africa Merchant Bank Ltd, NAL Merchant Bank (now Sterling Bank), NUB / FINBANK (now FCMB) and had a brief stint with Dangote Group as the Financial Controller of Kano Mills. His banking experience covers Corporate Finance, Banking Operations, Risk Management, Financial Controls and Branch / Regional Banking. Mr. Hassan has attended various local & foreign courses and workshops. He joined Jaiz Bank Plc. in October 2013. He is currently the Chief Compliance Officer of the Bank. PAGE - 050 Ismaila Adamu - Divisional Head, - Corporate Services Ismaila Adamu can easily be referred to as the first CEO of Jaiz Bank Plc (Jaiz International Plc), as he was part of the Jaiz Project right from the scratch. Malam Ismaila Adamu had his secondary education at Federal Government College, Kano and completed his first and second degree in Accounting (1992) and Banking & Finance (1997) respectively from Bayero University, Kano. A member of Chartered Institute of Taxation of Nigeria, Malam Adamu started his professional career in 1993 with Abdu Abdurrahim & Co (Chartered Accountant), Kano. He had a brief stint as the Financial Accountant of Nicco Sweet, Kano in 1998 before joining Ahmed Zakari & Co. (Chartered Accountant), Kano, as a pioneer staff in 1998. His involvement with Jaiz project dated back to 2001 while Ahmed Zakari & Co. was the committee secretariat for the promotion of Non-Interest Financial System in Nigeria with him as the secretary. In March 2003, he coordinated the Jaiz Profit Sharing Bank secretariat, the registration of Jaiz International Plc with the Corporate Affairs Commission (C.A.C) and the highly successful Initial Public Offer (I.P.O) in October 2003. The proceed (N2 billion) was deposited at the Central Bank of Nigeria in March, 2004 as the then required Banks minimum capital deposit. He has since been with the Jaiz Project up to the commencement of the Bank in January, 2012. On the commencement of the Jaiz Bank Plc, he was the Head of Support Service, a position he held before taking over as the General Manager/CEO of the Foundation. He is currently the Divisional Head, Corporate Services. Musa Zara Ibrahim - Regional Manager - Abuja Musa Zara Ibrahim started her banking career in 1991 with the then Premier Commercial Bank Plc as an officer and resigned in 1997 to take up an appointment with the then FSB International Bank Plc, where she rose to a managerial position. In the pursuit of her passion for Islamic Banking, Ibrahim left FSB International Bank Plc in 2005 to join Jaiz International Plc. where she worked with other team members to raise capital within and outside Nigeria towards the establishment of the first full-fledged Islamic Bank in Nigeria, the Jaiz Bank Plc. She is conversant with both conventional and Islamic banking operations and has attended training within and outside Nigeria in both fields of banking. These includes – Performance Management at Lagos Business School and
53. 52 Annual Report Accounts & Management Team Islamic Project & Infrastructure Finance at Terraphinn Financial Training, Singapore. She is now in the Business Development Division of the Bank. Staff Disciplinary Committee; Senior Staff Appraisal Committee; IT Steering Committee; Information Security Steering Committee, Human Resources and Service Improvement Committee. Rukayat O. Dahiru - Company Secretary/Legal Adviser Mrs. Dahiru has over twenty (20) years post-call experience, eleven (12) of which were acquired in the Financial Services Industry, (3 years in Insurance and 9 years in the Banking Sector). Mrs. Dahiru has received trainings spanning Corporate Governance, Management, Leadership, Anti-Money Laundering, Corporate/Commercial/Financial Law and Islamic Finance both locally and internationally. She joined Jaiz Bank as the pioneer Company Secretary and Legal Adviser in 2012, and recognizing her experience and competence in the Corporate Governance sphere, the Board immediately thrust on her the responsibility for designing the Board’s Governance Framework. Consequently, one of her notable accomplishments in the Bank was that she designed the Board and Board Committee Charters that were eventually approved by the Central Bank of Nigeria (CBN) in 2013. A fellow of the Institute of Chartered Accountants of Nigeria, Abdullahi Usman is a seasoned banker with versatile experience in Investment Banking, Development Banking and Commercial Banking that spanned a period of over 26 years. In addition to this, he had 3 years stint with Tawada Limited (a subsidiary of Nigerian Security Printing and Minting Company Ltd.) as the pioneer Financial Controller. In furtherance of her strategic role in providing support for the Board, Mrs. Dahiru Guided the Board in complying with the CBN/SEC Code of Corporate Governance, and recently, the Nigerian Code of Corporate Governance. She was therefore responsible for assis ting the Board in drafting/ensuring that the policies required under the various Codes were produced and in place. Another notable accomplishment of Mrs. Dahiru was that she Co-ordinated the Bank’s pre-Listing activities culminating in the successful listing of the Bank’s shares on the Nigerian Stock Exchange (NSE). Accordingly, she assumed responsibility for ensuring that the NSE Listing Rules as well as the provisions of the Investment Securities Act are complied with by the Bank. Furthermore, because of her dual responsibility as Company Secretary & Legal Adviser, Mrs. Dahiru has been a pioneer member of the Management Investment Committee, where she has not only learnt the rudiments of Investment appraisals, but also provided insightful advice from the legal viewpoint. Accordingly, she has advised on, drafted and reviewed several legal instruments, investment/facility documents, and other routine contracts that formed the basis of the Bank’s financing/investments activities right from inception. She was appointed, with the approval of the CBN, as the Chief Complaint Officer of the Bank, with functions similar to that of an Ombudsman; she has acted as the Chief Compliance Officer (CCO) of the Bank for a brief period in 2013 before a substantive CCO was recruited; She has chaired the Bank’s Procurement Committee for more than 6 years cumulatively; all while serving as a member of Executive Management Committee; Management Investment Committee; Senior Abdullahi Usman FCA - Chief Audit Executive He started his banking carrier in 1987 with the Bank of Agriculture (formerly Nigerian Agricultural and Cooperative Bank Ltd.) and left for Nigeria Universal Bank Ltd in 1988 from where he joined New Africa Merchant Bank Ltd. in 1989. After his stint with Tawada Limited from 1996 to 1998, he joined United Bank for Africa from 1999 to 2001 when he moved to Intercity Bank Plc and subsequently, Unity Bank Plc through merger in 2005. During this period, he held various responsibilities that covered all areas of core banking operations, which included Treasury and Foreign Operations Officer, Head of Branch Operations, Regional Head of Operations, Zonal Head Internal Control, Head of Budgeting and Financial Reporting, Head Strategy and Corporate Planning, Head Credit Remediation and Workout, and Head Credit Control and Policy. Abdullahi Usman joined Jaiz Bank in 2013 as Deputy Chief Risk Officer. He is currently the Ag. Chief Audit Executive of the Bank. A Chartered Accountant and Accounting graduate of 1987, he is also MBA holder from Ahmadu Bello University, Zaria. He had attended numerous local and international courses which include Strategic Treasury Management by D.C. Gardener, Management Development Program by School of Business Entrepreneurship of South Africa, Audit Command Language (ACL) by EDP Associates, Applied Corporate Finance Workshop by Jeff & O'Brien, IFRS training by Euromoney, Kaplan-Norton Balanced Score Card, Basel II/III training and Basel III and IFSB Regulations for Islamic Financial Institutions by Red Money Training, Kualar Lumpur, Malaysia. Alhassan Abdulkarim - Regional Manager South Alhassan Abdulkarim started his banking career in 1999 with Access Bank and then moved to Citizens Bank in 2003. From PAGE - 051
54. Annual Report Accounts & Management Team Citizen Bank, he joined Guaranty Trust Bank in 2005 and later returned to Access Bank in 2011 before he joined Jaiz Bank in 2012. Alhassan hold a Bachelor of Science Degree in Microbiology with a Second Class Upper honour from Bayero University, Kano in 1997 and later proceeded to obtain Masters in Business Administration from the same University in 2012. He is also a holder of Masters Degree in Islamic Banking and Finance. His banking experience is in the areas of Banking Operations, Relationship Management (Credit and International Trade), while his core competence/skills include credit, financial and business analysis, International Trade Finance and Islamic finance. In the course of his duty, Alhassan attended series of training among which include; Guaranty Trust Bank Training school; Guaranty Trust Bank Credit School; and International Trade Finance. He has completed training as a Commodity Broker under Abuja Commodity Exchange. Musa Potiskum - Ag. Chief Risk Officer Musa is a 1991 graduate of Business Administration (Finance) from the Ahmadu Bello University, Zaria and has over 20 years' experience with Tier 1 banks covering Operations, Credit & Marketing, Retail & Commercial Banking, and Public Sector marketing at Managerial and Regional levels. He was a Project Manager with a Canadian consultancy firm (CPCS) before joining Jaiz Bank. He is a pioneer staff of Jaiz Bank and established the Kaduna branch of the Bank before moving to the Head Office as the pioneer Retail Banking Group Head from where he was transferred to the Risk Management Division as the Head, Credit Risk / Deputy Chief Risk Officer. He acted as pioneer Nigerian Chief Risk Officer of the Bank before he was redeployed to head the North Central Regional. Musa is a certified member of the Institute of Risk Management, UK, the Risk Managers Association of Nigeria and the Chartered Institute of Bankers (CIBN). PAGE - 052 Muhammad K. Muhammad Ph.D - Chief Strategy Officer Muhammad Kabir (MK) is in charge of Strategy at Jaiz Bank. He was the pioneer Chief Financial Officer of the Bank where he set up from the scratch a Shariah-compliant accounting and financial reporting system. He is very versed and highly skilled in the area of Islamic Finance, Islamic Accounting, Corporate Strategy, Corporate Finance as well as Financial Control having worked for a combined period of over eighteen years spanning private equity investment, banking and a stint in academics both within Nigeria and the United Kingdom. As a former conventional Investment and Commercial Banker, MK has extensive experience in the financial services industry. He has previously managed the Structured Finance portfolio of an investment bank, where he developed the project finance and credit derivatives business of the firm. He also had academic stint at Henley Business School, University of Reading, UK where he taught Corporate Strategy and Management courses. MK is an AAOIFI Certified Professional (CIPA), and a Charter Holder of the Chartered Institute for Securities and Investments (CISI), United Kingdom as well as Chartered Islamic Finance Analyst (CIFA), Kuwait. He holds a B.Sc Hons. Accounting and M.Sc in International Accounting & Consulting (awarded with distinction) from Bayero University and the University of Reading respectively. He got his Ph.D in Strategic Finance from the Open University, United Kingdom. He is currently pursuing his second Ph.D in Islamic Finance from Malaysia with focus on Sukuk disclosure, pricing and risk.
55. 52 Annual Report Accounts & DIRECTORS' REPORT The Directors present their report along with the Audited Financial Statements and Auditors' Report for the year ended 31 December 2020. 1. Legal Form and Principal Activity Jaiz Bank Plc was incorporated as a public limited liability company in 2003 and obtained a regional licence to operate as a noninterest commercial bank on 10th November 2011. Subsequently it commenced operation on January 6, 2012 and was issued a National Banking licence by the Central Bank of Nigeria in May 2016. On February 10, 2017, the Bank's shares were listed on the floor of the Nigerian Stock Exchange. 2. Financial Summary 31st December, 2020 Paid Up Share capital 31st December, 2019 14,732,125 14,732,125 627,365 627,365 (2,538,887) (4,081,114) Risk regulatory reserve 2,175,084 2,714,153 Statutory reserve 2,108,625 1,237,662 740,742 17,845,054 321,757 15,551,947 Share premium Retained earnings Other reserves Shareholders' Fund 3. Business Review and Future Development The Company carried on as a non-interest commercial bank in the year under review in accordance with its Memorandum and Articles of Association. A comprehensive review of the business for the year and prospects for the ensuing year is contained in the Managing Director's Report. 4. Dividends Board of Directors, pursuant to the powers vested in it by the provisions of section 427 of the Companies and Allied Matters Act (CAMA) of Nigeria 2020, proposed a final dividend of 3kobo per share from the retained earnings account as at December 31, 2020. This will be presented for ratification of the shareholders at the Annual General Meeting. Payment of dividends is subject to withholding tax at a rate of 10% in the hands of qualified recipients 1. Directors a. Directors' Remuneration The Bank ensures that remuneration paid to its Directors and Managers complies with the provisions of the Code of Corporate Governance issued by its regulators. In compliance with Section 34(5) of the Code of Corporate Governance for Public Companies as issued by Securities and Exchange Commission, the Bank makes disclosure of the remuneration paid to its directors as follows: PAGE - 053
56. Annual Report Accounts & Directors' Report Type of package Fixed Description Timing Basic Salary Part of gross salary package for Executive Directors only. This reflects the banking industry competitive salary package and the extent to which the Bank's objectives have been met for the financial year. Paid monthly during the financial year. Other allowances Part of gross salary package for Executive Directors only. Reflects the banking industry competitive salary package and the extent to which the Bank's objectives have been met for the financial year. Paid at periodic intervals during the financial year. Performance Based Pay Paid to Executive Directors/other staff and tied to performance of the line report. It is also a function of the extent to which the Bank's objectives have been met for the financial year. Paid annually in arrears. Director fees P a i d a n n u a l l y t o N o n E x e c u t i v e D i r e c t o r s o n l y. Paid quar terly in arrears. Sitting allowances Allowances paid to Non-Executive Directors only, for attending Board and Board Committee Meetings. Paid after each Meeting. The Directors shall propose at the next AGM 80% increase over the current Directors Fees having regard to the growing complexities of their oversight functions and the effect of inflation. a. Changes on the Board Three new Directors were appointed in the 2nd quarter of 2020 in persons of Mrs Aisha Waziri Umar, Dr. Abdullateef Bello, and Dr. Sirajo Salisu. The three directors were appointed to fill the casual vacancies created by the exit of Prof. Tajudeen Adebiyi, Nafiu Baba Ahmed, and the Bank's Deputy Managing Director, Alhaji Mahe Mahmood Abubakar. Prof. Tajudeen Adebiyi, Nafiu Baba Ahmed retired after completing their maximum three (3) terms of 3 years each, allowed by the Nigerian Code of Corporate Governance (NCCG) for Independent Non-Executive Directors, while Alhaji Mahe Mahmood Abubakar retired after attaining his retirement age. However the effective date of Dr. Sirajo Salisu's appointment was January 1, 2021. Below are the profiles of the new Directors: (I) Mrs.Aisha Waziri Umar: - is a Legal Practitioner & Notary Public with over 23 years' experience across multiple sectors including law, banking, finance, public sector policy and administration. She is the founder of Inara Foundation, a nongovernmental organization assisting victims of violence in the northeast of Nigeria. Mrs. Umar is an advocate and promoter of special education in Nigeria and the proprietor of the Centre for Children with Special Needs in Abuja, a special school that caters for the learning needs of children and adolescents with physical and/or learning difficulties. She is a partner at Prodiverse Global, a legal and business advisory firm in Abuja Mrs. Umar is a 1987 graduate of Law from the University of Buckingham, England, Masters of laws Degree (University of London) and Post-Graduate Diploma in Global Business from Oxford University, Said Business School England. She is currently a student at the University of West Scotland, researching Nigeria's engagement with the WTO (World Trade Organization) Dispute Settlement system. (ii) Dr.Abdullateef Bello: As an international development banker, Dr. Bello served in different capacities, including treasury (dealing room), operations, and research departments at the Islamic Development Bank (IDB), where he worked for over 24 years on various initiatives and themes including Islamic finance, data analytics, capacity development, strategies, policies, and emerging development issues facing member countries of IDB. At IDB, he occupied three senior managerial positions simultaneously: Director of Economic Research and Policy; Director of Data Resources and Statistics; and the IDB Group Chief Librarian. He also attained the highest professional and technical position at the Bank. He began his career as a lecturer with the Federal University of Technology, Akure (Nigeria), and later became a software developer with the Numerical Algorithms Group (NAG), Oxford, UK. PAGE - 054
57. 52 Annual Report Accounts & Directors' Report In 2003, he won the highest and most coveted “IDB Award for Excellence in Performance”, and authored, among others, “The role of Islamic finance in achieving Sustainable Development Goals (SDGs)”. As an international scholar, he served as a board member of several international bodies and initiatives including the boards of the Global Strategy to improve Agricultural and Rural Statistics (FAO), and Partnership in Statistics for Development in the 21st Century (PARIS21) as well as a member of IFSB's Taskforce on Prudential Islamic Finance Database. Dr. Bello has travelled extensively to more than 40 countries representing IDB at various conferences and initiatives. (iii) Dr. Sirajo Salisu: - Dr. Sirajo Salisu is a Certified Risk Manager (CRM), Fellow of the Institute of Credit Administration (FICA) and Honorary Senior Member, Chartered Institute of Bankers of Nigeria (CIBN). Sirajo started his banking career in 1992 with Inland Bank Plc as a Supervisor and rose to the position of Assistant General Manager in 2009 with First Inland Bank Plc, where he held various Managerial Positions in both Operations, Credit Administration and Business Development including Regional Manager FCT Abuja. In 2009, he was appointed Managing Director/CEO, Arab Gambian Islamic Bank (AGIB), a position he held for Six (6) years till January 2015, before joining Jaiz Bank Plc. Dr. Sirajo is a 1991 BSc. Economics graduate from Bayero University Kano. He has an Msc in Monetary Economics from the University of Port Harcourt and Ph.D in Agricultural Economics from Abubakar Tafawa Balewa University, Bauchi. Sirajo obtained his second Masters Degree in Islamic Banking and Finance from Bayero University Kano. He has attended several Management and Islamic Banking Courses in and outside Nigeria as a participant and/or a speaker. He is an Alumnus of the prestigious Lagos Business School (SMP 33) and Madinah Institute for Leadership and Entrepreneurship (PALM 11), Kingdom of Saudi Arabia. Before his appointment as Executive Director, Business Development, Sirajo served as the Chief Risk Officer of the bank. He was the Pioneer Regional Manager in charge of Southern Operations. Mrs. Aisha Waziri Umar, Dr. Abdullateef Bello, and Dr. Sirajo Salisu are going to be presented at the AGM for election. a. Directors Retiring by Rotation In accordance with the provisions of the Companies & Allied Matters Act, Alhaji (Dr.) Umaru Abdul Mutallab, CON; HRH Engr. Bello Muhammad Sani, OON, Alhaji Musbahu Mohammad Bashir and Alhaji Mukhtar Sani Hanga hereby retire by rotation. Being eligible, the Directors hereby present themselves for re-election. The profile of the directors retiring by rotation is stated on page 69 of this Report. A record of attendance of Board and Board Committee meetings by Directors is contained in the Corporate Governance section of this report. b. Notification of Attainment of Seventy (70)Years of Age In accordance with the provisions of the Companies & Allied Matters Act, the Directors hereby announce that Alhaji (Dr.) Umaru Abdul Mutallab, CON; HRH. Engr. Bello Muhammad Sani; Alhaji (Dr.) Muhammadu Indimi; Alhaji (Dr.) and Aminu Alhassan Dantata, CON have attained the age of seventy (70) years and the approval of members for Alhaji (Dr.) Umaru Abdul Mutallab, CON; HRH. Engr. Bello Muhammad Sani; Alhaji (Dr.) Muhammadu Indimi; and Alhaji (Dr.) Aminu Alhassan Dantata, CON to continue in office is hereby sought. c. Directors' Shareholding The direct and indirect interests of directors in the issued share capital of the Bank as recorded in the register of directors' shareholding and/or as notified by the directors for the purposes of sections 301 and 302 of the Companies and Allied Matters Act (CAMA) 2020 and the listing requirements of the Nigerian Stock Exchange are as follows: PAGE - 055
58. Annual Report Accounts & Directors' Report Number of Shareholdings December 31, 2020 S/N Directors Direct 1 Alh. Dr . Umaru Abdul Mutallab, CON 4,000,000,000 2. Alh. (Dr.) Aminu Alhassan Dantata, CON 1,565,310,516 3. Alhaji (Dr.) Muhammadu Indimi, OFR 3,233,813,044 4. Mallam Falalu Bello, mni, OFR 12,496,750 5 HRH (Engr .) Bello Mohammed Sani, OON 12,500,000 6 Alh. (Dr.) Umaru Kwairanga 34,770,000 December 31, 2019 Indirect Direct Indirect N/A 4,000,000,000 3,904,369,327 1,567,310,516 (Dantata Invest. & Sec. Co. Ltd) N/A 3,233,813,044 40,000,000 12,496,750 N/A 12,500,000 629,429,413 34,770,000 (MBS Merchants Ltd) (Finmal Finance Serv.Ltd) 1,418,189,866 N/A 8. N/A Alh.(Dr.) Musbahu Muhammad Bashir 2,500,000,000 (Dantata Invest. & Sec. Co. Ltd) N/A 40,000,000 (MBS Merchants Ltd) N/A 629,429,413 (Finmal Finance Serv.Ltd) 1,418,189,866 (Linear Power Ltd) 7. Alh. Muktar Sani Hanga N/A 3,904,369,327 (Linear Power Ltd) N/A (Dangote Industries Ltd) 2,500,000,000 (Dangote Industries Ltd) 2,200,000,000 N/A 2,506,666,588 N/A Nil N/A Nil N/A 4,000 N/A 4,000 N/A 12. Mallam Hassan Usman, FCA 1,250,000 N/A 1,250,000 N/A 13. Mahe Mahmud Abubakar 14. AbdulFattah O. Amoo, FCA 3,441,526 N/A 3,441,526 N/A 200,000 N/A 200,000 N/A 9. Mr. Mohammed Seedy Njie 10. Mrs. Aisha Waziri Umar 11. Dr. Abdullateef Bello N/A (Althani Invest. Ltd) (Islamic Development Bank) 2,200,000,000 (Althani Invest. Ltd) 2,506,666,588 (Islamic Development Bank) d. Directors' interests in contracts For the purpose of section 303 of Companies and Allied Matters Act of Nigeria, (CAMA) 2020, all contracts with related parties during the year were conducted at arm's length. Information relating to related parties' transactions are contained in Notes to the financial statements. 6. Acquisition of own shares The shares of the Bank are held in accordance with the Articles of Association of the Bank. The Bank has no beneficial interest in any of its shares. 7. Property and equipment Information relating to changes in property and equipment is given in the Notes to the financial statements. In the opinion of the directors, the market value of the Bank's property and equipment is not less than the value shown in the financial statements. 8. New Ordinary Business to be transacted at an Annual General Meeting (AGM) Under Section 238 of CAMA 2020, disclosure of remuneration of managers of a company has been added as part of the business transacted at an Annual General Meeting (“AGM”), which shall be deemed ordinary business. Additionally, Section 257 of CAMA 2020 also provides that the compensation of managers of a company shall be disclosed to members of the company at the AGM. PAGE - 056
59. 52 Annual Report Accounts & Directors' Report 9. Employment and Employees a. Employee Involvement and Training Employees are the Bank's major assets and investment in their training continued during the period under review despite the Covid-19 challenges. Formal and informal channels of communication are employed in keeping staff abreast of various issues affecting the Bank as a going concern. b. Employment Policy The Company's recruitment policy, which is based solely on merit, does not discriminate against any person on the grounds of Religion, Tribe, or Physical Disability. c. Health Safety and Welfare at Work Health and safety regulations are in force within the Bank's premises and employees are aware of existing regulations. The Bank provides subsidy to all levels of employees for medical, transportation, lunch, as well as access to recreational facilities to enhance their welfare and improve productivity. The Bank operates a crèche facility at its Head Office for its staff with plans to extend to other locations in due course. We actively promote wellness of our employees and have provided a gymnasium at our Head Office for use by all staff. Fire prevention and fire-fighting equipment are installed in strategic locations within the Bank's premises. The Bank operates a contributory pension plan in line with the Pension Reform Act for its employees. d. Covid 19 Response The novel Corona Virus (COVID-19) severed our health, social and financial facets of living. The Bank in its capacity, as a socially responsible institution immediately the outbreak was declared a pandemic advised employees to work on rotational basis, with always a team off-site. As the nationwide lock-down measures were gradually eased, Work-From-Home (WFH) Policy was equally promulgated where possible. Employees were encouraged to work from home and on rotational basis. The pandemic and lockdown measures put in place country-wide made some business ventures to suffer financial losses. This in part led to the growth of the Bank’s Impairment Charges against non-performing Financing and Investment which when compared between financial year 2019 and 2020 indicated a rise of about 164% from N1.15billion in 2019 to N3.03billion in 2020. Hence, the Bank offered forbearances to the affected customers to cushion the negative impact of the pandemic. It also became evident that, to serve customers in situations like the lockdown period would require a strong IT infrastructure. Leveraging on latest IT infrastructure, the Bank deployed Hyper Converged Infrastructure (HCI) at its Data Centre to enhance its channels uptime and processing throughput. Consequently, we offered our customers improvements on USSD and Mobile Banking Services and commenced numerous back-office process automation such as Centralized Processing Centre, automation of Performance Management System, Loan Origination System, Document Management System and the deployment of Robotic Process Automation (RPA). Some risk management measures adopted by the Bank include the reduction in financing to adversely affected sectors and increment of financing to sectors positively impacted by the pandemic such as IT, Agriculture and Health. Some initiatives put in place include reduction in fees on COVID-related Advance Payment Guarantees and a more strengthened framework in respect of monitoring capabilities such as Early Warning Signal tools in order to proactively sniff and take remediation steps on financing. The Bank also did not just implement the non-pharmaceutical protocols introduced by the National Centre for Disease Control (such as compulsory use of face mask, monitoring of body temperature at entrance, hand sanitization and observing physical social distance) but also ensured full compliance by customer and visitors across its branch network and Head Office. The Bank also uniquely complemented government’s effort by introducing an innovation challenge aimed at tackling the pandemic through Social Entrepreneurship. The open-innovation challenge was opened to spur scientists, engineers, developers, inventors, and social entrepreneurs to ideate, experiment, and build products/solutions to help address the COVID-19 crisis in the country. One Hundred and Forty-Eight (148) entries were received across the following thematic areas and the top 10 entries made it to the finale that took place virtually on July 7, 2020. 1. Relevant medical devices/equipment 2. Treatment and diagnosis development 3. Software/Artificial Intelligence in contact tracing/containment strategies 4. Agritech and rural livelihood improvement solutions PAGE - 057
60. Annual Report Accounts & Directors' Report The total grand prize valued at N125million was earmarked for the final four winners (first prize-N50million, second prizeN40million, third prize - N20million and fourth prize -N15million), while all the top 10 Teams generally benefited from the following: Ÿ Sponsorship from the National Information Technology Development Agency (NITDA) for Business Clinic. An online interaction with experts where initiatives and ideas of entrepreneurs are polished and realigned. Ÿ Sponsorship from the Bank for a 3-month Accelerator Program with a renowned international Accelerator/Incubation organization (Bridge for Billions) that offers a digital ecosystem of entrepreneurship programs for early-stage entrepreneurs. The Program afforded the Teams and Mentors with the following benefits: Ÿ Lifetime access to a community for networking, masterclasses & startup discounts. Ÿ Skills on online accelerator programme and its methodology. Ÿ Access to the accelerator/incubator training tools that will guide them with a step-by-step detail of creating a validated visual business plan. Ÿ Sponsorship from Abuja Enterprise Agency on: Ÿ MSME One-Stop Shop (Regulatory Support such as Trademark, Patent, one-on-one interaction with NITDA, etc.) Ÿ Enterprise Development Services (Capacity building, Business Advisory, Enterprise Promotion, etc.) Ÿ Other supports as may be required. 11. Gender Analysis The average number and percentage of male and female employees during the year ended 31st December 2020 vis-à-vis total workforce are provided below. The Board is however committed to gender balance and has thus mandated Management to take the issue of gender balance into cognizance in filling future vacancies.: Number Male 463 Details Employees % Female 146 Total 609 Male 76% Female 24% Gender analysis of the Board and Top Management for the year ended 31st December, 2020 is as follows: Number Male Female Details % Total Male Female Board 14 1 15 93% 7% Top Management Total 8 22 2 3 10 25 80% 88% 20% 12% Board and Top Management Employees 600 30 463 146 200 0 PAGE - 058 22 20 400 Male Female 10 0 3 Male Female
61. 52 Annual Report Accounts & Directors' Report 12. Post-Balance Sheet Events All events which could have a material effect on the state of affairs of the Company as at 31 December 2020 or the profit for the year ended on that date have been adequately provided for or disclosed. However, further to the approval of the Shareholders at the Extraordinary General Meeting held last year, the process of raising additional capital of N3.3 Billion is ongoing and could be concluded before the 9th AGM. 13. Equity Range Analysis Range Analysis as at December 31st, 2020 Range No of Holders 1-1,000 Holder % Holders Cum 394 1.40 394 Units Units % Units Cum 179,822 0.00 179,822 1,001-5,000 11,140 39.57 11,534 30,644,200 0.10 30,824,022 5,001-10,000 5,321 18.90 16,855 48,176,501 0.16 79,000,523 10,001-50,000 4,811 17.09 21,666 121,897,742 0.41 200,898,265 50,001-100,000 2,592 9.21 24,258 244,764,242 0.83 445,662,507 100,001-500,000 2,738 9.73 26,996 690,327,705 2.34 1,135,990,212 500,001-1,000,000 527 1.87 27,523 431,847,918 1.47 1,567,838,130 1,000,000-9,999,999,999 628 2.23 28,151 27,896,411,170 94.68 29,464,249,300 28,151 100.00 29,464,249,300 100.00 14. Substantial Shareholders According to the register of members at 31st December, 2020, the following shareholders held more than 5% of the issued share capital of the Bank: S/N Name Holdings % 1. Mutallab Umaru Abdul 4,000,000,000 13.58% 2 Dantata Investment & Securities Limited 4,204,369,327 14.27 % 3. Indimi Muhammadu 3,233,813,044 10.98% 4. Islamic Development Bank 2,506,666,588 8.51% 5. Dangote Industries Ltd 2,500,000,000 8.48% 6. Altani Investment Limited 2,600,000,000 8.83% 7. Dantata Aminu Alhassan 1,565,210,516 5.31% We wish to declare that the Bank has diverse shareholding structures and that no other individual(s) holds above 5% of the Bank's issued and fully paid shares except as disclosed above. PAGE - 059
62. Annual Report Accounts & Directors' Report 15. Shareholding History Authorized Share Capital Increase Year Issued & Fully Paid Capital Increase Units From To Units 2003 2,500,000,000 - 2,500,000,000 2,500,000,000 2004 - - - - - 2005 - - - - - - - 2006 13,000,000,000 2,500,000,000 13,000,000,000 - - - Cash 2007 - - - 2008 - - - 1,514,429,720 2,500,000,000 4,014,429,720 Cash 2012 - - - 7,732,867,330 4,014,429,720 11,829,699,720 Cash 2014 15,000,000,000 13,000,000,000 15,000,000,000 2016 - - - 2017 25,000,000,000* 15,000,000,000 25,000,000,000 29,464,249,300 - 14,732,124,650 2018 25,000,000,000 - 25,000,000,000 29,464,249,300 - 14,732,124,650 2019 25,000,000,000 - 25,000,000,000 29,464,249,300 - 14,732,124,650 2020 25,000,000,000 - 25,000,000,000 29,464,249,300 - 14,732,124,650 - From To Consideration - 2,500,000,000 Cash - - 2,902,424,930 11,829,699,72 14,732,124,650 Cash * Share Split from N1.00 per Share to N0. 50kper Share. 16. Donations and Sponsorship S/N Description Amount 1. AMANI ICT training for women 100,000.00 2. She-EO Global Talk Show 350,000.00 3. 2020 Intl Islamic Education Conference 1,000,000.00 4. Gezawa Commodity Market Ltd. 500,000.00 5. 2020 Abuja Hult Prize Regional Summit 810,000.00 6. Project Rise 7. Kwara State Muslim Pilgrims Welfare Board 8. Hijrah Calendar 1442 AH 9. FITC/NIBSS Virtual Think Innovation Conference 2020 10. FLPE Awareness Campaign 11. Telemedicine 12. Capital Market Webinar Series 13. Nigeria in Diaspora Investment Summit (NDIS) 2020 Total PAGE - 060 5,375,000.00 500,000.00 1,500,000.00 500,000.00 1,043,310.00 925,622.76 1,000,000.00 200,000.00 13,803,932.76
63. Annual Report Accounts & Directors' Report 17. AssetValues Information relating to the Company's Assets is detailed in the Notes to the Financial Statements. 18. Audit Committee Pursuant to Section 404(7) of the Companies and Allied Matters Act, (CAMA) 2020, the Company has in place an Audit Committee comprising three shareholders and three directors as follows: Alhaji Shehu Mohammed, FCA Shareholder Representative -Chairman Alhaji Lawal Ibrahim Ozomata Shareholder Representative Alhaji Mohammed Gulani Shuaibu Shareholder Representative Alhaji (Dr.) Umaru Kwairanga Non-Executive Director Alhaji (Dr.) Aminu Alhassan Dantata Non-Executive Director Alhaji (Dr.) Musbahu Mohammed Bashir Non-Executive Director The functions of the Audit Committee are as laid down in Section 404(7) of the Companies and Allied Matters Act, (CAMA) 2020. 19. Auditors Messrs. Ahmed Zakari & Co. having indicated their willingness to continue in office will do so in accordance with Section 401(2) of the Companies and Allied Matters Act, (CAMA) 2020 and Section 20.2 of the Nigerian Code of Corporate Governance 2018. A resolution will be proposed at the Annual General Meeting to Authorize the Directors to determine their remuneration. By Order of the Board Mrs. Rukayat O. Dahiru FRC/2014/NBA/00000009649 Company Secretary /Legal Adviser Jaiz Bank Plc. Kano House No. 73 Ralph Shodeinde Street Central Business District Abuja Federal Capital Territory March 29, 2021. Ÿ PAGE - 061
64. Annual Report Accounts & CORPORATE GOVERNANCE REPORT J aiz Bank Plc recognizes the significance of Corporate Governance in building a sustainable organization. We believe that effective governance is achieved through a culture of transparency and openness between Management and the Board as well as the shareholders. The Board ensures on-going compliance with the requirements of the Code of Corporate Governance for Banks and Discount Houses in Nigeria issued by the Central Bank of Nigeria (“the CBN Code”), the Securities and Exchange Commission's Code of Corporate Governance for Public Companies, Nigerian Code of Corporate Governance, as well as the Post-Listing Requirements of the Nigeria Stock Exchange. The Bank conducts an Annual Board Appraisal covering the Board's responsibilities, processes, relationships, structure and composition through an independent consultant - Messrs. Nextzon Business Services Ltd. Their review and recommendations are contained in the Annual Report and would be presented to shareholders at the Annual General Meeting. Board Structure The Board of the Bank is made up of veteran professionals who possess the requisite skills, knowledge and experience to bring to bear independent judgment on their deliberations and decisions. The Board, headed by a Non-Executive Chairman, consists of 15 members made up of 12 Non-Executive Directors and 3 Executive Directors as listed below. Two of the Non-Executive Directors are Independent Directors appointed based on criteria laid down by the Central Bank of Nigeria's Guideline on Independent Directors of Banks in Nigeria. The position of the Managing Director and Chairman are held by separate persons with clearly defined roles. The Board meets regularly to set broad policies for the Bank's business and operations and ensures that an objective and professional relationship is maintained with the Bank's internal and external auditors to promote transparency in financial and non-financial reporting. Directors' emoluments, as well as their shareholding information, are disclosed in the Company's Annual Report and Accounts. The Directors are guided by the Code of Conduct of the Central Bank of Nigeria for Directors and various codes of corporate governance mentioned above. S/N Names Designation 1. Alh. (Dr.) Umar Abdul Mutallab, FCA, CON Chairman 2. Alh. (Dr.) Aminu Alhassan Dantata, CON Non-Executive Director 3. 4. 5. 6. Alh. Musbahu Muhammed Bashir Alh. Mukhtar Danladi Hanga H.R.H. Engr. Bello Muhammad Sani, OON Mall. Falalu Bello, FCIB, OFR Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 7. 8. Mr. Mohammed Seedy Njie Alh. (Dr.) Umaru Kwairanga, F.IoD, FCS, FCIP Non-Executive Director Non-Executive Director 9. Alh. (Dr.) Muhammadu Indimi, OFR Non-Executive Director 10. 11. 12. Alh. Mamun Ibrahim Maude Dr. Abdullateef Bello Mrs. Aisha Waziri Umar Non-Executive Director Independent Director Independent Director 13. 14. Mallam Hassan Usman, FCA, FCIB Alhaji Mahe Mahmud Abubakar Managing Director Deputy Managing Director* 15. 16. Mr. AbdulFattah Olanrewaju Amoo, FCA Dr. Sirajo Salisu Executive Director/Chief Financial Officer Executive Director, Business Development ** * Retired with effect from February 16, 2021 ** Appointed with effect from January 1, 2021 PAGE - 062
65. Annual Report Accounts & Corporate Governance Report Board Selection and Appointment Process The Board of the Bank ensures a formal and transparent process for the selection and appointment of Directors to the Board. The Board of Governance, Remuneration and Nomination Committee plays a major role in the selection of candidates for appointment to the Board. The Candidates sought are those who possess particular skills, experience, expertise and diversity that will best complement Board effectiveness at the given time. In its evaluation of candidates for the Board, the Nominations Committee considers: (a) honesty and integrity; (b) ability to exercise sound business judgment; (c) appropriate experience and professional qualifications; (d) absence of conflicts of interest or other legal impediments to serving on the Board; (e) willingness to devote the required time; and (f) availability to attend Board and Committee meetings among others. In considering overall Board balance, the Committee gives due consideration to the value of a diversity of backgrounds, gender and experiences among the members, and to having some of the Directors based in the centres of operation of the Bank. The Board often engages independent recruitment firms to undertake searches for suitable candidates, without prejudice to the rights of shareholders to nominate members of the Board as entrenched in the Companies and Allied Matters Act 2020 (CAMA). The minimum shareholding that would entitle a shareholder to nominate a member to the Board of the Bank is a holding of 5% of fully paid ordinary shares in the Bank. Prior to appointment, preferred candidates are required to: Ÿ be available to meet with members of the Board; Ÿ disclose the nature and extent of other appointments and activities; and Ÿ demonstrate that they understand what is expected of them and confirm that they are willing to make the necessary commitments, and will have available the time required to discharge their responsibilities. New directors are required to execute letters of appointment which set out the key terms and conditions of appointment, including duties, rights and responsibilities, the time commitment envisaged and the Board’s expectation regarding their involvement with committee work. Each director is required to enter into a Directors’ Service Contract, execute a code of conduct and ethics as well as insider trading prohibition statement prior to assuming duties. Non-executive directors appointed by the Board must retire at the next Annual General Meeting, at which time they may stand for election by shareholders. Non- executive directors are elected by the shareholders for a four year term and renewable at the instance of the shareholders for 3 terms A non-executive director may not stand for re-election except with the recommendation of the Board or otherwise in accordance with the procedure prescribed by the Bank’s Articles of Association. Board support for a director’s reelection is not automatic and is subject to satisfactory director performance (in accordance with the Bank’s director evaluation process). Matters Reserved for the Board The Board leads and provides directions for the management by determining the strategic objectives and policies of the Bank and overseeing its implementation. The Board has delegated to the Managing Director its powers which relate to the operational running of the Bank. PAGE - 063
66. Annual Report Accounts & Corporate Governance Report Specific matters have been reserved for approval by the Board and include but are not limited to the following: Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Defining the Bank’s Strategic Plans and Objectives. Ensuring integrity of financial reports. Approval of major changes to the Bank’s accounting policies. Appointment and removal of Directors and the Company Secretary. Approval of charter and membership of Board Committees. Establishing effective internal control systems. Instilling a culture of compliance with rules and regulations. Formulating risk policies. Approval of quarterly, half yearly and full year financial statements. Ensuring planned Management succession. Effective communication with shareholders. Performance appraisal and compensation of Board members and Senior Executives. Directors’ Induction and Training In line with best practice, a personalized induction programme on the Bank’s operational processes and expected duties and responsibilities is conducted for new members of the Board. The member also receives an induction pack which comprises of the Board’s charter, charter of the various Board Committees, significant reports, memorandum and articles of association of the Bank, Board/Board Committee resolutions, important legislations/policies and a calendar of Board activities. The Board ensures that members are trained on issues relating to their oversight functions. Directors are required to partake in periodic relevant continuing professional development programmes to update their knowledge and skills to keep them abreast of new developments in the industry and operating environment. The table below provides the details of continuous education training programmes undertaken by directors in 2020. However, some of the Trainings the Directors were scheduled for could not hold due to the outbreak of the COVID-19 pandemic. S/N Names of Directors Training Organiser Location Date 1. Statutory Audit Committee members: Improving the Performance of the Alh. Shehu Mohammad Audit Committee Alh. Mohammed Shuaibu Gulani Mr. Ibrahim Lawal Ozomata DCSL Corporate Services Ltd Online 24th June, Training 2020 2. Alh. (Dr.) Umaru Kwairanga Alh. Tajuddeen Dantata Alh. Musbahu Bashir Compensation Committees: New Challenges, New Solutions Harvard Business School, Boston Online 15th -17th Training November, 2020 3. Alh. Mamun Ibrahim Maude Dr. Abdullateef Bello The Future of Board and Governance: Reporting, Supervising and Risk Management FITC Online 12th -13th Training November, 2020 4. Hassan Usman Oil & Gas Training Financial Accounting Standards (FAS) Auditing and Governance Standards Code of Ethics for Islamic Finance Professionals Sustainable Business Strategy - A Purpose Driven Leader 5. Amoo Abdulfattah Olanrewaju 6. Sirajo Salisu PAGE - 064 Roberts & Roberts AAOIFI AAOIFI AAOIFI Harvard Business School Oil & Gas Training Roberts & Roberts IFRS9 Ernest and Young Sustainable Business Strategy - A Purpose Driven Leader Harvard Business School Oil & Gas Training Abuja Online Online Online Online 31 Jan - 2 Feb, 2020 28 - 30 Jun, 2020 12 - 14 Jul, 2020 19 - 21 Jul, 2020 16 Sep - 7 Oct, 2020 Abuja Online Online 31 Jan - 2 Feb, 2020 25 - 26 Aug, 2020 16 Sep - 7 Oct, 2020 Roberts & Roberts Abuja 31 Jan - 2 Feb, 2020
67. 52 Annual Report Accounts & Corporate Governance Report Tenure of Directors In order to ensure both continuity and injection of fresh ideas, the tenure for Non-Executive Directors is limited to a maximum of three (3) terms of four (4) years each, i.e. twelve (12) years, tenure for Non-Executive Independent Directors is limited to a maximum of three (3) terms of three (3) years each, i.e. nine (9) years while the maximum tenure for Executive Directors is two (2) terms of five (5) years each, i.e. ten (10) years. This is in compliance with the provisions of the CBN Code. Board Meetings The Board meets quarterly and additional meetings are convened as the need arises. The Board has the authority to delegate matters to Board Committees and the Executive Management. Attendance of Meetings In its bid to continuously improve its corporate governance processes, as well as enhance attendance at Board meetings by Board members, the Company Secretary prepares an annual calendar of meetings which is subsequently reviewed and adopted by the Board prior to the commencement of a new financial year. The table below is the record of attendance for the Board of Directors meetings for the 2020 financial year. It is noteworthy that because of the outbreak of the COVID-19 pandemic in 2020, a good number of Board and Board Committee meetings were held virtually: S/N Names of Directors 1. Alhaji (Dr.) Umaru Mutallab, CON 2. March 16 May 27 (Emergency) 15th July 24th Sept. 27th Oct. (Emergency) 15 Dec. √ √ √ X √ √ Hassan Usman √ √ √ √ √ √ 3. Mahe Abubakar Mahmud √ √ √ √ √ √ 4. AbdulFattah O. Amoo √ √ √ √ √ √ 5. * Alhaji (Dr.) Aminu Dantata, CON √ √ √ √ √ √ 6. * * Mallam Falalu Bello, OFR √ √ √ √ √ √ 7. Alhaji (Dr.) Umaru Kwairanga √ √ √ X √ √ 8. Nafiu Baba-Ahmad, mni. √ √ N/A N/A N/A N/A 9. Mr. Mohammed Seedy Njie X √ √ √ √ √ 10. Alhaji (Dr.) Muhammadu Indimi, OFR √ √ √ √ √ √ 11. HRH (Engr.) Bello Muhammad Sani, OON √ √ √ √ √ √ 12. Prof. Tajudeen Adebiyi √ √ N/A N/A N/A N/A 13. Alhaji Mukhtar Sani Hanga √ √ √ √ √ √ 14. Alhaji Musbahu M. Bashir √ √ √ √ √ √ 15. Alh. Mamun Ibrahim Maude √ √ √ √ √ √ PAGE - 065
68. Annual Report Accounts & Corporate Governance Report Board Committees The Board has established various Committees with Terms of Reference defining their scope of responsibilities. The Committees meet quarterly but may hold additional meetings as the need arises. The Board maintained four (4) standing Committees during the year under review and they include: 1. 2. 3. 4. Board Risk Management Committee. Board Investment Committee. Board Governance Remuneration and Nomination Committee. Board Audit Committee. In addition to the above committees, and in line with the provisions of the Companies and Allied Matters Act, the Board also established the Statutory Audit Committee with six (6) members drawn from among the shareholders and the Board. It is noteworthy that the Board initially resolved towards the end of year 2019 to abolish the Finance & General Purpose Committee, but has again resolved to revive it in 2021. Board Governance, Remunerations & Nominations Committee (BGRNC) Membership of the Committee in 2020 1. Alh. (Dr.) Muhammadu Indimi (Chairman) 2. Alh Mukhtar S. Hanga 3. Alh. (Dr.) Aminu A. Dantata 4. Nafiu Baba Ahmad 5. Alh. (Dr.) Musbahu M. Bashir The Committee's major responsibilities includes: Ÿ Considering matters relating to Board's remunerations and appointment; Ÿ Recommending any proposed change(s) to the Board; Ÿ Keeping under review the need for appointments; Ÿ Preparing a description of the specific experience and capabilities needed for each Board appointment, considering candidates for appointment as either Executive or Non-Executive Directors and recommending such appointments to the Board; Ÿ Advising the Board on succession planning regarding the roles of the Chairman, Chief Executive Officer and Executive Directors; Ÿ Advising the Board on the contents of the Directors Annual Remuneration Report to shareholders; Ÿ Revising personnel policies for Board approval, reviewing job descriptions, establishing or periodically reviewing the staff salary structure and staff benefits package. The Committee met seven (7) times during the 2020 financial year. BGRNC Meeting Attendance Names of Directors 24th Feb. 15th May 10th June 8th July 26th Oct. 25th Nov. (Emergency) 2nd Dec. Alh. (Dr.) Muhammadu Indimi √ √ √ √ √ √ √ Alh. (Dr.) Aminu A. Dantata √ √ √ √ √ √ √ Nafiu Baba-Ahmad √ √ retired retired retired retired retired Alh. Mukhtar S. Hanga √ √ √ √ √ √ √ Alh. (Dr.) Musbahu M. Bashir √ √ √ √ √ √ √ PAGE - 066
69. 52 Annual Report Accounts & Corporate Governance Report Board Investment Committee (BIC) Membership of the Committee in 2020 1. Alh (Dr.) Musbahu M. Bashir (Chairman) 2. Alh (Dr.) Umaru Kwairanga 3. Prof. Tajudeen A. Adebiyi 4. HRH Engr. Bello Muhammad Sani 5. Hassan Usman (Managing Director) 6. Mahe Mahmud Abubakar (Deputy Managing Director) The Committee's major responsibilities includes Ÿ Evaluating and approving all investments within its powers delegated by the Board; Ÿ Evaluating and recommending all investments beyond its powers to the Board; Ÿ Reviewing investments portfolio in line with set objectives. Ÿ Reviewing classification of investments of the Bank based on prudential guidelines on quarterly basis; Ÿ Approving the restructuring and rescheduling of investments within its powers; Ÿ Writing-off and grant of waivers within powers delegated by the Board; and Ÿ Periodic review of Investment Manuals and Guidelines. The Committee met six (6) times during the 2020 financial year. BIC Meeting Attendance Names of Directors 30th Jan. 3rd June 13th Aug 21st Oct 9th Dec. 24th Dec. Alh (Dr.) Musbahu M. Bashir √ √ √ √ √ √ Hassan Usman √ √ √ √ √ √ Alh. (Dr.) Umaru Kwairanga √ √ √ √ √ √ Prof. Tajudeen A. Adebiyi √ √ retired retired retired Retired HRH Engr. Bello Muhammad Sani √ √ √ √ √ √ Mahe Mahmud Abubakar X √ √ √ √ √ Board Risk Management Committee (BRMC) Membership of the Committee in 2020 1. Mall. Falalu Bello (Chairman) 2. Alh. (Dr.) Muhammadu Indimi 3. Alh. Mukhtar S. Hanga 4. Hassan Usman (Managing Director) 5. Mahe Abubakar Mahmud (Deputy Managing Director) 6. AbdulFattah O. Amoo (Executive Director) The Committee's major responsibilities includes: Ÿ Overseeing the overall Risk Management of the Bank; Ÿ Reviewing periodically, Risk Management objectives and policies for consideration of the full Board; Ÿ Approving the Risk Rating Agencies, Credit Bureau and other related services providers to be engaged by the Bank; Ÿ Approving the Internal Risk Rating Mechanism; Ÿ Reviewing the Risk compliance reports for regulatory authorities; Ÿ Reviewing and approving exceptions to the Bank's Risk policies; Ÿ Reviewing policy violations on Risk issues at Senior Management level; Ÿ Certifying Risk reports for investments, operations, market/liquidity subject to limits set by the Board. Ÿ Considering the appointment, resignation or dismissal of the Bank's Chief Risk Officer; The Committee met four (4) times during the 2020 financial year. PAGE - 067
70. Annual Report Accounts & Corporate Governance Report BRMC Meeting Attendance Names of Directors 26th February 29th June 15th September (emergency) 14th October Mall. Falalu Belo √ √ √ √ Alh. (Dr.) Muhammadu Indimi √ √ √ √ Alh. Mukhtar S. Hanga √ √ √ √ Hassan Usman √ √ √ √ Mahe Mahmud Abubakar √ √ √ √ AbdulFattah O. Amoo √ √ √ √ Board Audit Committee Membership of the Committee in 2020 1. Prof. Tajudeen A. Adebiyi (Chairman) 2. Alh. (Dr.) Umaru Kwairanga 3. Alh. (Dr.) Muhammadu Indimi The Committee's major responsibilities includes: Ÿ Developing and keeping under review the Bank's accounting policies in order to ensure that they are in consonance with the applicable Accounting Standards; Ÿ Reviewing the effectiveness of the Bank's system of accounting, reporting, and internal control and ensuring compliance with legal and ethical requirements of the Bank; Ÿ Reviewing the integrity of the bank's financial reporting and the independence of the external auditors; Ÿ Reviewing the appropriateness and completeness of the Bank's statutory accounts and other published financial statements, and thus; Ÿ Considering , reviewing and reporting on the periodic Management Accounts of the Bank; and also advise the Board of Directors on the year-end accounts; Ÿ Ensuring that the Bank complies with all relevant internal policies and procedures as well as regulations governing the Bank; Reviewing the summaries of the whistleblowing cases reported and the result of the investigation from the Head of Internal Audit. Ÿ Reviewing the internal audit reports and assessing the adequacy of the internal controls. Ÿ Reviewing the Compliance Reports for each quarter. Ÿ Ensuring full and prompt implementation of recommendations of Internal Auditors, Examiners and External Auditors. The Committee met four (4) times during the 2020 financial year. Names of Directors 13th March 5th May Prof. Tajudeen A. Adebiyi √ √ Alh. (Dr.) Muhammadu Indimi √ √ √ √ Alh. (Dr.) Umaru Kwairanga √ √ √ √ PAGE - 068 13th July Retired 13th October Retired
71. 52 Annual Report Accounts & Corporate Governance Report Statutory Audit Committee Membership Membership of the Committee in 2020 Alh. Shehu Mohammed, FCA (Chairman/Shareholder) Alh. Lawal Ibrahim Ozomata (Shareholder) Alh. Mohammed Gulani Shuaibu (Shareholder) Alh. (Dr.) Aminu Alhassan Dantata, CON (Non-Executive Director) Alh. (Dr.) Musbahu M. Bashir (Non-Executive Director) Alhaji (Dr.) Umaru Kwairanga (Non-Executive Director) Terms of Reference The Committee is saddled with the following responsibilities amongst others: Ÿ Ascertain whether the accounting and reporting policies of the Bank are in accordance with legal requirements and agreed ethical practices; Ÿ Review and approve the scope and planning of audit requirements; Ÿ Review the findings on management matters in conjunction with the External Auditors and Management's responses thereon; Ÿ Oversee the independence of the external auditors; Ÿ Review the effectiveness of the Bank's system of accounting and internal control systems; Ÿ Oversee management's process for the identification of significant fraud risks across the Bank and ensure that adequate prevention, detection and reporting mechanisms are in place; Ÿ At least on an annual basis, obtain and review a report by the internal auditor describing the strength and quality of internal controls including any issues or recommendations for improvement raised by the most recent internal control review of the Bank; Ÿ Discuss the annual audited financial statements and half yearly unaudited statements with management and external auditors. The Statutory Audit Committee met four times in 2020 and the record of attendance is provided below: Name 13th March 5th May 13th July 13th October Alh. Shehu Mohammed, FCA X √ √ √ Alh. Mohammed Gulani Shuaibu √ √ √ √ Alh. Lawal Ibrahim Ozomata √ √ √ √ Prof. Tajudeen A. Adebiyi √ √ Retired Retired Alh. (Dr.) Aminu A. Dantata √ √ √ √ Alh. (Dr.) Umaru Kwairanga √ √ √ √ Alh. (Dr.) Musbahu M. Bashir √ √ √ √ Management Committees The Board Committees are supported by Management Committees of the Bank, comprising of senior officers who are responsible for the day-to-day operations of the Bank as a going concern. They ensure that laid down policies are followed and that the Bank abides by all relevant regulatory and legal requirements. Executive Management Committee is the highest Management Committee comprising of the Executive Directors and Top Management Staff of the Bank. Other Management Committees include; Assets and Liability Committee (ALCO), Management Investment Committee (MIC); Branch Development Committee; Procurement Committee; IT Steering Committee; Disciplinary Committee; Criticized Asset Committee (CAC), and Operation Risk Management Committee. These Committees review and formulate strategies to implement the Board's broad strategic direction in various areas including business and financial performance, strategic planning, manpower planning, operations, customer service, investor relations, external relations, and organizational efficiency amongst others. PAGE - 069
72. Annual Report Accounts & Corporate Governance Report Ownership Structure The ownership structure of the Bank as of December 31, 2020 is as follows: S/N Category No Units 1 Individual 27,378 12,297,335,191 2 Government 119 2,496,038,790 3 Corporate 282 14,249,904,315 4 Joint 168 76,231,603 5 Institution 195 338,877,519 6 Foreign 8 2,619,359 7 Pension 1 3,242,523 28,151 29,464,249,300 Total Code of Ethics The Bank has an Ethical Conduct and Integrity Policy in place and all employees are required to abide by it. All employees are expected to maintain high ethical standards in all aspect of their professional lives. The Policy also provides sample offences and appropriate disciplinary measures to be adopted. The Bank also has a Code of Conduct & Ethics for its Directors which specifies expected behaviours. Dealing in Company Securities and price sensitive information The Bank has adopted a policy on insider trading and market abuse regarding all transactions in the Bank's securities which is applicable to its Directors, Officers, employees, contractors and consultants who have access to material public information. In line with the policy, persons concerned are prohibited from trading on the Bank's security during a closed period. Whistle Blowing Procedure The Bank has established a robust whistle blowing procedure. The Bank has a direct link on its website and intranet to enable stakeholders to report any allegations they want the Bank to investigate. Apart from the direct link, unethical practices can be reported via the email address whistleblowing@jaizbankplc.com. A team comprising selected members of Top Management are responsible for reviewing reported cases and recommending appropriate action to the Board through the Audit Committee depending on the severity of the issues involved. A quarterly report of all whistleblowing cases are forwarded to the Board. The Chief Compliance Officer of the Bank similarly renders quarterly whistle-blowing report to the Central Bank of Nigeria. Remuneration Policy In line with corporate governance best practices, the Board had developed a robust policy on Remuneration for the Bank. The Policy takes into account the environment in which the Bank operates and the results it achieves at the end of each financial Year. The bank's remuneration comprises of the following elements: Ÿ Fixed remuneration: This is primarily based on the level of responsibility and constitutes a relevant part of total compensation. It entails the base salary and allowances payable monthly, in arrears or annually. A wage benchmark is established for each position/level. Ÿ Variable remuneration: This is primarily linked to the achievement of previously established targets and prudent risk management. It comprises profit sharing/productivity bonus payable annually. Ÿ The combination of these elements serves as the basis for a balanced remuneration system reflecting the bank's strategy, its values as well as the interests of its shareholders. PAGE - 070
73. 52 Annual Report Accounts & Corporate Governance Report i. Remuneration to Non-Executive Directors: The Non-executive Directors of the Bank are paid remuneration by way of sitting allowances for attending the meetings of the Board of Directors and its Committees. Beside the sitting allowances they are also entitled to Directors fees, reimbursement of travel, hotel, and other out-of-pocket expenses incurred in the course of discharging their responsibilities. The Non-executive Directors of the Company are not paid any other remuneration or commission. ii. Remuneration to Executive Directors: The remuneration for Executives comprises of fixed remuneration, benefits & perquisites, retirement/exit benefit and performance based remuneration (short term incentives and long term incentives). Contingency Planning Framework The framework for contingency planning consists of a set of identified policies, actions and processes necessary for the prevention, management and containment of banking systemic distress and crisis. The Board has put in place various contingency plans for capital and liquidity restoration, amongst others which would enhance the Bank's ability to withstand both temporary or long term disruptions in its ability to fund its activities in a timely manner. Shareholders' interest The Bank in its bid to protect the interest of its shareholders including particularly, its minority shareholders, ensures that Shareholders meetings are convened in a transparent and fair manner. Adequate notice of general meeting is provided to shareholders and their rights are protected at all times. Attendance of general meeting is open to all shareholders or their proxies. The proceedings are usually monitored by the representatives of the Central Bank of Nigeria, Corporate Affairs Commission, Nigerian Deposit Insurance Commission and the Securities and Exchange Commission. The Bank has an Investor Relations Unit, which deals with communications among the Bank; the shareholders; as well as the capital market. The Bank also has an Investor Relations Portal on its website where the Bank's annual reports and accounts and other relevant information are made accessible to its shareholders. The Bank has a dedicated email address through which shareholders and prospective investors can channel their enquiries for prompt response. The email address is investorrelations@jaizbankplc.com. Communication Policy The main objective of the Policy is to support the Bank in achieving its objectives in pursuit of best corporate governance practices. The Executive Management ensures that communication and dissemination of information is done in English language which must be clear, relevant, objective, easy to understand and useful. The Policy also ensures that the Bank delivers prompt, courteous and responsive service that is sensitive to the needs and concerns of the customers and other stakeholders. Advisory Committee of Experts (ACE) The independent Committee of Shariah Experts reviews the Bank’s operations to confirm that activities were carried out in accordance with the Shariah. The ACE has the responsibility of providing assurances that the Bank’s funds are not invested in prohibited activities or transactions, and also certify that all the Bank's products and services are compliant with the Shariah. The members of the Shari'ah Advisory Board are a mixture of Islamic scholars well versed in Islamic laws, principles and traditions relating to trade, finance and economics, as well as financial experts. Internal Control Various aspects of the internal control of the bank are the responsibilities of key officers. The Chief Audit Executive, the Chief Compliance Officer, the Chief Risk Officer, the Chief Finance Officer, and the Company Secretary/Legal Adviser are all responsible for providing one form of assurance or another in the Bank. The Bank therefore provides adequate assurance that it will not be adversely affected by any event that could be reasonably foreseen. Company Secretary The Company Secretary is responsible for assisting the Board and Management in the implementation of the applicable Codes of Corporate Governance. The Company Secretary serves as a point of reference and support for all Directors. The appointment of the Company Secretary is done through a rigorous process that is similar to those of directors. The Company Secretary is fully empowered to discharge these responsibilities and the position reports functionally to the Board through the Chairman, and administratively to the MD/CEO. PAGE - 071
74. Annual Report Accounts & Corporate Governance Report Statement of Compliance The Bank complies with the relevant provisions of the SEC, FRCN and CBN Codes of Corporate Governance. In the event of any conflict between the two Codes regarding any matter, the Bank would defer to the provision of the CBN Code as its primary Regulator. Monitoring Compliance with Corporate Governance The Chief Compliance Officer monitors compliance and implementation of the Central Bank of Nigeria (CBN) Code of Corporate Governance and other applicable Codes of Corporate Governance. Complaints Management Policy The Bank has put in place a Complaints Management Policy to resolve complaints arising from issues covered under the Investments and Securities Act, 2007 (ISA) among others. Customer' Complaints Report for theYear Ended December 31, 2020 The Bank complied with the provision of the CBN Circular on handling customer complaints. Various channels such as, 24 hour contact centre; customer service desks and contacts through the Bank's website have been provided to facilitate seamless complaint lodgement and feedback process. The report below details the customer complaints processed within the Year ended December 31, 2020. S/N Description Number 2019 Amount Claimed (Naira) 2020 2019 Amount Refunded (Naira) 2020 2019 2020 1. Pending Complaints 105 4,35 344,780 2 Received Complaints 72,156 109,211 21,846,663 52,813,322 21,099,291. 47,093,677 3 Resolved Complaints 67,799 105,137 21,099,291 47,093,677 21,099,291 47,093,677 4 Unresolved Complaints Escalated to CBN for Intervention - - - - - - 5 Unresolved Complaints Pending with the Bank Carried Forward 4,357 4,074 747,370 5,719,646 By Order of the Board Mrs. Rukayat O. Dahiru FRC/2014/NBA/00000009649 Company Secretary /Legal Adviser Jaiz Bank Plc. Kano House No. 73 Ralph Shodeinde Street Central Business District Abuja, Federal Capital Territory Ÿ March 29, 2021 PAGE - 072
75. 52 Annual Report Accounts & STATEMENT OF DIRECTORS’ RESPONSIBILITIES RC: 476637 Statement of Directors' Responsibilities in Relation to the Financial Statements for financial year ended December 31, 2020 The Directors accept responsibility for the preparation of the nancial statements that give a true and fair view in accordance with the requirements of the International Financial Reporting Standards, the Financial Accounting Standards issued by AAOIFI, the Financial Reporting Council of Nigeria Act 2011, the Banks and Other Financial Institutions Act, and relevant Central Bank of Nigeria regulations. The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the Directors determine is necessary to enable the preparation of nancial statements that are free from material misstatement whether due to fraud or error. Going Concern: The Directors have made assessment of the Company's ability to continue as a going concern and have no reason to believe that the Bank will not remain a going concern in the years ahead. Resulting from the above, the directors have a reasonable expectation that the company has adequate resources to continue operations for the foreseeable future. Thus, directors continued the adoption of the going concern basis of accounting in preparing the annual nancial statements. Signed on behalf of the Directors by: Abdufattah O. Amoo, FCA Chief Financial Officer FRC/2018/ICAN/00000017779 Hassan Usman, FCA Managing Director/CEO FRC/2013/ICAN/0000003984 PAGE - 073
76. Annual Report Accounts & BOARD EVALUATION REPORT NEXTZON STRATEGY TECHNOLOGY SME DEVELOPMENT VENTURE CAPITAL February 05, 2021 Chairman, Board of Directors Jaiz Bank PLC Kano House, 73, Ralph Shodeinde Street, Central Business District, P. M. 31 Garki, Abuja, Nigeria. Dear Sir, RE: CORPORATE GOVERNANCE PERFORMANCE REVIEW 2020 Nextzon was engaged to undertake an annual Corporate Governance performance evaluation for Jaiz Bank PLC for the financial year ended December 2020. We certify that we have concluded the 2020 Corporate Governance performance review exercise for Jaiz Bank Plc, wherein governance and control areas were reviewed and appraised using the Central Bank of Nigeria (CBN) revised Code of Corporate Governance for Banks and Discount Houses issued in May 2014 as benchmark. From our independent assessment, the Bank achieved full compliance on 98% of the principles defined by the CBN in the industry code of corporate governance. Our evaluation identified a few gaps which we have advised that the Board focuses its attention on implementing this financial year. We thank you for the opportunity and privilege of working with you Yours faithfully; For: Nextzon Business Services Limited Segun Olukoya Executive Director FRC/2019/IODN/000000019793 RC 418477 NEXTZON BUSINESS SERVICES LIMITED …enterprise builders" PAGE - 074 1 Rachael Nwangwu Close, Lekki Phase 1, Lagos, Nigeria. Phone: GL +(234) 0812 722 7044 email: info@nextzon.com"
77. 52 Annual Report Accounts & STATUTORY AUDIT COMMITTEE’S REPORT RC: 476637 Report of the Statutory Audit Committee We have examined the Auditors' Report for the year ended 31st December, 2020 in accordance with the provisions of Section 404 (7) of the Companies and Allied Matters Act (CAMA) 2020. In our opinion, the Auditors' Report is consistent with our view of the scope and planning of Audit. The External Auditors' ndings as stated in the Management Letter received satisfactory responses from Management. We are also satised that the Bank's Accounting Policies are in conformity with the Statutory requirements and agreed with ethical practices. Alhaji Shehu Mohammed FCA FRC2018/ICAN/00000017824 Chairman, Statutory Audit Committee Abuja March 2, 2021 Members of the Audit Committee 1. Alhaji Shehu Mohammed FCA 2. Alhaji Mohammed Shuaibu Gulani FCA 3. Mr. Ibrahim Ozomata Lawal FCA 4. Alhaji (Dr.) Aminu Alhassan Dantata CON 5. Alhaji (Dr.) Musbahu Muhammad Bashir 6. Alhaji (Dr.) Umaru Kwairanga F.IoD, FCS, FCIP – – – – – – Chairman Member Member Member Member Member PAGE - 075
78. Annual Report Accounts & WHISTLE BLOWING REPORT RC: 476637 ANNUAL REPORT ON CODE OF CORPORATE GOVERNANCE AND WHISTLE BLOWING GUIDELINES With reference to section 5.2.8 of the Code of Corporate Governance for Banks and Discount Houses in Nigeria and Section 4.11 of the whistle blowing guidelines issues by the Central Bank of Nigeria (CBN). I confirm that no breach of corporate governance code was observed in 2020 while some whistle blowing cases were reported and being investigated as at December, 2020.The outcome of the investigation shall be published in subsequent Annual Report and Accounts. Ahmed Alhaji Hassan Chief Compliance Officer FRC/2013/ICAN/00000004528 PAGE - 076
79. 52 Annual Report Accounts & ACE REPORT RC: 476637 In the Name of Allah, the Most Gracious, the Most Merciful Praise be to Allah, and may peace and blessings be upon our Beloved Prophet Muhammad (SAW), his family and companions. To the Shareholders of Jaiz Bank Plc: Peace, mercy and blessings of Allah be upon you and Assalamu Alaikum wa Rahmatullahi wa Barakatuh; According to the letter of assignment, we present the following report: We have reviewed the products used and the contracts relating to transactions, application and practices made by the Jaiz Bank Plc during the year ending December 31, 2020. We have also taken due diligence to determine our opinion regarding whether Jaiz Bank has committed to the principles and rules of the Shariah as well as our advisory opinions, decisions and directives. Responsibility of Management: The management is responsible for ensuring that Jaiz Bank operates in accordance with the provisions and principles of Islamic Law as the ACE advises regularly on Shariah application and our responsibility is restricted and conned to expression of an independent opinion based on our observations of the Bank's operations, as well as preparations of report for you. Scope of work of the Advisory Committee of Experts: We have reviewed and adopted forms of contracts and agreements. We have also reviewed various processes relating to all transactions of Jaiz Bank, with shareholders, investors, customers and others. We have selected random samples of such transactions through the Internal Shariah Audit Unit covering all transactions as well as review of feedback regarding the Shariah Audit, its eld visit, the operations and applications of ACE Fatwas and decisions issued by the Board in this regards. In performing our duties, we have received cooperation and understanding from all levels of Management in the Jaiz Bank especially the Managing Director and the Shari'ah Audit Department. We planned and implemented our task with the aim of obtaining all the information and explanation which we considered necessary to provide us with sufficient evidence to give reasonable assurance that all transactions by Jaiz Bank did not violate the provisions of the rules and principles of Shariah and wherever we found any earned income to be from nonpermissible sources we directed that such income must be transferred to charity. PAGE - 077
80. Annual Report Accounts & ACE Report Opinions of the ACE: a. We are of the opinion that the reviewed contracts and transactions conducted by Jaiz Bank during the year ending by 31/12/2020 were in accordance with the rules and principles of Shariah. b. The distribution of prots on the investment accounts were in line with the bases adopted and approved by the ACE according to the rules and principles of Islamic law. c. All the gains made from Haram (prohibited by Shariah rules) sources have been set aside in a separate account and/or transferred to Jaiz Foundation for charitable purposes. d. However, we have noticed a few mistakes in processing some of the transactions which we communicated to the management for correction. Many of these have already been regularized and some are still in the process which the management promise to work on regularizing them. e. The Advisory Committee of Experts (ACE) of Jaiz Bank Plc has reviewed the nancial statements of the Bank, and taken note of the Non-Permissible Income (NPI) declared by the Bank during the review period. The ACE hereby conrms that the NPI has been disposed by the Bank to the satisfaction of the ACE. The Advisory Committee of Experts (ACE) wish to thank the Board of Directors, management, departments and staff of the Jaiz Bank for their good cooperation with it and their commitment to the Islamic banking practices. The ACE prays to Almighty Allah to bring them success. And Allah knows best. May Allah's mercy and blessings be upon you. Date: March, 2021 Prof. (Dr.) Monzer Kahf Chairman Dr. M. A. Abubakar Member Sheik Abdulwahab A. Muhammad Member Prof. Ahmad Bello Dogarawa Member PAGE - 078
81. 52 Annual Report Accounts & FINANCIAL Statements PAGE - 079
82. Annual Report Accounts & INDEPENDENT AUDITOR’S REPORT Opinion We have audited the inancial statements of Jaiz Bank PLC ('the Bank') which comprise the statements of inancial position as at 31 December 2020, the statements of pro it or loss and other comprehensive income, statement of changes in equity and cash lows for the year ended, a summary of signi icant accounting policies, inancial summary and other explanatory information. In our opinion, the inancial statements give a true and fair view of the inancial position of the Jaiz Bank PLC as at 31 December 2020 and of its inancial performance and cash lows for the year ended in compliance with the Financial Reporting Council of Nigeria Act No. 6,2011 and in accordance with the International Financial Reporting Standards, the Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions(AAOIFI), the Companies and Allied Matters Act 2020 and the Banks and Other Financial Institutions Act 2020 and relevant Central Bank of Nigeria (CBN) Guidelines and Circulars. BasisforOpinion 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 inancial statements section of our report. We are independent of the Bank in accordance with the Institute of Chartered Accountants of Nigeria (ICAN) professional code of conduct and guide for accountants, which is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountant (Part A and B) (IESBA Code) and other independence requirements applicable to performing audits of inancial statements in Nigeria. We have ful illed our other ethical responsibilities in accordance with these requirements and IESBA Code. We believe that the audit evidence we obtained is suf icient and appropriate to provide a basis for our opinion. KeyAuditMatters Key audit matters are those matters that, in professional judgement, were most signi icance in our audit of the inancial statement of the current period. These matters were addressed in the context of our audit of the inancial statement as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. The key audit matters below relate to the audit of inancial statement Key audit matter PAGE - 080
83. 52 Annual Report Accounts & Independent Auditor’s Report Impairment of Islamic inancial and investment assets The expected credit losses on inancing and investment assets to customers are considered to be a key audit matter because it requires signi icant judgment by management in measuring credit risk in line with the Expected Credit Loss (ECL) model. We focused on this judgement area because of the signi icant value of Islamic inancing and investment assets and the management make signi icant judgement and level of subjectivity over the impairment. The key areas where signi icant judgement was exercised by the management includes: Ÿ Allocation of Islamic inancing and investment assets into various stage to re lect the credit risk of the facilities. Ÿ Determination of default and the criteria for assessing signi icant increase in credit risk (SICR) Ÿ Determination of 12 month and Lifetime probability of default (PD) used in ECL calculation. Ÿ Assumption used in the ECL model such as inancing condition of counterparty, expected future cash lows, forward looking macroeconomic factor. Ÿ Techniques that were used to determine the probability of default (PD) and the loss given default (LGD) Ÿ We performed the following audit procedures to assess the adequacy of the Expected Credit Loss (ECL) include in the bank's inancial statements for the year ended 31 December 2020. Ÿ We reviewed the completeness and accuracy of the data use in the calculation of Expected Credit Loss (ECL). Ÿ We examined a sample of exposure and performed procedures to determine whether there is signi icant increase in credit risk since initial recognition of the facilities to determine credit-impaired facilities. Ÿ We check directors default de inition as prescribed by the Standard. Ÿ We checked the forward looking information applied by the management in the ECL calculations by comparing to publicly available macroeconomic information Ÿ We check directors default de inition as prescribe by the Standard. Ÿ We check the forward looking information applied by the management in the ECL calculation by comparing to publicity available macroeconomic information. Ÿ For exposure determined to be credit impaired, we tested sample of Islamic inancing and investment asset and we challenge the estimate and assumption used by management around the staging criteria and impairment allowance calculation. Ÿ We also assessed the accuracy of disclosure in the inancial statements to determine if they were in compliance with the requirement of IFRSs. PAGE - 081 
84. Annual Report Accounts & Independent Auditor’s Report Otherinformation The directors are responsible for other information. The other information comprises the Directors' Report, Corporate Governance Report, Statement of Directors' Responsibilities, Corporate Information, Financial Highlight, Remuneration Policy, Board Evaluation Report, the Audit Committee's Report, Notice of Annual General Meeting, Chief Executive Of icer's Statement and the Chairman Statement. Other Information does not include the Financial Statement and our audit report. Our opinion on the inancial statement does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the inancial statement, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the inancial statement or our knowledge obtained in audit, or otherwise appears to be materially misstated. If based on the work we have performed, we conclude that there is a materially misstatement of this other information we are required to record that fact. We have nothing to report in this regard. ResponsibilitiesoftheDirectorsforthe inancialstatements The directors are responsible for preparation and fair presentation of the inancial statement in compliance with the Financial Reporting Council of Nigeria Act No. 6, 20211 and in accordance with International Financial Reporting Standards, issued by the accountant and audit organization for Islamic inancial institution (AAOIFI) and in the manner Required by companies and allied matters act of Nigeria, cap C20 LFN 2014, the bank and other inancial institution Act, CAP B3, LFN 2014, and relevant Central Bank of Nigeria circulars. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of inancial statement that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimate that are reasonable in the circumstance. In preparing the inancial statement, the directors are 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 basic of accounting unless the directors either intend to liquidate the company or cease operation, or have no realistic alternative to do so. Responsibilityoftheauditorfortheauditofthe inancialstatements Our objectives are to obtain reasonable assurance about whether the inancial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor's report that include our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with international Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually of in the aggregate, they could reasonably be expected to in luence the economic decision of users taken on the basis of these Financial Statement. PAGE - 082
85. 52 Annual Report Accounts & Independent Auditor’s Report As part of an audit in accordance with international standards on auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also Ÿ Identify and assess the risk of material misstatement of the inancial statements, whether due to fraud or error, design and perform audit procedure responsive to those risks, and obtain audit evidence that is suf icient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentation, or the override of internal control. Ÿ Obtain an understanding of internal control relevant to the audit in order to design audit procedure that are appropriate in the circumstances, but not for the purpose not expressing an opinion on the effectiveness of the company's internal control. Ÿ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimate and related disclosure made by directors. Ÿ Conclude on the appropriateness of the director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to event or condition that may cast signi icant doubt on the company's ability to continue as a going concern. If we conclude that material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the inancial statements or, if such disclosure 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 event or condition may cause the company to cease to continue as a going concern. Ÿ Evaluate the overall presentation, structure and content of inancial statement, including the disclosure, and whether the inancial statements represent the underlying transactions and events a manner that achieves fair presentation. We communicate with those charge with government regarding among other manners, the planned scope and timing of the audit and signi icant matters. We also provide those charges with governance with a statement that we have complied with relevant ethical requirement regarding independence and communicate with them all relationship and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguard. From the matters communicated with those charge with governance, we determine those matters that were of most signi icance in the audit of inancial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest bene it of such communication. PAGE - 083
86. Annual Report Accounts & Independent Auditor’s Report Reportonotherlegalandregulatoryrequirements Compliance with the requirement of schedule 5 of The Companies and Allied Matters Act 2020 I. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of audit. II. The bank has kept proper books of account, so far as appears from our examination of those books and returns adequate for our audit have been received from branches not visited by us. III. The bank statement of inancial position and statement of pro it or loss and other comprehensive income are in agreement with the books of account. Compliancewithsection27(2)oftheBanksandOtherFinancialInstitutionsAct2020andCentral BankofNigeriacircularBSD/1/2014 I. Information required on related party transactions and balances are disclosed in note 38 to the inancial statement in accordance with the central bank of Nigeria circular BSD/1/2004 II. As disclosed in note 47 to the inancial statements, the bank did not pay penalties in respect of contraventions of any sections of the banks and other inancial institutions Act and relevant circulars issued by the central bank of Nigeria during year ended 31 December 2020. PAGE - 084
87. 52 Annual Report Accounts & Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2020 Income: Income from nancing contracts Income from investment activities Notes 2020 N'000 2019 N'000 28 29 10,757,796 8,003,175 7,461,682 6,055,941 18,760,971 13,517,623 (3,789,440) (2,907,985) 14,971,531 10,609,638 (3,027,892) (1,145,875) 11,943,639 9,463,763 500,930 352,040 1,008,943 188,257 12,796,609 10,660,963 4,902,366 811,624 4,016,643 3,863,554 714,586 3,972,805 9,730,633 8,550,945 3,065,976 (162,764) 2,110,018 332,768 2,903,212 2,442,785 273,825 - 3,177,036 2,442,785 9.85 kobo 8.29 kobo Gross income from nancing transactions Return on equity of investment account holders 30(i) Bank's share as equity investor/ mudarib Net impairment (charges)/writeback 37 Net Spread after Provision Other Income Fees and commisssion Other Operating income 31 32 Total Income Expenses: Staff costs Depreciation and Amortisation Operating Expenses 34 35 36(i) Total expenses Prot Before Tax Income Tax Expenses 18a Prot for the year after tax Other Comprehensive Income Item that may be reclassied to prot or loss Foreign currency translation difference Total comprehensive income for the year Earnings per share Basic and diluted Earnings per share (Kobo) 33 PAGE - 085
88. Annual Report Accounts & Statement of Financial Position As at 31 December 2020 Assets Notes Cash and balances with Central Bank of Nigeria Due from banks and other financial institutions Investment in sukuk Murabaha receivables Investment in Bai Mu'ajjal Investment in istisna Investment in ijara assets Qard Hassan Investment in Salam Investment properties Investment in assets held for sale Property, plant and equipment Leasehold improvement Intangible assets Other assets Deferred tax asset 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18b Total Assets 2020 N’000 45,869,170 14,839,178 73,795,575 40,907,082 1,979,088 3,662,628 24,962,636 97,301 11,393 1,603,513 18,975,452 2,926,153 47,526 475,815 2,611,415 832,253 2019 N’000 42,103,116 11,438,274 41,086,469 32,168,321 1,008,613 1,080,389 21,283,416 79,430 1,603,513 9,464,869 2,547,972 65,297 481,366 2,400,175 462,186 233,596,177 167,273,406 74,580,714 15,405,242 24,273,970 558,770 69,603,883 11,963,766 12,443,964 120,251 114,818,695 94,131,864 100,932,427 57,589,595 100,932,427 57,589,595 14,732,125 627,365 (2,538,887) 2,175,084 2,108,625 740,742 14,732,125 627,365 (4,081,114) 2,714,153 1,237,661 321,757 17,845,054 15,551,947 233,596,177 167,273,406 Liabilities Customer current deposits Other financing Other liabilities Tax payable 19a 20 21 18a Total Liabilities Equity of investment account holders Customers' unrestricted investment accounts 19b Total Equity of investment account holders Owners' Equity Share capital Share premium Retained earnings Risk regulatory reserve Statutory reserve Other reserves 22 23 24 25 26 27 Total Equity Total Equity and Liabilities The accompanying notes form an integral part of these financial statements. These financial statements were approved by the Board of Directors for issue on 9th March, 2021 and signed on its behalf by: Dr. Umaru A. Mutallab, FCA, CON Hassan Usman, FCA Abdufattah O. Amoo, FCA Chairman FRC/2013/ICAN/00000004391 Managing Director/CEO FRC/2013/ICAN/00000003984 Chief Finance Officer FRC/2018/ICAN/00000017779 PAGE - 086
89. Share Premium N '000 627,365 - Share Capital N'000 14,732,125 - As at 31 December 2019 627,365 627,365 14,732,125 As at 31 December 2020 14,732,125 N'000 627,365 - N'000 Opening balance 14,732,125 Transfer to risk regulatory reserve Transfer to statutory reserve Transfer to AGSMEIS Dividend Paid Foreign currency translation difference Profit for the year - Opening balance Transfer to risk regulatory reserve Transfer to statutory reserve Transfer to AGSMEIS Profit for the year Share Premium Share Capital N'000 2,714,153 (539,069) - Risk Regulatory Reserve N'000 1,619,336 1,094,817 - Risk Regulatory Reserve (4,081,114) 2,714,153 N'000 (4,574,108) (1,094,817) (732,835) (122,139) 2,442,785 Retained Earnings 31 December 2019 (2,538,887) 2,175,084 N'000 (4,081,114) 539,069 (870,964) (145,161) (883,929) 2,903,212 Retained Earnings 31 December 2020 N'000 112,313 - Other Comp income N'000 1,237,661 870,964 - Statutory Reserve 209,444 N'000 87,305 122,139 - CBN (AGSMEIS) Reserve 112,313 N'000 112,313 - Other Comp income - N'000 - Foreign Currency Translation Reserve 273,825 N'000 273,825 Foreign Currency Translation Reserve 1,237,661 N'000 504,826 732,835 - Statutory Reserve 354,605 112,313 2,108,625 N'000 209,444 145,161 - CBN (AGSMEIS) Reserve 15,551,947 N'000 13,109,162 2,442,785 Total 17,845,054 N'000 15,551,947 (883,929) 273,825 2,903,212 Total 52 Annual Report & Accounts Statement of Changes in Equity As at 31 December 2020 PAGE - 087
90. Annual Report Accounts & Statement of Cashflows For the year ended 31 December 2020 2020 N'000 2019 N'000 Total comprehensive income for the year 3,177,036 2,442,784 Adjustments for non -cash items: Depreciation Amortization of Intangible Assets/Leasehold Improvement Provision for financing impairment Amortisation of Right of use Income Tax Foreign currency translation Reserve 697,252 114,372 3,027,892 377,319 162,764 (273,825) 605,893 108,693 1,145,877 341,564 (332,768) - Operating prot before changes in operating asset and liabilities 7,282,811 4,312,045 Working capital adjustment: Sukuk Murabaha receivables Qard Hassan Salam Istisna Bai Muajjal Ijara rental receivables Investment in trading assets Other assets Customers' current account Other financing Other liabilities Tax paid (32,709,106) (11,251,798) (58,927) (11,722) (2,601,497) (970,474) (3,876,433) (9,510,584) (572,062) 4,976,831 3,441,476 11,831,839 (94,312) (21,266,597) (6,837,625) 92,518 (34,123,960) 5,373,935 (1,075,432) (108,821) 17,771 (575,276) (192,595) (33,894) (1,166,483) (801,766) (1,504) 43,342,832 (883,929) (13,772) 18,506,741 - 42,457,399 18,492,969 7,166,956 53,541,390 22,723,573 30,817,816 60,708,349 53,541,390 Cash ow from Operating Activities Net cash from/(used in) Operating Activities Investing Activities Purchase of property, plant & equipment Purchase of intangible assets Improvement on leasehold properties Financing Activities Distribution to charity Customers investment accounts Dividend Payment Net cash provided by/(used in) Financing Activities Increase/(decrease) In cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents At 31 December PAGE - 088 785,267 (949,429) (6,018,506) (1,765,039) 409,035 23,653,745 9,963,766 3,081,899 (87,144)
91. 52 Annual Report Accounts & Statement of Sources and Uses of Qard Fund As at 31 December 2020 2020 N'000 Qard Hasan 2019 N'000 Qard Hasan Opening balance Granted to customers 158,376 - 174,597 15,013 Total uses during the year 158,376 189,610 Repayments Staff repayment Customer repayment 12,486 19,690 14,222 17,013 Total Repayment 32,176 31,235 Net Qard Hassan 126,200 158,376 Impairment allowance (28,899) (78,945) Balance at 31 December 97,301 79,430 The balance due from staff is made up of facilities granted to employees to buy the Bank's shares under 2012 Private Placement exercise and facilities taken over by the Bank from their previous employers. Staff under critical situations were also granted this type of facility. The amount granted to customers during the year was NIL (2019: N15.01 million). The impairment charged under Qard Hassan is in line with the IFRS 9 requirements. PAGE - 089
92. Annual Report Accounts & Statement of Sources and Uses of Charity Fund As at 31 December 2020 Sources of Charity Funds Balance at 1 January Non-permissible income during the year Total sources of charity funds Uses of charity Funds Transfer to Jaiz Foundation Philanthropic activities Total uses of Charity Funds Balance at 31 December 2020 N'000 2019 N'000 800 2,958 3,298 11,273 3,758 14,571 1,504 2,254 13,772 - 3,758 13,772 - 800 This Statement discloses how the non-permissible income was utilised. During the year under review the Bank utilised all the non-permissible income which was largely generated in the current year. PAGE - 090
93. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 1. Reporting entity Jaiz Bank Plc (the “Bank”) is the first fully fledged non-interest financial institution in Nigeria. The Bank was granted a banking license to carry on the business of non interest banking and commenced operation on January 6th, 2012 with three branches in two states and the Federal Capital Territory. It was established as a private limited liability Company but was converted to a Public limited liability company in April 2016 and now trades its Stock on the Nigeria Stock Exchange. The address of the Bank's registered office is Kano House, Plot 73, Ralph Shodeinde Street, Central Business District, Abuja, Nigeria. The Financial Statement of the Bank as at 31 December 2020, is only for the Bank as it has no subsidiary and/or Associate company. These financial statements were approved and authorized for issue by the Board of Directors on 9 March 2021. The Directors have the power to amend and issue the financial statements. 2. Statement of Compliance The nancial statements have been prepared in accordance with the requirements of International Financial Reporting standards (IFRS) as issued by International Accounting standards Board (IASB).For matters that are peculiar to Islamic Banking and Finance, the Bank shall rely onthe Statement of Financial Accounting (“SFA”) and Financial Accounting Standards (“FAS”) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (“AAOIFI”), Standards issued by the Islamic Financial Services Board (“IFSB”) and Circulars issued by the Central Bank of Nigeria (“CBN”) shall also be of guidance. 3 Basis of Preparation The Bank's financial statements were prepared under the historical cost convention except for the following i. Financial assets measured at fair value through profit or loss. ii. Financial instruments measured at fair value through other comprehensive income a Going Concern The Bank's management shall be making assessment of the Bank's ability to continue as a going concern and where satisfied that the Bank has the resources to continue in business for the forseeable future, shall form a judgment and prepare accounting information based on that premise. In any situtation whereby the Board of Directors is aware of any material uncertainties that may cast significant doubt upon the Bank's ability to continue as a going concern such issues shall be disclosed in the annual report. b. Functional and presentation currency The Bank presented its Financial Statements in its functional currency the Nigeria Naira. All values are rounded to the naira’s thousands of Naira (N'000) except where otherwise stated. c Use of estimates and judgments The preparation of the financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and core assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised, if the revision affects only that year, or in the year of the revision and future years, if the revision affects both current and future years. Information about significant areas of estimation uncertainties and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in separate financial statements. Actual Results may differ from these estimates. 4 New and amended standards and interpretations effective during the year The accounting policies adopted are consistent with those of the previous financial period except as noted below which became effective January 2021. Adoption of the standard did not result in changes in the amounts previously recognised in the financial statements. However the standard affected disclosures of the Bank. i. Amendment to IAS 1 (Presentation of Financial Statements) and IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors) In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. These amendments are effective for reporting periods beginning on or after 1 January 2020, with early application permitted. The new definition states that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Bank has incorporated this definition in preparation of its financial statement. PAGE - 091
94. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 iii. Amendments to IFRS 16 Leases relating to COVID19 Related Rent Concessions. As a result of the COVID-19 pandemic, rent concessions have been granted to lessees. Such concessions might take avariety of forms, including payment holidays and deferral of lease payments.In May 2020, the IASB made an amendment to IFRS 16 Leases which provides lessees with an option to treat 5. qualifying rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concessions as variable lease payments in the period in which they are granted. The Bank had such Covid -19 related rent concessions, there is no impact on the Bank's financial statements. Standards and interpretations issued/amended but not yet effective The following standards have been issued or amended by the IASB but are yet to become effective for annual periods beginning on or after 1 January 2020: Standard IAS 37 Content Provisions, Contingent Liabilities and Contingent Assets relating to onerous contracts. Effective date 1 January, 2022 IAS 16 Property, plant and equipment relating to proceeds before intended use 1 January, 2022 IAS 1 Presentation of Financial Statements relating to classification of Liabilities as Current or Non-Current 1 January, 2023 The Bank has not applied the following new or amended standards in preparing these financial statements as it plans to adopt these standards at their respective effective dates. Entities are however allowed to recognize the proceeds from selling such items, and the cost of producing those items, in profit or loss. i Amendments to IAS 1 IAS 1 Presentation of Financial Statements clarify that liabilities are classified as either current or noncurrent, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (eg the receipt of a waver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the 'settlement' of a liability The amendment is effective for annual periods beginning on or after 1 January 2022. Early adoption is permitted The Bank is currently evaluating the impact of this amendment on the Bank's financial statements. The amendments could affect the classification of liabilities, particularly for entities that previously considered management's intentions to determine classification and for some liabilities that can be converted into equity. They must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The impact of this amendment on the Bank's financial statements is currently under evaluation. ii Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 In May 2020, the IASB issued Property, Plant and Equipment Proceeds before Intended Use, which prohibits entity to deduct proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management from the cost of an item of property, plant and equipment. PAGE - 092 iii Amendments to IAS 37 (Onerous Contracts – Costs of Fulfilling a Contract) In May 2020, the IASB issued amendments to IAS 37 to specify which cost of fulfilling a contract comprises the costs that relate directly to the contract. The standard further states that costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The Bank is currently evaluating the impact of this amendment on the Bank's financial statements. 6. Significant Accounting Policies a Transactions in Foreign Currencies `The financial statements are presented in Nigerian Naira, which is the reporting currency in line with IAS21 (Effects of foreign exchange) Transactions in foreign currencies are recorded in the books at the rate of exchange ruling on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are converted into Naira at the rate of exchange
95. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 ruling at the balance sheet date. All differences are taken to the statement of income. financial assets and liabilities carried at fair value through profit or loss are expensed in income statement at initial recognition. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated into Naira using the exchange rates as at the dates of the initial recognition. Nonmonetary items measured at fair value in a foreign currency are translated into Naira using the exchange rates at the date when the fair value is determined. Exchange gains and losses on non-monetary items classified as “fair value through statement of income” are taken to the income statement and for items classified at “fair value through equity” such differences are taken to the statement of comprehensive income Financial assets are classified into one of the following measurement categories: Ÿ those to be measured at amortised cost. Ÿ those to be measured at fair value through other comprehensive income Ÿ those to be measured at fair value through profit or loss Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate. b i. ii. iii. iv. Cash and Cash Equivalent Cash in hand Balance held with Central Bank of Nigeria Balance with banks in Nigeria and outside Nigeria Demand deposit denominated in Naira and other foreign currencies Cash equivalent are short term, highly liquid instruments which are: i. readily convertible into cash, whether in local and foreign currencies; and ii. so near to their maturity dates as to present insignificant risk of changes in value as a result of changes in profits rates. c Financial Instrument i Initial recognition and measurement "Financial assets and liabilities, with the exception of financing to customers, deposits to customers and banks, are initially recognised on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument. Financing to customers are recognised when assets purchased are transferred to the customers. The Bank recognises deposits from customers and banks when funds are received. ii Classification and Measurement Financial asset or liability are measured initially at fair value plus or minus, for an item not at fair value through profit or loss, direct and incremental transaction costs that are directly attributable to its acquisition or issue. Transaction costs of The classification depends on the Bank’s business model (i.e. business model test) for managing financial assets and the contractual terms of the financial assets cash flows (i.e. solely payments of principal and return – SPPI test). Debt Instruments Amortised Cost A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL i The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and ii The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and return on the principal amount outstanding. The gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in income statement when the asset is derecognised or impaired. Returns from these financial assets is determined using the effective rate of return (ERR) method and reported in income statement as ‘income’. The amortised cost of a financial instrument is defined as the amount at which it was measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the 'effective rate of return method' of any difference between that initial amount and the maturity amount, and minus any loss allowance. The effective rate of return method is a method of calculating the amortised cost of a financial instrument (or group of instruments) and of allocating the income or expense over the relevant period. The effective rate of return (ERR) is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the instrument or, when appropriate, a shorter period, to the instrument's net carrying amount. Business Model Assessment The Bank makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: PAGE - 093
96. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 I The stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual return revenue, maintaining a particular return rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets; ii How the performance of the portfolio is evaluated and reported to management; iii The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; iv How managers of the business are compensated e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and v. The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank’s stated objective for managing the financial assets is achieved and how cash flows are realised The business model assessment is based on reasonably expected scenarios without taking 'worst case' or 'stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Bank's original expectations, the Bank does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward. Assessment of whether contractual cash flows are solely payments of principal and return The Bank assesses the contractual terms of financial to identify whether they meet the SPPI test. ‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amor tiza tion of the premium/discount).‘Return’ is include consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. The most significant elements of return within a lending PAGE - 094 arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Bank applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the return rate is set. Financial Liabilities The Bank’s holding in financial liabilities is in financial liabilities at fair value through profit or loss and financial liabilities at amortised cost. Financial liabilities are derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in income statement. i Financial Liabilities at fair value through Profit or Loss Financial liabilities at fair value through profit or loss are financial liabilities held for trading. A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profittaking. Derivatives are also categorised as held for trading unless they are designated and effective as hedging instruments. Financial liabilities held for trading also include obligations to deliver financial assets borrowed by the Bank. Gains and losses arising from changes in fair value of financial liabilities classified as held for trading are included in the income statement and are reported as ‘Net gains/(losses) on financial instruments classified as held for trading’. Return expenses on financial liabilities held for trading are included in ‘Net income’. ii Financial Liabilities at Amortised Cost Financial liabilities that are not classified at fair value through profit or loss fall into this category and are measured at amortised cost. Financial liabilities measured at amortised cost are deposits from banks or customers, debt securities in issue for which the fair value option is not applied, convertible bonds and subordinated debts. Modifications of Financial Assets and Financial Liabilities i Financial Assets When the terms of a financial asset are modified, the Bank evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially
97. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value. Any difference between the amortised cost and the present value of the estimated future cash flows of the modified asset or consideration received on derecognition is recorded as a separate line item in income statements as ‘gains and losses arising from the derecognition of financial assets measured at amortised cost’. If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Bank recalculates the gross carrying amount of the financial asset as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset’s original effective rate of return (or creditadjusted effective rate of return for purchased or originated credit-impaired financial assets). The amount arising from adjusting the gross carrying amount is recognised as a modification gain or loss in income statement as part of impairment charge for the year. ii Financial liabilities The Bank derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. This occurs when the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate of return, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in income statement. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment (i.e. the modified liability is not substantially different), any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. Offsetting of Financial Instruments Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right and under Sharia’a framework to set off the recognized amounts and the Bank intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously. Impairment of Financial Assets The Bank recognizes allowance for expected credit losses for all facilities and other debt financial assets not held at FVPL, together with facilities commitments and financial guarantee contracts, in this section all referred to as ‘financial instruments’. Equity instruments are not subject to impairment under IFRS 9. The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 years’ expected credit loss (12mECL) The 12m ECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 years after the reporting date. Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments Loss allowances for accounts receivable are always measured at an amount equal to lifetime ECL. The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. Based on the above process, the Bank groups its financing facilities into Stage 1, Stage 2, Stage 3 and POCI, as described below: Stage 1: When loans are first recognised, the Bank recognises an allowance based on 12mECLs. Stage 1 also include facilities where the credit risk has improved and the facilities has been reclassified from Stage 2. Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECLs. Stage 2 also include facilities, where the credit risk has improved and the facilities has been reclassified from Stage 3. Stage 3: Facilities considered credit-impaired. The Bank records an allowance for the LTECLs POCI: Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and return is subsequently recognised based on a credit-adjusted ERR. ECLs are only recognised or released to the extent that there is a subsequent change in the expected credit losses. If, in a subsequent period, credit quality improves and reverses PAGE - 095
98. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 any previously assessed significant increase in credit risk since origination, depending on the stage of the lifetime 2 or stage 3 of the ECL bucket, the Bank would continue to monitor such financial assets for a probationary period of 90 days to confirm if the risk of default has decreased sufficiently before upgrading such exposure from Lifetime ECL (Stage 2) to 12years ECL (Stage 1). In addition to the 90 days probationary period above, the Bank also observes a further probationary period of 90 days to upgrade from Stage 3 to 2. This means a probationary period of 180 days will be observed before upgrading financial assets from Lifetime ECL (Stage 3) to 12years ECL (Stage 1). For financial assets for which the Bank has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset. Measurement of ECLs The Bank calculates ECLs based on probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the expected profit rate. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. The mechanics of the ECL calculations are outlined below and the key elements are, as follows: • PD: The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio. • EAD: The Exposure at Default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and return, whether scheduled by contract or otherwise, expected draw downs on committed facilities, and accrued return from missed payments • LGD: The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD. When estimating the ECLs, the Bank considers three PAGE - 096 scenarios (a base case, an upside and downside). Each of these is associated with different PDs, EADs and LGDs. When relevant, the assessment of multiple scenarios also incorporates how defaulted facilities are expected to be recovered, including the probability that the loans will accrue and the value of collateral or the amount that might be received for selling the asset. Impairment losses and releases are accounted for and disclosed separately from modification losses or gains that are accounted for as an adjustment of the financial asset’s gross carrying value. The Mechanics of the ECL method are summarised below: Stage 1: The 12mECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12years after the reporting date. The Bank calculates the 12mECL allowance based on the expectation of a default occurring in the 12 years following the reporting date. These expected 12-year default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR. This calculation is made for each of the four scenarios, as explained above. Stage 2: When a facility has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECLs. The mechanics are similar to those explained above, including the use of multiple scenarios, but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR Stage 3: For facilities considered credit-impaired, the Bank recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%. POCI: POCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the cumulative changes in lifetime ECLs since initial recognition, based on a probabilityweighting of the four scenarios, discounted by the credit-adjusted EIR. Facility Commitments and Letters of Credit: When estimating LTECLs for undrawn facility in cash flows if the facility is drawn down, based on a probability-weighting of the four scenarios commitments, the Bank estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the
99. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 present value of the expected shortfalls. The expected cash shortfalls are discounted at an approximation to the expected EIR on the facility. Forward Looking Information The Bank's expected credit losses for each stage and the assessment of significant increases in credit risk considers information about past events and current conditions as well as reasonable and supportable forecasts of future events and economic conditions. The estimation and application of forward-looking information requires significant judgement. In its ECL models, the Bank relies on a broad range of forward looking information as economic inputs, such as: • GDP growth • Unemployment rates • Exchange rate • House price indices • Inflation • Crude Oil prices To evaluate a range of possible outcomes, the bank formulates three scenarios: a base case, an upward and a downward scenario The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material. Definition of Default and Credit Impaired Financial Assets The Bank considers a financial asset to be in default when: • it is established that due to financial or non-financial reasons the borrower is unlikely to pay its credit obligations to the Bank in full without recourse by the Bank to actions such as realising security (if any is held); • the borrower is past due 90 days or more on any material credit obligation to the Bank In assessing whether a borrower is in default, the Bank considers indicators that are i qualitative - e.g. material breaches of covenant; ii quantitative - e.g. overdue status and non-payment on another obligation of the same customer/customer group to the banks; and iii based on data developed internally and obtained from external sources iv Disappearance of an active market for a security because of financial difficulties v Others include death, insolvency, breach of covenants, etc Inputs into the assessment of whether a financing exposure is in default and their significance may vary over time to reflect changes in circumstances. Renegotiated Financing Facilities Where possible, the Bank seeks to restructure financing facilities rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new conditions. Management continually reviews renegotiated facilities to ensure that all future payments are highly expected to occur. When the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the finance customer, then an assessment is made of whether the financial asset should be derecognized and ECL are measured as follows: • If the expected restructuring will not result in derecognition of the exiting asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. • If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset. The cash shortfalls are discounted from the expected date of derecognition to the reporting date using the original effective profit rate of the existing financial asset. Presentation of allowance for ECL in the Statement of Financial Position Facility allowances for ECL are presented in the statement of financial position as follows: • Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; • Facility commitments and financial guarantee contracts: generally, as a provision; • Where a financial instrument includes both a drawn and an undrawn component, and the Bank cannot identify the ECL on the facility commitment component separately from those on the drawn component: the Bank presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and • Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve. CollateralValuation PAGE - 097
100. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 "To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The Bank’s accounting policy for collateral assigned to it through its lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded on the Bank’s statement of financial position. However, the fair value of collateral affects the calculation of ECLs. It is generally assessed, at a minimum, at inception and re-assessed on a quarterly basis. However, some collateral, for example, cash or securities relating to margining requirements, is valued daily. To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which do not have readily determinable market values are valued using models. Non-financial collateral, such as real estate, is valued based on data provided by third parties such as mortgage brokers, or based on housing price indices. Collateral Repossession In certain circumstances, a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset. Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets)and fair value less cost to sell for nonfinancial assets at the repossession date in, line with the Bank’s policy. Write-Off After a full evaluation of a non-performing exposure, in the event that either one or all of the following conditions apply, such exposure is recommended for write-off (either partially or in full): • • • • continued contact with the customer is impossible recovery cost is expected to be higher than the outstanding debt amount obtained from realisation of credit collateral security leaves a balance of the debt It is reasonably determined that no further recovery on the facility is possible All credit facility write-offs require endorsement by the Board Investment Committee, as defined by the Bank. Credit writeoff approval is documented in writing and properly initialed by the Board Investment Committee A write-off constitutes a derecognition event. The write-off PAGE - 098 amount is used to reduce the carrying amount of the financial asset. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Bank's procedures for recovery of amount due. Whenever amounts are recovered on previously written-off credit exposures, such amount recovered is recognised as income on a cash basis only d Property Plant and Equipment The bank recognizes items of property, plant and equipment at the time the cost is incurred. They are stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Bank and the cost of the asset can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Construction cost in respect of offices is carried at cost as work in progress. On completion of construction, the related amounts are transferred to the appropriate category of fixed assets. Payments in advance for items of fixed assets are included as Prepayments in Other Assets and upon delivery are reclassified as additions in the appropriate category of property and equipment. Depreciation Depreciation is to be provided on a straight-line basis to write off the cost of asset over their estimated useful live. The annual rate which should be applied consistently over time are as follows: Motor vehicle Furniture and fittings Equipment Computer Equipment- General Computer Equipment- Special Computer software Freehold Buildings Leasehold building Right of use assets Leasehold improvement (5 years) (5 years) (5 years) (3 years) (5 years) (10 years) (50 years) over the expected life of the lease Lower of lease term or the useful life for the specified class of item over the expected life of the lease Property, plant and equipment is derecognised on disposal or
101. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 when no future economic benefits are expected from it use. Gain and losses are recognised in the income statement. Depreciation is charged when the assets are available for use irrespective of whether they are put to use. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the statement of income for the year. e Intangible Assets Software licenses acquired by the Bank are stated at cost less accumulated amortization and accumulated impairment loss (if any). Expenditure incurred on internally developed software is recognized as an asset when the Bank is able to complete the software development and use it in such a manner that it will be able to generate economic benefit to the Bank, and that the cost to complete the development can reliably be measured by the Bank. "Internally developed software cost that is capitalized includes cost directly attributable to developing the software, and is amortized over the useful economic life of the software. Amortization is recognized in the income statement on a straight line basis over the estimated useful life of the software. “ f Inventory Inventory of stationery and consumables held by the Bank are to be stated at the lower of cost and net realizable value in line with IAS 2. When inventories become old or obsolete, an estimate is to be made of their net realizable value. For individually significant amounts, this estimation is to be performed on an individual basis. For amounts that are not individually significant, collective assessment shall be made and allowance applied according to the inventory type and degree of ageing or obsolescence based on historical selling prices. g. Islamic Financing and Investing Contracts The Bank engages in Sharia’a compliant Islamic banking activities through various Islamic instruments such as Ijarah, Murabaha, Musharaka, Istisna'a and Wakala. i Ijarah The Bank complies fully with the requirements of Sharia in recognition and measurement of Ijarah financing. The periodic lease rentals receivable are treated as rental income during the period they occur and charge thereon is included in operating expenses while initial direct cost incurred are written off to the income statement in the period they are incurred. ii Murabaha This is a sale contract whereby the Bank sells to a customer commodities and other assets at an agreed upon profit mark up on cost. The Bank purchases the assets based on a promise received from customer to buy the item purchased according to specific terms and conditions. Profit from Murabaha is quantifiable at the commencement of the transaction. Such income is recognised as it accrues over the period of the contract on effective profit rate method on the balance outstanding. ii Musharaka Musharaka contracts represents a partnership between the Bank and a customer whereby each party contributes to the capital in equal or varying proportions to establish a new project or share in an existing one, and whereby each of the parties becomes an owner of the capital on a permanent or declining basis and shall have a share of profits or losses. These are stated at the fair value of consideration given less any amounts written off and provision for impairment, if any. iv Istisna'a A sale contract between two parties whereby the Bank (the “Sani” or “Seller”) undertakes to construct, for its customer (the “Mustasni” or “Purchaser”), a specific asset or property (being “Al-Masnoo”) according to certain pre-agreed specifications to be delivered during a pre-agreed period of time in consideration of a pre-determined price, which comprises the cost of construction and a profit amount. The work undertaken is not restricted to be accomplished by the Sani’ alone and the whole or part of the construction/development can be undertaken by third parties under the control and responsibility of the Sani’. Under an Istisna’a contract the Bank could be the Sani’ or the Mustasni’. Istisna’a profit (difference between the sale price of AlMasnoo to the customer and the Bank's total Istisna’a cost) is internally accounted for on a time-apportioned basis over the period of the contract based on the principal amount outstanding. v Wakala A contract between a Bank and a customer whereby one party (the principal: the Muwakkil) appoints the other party (the agent: Wakil ) to invest certain funds according to the terms and conditions of the Wakalah for a fixed fee in addition to any profit exceeding the expected profit as an incentives for PAGE - 099
102. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 the Wakil for the good performance. Any losses as result of the misconduct or negligence or violation of the the terms and conditions of the Wakalah are borne by the Wakil for otherwise, they are by the principal. v. Sukuk Certificates which are equal in value and represent common shares in the ownership of a specific physical asset (leased or to be leased either existing or to be constructed in future), or in the ownership of cash receivables of selling an existingowned asset, or in the ownership of goods receivables, or in the ownership of the assets of Mudaraba or Partnership companies. In all these cases, the Sukuk holders shall be the owners of their common shares in the leased assets, or in the cash receivables, or the goods receivable, or in the assets of the Partnership or the Mudaraba.These comprise asset backed, Sharia’a compliant trust certificates. vi. Qard Hasan Are non profit bearing financing whereby the customer borrows funds for a period of time with an understanding that the same amount shall be repaid at the end of agreed period. h. Income Recognition The Bank recognised income on Sharia’a compliant Islamic banking activities through various Islamic instruments such as Ijarah, Murabaha, Musharaka, Istisna'a and Wakala. i. Ijarah Ijarah income is recognized on a time-apportioned basis, over the lease term. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful. ii. Murabaha Where the income is quantifiable and contractually determined at the commencement of the contract, income is recognized on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful. iii. Musharaka Income on Musharaka Contracts is recognized when the right to receive payment is established or on distribution by the Musharek. iv. Wakala Estimated income from Wakala is recognised on an accrual basis over the period, adjusted by actual income when received. Losses are accounted for on the date of declaration by the agent. v Sukuk Income is accounted for on a time apportioned basis over the terms of the Sukuk. vi. Fees and Commission Income PAGE - 100 The Bank earns fee and commission income from a diverse range of services it provides to its customers. vii. Dividend Dividends from investments in equity securities are recognized when the right to receive the payment is established. This is usually when the dividend has been declared. viii. Non-Credit related Fee Income This is recognized at the time the services have been performed and delivered or the transaction has been completed. ix. Sale of Property under Development Where property is under development and agreement has been reached to sell such property when construction is complete, the bank considers whether the contract comprises: • Contract to construct a property; or • Contract for the sale of completed property Where a contract is judged to be for the construction of a property, revenue is recognized using the percentage of completion method, as construction progresses. The percentage of work completed is measured based on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred. Where the contract is judged to be for the sale of a completed property, revenue is recognized when the significant risks, rewards and control of ownership of the property are transferred to the buyer. x. Foreign Income Commission on negotiation of various letters of credit and overdue Profit on delayed foreign payments are accounted for on receipt. Other Profit and income earned on the Bank's own funds held outside Nigeria are accounted for on receipt. xi Service Income Revenue from rendering of services is recognized when the services are rendered. xii Revenue from Sale of Goods Revenue from sales of goods is recognized when the significant risks, rewards and control of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably. xiii Bank's Share as a Mudarib The Bank's share as a mudarib for managing the equity of investment account holders is accrued based on the terms and conditions of the related mudaraba agreements whereas, for off balance sheet equity of investment accounts, mudarib
103. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 share is recognized when distributed i. Expense recognition a. Profit on Mudaraba Payable (Banks and Non-Banks) Profit on these is accrued on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. b. Return on Equity of Investment Accountholders Return on equity of investment account holders is based on the income generated from jointly financed assets after deducting Mudarib share and is accrued based on the terms and conditions of the underlying Mudaraba agreement. Investors' share of income represents income generated from assets financed by investment account holders net off allocated administrative expenses and provisions. The bank's share of profit is deducted from the investors' share of income before distribution to investors. j. Taxation a Current income taxation Income tax is the amount of income tax payable on the taxable profit for the period determined in accordance with current statutory rate. Income tax payable on profits, based on the applicable tax law, is recognized as an expense in the period in which the related profits arise. All taxes related issues including deferred tax are treated in accordance with IAS 12 (Income taxes). b. Deferred Taxation Provision for deferred taxation is made by the liability method and calculated at the current rate of taxation on the temporary differences between the net book value of qualifying fixed assets and their corresponding tax written down value in accordance with IAS 12 (Income taxes). The principal temporary differences arise from depreciation of property, plant and equipment, provisions for pensions and other post-retirement benefits, provisions for Investment losses and tax losses carried forward. The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognized where it is probable that future taxable profit will be available against which the timing differences can be utilized. k. Investment Investment securities Investment securities are initially measured at fair value plus, in case of investment securities not at fair value through profit or loss, incremental direct transaction costs and subsequently accounted for depending on their classification as amortised cost, fair value through profit or loss or fair value through other comprehensive income. Defined Contribution Plans A defined contribution plan is a pension plan under which the Bank pays fixed contributions to a separate entity. The rate of contribution by the Bank and its employee is 10% and 8% respectively of basic salary, housing and transport allowance in line with the new Pension Reform Act, 2014. The Bank has no legal or constructive obligations to pay further contributions Membership of the scheme is automatic upon resumption of duty with the Bank. The Bank has no further payment obligations once the contributions have been paid to Pension Fund Administrators (PFA). The Bank's liabilities in respect of the defined contribution are to be charged to statement of profit or loss for the year in which they become payable. Payments are made to Pension Fund Administrator (PFA) are financially independent of the bank. m. Provisions A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows, at a pre-tax rate, that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. n. Financial Guarantees and Loan Commitments Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are initially recognised at their fair value, and the initial fair value is amortised over the life of the financial guarantee. After initial recognition, guarantee contracts are subsequently measured at the higher of: i ii The amount of the loss allowance, and The amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15. "Financial guarantees, principally consisting of letters of credit are included within other liabilities. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. The Bank recognises a provision in accordance with IAS 37 if the contract was considered to be onerous." "Transactions that are not currently recognized as assets or liabilities in the balance sheet, but which nonetheless give rise to credit risks, contingencies and commitments are reported off balance sheet. Such transactions included letters of credit, l. Employee Benefits PAGE - 101 103
104. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 bonds, guarantees, acceptances, trade related contingencies such as documentary credits etc. Outstanding and unexpired commitments at year end in respect of these transactions are to be shown by way of note to the financial statements. “ o. Borrowings i Murabaha and Due to Banks This represents funds received from banks on the principles of murabaha contracts and are stated at fair value of consideration received less amounts settled. ii Murabaha and Due to Non-Banks These are stated at fair value of consideration received less amounts settled. Profit paid on borrowings is recognized in the statement of income for the year. p. Fiduciary Activities The Bank acts as trustee in its capacity as a Mudarib when managing the equity of investment account holders. Equity of investment account holders is invested in murabaha and due from banks, sukuk and financing contracts with customers. Equity of investment account holders is carried at fair value of consideration received less amounts settled. Expenses are allocated to investment accounts in proportion of average equity of investment account holders to total average assets of the Bank. Income is allocated proportionately between equity of investment account holders and owners' equity on the basis of the average balances outstanding during the year and share of the funds invested. Equity and assets of restricted investment account holders are carried off-balance sheet as they are not assets and liabilities of the Bank. q Segment Reporting "The Bank prepares its segment information based on geographical and business segments as primary and secondary reporting segments, respectively in accordance with IFRS 8 (Operating segments). A business segment is a Bank of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of segments operating in other economic environments." The Bank has appointed the Management committee charged with the responsibility of allocating resources and assessing performance as the Chief Operating Decision Maker as PAGE - 102 required under IFRS 8. The CODM is reviewed and advised by the Board for decisions on significant transactions and or events. r. Gifted Assets The recording of the gift would be based on nature, lifetime and materiality of the gift. If the gift is usable or has a material value addition to the business like Property, plant and equipment would be recognized in an asset of appropriate category hence a debit, In terms of credit several approaches are acceptable recognizing it to Owners equity via Profit or Loss Account or Other Comprehensive Income. The Bank adapted recognition through other comprehensive income to the owners’ equity. s. Investment Property "An Investment Property is an investment in land or buildings held primarily for generating income or capital appreciation and not occupied substantially for use in the operations of the Bank. A piece of property is treated as an investment property if it is not occupied substantially for use in the operations of the Bank, an occupation of more than 15% of the property is considered substantial. The initial Recognition is to be at its cost price while for subsequent measurement the Bank adapted the fair value model which carry the investment properties in the balance sheet at their market value and revalued periodically on a systematic basis at least once in every three years in accordance in (IAS 40). Investment properties are not subject to periodic charge for depreciation. "When there is a decline in value of an investment property, the carrying amount of the property is written down to recognize the loss. Such a reduction is charged to the statement of income. Reductions in carrying amount are reversed when there is an increase, following a revaluation in accordance with the Bank’s policy, in the value of the investment property, or if the reasons for the reduction no longer exist. An increase in carrying amount arising from the revaluation of investment property is credited to owners' equity as revaluation surplus. To the extent that a decrease in carrying amount offsets a previous increase, for the same property that has been credited to revaluation surplus and not subsequently reversed or utilized, it is charged against that revaluation surplus rather than the statement of income. An increase on revaluation which is directly related to a previous decrease in carrying amount for the same property that was charged to the income statement is credited to income statement to the extent that it offsets the previously recorded decrease. Investment properties are disclosed separate from the
105. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 property and equipment used for the purposes of the business in line with IAS 40 (Investment Properties) t. Share Capital and Reserves i Share issue cost Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds ii. Dividend on Ordinary Shares Dividends on the Bank’s ordinary shares are recognised in equity when approved by the Bank’s shareholders. Dividends for the period that are declared after the end of the reporting period are dealt with in the subsequent events note. iii. Share Premium Share premium is the excess paid by shareholders over the nominal value for their shares. iv. Statutory Reserve “The banking regulations in Nigeria require the Bank to make an annual appropriation to a statutory reserve. As stipulated by Section 16(1) of the Banks and Other Financial Institutions Act of 1991 (amended), an appropriation of 30% of profit after tax is made if the statutory reserve is less than the paidup share capital and 15% of profit after tax if the statutory reserve is greater than the paid-up share capital. iv AGSMIES Reserve The AGSMIES reserve is maintained to comply with the Central Bank of Nigeria (CBN) requirement that all licensed banks set aside 5% of their annual profit after tax for equity investments in permissble activites. v Retained Earnings Retained earnings comprise the undistributed profits from previous periods which have not been reclassified to any specified reserves. vi Regulatory Risk Reserve The reserve warehouses the difference between the impairment balance on financing facilities as determined in accordance with the provisions of Prudential guidelines of Central Bank of Nigeria (CBN) when compared with the assessment in line with the requirement of IFRS 9 Expected credit loss model. The key component of Prudential Guidelines (PG) is the setting aside provision on all performing loans assessed under the PG. The Bank presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss that is attributable to ordinary shareholders and the weightedaverage number of ordinary shares outstanding for effects of all dilutive potential ordinary shares. v. Leases The Bank assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Bank applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Bank recognizes lease liabilities to make lease payments and rightof-use assets representing the right to use the underlying assets. Right-of-Use Assets T h e B a n k re c o g n i ze s r i g h t - o f - u s e a s s e t s a t t h e commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease obligations recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Bank is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right-of-use assets are subject to impairment. Ÿ u. Earning per Share PAGE - 103
106. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 3 Cash and balances with Central Bank of Nigeria Cash Current account with CBN Deposit with CBN CBN AGSMEIS Balance Balance as at 31 December 2020 N '000 7,799,167 15,301,510 22,590,165 178,327 2019 N '000 5,062,591 9,455,427 27,500,960 84,138 45,869,170 42,103,116 Cash on hand constitutes the aggregate cash balances in the vaults of the Bank branches while Deposits with the Central Bank of Nigeria represent Mandatory Reserve Deposits (as prescribed by the CBN) and are not available for use in the bank’s day to day operations. Differentiated Cash Reserve Requirement (DCRR) is included in this Deposit with CBN: Under this Programme, Deposit Money Banks (DMBs) may request from the CBN, a release of funds under their Cash Reserve Requirement (CRR) to finance eligible projects subject to DMBs providing evidence that the funds shall be directed at the projects approved by the CBN. 4 Due from banks and other nancial institutions 2020 N'000 2019 N'000 4,737 95,117 4,737 95,117 5,565,902 45,141 6,314,792 214,962 1,109,697 68,393 1,515,554 5,955,940 23,920 3,904,834 214,350 1,173,123 4,519 43,769 22,701 b 14,834,441 11,343,157 a+b 14,839,178 11,438,274 Balances with banks within Nigeria: First Bank Plc a Balances with banks outside Nigeria: First Bank UK Banco De Sabadel Standard Chartered Bank Al-Bilad Zenith Bank UK FCMB UK Aktif Bank Bank of Beirut Balance as at 31 December “The balances held with Banks outside Nigeria substantially represent the Naira equivalent of Foreign Currency balances held on behalf of customers in respect of Letters of Credit,Cash Collaterals and Bank's induced transactions. The corresponding Liabilty is included in Customers'Domiciliary Deposit and Margin Deposits under "Other Liabilities"(see Note 18).” 5 Investment in Sukuk Opening Balance Addition during the year Disposal/Redemption Gross investment in Sukuk Premium Rental Receivable Balance as at 31 December PAGE - 104 2020 N'000 37,866,824 30,905,153 (1,857,338) 2019 N'000 18,965,012 21,486,000 (2,584,188) 66,914,639 5,848,786 1,032,152 37,866,824 2,367,231 852,414 73,795,575 41,086,469
107. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 The total sukuk investment is broken down into (i) and (ii) below: i Osun State Sukuk 2020 N'000 557,338 (557,338) 2019 N'000 1,039,527 (482,188) Gross investment in Sukuk Premium Rental Receivable - 557,339 12,205 20,552 Balance as at 31 December - 590,096 2020 N'000 37,309,485 30,905,153 (1,300,000) 2019 N'000 17,925,485 21,486,000 (2,102,000) 66,914,638 5,848,786 1,032,152 37,309,485 2,355,025 831,863 73,795,575 40,496,373 Murabaha Retail Murabaha Corporate Commercial Agric. Credit Scheme Paddy Aggregation Scheme Murabaha Staff Murabaha SME 2020 N'000 13,031,873 22,778,170 2,111,192 2,162,226 28,377 8,804,367 2019 N'000 13,987,773 14,765,178 625,305 4,659,529 647 3,231,340 Gross Recievables Allowance for impairment Deffered profit 48,916,205 (3,436,052) (4,573,070) 37,269,772 (1,904,071) (3,197,380) 40,907,082 32,168,321 2020 N'000 2,682,254 2019 N'000 1,305,501 Gross Receivables Allowance for impairement Deffered Profit 2,682,254 (170,686) (532,480) 1,305,501 (296,888) Balance as at 31 December 1,979,088 1,008,613 2020 N'000 3,922,127 (16,580) (242,919) 2019 N'000 1,146,745 (16,576) (49,780) 3,662,628 1,080,389 Opening Balance Disposal/Redemption ii FGN Sovereign Sukuk Opening Balance Addition during the year Disposal/Redemption Gross investment in Sukuk Premium Rental Receivable Balance as at 31 December 6 Murabaha Receivables Balance as at 31 December 7 Investment in Bai Mu'ajjal Bai Mu'ajjal Corporate 8 Investment in Istisna Istisna recievable Allowance for impairment Deffered Profit Balance as at 31 December PAGE - 105
108. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 9 Investment in Ijara Assets 2020 N'000 17,961,051 16,380 3,636,770 2019 N'000 15,980,326 19,227 2,738,898 21,614,200 3,413,218 (64,782) 18,738,450 2,714,707 (169,740) 24,962,636 21,283,416 Balance at 1 Jan Granted to staff Granted to customers 2020 N'000 158,376 - 2019 N'000 174,597 15,013 Gross Qard Hassan 158,376 189,610 Repayments Staff repayment Customer repayment 12,486 19,690 14,222 17,013 32,176 31,235 Gross Receivables 126,200 158,376 Impairment Allowance (28,899) (78,945) Balance as at 31 December 97,301 79,430 Ijara wa Iqtina Ijara Home Finance Ijara Auto & others Gross Investment in Ijara Ijara accrued profit Impairment allowance Balance as at 31 December 10 Qard Hassan Total Repayment during the year The balance due from staff is made up of facilities granted to employees to buy the Bank's shares under 2012 Private Placement exercise and facilities taken over by the Bank from their previous employers. Staff under critical situations were also granted this type of facility. The amount granted to customers during the year was nil. The impairment charge under Qard Hassan is in line with IFRS 9 requirements. 11 Investment in Salam 2020 N'000 11,722 11,722 2019 N'000 - (12) (317) - 11,393 - 2020 N'000 1,603,513 2019 N'000 1,603,513 Balance as at 31 December 1,603,513 1,603,513 Investment in Assets held for sale 2020 N'000 4,220,174 16,053,100 (1,297,822) 2019 N'000 1,355,993 8,478,819 (369,943) 18,975,452 9,464,869 Salam Corporate Gross Investment in Salam Allowance for impairement Deferred Profit Balance as at 31 December 12 Investment Properties Investment properties 13 Advances for LC Murabaha Inventory for sale - (note 13 (I)) Impairment Allowance Balance as at 31 December PAGE - 106
109. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 13(i) Schedules of Inventory for Sale 2020 N'000 2,159,524 569,410 10,801,908 2,522,259 2019 N'000 2,159,524 698,909 5,126,802 493,584 16,053,100 8,478,819 Repossessed property Inventory - other properties Mur Inv Financing Inventory Murabaha Corporate Financing Total Inventory for Sale 14 Property, Plant and Equipment Freehold Land Building Office Freehold Equipment Motor Vehicle Furnitures & Fixtures Computer Equipment Fixed Assets WIP Total N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 Cost 1-January-2020 Additions/Reclassification Disposals 57,086 10,117 - 674,490 94,711 - 997,514 11,514 - 597,499 145,180 - 248,651 9,273 - 2,386,646 338,278 - 222,623 406,477 - 5,184,510 1,115,550 - 31 December 2020 67,203 Accumulated Depreciation 1-January-2020 Depreciation - 31 December 2020 - Freehold Land 769,201 1,109,028 742,679 257,923 2,724,924 39,653 53,047 586,211 152,000 297,269 97,871 168,739 29,377 1,544,667 406,215 92,700 738,211 395,140 196,974 1,950,882 Building Office Freehold Equipment 629,101 6,300,059 - 2,636,539 738,510 - 3,373,907 Motor Vehicle Furnitures & Fixtures Computer Equipment Fixed Assets WIP Total N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 N' 000 Cost 1-January-2019 Additions/ Reclassification 57,086 - 559,211 115,279 842,730 154,784 475,431 122,068 214,490 34,161 2,027,518 359,128 442,763 220,140 4,619,231 565,279 31 December 2019 57,086 Accumulated Depreciation 1-January-2019 Depreciation - 31 December 2019 - 674,490 997,514 597,499 248,651 2,386,646 26,735 12,918 429,220 156,991 238,253 59,016 139,362 29,377 1,207,073 337,594 39,653 586,211 297,269 168,739 1,544,667 222,623 5,184,510 - 2,040,642 595,896 - 2,636,539 Net book Amount 31 December 2020 67,203 676,501 370,817 347,539 60,949 774,042 629,101 2,926,153 31 December 2019 57,086 634,836 411,303 300,230 79,912 841,979 222,623 2,547,972 PAGE - 107
110. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 15 Leasehold Improvement Cost Opening balance Addition 2020 N'000 878,153 12,546 2019 N'000 848,458 29,695 890,699 878,153 812,855 30,316 790,340 22,515 843,173 812,855 47,526 65,297 2020 N'000 2019 N'000 880,494 44,513 687,898 192,596 925,006 880,494 399,128 50,064 317,150 81,978 449,192 399,128 As at 31 December 475,815 481,366 Other Assets 2020 N'000 30,737 331,752 34,473 122,401 142,414 25,128 1,021,393 1,336,563 167,350 3,324 2019 N'000 29,619 403,944 17,246 110,715 75,819 29,614 626,307 1,257,471 20,154 6,213 3,215,534 2,577,102 (604,119) (176,927) 2,611,415 2,400,175 2020 N'000 2,400,175 815,359 (604,119) 2019 N'000 2,809,209 (232,106) (176,927) 2,611,415 2,400,175 As at 31 December Amortisation and impairment losses Opening balance Amortisation for the year As at 31 December Carrying amount As at 31 December 16 Intangible Assets Computer Software Cost Opening balance Addition As at 31 December Amortisation and Impairment losses Opening balance Amortisation for the year As at 31 December Carrying amount 17 Sundry debtors Right of use asset Other prepayments Prepaid staff Inventory and other security items Branch development expenditure Account receivables Settlement suspense Investment in financial inclusion centres Interbranch Total Impairment allowance As at 31 December Movement in Other Assets: Opening balance Changes in the year Impairment allowance As at 31 December PAGE - 108
111. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 18a (i) Tax payable Statement of Financial Position 2020 N'000 120,251 532,831 2019 N'000 90,345 117,050 Less payment during the year 653,082 (94,466) 207,395 (87,144) As at 31 December 558,770 120,251 Income Statement 2020 N'000 310,871 191,604 30,356 2019 N'000 96,159 20,891 Opening balance Charge for the year (ii) Company income tax (minimum tax) Additional Tax Provision for Dividend Paid Education tax Information technology levy 532,831 117,050 Deferred tax expenses ( note 18 b) Deferred tax expenses (origination)/reversal of temporary differences (370,067) (449,818) Balance at 31 December 162,764 (332,768) The total tax expenses of N163 million for the current year comprises of the Company income tax and Information Technology tax of N533 million while the N-370 million is a deferred tax credit arising in the year. 18b Deferred Tax Asset 2020 N'000 462,186 370,067 2019 N'000 12,368 449,818 Balance at 31 December 832,253 462,186 Reconciliation of tax expense and the accounting prot 2020 N'000 3,065,976 2019 N'000 2,110,018 1,914,136 4,980,112 1,531,233 3,641,251 6,862,168 30,356 4,728,155 20,891 (1,912,412) (1,107,796) 502,475 30,356 96,159 20,891 Total Tax payable Deferred tax (origination)/reversal 532,831 (370,067) 117,050 (449,818) Income Tax Expense 162,764 (332,768) Opening balance Deferred tax expenses(origination)/reversal note 18b(ii) (i) Accounting profit before tax Add non-deductible expenses for tax purpose: Depreciation of PPE, collective impairment & others Less: Exempted income on Sukuk Technology levy Adjusted prot Company income tax at 30% of adjusted prot Minimum tax Education tax Technology levy PAGE - 109
112. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 (ii) Deferred Tax Movement The movement in the deferred tax account during the year by various components was as follows: Property, plant & equipment Collective impairment Unabsorbed capital allowance Deferred Tax (origination)/reversal 19a Customers' Current Account Analysis by type of account Current account Balance as at 31 December 19b Unrestricted Investment Account Savings account JAPSA term deposit (note 19 d) Balance as at 31 December 19c Analysis by type of customer Government Corporate Individual Balance as at 31 December 19d Analysis of JAPSA maturity by Product JTD 30 days JTD 60 days JTD 90 days JTD 180 days JTD above 360 days Balance as at 31 December 2020 2019 N'000 (11,015) (247,448) (111,604) N'000 30,460 (211,480) (268,798) (370,067) (449,818) 2020 N'000 2019 N'000 74,580,714 69,603,883 74,580,714 69,603,883 56,925,493 44,006,934 35,099,480 22,490,115 100,932,427 57,589,595 2020 N'000 9,030,071 46,874,042 119,609,028 2019 N'000 13,845,100 40,422,583 72,925,795 175,513,141 127,193,478 2020 N'000 28,071,521 2,483,673 9,678,044 2,365,563 1,408,134 2019 N'000 14,934,600 967,381 3,938,349 1,324,536 1,325,249 44,006,934 22,490,115 The Bank has different JAPSA tenored deposits which give customers the opportunity to choose from a basket of return available for different tenors. 20 Other Financing i ii iii iv v I Central Bank of Nigeria Bank of Agriculture Bank of Industry Islamic Corporation for Development for the Private Sector(ICD) Islamic Trade Finance Corporation Federal Mortgage Bank of Nigeria PAGE - 110 2020 N'000 8,732,916 2,000,000 1,496,984 133,480 9,422 3,032,440 2019 N'000 7,298,545 1,009,342 2,700,000 946,456 9,423 - 15,405,242 11,963,766
113. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 Movement in other financing during the year Opening balance Additions Profit payment Repayment Balance as at 31 December 11,963,766 3,441,476 (1,283,677) 1,283,677 2,000,000 9,887,052 (544,263) 620,977 15,405,242 11,963,766 20(I) This represents the balance on the on-lending facilities granted by the Central Bank of Nigeria in collaboration with the Federal Government of Nigeria (FGN) under the Commercial Agriculture Credit Scheme (CACS). The Federal Government of Nigeria is represented by the Federal Ministry of Agriculture and Rural Development) who has the aim of providing concessionary funding for agriculture so as to promote commercial agricultural enterprises in Nigeria.Likewise,The Real Sector Support Facility (RSSF): The Central Bank of Nigeria, as part of the efforts to unlock the potential of the real sector to engender output growth, productivity and job creation has established a N300 billion Real Sector Support Facility (RSSF). The activities targeted by the Facility are manufacturing, agricultural value chain and selected service subsectors. The funds are received from the CBN at 2%, and disbursed at 9% to the beneficiary.The profit rate on the facility is 9% per annum inclusive of all related charges associated with the financing and the profit distribution ratio between the CBN as Capital Provider and the NIFI as the Implementing Party is in the ratio of 2:7. 20(ii) This represents the amount granted under a N1billion facility in June 2016. The facility is for a tenored and rolled over which is solely for financing agricultural related transaction. The profit rate of the facility is 12% payable yearly. 20(iii) This represents an intervention fund granted to the Bank by the Bank of Industry under their Bottom of pyramid funds referred to as BOI-BOP. This is a fund set up by BOI in fulfilment of its mandate of achieving Financial Inclusion through provision of finance to entrepreneurs who are either un-served or underserved with regards to access to finance and other developmental support services. The financing is available to Individuals, SMEs, Cooperatives and Associations in several cottage industries (Artisans, Manufacturing, fashion, etc). The bank under this program pays BOI quarterly based on the structure of finance at 12% and the Bank is under obligation to on-finance to customers at a profit rate of 20% per annum. The Bank is the primary obligor to BOI and assumes 100% default risk. 20(iv) This represents the amount granted under the USD 20 million line of financing provided by Islamic Corporation for the Development of private sector (ICD) for onward financing to eligible SME’s in Nigeria. The facility has a maximum tenor of 3 years inclusive of 6 months moratorium with quarterly repayment at a financing rate of 6.5% p.a. 20(v) This represents the amount of USD 10 million Trade Financing facility granted by International Islamic Trade Finance Corporation (ITFC). The facility is for a tenor of one year (revolving) and is to be used solely for financing trade finance transactions. Financing rate on the facility is applicable USD LIBOR plus 385 basis points. 21 Other Liabilities Managers' Cheque Letter of credit margin deposits Accounts payable Vendors payable Other tax liabilities Profit payable to investment Accountholder E-banking payables Due to charity Sundry payables Accrued audit fee and expense Sundry deposit Impairment allowance on Off Balance sheet items Unearned income Other payables Balance as at 31 December 2020 N'000 284,012 7,450,097 154,469 187,466 262,661 32,635 1,513,597 10,449,030 17,284 3,571,143 170,230 157,932 23,415 2019 N'000 279,316 4,844,556 82,680 243,995 93,414 144,706 1,422,237 800 1,821,463 17,500 3,348,011 49,317 50,031 45,938 24,273,970 12,443,964 PAGE - 111
114. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 22 (i) Owners' Equity Share Capital Authorised 50,000,000,000 ordinary shares of N0.50 each Balance as at 31 December (ii) Issued and fully paid Share Capital 29,464,249,300 ordinary shares of N0.50 each at 1 January Balance as at 31 December 2020 N'000 25,000,000 2019 N'000 25,000,000 25,000,000 25,000,000 2020 N'000 14,732,125 2019 N'000 14,732,125 14,732,125 14,732,125 There was no movement in the share capital account during the year. The holders of ordinary shares are entitled to receive dividends and each shareholder is entitled to a vote at the meetings of the Bank. All ordinary shares are ranked equally. 23 Share Premium Opening balance Balance as at 31 December 2020 N'000 627,365 2019 N'000 627,365 627,365 627,365 Share premium is the excess paid by shareholders over the nominal value for their shares. There was no movement in share premium account during the year. 24 Retained Earnings Opening balance Transfer from risk regulatory reserve Transfer to statutory reserve Transfer to AGSMEIS Dividend Paid Profit for the year Balance as at 31 December 25 Risk Regulatory Reserve Opening balance Adjustment against retained earnings Balance as at 31 December 26 Statutory Reserve Opening balance Adjustment against retained earnings Balance as at 31 December 27 (a) Other Reserves Other comprehensive income Opening balance Movement in the year Balance as at 31 December PAGE - 112 2020 N'000 (4,081,114) 539,069 (870,964) (145,161) (883,929) 2,903,212 2019 N'000 (4,574,108) (1,094,817) (732,835) (122,139) 2,442,785 (2,538,887) (4,081,114) 2020 N'000 2,714,153 (539,069) 2019 N'000 1,619,336 1,094,817 2,175,084 2,714,153 2020 N'000 1,237,662 870,964 2019 N'000 504,826 732,835 2,108,625 1,237,661 2020 N'000 112,313 273,825 2019 N'000 112,313 - 386,137 112,313
115. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 (b) Agricultural /small and medium enterprises investment scheme Opening balance Provision for the year Balance as at 31 December 2020 N'000 209,445 145,161 354,605 2019 N'000 87,305 122,139 209,445 Total (a + b) 740,742 321,757 The Agric-Business/Small and Medium Enterprises Investment Scheme is an initiative of Banker's committee of Nigeria. The contributed funds is meant for supporting the Federal Government's effort at promoting agricultural businesses as well as Small and Medium Enterprises. In line with this initiative, the Bank will contribute 5% of Profit After Tax yearly to the fund . The amount of N145 million (2019: N122 million) represents 5% provision made for the year ended 31 December, 2020. 28 Income from Financing Contracts Murabaha Transactions Murabaha profit - corporate Murabaha profit - retail Murabaha income - LC Bai Mu'ajjal 2020 N'000 4,618,263 1,833,197 228,562 369,147 2019 N'000 3,279,907 1,007,198 7,574 86,219 7,049,169 4,380,898 3,108,774 388,639 914 10,164 2,598,460 309,474 2,163 752 3,508,490 2,910,849 199,233 905 169,935 - 200,138 169,935 10,757,796 7,461,682 2020 N'000 1,009,976 6,862,168 131,031 2019 N'000 1,224,273 4,728,156 103,513 8,003,175 6,055,941 2020 N'000 2019 N'000 3,789,440 2,907,985 4,453,204 10,518,328 3,976,337 6,633,301 Bank's Fees as Mudarib/Prot from Bank Joint Investments 14,971,531 10,609,638 Total prot from Murabaha Transactions Ijara Transactions Ijara wa iqtina Ijara finance lease Ijara home finance Ijara others Total prot from Ijara Transactions Others Istisna Salam Profit Total prot from Other Financing Total income from Financing Contracts 29 Income from Investment Activities Trading assets Sukuk Rental Total Income from Investing Activities 30(I). Return on equity investment account holders Prot from Financing Investments paid to Mudarabah account holders (ii) Mudarib Fees/Profit of Joint Investments Bank's Fees as Mudarib Profit from Bank Joint Investments PAGE - 113
116. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 31 Fees and Commission Banking services Net income from E-Business LC/ trade finance income 32 Other Operating Income Wakala income Miscellaneous income 33 Other Comprehensive Income Foreign currency translation difference 34 Staff Costs Salaries Staff pension Training and seminar expenses Other staff expenses Balance as at 31 December 35 Depreciation and Amortisation Depreciation of property, plant & equipment Amortisation of leasehold improvement Amortisation of intangible assets Balance as at 31 December 36(I) Operating Expenses Advertising and marketing Administrative - note 36 (iii) Subscription and professional fees ACE's Expense Right-of-use assets amortisation- note 36 (ii) Licences Bank charges Audit fee & other expenses NDIC premium Bandwith and connectivity Directors expenses Balance as at 31 December PAGE - 114 2020 N'000 214,041 68,050 218,839 2019 N'000 215,038 406,652 387,252 500,930 1,008,943 2020 N'000 289,975 62,065 2019 N'000 174,670 13,587 352,040 188,257 2020 N'000 273,825 2019 N'000 - 273,825 - 2020 N'000 4,609,690 117,650 83,896 91,130 2019 N'000 3,417,081 168,749 162,815 114,909 4,902,366 3,863,554 2020 N'000 697,252 24,192 90,180 2019 N'000 605,893 26,716 81,978 811,624 714,586 2020 N'000 170,960 1,557,114 149,588 24,519 377,319 603,326 118,493 30,806 556,778 164,564 263,176 2019 N'000 284,607 1,579,503 158,727 36,937 341,564 546,723 63,514 31,552 391,855 280,912 256,912 4,016,643 3,972,805
117. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 36(ii) Right-of-use Amortisation/ Rental Charges Right-of-use assets amortisation Balance as at 31 December 36(iii)Administrative Telephone expenses SWIFT/NIBBS charges Courier charges Service contract (HR and Admin) Local and foreign travels Printing & Stationaries Repairs and maintenance Security related expenses Money and other Insurance Fuel expense Data recovery & IT related expenses Newspaper, magazine & periodicals Entertainment Regulatory expenses Sundry expenses Cash shortage w/o Listing expenses Industry certification Balance as at 31 December 2020 N'000 377,319 2019 N'000 341,564 377,319 341,564 2020 N'000 6,398 38,339 20,275 608,705 75,026 95,750 282,878 87,673 43,120 100,366 1,376 18,332 20,351 50,664 2,560 2,352 2,949 2019 N'000 4,268 23,970 14,788 483,709 96,574 114,677 342,610 80,365 41,613 110,888 1,155 1,831 16,465 50,538 160,839 3,035 4,072 28,105 1,557,114 1,579,503 37 Impairment Provisions 37 (a) Statement of Prudential Adjustment Prudential Adjustment for the year ended 2020 In compliance with the provisions under the revised Prudential Guidelines issued by the Central Bank of Nigeria, which became effective 1 July, 2010,addresses the variance between the impairment allowance under prudential guidelines and the expected credit loss model required by IFRS 9. Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be required to make provisions for facilities as prescribed in the relevant IFRS Standards when IFRS is adopted. However, Banks would be required to comply with the following: Provisions for facilities recognized in the profit and loss account should be determined based on the requirements of IFRS. However, the IFRS provision should be compared with provisions determined under prudential guidelines and the expected impact/changes in general reserves should be treated as follows: • Prudential Provisions is greater than IFRS provisions; the excess provision resulting therefrom should be transferred from the general reserve account to a "regulatory risk reserve". As at 31 December 2020, the difference between the Prudential provision and IFRS impairment was N539 million for the Bank (December 2019: N1.095 billion). This requires transfer of N539 million to retained earnings from regulatory risk reserves for Bank as disclosed in the statement of changes in equity. These amounts represent the difference between provisions for credit and other known losses as determined under the prudential guidelines issued by the Central Bank of Nigeria (CBN) and impairment reserve as determined in line with IFRS 9 as at the year end PAGE - 115
118. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 Provision on Risk Assets Total impairment allowance per IFRS 9 2020 N'000 5,793,412 2019 N'000 2,765,520 Total N'000 3,027,892 Total impairment per Prudential Guidelines 7,968,496 5,479,671 2,488,825 2,175,084 2,714,151 539,067 Risk regulatory reserves balance as at 31 December 37 (b) Carrying value of Financing and Investment 2020 Risk Assets Summary Carrying Amount Impairment Summary Stage1 N'000 Stage 2 N'000 Stage3 N'000 2,465,356 40,296,049 11,722 18,568,848 2,781,872 97,386 31,231 2,914,762 924,549 589,902 - 185,668 5,705,394 2,120,803 550,35 28,814 2,682,254 14,952 48,916,205 1,046,825 11,722 12 21,614,200 20,128 3,922,127 3,810 126,200 85 162 155,572 170,686 2,511,568 67,531 2,321,697 3,436,052 45,480,153 12 11,710 2,237 42,416 64,782 21,549,418 1,775 10,995 16,580 3,905,547 28,814 28,899 97,301 64,221,233 4,460,444 8,591,032 77,272,708 1,085,812 71,705 2,559,494 3,717,010 73,555,698 Other Financing Assets - 18,915,711 Off Balance Sheet 11,556,341 32,474,974 1,357,824 - 20,273,535 44,031,316 Total 9,948,856 141,577,558 1,226,419 1,238,312 2,720,331 5,185,063 136,392,495 Bai-Muajjal Murabaha Finance Salam Ijara Finance Istisna Qard Hassan 75,777,574 55,851,129 Total N'000 Stage 1 N'000 Stage 2 N'000 - 1,136,985 140,607 29,623 Stage 3 N'000 Total N'000 Total N'000 160,838 1,297,822 18,975,712 - 170,230 43,861,085 37(b) Carrying value of financing and investment 2019 Risk Assets Summary Stage 1 N'000 Bai-Muajjal 1,224,405 Murabaha Finance 33,677,163 Ijara Finance 17,681,792 Istisna 642,792 Qard Hassan 158,374 Impairment Summary Stage 2 Stage 3 Total N'000 N'000 N'000 81,097 1,305,501 196,017 3,396,592 37,269,772 89,903 966,755 18,738,450 133,887 370,066 1,146,745 158,374 Stage 1 N'000 3,594 853,773 68,269 8,272 113 53,384,526 419,807 4,814,509 58,618,843 934,021 Other Financing Assets 9,055,666 Off Balance Sheet 27,719,808 4,395,051 80,237 - 9,135,903 32,114,859 368,287 38,338 Total 4,814,858 4,894,746 90,160,001 99,869,605 1,340,647 Stage 2 N'000 12,995 9 137 - Carrying Amount Stage 3 Total N'000 N'000 1,622 5,216 1,032,087 1,898,855 101,463 169,740 8,166 16,576 78,831 78,944 Total N'000 1,300,285 35,370,917 18,568,710 1,130,169 79,430 3,141 1,222,169 2,169,332 56,449,511 10,979 1,656 - 369,943 49,317 8,765,960 32,065,542 24,120 1,223,825 2,588,592 97,281,013 2020 Balance as at 1 January Impairment charged during the year Reclassication Balance as at 31 December PAGE - 116 Stage 1 N'000 1,340,647 (254,847) Stage 2 N'000 24,120 47,585 - Stage 3 N'000 1,223,825 1,904,660 (419,260) Trading Assets N'000 927,879 - OKL N'000 176,927 402,615 369,943 OBS N'000 120,913 49,317 Total N'000 2,765,520 3,027,892 - 1,085,800 71,705 2,559,494 1,297,822 579,542 170,230 5,793,412
119. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 2019 Balance as at 1 January Impairment charged during the year Write offs Balance as at 31 December Stage 1 N'000 609,000 731,647 - Stage 2 N'000 78,133 54,013 - Stage 3 N'000 1,119,249 152,577 48,000 Trading assets N'000 179,688 179,688 OKL N'000 40,950 135,977 - Total N'000 1,847,331 1,145,876 227,688 1,340,647 24,120 1,223,825 - 176,927 2,765,520 38. Related Parties Jaiz Bank Plc has some exposures that are related to its Directors. The Bank however follows a strict process before granting such credits to its Directors. The requirements for creating and managing this category of risk assets include the following amongst others:(i)Related parties: Parties are considered to be related if one party has the ability to control the other party or exercise influence over the other party in making financial and operational decisions, or one other party controls both. The definition includes investment as well as key management personnel. (ii)Transaction with key management personnel: The Bank's key management personnel, and persons connected with them, are also considered related parties. The definition of key management includes the close family members of key personnel and any entity over which key management exercise control. Close family members are those who may be expected to influence, or be influenced by that individual in their dealings with Jaiz Bank plc and its related entities/parties. 2020 Name Related Party Relationship with the Bank Limit N’000 Abdulfattah Olanrewaju Amoo Ahmad Rufa'i Sani Bellmari Energy Limited Bello Muhammad Sani Fursa Foods Ltd Hassan Usman Noble Hall Limited Abdulfattah Olanrewaju Amoo HRH Engr. Sani Bello Dangote Industries Ltd. HRH Engr. Sani Bello Alh. Aminu Alhassan Dantata Hassan Usman Dr. Umaru Abdulmutallab Executive Director Non-Executive Director Significant Shareholder Non-Executive Director Significant Shareholder Managing Director Chairman At 31st December Off Balance Sheet Dangote Cement Plc 59,400 510,000 1,091,775 80,250 1,295,666 30,000 279,995 3,347,085 Dangote Industries Ltd Significant Shareholder Amount Classification Receivable N’000 49,410 238,130 1,177,377 80,250 538,686 12,290 265,736 2,361,879 401,154 At 31st December Performing Performing Performing Performing Performing Performing Performing Performing 401,154 2019 Ahmad Rufa'i Sani Noble Hall Limited MBS Merchants Ltd Bello Muhammad Sani Abdulfattah Olanrewaju Amoo Mahe Mahmud Abubakar Mukhtar Danladi Hanga Sani Hassan Usman Related Party Relationship with the Bank Ahmad Rufa'i Sani Dr. Umaru Abdulmutallab Mbs Merchants Ltd Bello Muhammad Sani Abdulfattah Olanrewaju Amoo Mahe Mahmud Abubakar Mukhtar Danladi Hanga Sani Hassan Usman Classification N'000 Amount Receivable N'000 Non-Executive Director 510,000 Chairman 279,995 Non-Executive Director 604,646 Non-Executive Director 80,250 Executive Director 59,400 Deputy Managing Director 66,350 Director Rep. by Mukhtar DH Sani 54,000 Managing Director 30,000 279,972 265,736 122,359 80,250 55,076 35,903 32,909 18,000 Performing Performing Performing Performing Performing Performing Performing Performing 1,684,641 890,205 At 31st December Off Balance Sheet Incar Petroleum At 31st December Dr. Umaru Abdulmutallab Chairman Limit 480,516 Performing 480,516 PAGE - 117
120. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 39. Significant Shareholding (5% & Above) Dr. Umaru Abdul Mutallab Dantata Investment & Securities Limited Dr.Muhammadu Indimi Islamic Development Bank Dangote Indutries Ltd Althani Investment Limited Dr. Aminu Alhassan Dantata Balance as at 31 December 2020 Holdings 4,000,000,000 4,204,369,327 3,233,813,044 2,506,666,588 2,500,000,000 2,600,000,000 1,565,210,516 % 13.58 14.27 10.98 8.51 8.48 8.83 5.31 2019 Holdings 4,000,000,000 3,904,369,327 3,233,813,044 2,506,666,588 2,500,000,000 2,200,000,000 1,565,210,516 % 13.58 13.25 10.98 8.51 8.48 7.47 5.31 20,610,059,475 69.96 19,910,059,475 67.58 40. Earnings per share Basic earnings per share Basic earnings per share of 9.85 kobo (2019:8.29 kobo) is based on the profit of N3.54billion (31 December 2019: N2.44billion) attributable to shareholders with ordinary shares of 29,464,249,300 (2019:29,464,249,300) Prot attributable to ordinary shareholders Profit for the period Profit attributable to ordinary shareholders Weighted average number of ordinary shares Issued ordinary shares at 1 January Weighted average number of ordinary shares at 31 December Basic and diluted earnings per share (Kobo) 2020 N'000 2,903,212 2019 N'000 2,442,785 2,903,212 2,442,785 2020 In Thousand 29,464,250 2019 In Thousand 29,464,250 29,464,250 29,464,250 9.85 kobo 8.29 kobo There have been no transactions during the year which caused dilution of the earnings per share. 41a Information regarding Directors/Managers Remunerations Chairman Other Directors Emolument of Executives Highest paid director Senior Management 2020 N'000 2019 N'000 10,000 80,000 144,656 68,007 263,119 10,000 80,000 135,615 48,577 183,592 No. of Directors excluding the Chairman with gross emoluments within the following ranges were: N 5,000,000 10,000,001 15,000,001 PAGE - 118 - N 10000000 15000000 Above 2020 Number 3 2019 Number 3
121. 52 Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 No. of Senior Management with gross emoluments within the following ranges were: N N 2020 Number 5,000,000 - 10000000 10,000,001 - 15000000 15,000,001 - Above 10 2019 Number 8 b Information regarding Employees The number of employees excluding Directors in receipt of emoluments excluding allowances in the following ranges were: N N 2020 2019 Number Number Below - 2,990,000.00 40 282 2,990,000.01 3,990,000.00 184 40 3,990,000.01 4,990,000.00 50 56 4,990,000.01 5,990,000.00 26 44 5,990,000.01 6,990,000.00 70 40 6,990,000.01 7,990,000.00 0 7 7,990,000.01 8,990,000.00 77 0 8,990,000.01 9,990,000.00 24 13 9,990,000.01 10,990,000.00 36 25 10,990,000.01 15,990,000.00 39 35 Above 15,990,000.00 63 20 Number of persons employed as at the end of the year were: Managerial Senior Junior 609 562 2020 Number 13 91 505 2019 Number 11 82 469 609 562 42 Card issuance and usage in Nigeria In line with Sec.11 of the CBN' Circular on The Guidance for issuance and usage of cards in Nigeria, below is the Bank's information on it's Card CardType Verve Debit Card Mastercard Card Total Transaction Volumes Number 7,829,918 1,932,213 Transaction Value N'000 108,654,108 30,964,322 9,762,131 139,618,430 In line with CBN circular Ref FPR/DIR/CIR/GEN/01/020, below are the customer complaints data for the year: (i) ATM Complaints data- 31 December 2020 Unresolved as At 1 January Number of Complaints Number of Complaints Resolved Unresolved as at 31 December Number 219 10,879 (11,151) Amount N'000 606 21,672 (21,316) 53 962 PAGE - 119
122. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 Number 114 33,898 (33,793) Amount N'000 262 42,644 (42,300) 219 606 (ii) ATM Complaints Data- 31 December 2019 Unresolved as At 1 January Number of Complaints Number of Complaints Resolved Unresolved as at 31 December 43. (i) Financing Analysis By Security Legal mortgage Total asset debenture Cash and deposits Equitable mortgage Equity Assets - Other Total (i) By Products Murabaha finance Bai Muajjal Ijara Finance Paddy aggregation CACS DCRR Istisna Ijara service Qard Total (ii) By sector General Oil & gas Real estate activities General commerce Agriculture Construction Manufacturing Education Information and communication Recreation Human health and social work activities Transportation and storage Mining And Quarrying Total PAGE - 120 2020 N'000 31,152,121 9,239,693 16,383,948 7,939,400 132,834 12,424,711 2019 N'000 28,597,817 880,045 10,327,398 1,785,861 158,374 16,869,347 77,272,708 58,618,843 2020 N'000 43,611,743 2,695,612 18,230,333 2,162,226 4,472,695 589,902 2,666,379 2,717,618 126,200 2019 N'000 31,984,938 1,305,501 14,570,891 4,659,529 625,305 1,146,745 4,167,559 158,374 77,272,708 58,618,843 2020 N'000 2019 N'000 10,731,571 12,595,776 12,394,631 16,977,873 12,818,514 3,875,997 3,476,873 2,215,943 377,289 31,742 652,520 603,815 520,164 9,799,615 9,874,132 12,174,357 12,122,055 8,163,108 2,612,383 1,686,821 1,383,619 387,269 5,278 171,167 239,040 - 77,272,708 58,618,843
123. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 (iii) By Business Unit Corporate Retail Total (iv) By Security 0 61 91 180 Over 60 days 90 days 180 days 360 days 360 days Total 2020 N'000 52,475,708 24,797,000 2019 N'000 40,550,821 18,068,022 77,272,708 58,618,843 2020 N'000 1,072,124 3,146,646 6,338,405 15,243,993 51,471,540 2019 N'000 233,449 1,419,801 6,263,984 12,581,924 38,119,685 77,272,708 58,618,843 44 Operating segments For reporting purposes, the Bank is organised into business segments and has reportable operating segments as follows: Resources are allocated based on the business segments and Management reviews the segments on periodic basis to assess their performance. The Management Committee reviews and allocates the necessary resources for the achievement of the Bank's objectives. Corporate Banking Retail Banking Total As at 31 December 2020 N'000 N'000 N'000 Investment in sukuk 73,795,575 73,795,575 Murabaha finance 30,754,751 12,856,993 43,611,743 Bai Muajjal 164,176 2,531,435 2,695,612 Ijara finance 10,709,324 7,521,009 18,230,333 Ijara service 2,533,194 184,424 2,717,618 Istisna 1,089,440 1,576,940 2,666,379 Qard 126,200 126,200 Intervention fund 7,224,823 7,224,823 Investment properties 1,603,513 1,603,513 Investment in assets held for sale 20,273,275 20,273,275 / Total Assets As at 31 December 2019 Investment in sukuk Murabaha finance Bai Muajjal Ijara finance Ijara service Istisna Qard Intervention fund Investment properties Investment in assets held for sale Total assets 148,148,070 24,797,000 172,945,071 Corporate Banking N'000 41,086,469 20,050,012 8,220,991 35,136 538,324 5,284,834 1,603,513 9,834,812 Retail Banking N'000 17,219,760 1,305,501 7,778,822 2,703,501 608,421 158,375 3,126,350 - Total N'000 41,086,469 37,269,772 1,305,501 15,999,813 2,738,637 1,146,745 158,375 8,411,184 1,603,513 9,834,812 86,654,091 32,900,729 119,554,820 In line with the requirements of the Accounting and Auditing Organization for Islamic Financial Institutions (“AAOIFI”), the investments in Islamic Finance are shown here as gross, while on the face of statement of financial position they are shown net of PAGE - 121
124. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 impairment and deferred profit. This accounts for the difference between the balance sheet size in the notes to the financial statements and what is disclosed on the face of the statement of financial position. 45. Capital Adequacy Ratio The Bank presents details of its regulatory capital resources in line with the Central Bank of Nigeria's guidance on Pillar I capital requirements. Regulatory capital Tier 1 capital Share capital Share premium Retained earnings Statutory reserves Other reserves 2020 N'000 2019 N'000 14,732,125 627,365 (2,538,887) 2,108,624 466,917 14,732,125 627,365 (4,081,114) 1,237,659 209,444 Less: Deferred tax assets Intangible assets 15,396,145 832,253 475,815 12,725,479 462,186 481,366 Total qualifying Tier 1 capital 14,088,077 11,781,928 Tier 2 capital Qualifying other reserves Other comprehensive income 273,825 12,313 Total qualifying Tier 2 capital (100% of total qualifying Tier I capital) 273,825 112,313 14,361,902 11,894,241 41,773,153 14,801,287 15,155,342 42,375,487 15,010,602 14,966,436 71,729,782 72,352,525 20.02% 16.44% Total qualifying capital Risk - weighted assets: Credit risk Operational risk Market risk Total risk-weighted assets Risk-weighted capital adequacy ratio 46. Contingencies and commitments (i) Litigation and claims Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has proper controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing. The Bank, in its ordinary course of business, is presently involved in 18 (31 December, 2019: 21) litigation suits: 14 (31 December, 2019: 16) cases instituted against the Bank, 4 (31 December,2019: 4) cases instituted by the Bank, 1(31 December, 2019: 0) judgement in favour of the Bank awaiting execution and NIL (31 December, 2019: 1) civil appeal against the Bank. The Directors are of the opinion that none of the aforementioned cases is likely to have a material adverse effect on the Bank and are not aware of any other pending or threatened claims and litigations. PAGE - 122
125. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 (ii) Other contingent liabilities In the normal course of business, the Bank enters into various types of transactions that involve undertaking certain commitements such as letter of credit, guarantees and undrawn financial commitments. 2020 2019 N'000 N'000 Advanced payment guarantees 5,295,918 3,112,696 Letters of credit 25,357,314 13,444,634 Bonds and guarantees 1,821,742 1,710,055 Wakala guarantee 9,329,970 12,651,847 Undrawn commitment 2,226,371 1,195,627 Balance as at 31 December 44,031,315 32,114,859 (iii) Capital commitments There were no capital commitments at the end of the reporting period of 31 December 2020. (iv) Guarantees and other financial commitments The Directors are of the opinion that all known liabilities and commitments which are relevant in assessing the company's financial position, financial performance and cash flows have been taken into account in the preparation of these financial statements. 47. Contravention of CBN/NDIC guidelines 31 December 2020 In 2020 financial year, the Bank did not contravene any CBN guidelines 31 December 2019 During the year, the Bank incurred the following penalty due to contravention and/or infractions of CBN regulations and guidelines. Details i. Penalty for non-compliance with FCTP limit ii Fines for non-compliance with anti-money laundering procedures N'000 2,000 32,000 34,000 48. Dividend The Board of Directors, pursuant to the powers vested in it by the provisions of Section 379 of the Companies and Allied Matters Act (CAMA) of Nigeria, 2020, proposed a dividend of 3 kobo per share as at December 31, 2020. This is subject to approval by shareholders at the next Annual General Meeting. The number of shares in issue and ranking for dividend represents the outstanding number of shares as at 31 December 2019. Dividends are paid to shareholders net of withholding tax at the rate of 10% in compliance with extant tax laws. 49. Comparatives gures Certain comparative figures have been restated where necessary for a more meaningful comparison. 50. Employee benet plans Opening defined contribution obligation Charge for the year Payment to fund administrator Balance as at 31 December 2020 N'000 34,200 272,727 306,137 2019 N'000 26,154 228,570 220,524 790 34,200 A defined contribution plan is a pension plan under which the Bank pays contributions at a fixed rate. The Bank does not have any legal obligation to pay further contributions over and above the fixed rate as determined by the Pension Act, 2004 as amended. T h e t o t a l e x p e n s e c h a r g e d t o i n c o m e fo r t h e ye a r w a s N 2 7 2 . 7 m i l l i o n ( 2 0 1 9 : N 2 2 8 . 6 m i l l i o n ) PAGE - 123
126. Annual Report Accounts & Notes to the Financial Statements For the year ended 31 December 2020 52. Assessing the impact of COVID-19 The COVID-19 pandemic has caused disruptions to global economic and social activities during the period ended 31 December 2020. The impact in Nigeria markets was experienced in the second quarter and few months of the third quarter period, by way of reduction in social interactions and disruptions in economic activities.The Bank has assessed on a line-by-line basis the impact of Covid-19 on the amount presented on the statement of financial position and concluded that no further adjustment will be required in the financial statements. The Bank has also reviewed the current uncertainty as a result of this pandemic and nothing has come to the attention of the Directors to indicate that the Bank will not remain a going concern for at least twelve months from the date of this statement. 53. Events after the reporting date There were no events after the reporting date that could have material effect on the financial condition of the Bank as at 31 December 2020 and the profit and other comprehensive income for the year ended which have not been adjusted or disclosed . PAGE - 124
127. Annual Report Accounts & OTHER NATIONAL Disclosures PAGE - 125
128. Annual Report Accounts & Value Added Statement For the year ended 31st December 2020 31 Dec. 2020 N`000 31 Dec. 2019 % 31 Dec. 2019 N`000 31 Dec. 2019 % Gross Income from financing transactions Return on Equity of Investment Account Holders 19,613,940 (3,789,440) 2.23 0.43 14,714,822 (2,907,985) 2.20 0.43 Bank's share as a Mudarib/Equity investor Impairment Charges against non-performing Financing and Investment 15,824,499 1.80 11,806,838 1.77 (3,027,892) 0.34 (1,145,875) 0.17 12,796,608 (4,016,643) 1.46 0.46 10,660,963 (3,972,805) 1.60 0.60 8,779,965 1.00 6,688,157 1.00 4,902,366 0.56 3,863,554 0.84 162,764 0.02 332,768 - 811,624 2,903,212 0.09 0.33 714,586 2,442,785 0.16 8,779,965 1.00 6,688,157 1.00 Bought in Goods and Services Value Added Distribution Employees Salaries and Benefits Government Taxation Retained in the Bank Re-invested in non-current asset & development of operation Profit for the year (inclusive of all Statutory Reserves) Total Value Added PAGE - 126
129. 52 Annual Report Accounts & Five Years Financial Summary Statement of Profit or Loss and Other Comprehensive Income Income: Income from Financing Contracts Income from Investment Activities 2020 N`000 10,757,796 8,003,175 2019 N`000 7,461,682 6,055,941 2018 N`000 6,291,944 1,223,633 2017 N`000 6,239,803 684,854 2016 N`000 5,289,075 188,967 Gross Income from nancing transactions 18,760,971 13,517,623 7,515,577 6,924,657 5,478,042 Return on Equity of Investment Account Holders (3,789,440) (2,907,985) (1,916,804) (1,397,009) (1,181,787) Bank's share as a Mudarib/Equity investor 14,971,531 10,609,638 5,598,773 5,527,649 4,296,255 Net Impairment /( charges)/write Back of non-performing Financing and Investment (3,027,892) (1,145,876) Net Spread after Provision 9,463,762 5,830,357 5,366,190 4,391,045 Other Income Fee and commission Other Operating Income Total Income Expenses: Staff costs Depreciation and Amortisation Operating Expenses Total Expenses Operating Profit/(Loss) Before Tax Income Tax Expenses Prot/(Loss) for the Year after Tax Other Comprehensive Income Item that may be reclassified to profit or loss Net Gain on Gifted Property Foreign Currency translation difference 11,943,639 500,930 352,040 12,796,609 4,902,366 811,624 4,016,643 9,730,633 1,008,943 188,258 231,584 988,439 240,305 (161,459) 748,709 182,003 (94,790) 364,171 122,440 10,660,962 7,059,101 6,296,902 4,877,656 3,863,554 714,586 3,972,805 2,808,765 608,398 2,744,236 2,374,457 522,187 2,506,250 1,944,405 531,054 2,059,180 8,550,945 6,161,399 5,402,894 4,534,639 3,065,976 (162,764) 2,110,017 332,768 897,702 (63,336 ) 894,006 (356,891) 343,017 (31,745) 2,903,212 2,442,785 834,366 537,115 311,272 273,825 - 12,313 - - - 3,177,036 2,442,785 846,679 537,115 311,272 9.85 kobo 8.29 kobo 2.83 kobo 1.82 kobo 1.16 kobo - Total comprehensive income for the year Basic and diluted Earnings per share (Kobo) PAGE - 127
130. Annual Report Accounts & Five Years Financial Summary Statement of Financial Position Assets Cash and Balances with Central Bank of Nigeria 3 Due from banks and financial institution 4 InterBank Murabaha Sukuk Investment 5 Investment in Musharaka Murabaha Receivables 6 Investment in Bai Mu'ajjal 7 Investment in Istisna 8 Investment in Ijara asset 9 Qard hassan 10 Investment in Salam 11 Investment properties 12 Investment in Assets Held for sale 13 Property, plant and equipment 14 Leasehold Improvement 15 Intangible assets 16 Other Assets 17 Deferred taxation asset 18b Total Assets Liabilities Customer Current Deposits Other Financing Other Liabilities Tax payable Deferred tax 2020 N`000 2019 N`000 2018 N`000 45,869,170 14,839,178 73,795,575 40,907,082 1,979,088 3,662,628 24,962,636 97,301 11,393 1,603,513 18,975,452 2,926,153 47,526 475,815 2,611,415 832,253 42,103,116 11,438,274 41,086,469 32,168,321 1,008,613 1,080,389 21,283,416 79,430 1,603,513 9,464,869 2,547,972 65,297 481,366 2,400,175 462,186 23409751 7408063 19819872 1,200,000 25330697 59186 1865656 15264911 171948 1603513 7699830 2578588 58118 370748 2809209 12368 69,603,883 11,963,766 12,443,964 120,251 - 19a 20 21 18a 16b 114,818,696 94,131,864 Equity of Investment Account Holders Customers' Unrestricted Investment Accounts 19b 100,932,427 57,589,595 100,932,427 57,589,595 14,732,125 627,365 (2,538,887) 2,175,084 2,108,624 740,742 14,732,125 627,365 (4,081,114) 2,714,153 1,237,662 321,757 17,845,053 15,551,948 Total liabilities Total Equity Total Equity and Liabilities PAGE - 128 2016 N`000 23,909,987 21,506,853 5,441,073 1,478,026 - 1,000,000 6,387,918 1,060,252 1,191,704 22,677,161 16,451,245 1,335,361 754,448 13,153,201 14,251,232 149,082 127,674 5,883,288 488,942 2,123,997 1,892,970 34,932 42,435 340,286 368,089 4,676,323 5,233,384 206,573 233,596,177 167,273,406 108,462,458 87,312,608 66,053,824 74,580,714 15,405,242 24,273,971 558,770 - ! Owners' Equity Share Capital Share Premium Retained Earnings Risk Regulatory reserve Statutory Reserve Other Reserves 2017 N`000 22 23 24 25 26 27 45,950,138 2000000 8229960 90,344 - 33,706,359 24,415,544 996,635 5,367,886 1,552,659 136 77087 14,641 - 56,270,442 39,224,563 27,041,925 39,082,854 34,408,897 25,868,115 39,082,854 34,408,897 25,868,115 14,732,125 627,365 (4,574,108) 1,619,336 504,826 199,618 14,732,125 14,732,125 627,365 627,365 (4,244,308) (3,669,861) 2,267,029 1,360,774 254,517 93,381 42420 - 13,109,163 13,679,147 13,143,784 233,596,177 167,273,406 108,462,458 87,312,608 66,053,824
131. 52 Annual Report Accounts & STAKEHOLDERS Information PAGE - 129
132. Annual Report Accounts & Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the 9th Annual General Meeting of Jaiz Bank Plc. will hold at Fraser Suites, 294 Leventis Close, Central Business District, Abuja on Wednesday 23 June, 2021 at 11.00am to transact the following business: Ordinary Business: 1. 2. 3. 4. 5. 6. To lay before Members for approval, the Audited Financial Statements of the Bank for the period ended December 31, 2020, together with the Reports of the Directors, Auditors, and Audit Committee thereon.; To declare a dividend; To elect and re-elect Directors; To authorize the Directors to fix the remuneration of the Auditors; To disclose the remuneration of managers of the Bank; To elect members of the Statutory Audit Committee. Special Business 7. To consider and if approved, to pass, with or without modification, the following ordinary resolution to fix the remuneration of the Non-Executive Directors: “That the Directors fees shall until reviewed by the Company in Annual General Meeting be fixed at N16 Million (Sixteen Million Naira) per annum for the Board Chairman and N14 Million (Fourteen Million Naira) per annum for every other Non-Executive Director.” Dated this 26th day of April, 2021 Notes: 1. Compliance with Covid-19 Related Directives and Guideline The Federal Government of Nigeria, State Governments, Health Authorities and Regulatory Agencies have issued a number of guidelines and directives aimed at curbing the spread of COVID-19 in Nigeria. Particularly, the Federal Capital Territory Administration prohibited the gathering of more than 20 people while the Corporate Affairs Commission (CAC) issued Guidelines on Holding AGM of Public Companies by Proxy. The Convening and conduct of the AGM shall be done in compliance with these directives and guidelines. PAGE - 130 2. Proxy A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his/her stead. A proxy need not be a member of the Company. For the appointment of the proxy to be valid, a proxy form must be completed and deposited at the office of the Company's Registrar, Africa Prudential Plc, 220B Ikorodu Road, Palmgrove , Lagos, Nigeria, or via email at cfc@africaprudential.com not later than 48 hours before the time fixed for the meeting. A blank proxy form is attached to the Annual Report and may also be downloaded from the Company's website at https://www.jaizbankplc.com. 3. Attendance by Proxy In line with CAC Guidelines, attendance at the AGM shall be by proxy only. Shareholders are required to appoint a proxy of their choice from the list of nominated proxies below: i. Alhaji (Dr.) Umaru Mutallab, CON ii. Mall. Hassan Usman, FCA iii. Alhaji (Dr.) Musbahu M. Bashir iv. Mrs Olabisi Bakare v. Alhaji Kabiru Tambari vi. Mr. Patrick Ajudua 4. Stamping of Proxy The Company has made arrangement at its cost, for the stamping of the duly completed and signed proxy forms submitted to the Company's Registrars within the stipulated time. 5. Dividend If the dividend recommended by the Directors is approved by the shareholders at the AGM, dividend will be paid by Wednesday, June 23, 2021. Given the previous notice to shareholders and the investing public by the Company on the closing period for the purpose of dividend payment, dividend approved at the AGM will be paid to shareholders whose names appear in the Company's Register of members by close of business on Friday, June 10, 2021.
133. Annual Report Accounts & Notice of Annual General Meeting 6. Election and Re-election of Directors Pursuant to Section 249 of the Companies and Allied Matters Act, Dr. Abdullateef Bello and Hajia Aisha Umar are being proposed for election as Non -Executive Directors of the Bank while Dr. Sirajo Salisu is being proposed for election as Executive Director of the Bank. The appointments have been approved by the Central Bank of Nigeria and would be presented to Shareholders' approval at the 9th Annual General Meeting. Pursuant to Section 259 of the Companies and Allied Matters Act, the following Directors shall retire by rotation and being eligible have offered themselves for re-election: i. Alhaji (Dr.) Umaru Abdul Mutallab, CON ii. HRH Engr. Bello Muhammad Sani, OON iii. Alhaji Mukhtar Sani Hanga iv. Alhaji (Dr.) Musbahu Mohammad Bashir Special Notice is hereby given pursuant to Section 256 of the Companies and Allied Matters Act that Alhaji (Dr.) Umaru Abdul Mutallab, CON, HRH. Engr. Bello Muhammad Sani, OON, Alhaji (Dr.) Muhammadu Indimi, OFR and Alhaji (Dr.) Aminu Alhassan Dantata, CON are over 70 years of age and have indicated their willingness to continue in office. The Biographical details of the Directors standing for election/re-election are provided in the Annual Report as well as the Bank's Website stated above. 7. Closure of Register As previously notified to shareholders and the investing public, the Register of Members and Transfer Books of the Bank will be closed from Friday June 11, 2021 to Friday June 18, 2021 (both days inclusive) for the purpose of dividend payment and updating the Register. 8. Nomination to the Audit Committee In accordance with Section 359(5) of the Companies & Allied Matters Act, any member may nominate a shareholder as a member of the Statutory Audit Committee by giving notice in writing of such nomination to the Company Secretary at least 21 days before the Annual General Meeting. Such notice of nominations should be sent via email to investorrelations@jaizbankplc.com for the attention of the Company Secretary. A member of the Statutory Audit Committee is required to be financially literate and be knowledgeable in internal control processes. Consequently, a detailed resume should be submitted along with each nomination. 9. e-Dividend Registration Notice is hereby given to all shareholders to open bank accounts, stockbroking accounts and CSCS accounts for the purpose of receiving dividend payment electronically. Application form for e-dividend could be downloaded from our Registrars website at https://africaprudential.com/formsoffers/ to enable shareholders furnish particulars of their accounts to the Registrar as soon as possible. 10. Rights of Securities' Holders to Ask Questions Securities' Holders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and such questions must be submitted to the Company through email at investorrelations@jaizbankplc.com on or before Tuesday, June15, 2021. 11. Unclaimed Dividend Warrants And Share Certificates Shareholders with dividend warrants and share certificates that have remained unclaimed, or are yet to be presented for payment or returned for validation are advised to complete the e-dividend registration or contact the Bank's Registrars at the address stated above, or the Company Secretary at the Bank's Registered address stated below, or any of the Bank's Branches. Shareholders are also encouraged to update their contact information as such information change. Change of Address Form can be downloaded from our Registrar's Website stated above. Requests may be addressed to the Registrars of the Bank or the Company Secretary at the Bank's registered address stated below. A copy of this Notice, Biographical details of Directors standing for election, re-election, and other information relating to the meeting, as well as the full version of the Annual Reports and Financial Statements can be downloaded from the Bank's website stated above. 12. e-Report To improve delivery of our Annual Reports, we hereby request that shareholders who wish to receive Annual Reports and other statutory reports of Jaiz Bank Plc in electronic format should download the e-Report Request Form from the Bank's Website stated above, complete and return the form to the Company Secretary for further processing or simply email the Company Secretary at investorrelations@jaizbankplc.com. By Order of the Board Mrs. Rukayat Oziama Dahiru Company Secretary FRC/2014/NBA/00000009649 No. 73 Ralph Shodeinde Street Central Business District Abuja Federal Capital Territory PAGE - 131
134. Annual Report Accounts & Notes PAGE - 132
135. 52 Annual Report Accounts & PAGE - 133
136. Annual Report Accounts & PAGE - 134
137. 52 Annual Report Accounts & Proxy Form NOTICE IS HEREBY GIVEN that the 9th Annual General Meeting of Jaiz Bank Plc. will hold at Fraser Suites, 294 Leventis Close, Central Business District, Abuja on Wednesday 23 June, 2021 at 11.00am to transact the following business: I/WE ………………………………………………..... Being a member/members of Jaiz Bank Plc. hereby appoint: as my/our proxy to vote for me/us on my /our behalf at the Annual General Meeting of our Company Jaiz Bank Plc. to be held on Wednesday June 23, 2021, at 11.00am and at any adjournment thereof. Full Name and Address of Shareholder Number of Shares Signed this…………………day of……………2021. Shareholder's Signature:……………………………..... A member (shareholder) who is unable to attend an Annual General Meeting by Law may vote by proxy. The form has been prepared to enable you exercise your vote since you cannot attend. Provisions have been made on this form for either the Chairman of the Meeting, Alhaji (Dr.) Umaru Mutallab CON; or Alhaji (Dr.) Musbahu Bashir; or Mall. Hassan Usman FCA; or Mrs Olabisi Bakare: or Alhaji Kabiru Abdullahi Tambari; or Mr. Patrick Ajudua to act as your proxy. Please sign the above and choose any of the mentioned Proxies to act in your stead. Post or email it to investorrelations@jaizbankplc.com so as to reach the address shown overleaf not later than 48 Hours before the meeting. If executed by a Corporation, the proxy form should be sealed with common seal. It is a legal requirement that all instruments of proxy must bear appropriate stamp duty from the Stamp Duties Office, and not adhesive postage stamps. The Bank has made arrangement to stamp the forms at its cost. 1. 2. The Proxy must produce the Admission card sent with the Notice of the Meeting to obtain entrance to the meeting. Before posting or emailing the above card tear off this part and retain it. Resolution 1. 2. For Against Abstain To receive/adopt the Accounts and the result thereon 2. To Declare a Dividend 3. To Re-Elect Director: 1. Alh. (Dr) Umaru Abdul Mutallab CON 2. HRH (Engr) Bello Muhammad Sani OON 3. Alh. (Dr) Musbahu Mohammad Bashir 4. Alh. Mukhtar Sani Hanga To Elect Directors: 1. Dr. Abdullateef Bello 2. Mrs Aisha Waziri Umar 3. Mr. Sirajo Salisu 4. To authorize the Directors to fix the remuneration of the Auditors 5 To elect members of the Statutory Audit Committee. 6. To approve the remuneration of NonExecutive Directors to be fixed at N16 Million (Sixteen Million Naira) per annum for the Board Chairman and N14 Million (Fourteen Million Naira) per annum for every other Non-Executive Directors. 7. To disclose the remuneration of managers of the Bank. Please admit………………………………………………………………………………………………to the Annual General Meeting Jaiz Bank Plc. which will be held at Fraser Suites, 294 Leventis Close, Central Business District Abuja, Federal Capital Territory on Wednesday 23 June, 2021 at 11.00am and at any adjournment thereof Signature……………………………………………………………………………………………………………………………… Important (A) This admission card must be produced by the shareholder or his proxy in order to obtain entrance to the General Meeting. (B) Shareholders or their proxies are requested to sign the admission card before attending the Meeting.
138. PLEASE AFFIX A STAMP HERE Send by post to : Africa Prudential Registrars Plc. (Formerly UBA Registrars Limited) 220B Ikorodu Road, Palmgrove, Lagos, Nigeria. Or by email to: investorrelations@jaizbankplc.com
140. JAIZ BANK PLC KANO HOUSE 73 RALPH SHODEINDE STREET CENTRAL BUSINESS DISTRICT ABUJA www .jaizbankplc.com