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Jordan Islamic Bank: Annual Report 2020

IM Insights
By IM Insights
2 years ago
Jordan Islamic Bank: Annual Report 2020

Dinar, Fiqh, Ijara, Islam, Islamic banking, Mal, Mudarib, Murabaha, Sukuk, Takaful, Zakat, Credit Risk, Ijarah Contract, Istiqlal, Joint Investment Account, Al-mal, Participation, Provision, Receivables, Reserves, Sales, Muwakkil, Wakeel

Banking

Sukuk

Waqf

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  4. 4
  5. His Majesty King Abdullah II bin Al Hussein 5
  6. 6
  7. HRH Prince Hussein bin Abdullah Crown Prince 7
  8. In the Name of Allah , the Compassionate, the Merciful 8
  9. Public Shareholding Limited Liability Company Established in Amman - the Hashemite Kingdom of Jordan and registered as a public shareholding limited liability company in the Companies Registry on 28 /11/1978 under reference No. 124 pursuant to the requirements of the by-then effective Companies Law and in accordance with the provisions of Jordan Islamic Bank temporary Law No. 13 of 1978, which was superseded by the Banks Law No. 62 of 1985 that was abolished pursuant to the Banks Law No. 28 of 2000 effective as of 02/08/2000, which included a special chapter on Islamic Banks and as amended in 01/05/2019. The Forty Second Annual Report For the Year 2020 9
  10. 10
  11. Our Mission Commitment to consolidate the values of the Islamic Sharia by dealing with all people according to the teachings and principles of the Islamic Law (Sharia) to serve the public interest of the society. Commitment to equally serve the interests of all stakeholders including shareholders, investors, borrowers and employees. Commitment to attain the latest innovative products in banking industry and technology, as well as looking forward to gaining the trust of all people in our distinguished services that are in line with recent developments and changes within the framework of compliance with our Islamic Sharia. 11
  12. Members of the Board of Directors H .E. Mr. Musa Abdulaziz Mohammad Shihadeh Chairman Representative of Al Baraka Banking Group Company Vice-Chairman H.E. Mr. Hamad Abdulla Ali Al-Oqab Representative of Al Baraka Banking Group Company H.E. Mr. Adnan Abdulla Al Suleiman Al Bassam Member Representative of Al Baraka Banking Group Company H.E. Mr. Hood Hashem Ahmed Hashem Member Representative of Al Baraka Banking Group Company Member H.E. Dr. Nour “Moh’d Shaher” “Moh’d Lutfi” Mahayni H.E. Dr. Hatem Hafez AL-Halawani Al -Tamimi Member As of 28 /12/2020 H.E. Mr. Salem Ahmad Jamil Al Khaza’aleh Member H.E. Mr. Ayman Abdel Karim Basheer Hatahet Member H.E. Mr. Issa Haidar Issa Murad Member H.E. Mrs. Malak F. R. Ghanem Member H.E. Dr. Nabih Ahmad Salameh Alzenat Member H.E. Mr. Saleh Yacoub Moh’d Hussein Member Passed away on 30/11/2020 Auditors: Messrs. Ernst & Young/ Jordan 12
  13. Sharia Supervisory Board Members H .E. Dr. Mahmoud Ali Mosleh Al Sartawi Chairman H.E. Dr. Abdul Rahman Ibrahim Zaid Al Kelani Vice Chairman H.E. Dr. “Mohammad Khair” Mohammad Salem Al-Issa Member H.E. Dr. Abdul Sattar Abdul Karim Abu Goddeh Member Passed away on 23/10/2020 The Management of Jordan Islamic Bank H.E. Dr. Hussein Said Saifan CEO / General Manager H.E. Dr. “Mohamed Fahmy” “Mohamed Khalil”Al Jabari Assistant General Manager H.E. Dr. Abdul Hamid Abdullah Abu Saqri Assistant General Manager H.E. Dr. Musa Omar Abu Muhaimed Assistant General Manager H.E. Mr. Mohamed Ahmed Jibril Assistant General Manager H.E. Mr. “Mohammed Fawaz” Sudqi Imam Assistant General Manager 13
  14. Chairman ’s Message Chairman’s Message In the name of Allah, Most Gracious, Most Merciful Peace be Upon You, so as Allah’s Mercy and Blessings, All Praise be to Allah, Lord of the Worlds, and Prayers and Peace be upon His Prophet Mohammed, His Servant and Messenger, his Kinsfolk, and all his Companions. Dear Shareholders, The year 2020 is over, with new accomplishments added to the past years’ achievements due to the JIB’s businesses and practices.  14
  15. During 2020 , the whole world suffered the crisis of the Covid-19 pandemic and the repercussions which affected all countries and economic sectors. Even though JIB worked hard to implement the board of directors’ strategy, overcome the difficulties and obstacles that the pandemic imposed, and operate transparently and trustworthy manner based on sound governance, wise management, and qualified staff at the top level. This was achieved by using modern techniques and systems and improving the quality of services and products without neglecting its role in serving society.  Despite the challenges in 2020, our Bank managed to achieve more accomplishments. The Bank’s assets amounted to about JD 4.8 billion, and its balances of saving schemes amounted to about JD 4.2 billion. The total balance of its financial investments amounted to about JD 3.8 billion, the profits of joint investment amounted to about JD 200 million, and the Bank’s profits before tax amounted to about JD 84 million. Simultaneously, the profits after tax amounted to about JD 52 million, with a return rate on average equity of about 12%. The Board of Directors has recommended that the Ordinary General Assembly distribute cash dividends to shareholders by 12% of the paid-up capital. Such percentage was decided by the Central Bank of Jordan in accordance with its letter No. 10/3/ 1228, on 20th Jan 2021, which was sent to the Jordanian banks operating in the kingdom, on condition that the percentage of distribution of cash dividends to shareholders does not exceed 12% in light of international, local economic developments, and the levels of cash, and banks’ solvency and the commitment to keep it.  Those achievements were possible only with blessings and grace of Allah Almighty and the fruit of continuous support from those who believe in the values and the method of work of ​​this institution and its customers, as well as a result of a constant and distinguished effort from the Bank’s executive management and its employees. May Allah reward everyone for us. The Bank will continue to follow its rightful approach to serve its mission, interacting with the national economy and local community’s needs, contributing to every good deed possible. I want to thank the Sharia Supervisory Board for the efforts they exerted to give us insights about banking, according to Sharia. Also, I thank the Central Bank of Jordan for its active role and understanding of Islamic banks’ unique business nature concerning its instructions. Even though it was a challenging year, 2020 was also a sad year; since the Islamic Banking lost one of its pioneers, establishers, supporters, Sheikh Saleh Abdullah Kamel – May Allah rest his soul in peacewho was also one of the founders of Jordan Islamic Bank and the Chairman of the Board of Directors from 1980-1995 and the honorary chairman thereof as well. With this, we recall his fixed attitudes and the support he provided for the Islamic Banking industry in general, and to our Bank in particular, as he continued to support our Bank up to the last minute before he moved to the Mercy of Almighty Allah. Unfortunately, we also lost H.E. Dr. Abdul Sattar Abdul Karim Abu Goddeh, the Sharia Advisor and Chairman/ Member of the Shari’a Supervisory Board in our Bank since 1994, and we lost the CoMember of the Bank’s Board of Directors, Saleh Yaqoub Hussein. They all had a genuine impact on the Bank’s course of work. May Allah have mercy upon them all and admit them into his spacious paradise.  Musa Abdulaziz Shihadeh Chairman of the Board 15
  16. CEO / General Manager’s Message In the name of Allah, Most Gracious, Most Merciful Peace be Upon You, so as Allah’s Mercy and Blessings, All Praise be to Allah, Lord of the Worlds, and Prayers and Peace be upon His Prophet Mohammed, His Servant and Messenger, his Kinsfolk, and all his companions. 16
  17. Despite the challenging circumstances of the year 2020 we faced due to the breakthrough of the Covid-19 pandemic and its repercussions we achieved development in all key indicators , maintaining the quality of the assets and the sufficiency of the capital, providing a stable and safe financial performance for all concerned parties. This development results from implementing the strategic goals that have been set carefully to the Bank to achieve sustainability of the resources and recruiting by studied percentages. During 2020, the Bank accomplished more developments and updates in the various fields of banking technologies and continued its plan to expand by providing new services through its electronic channels to provide additional services on Mobile Banking, I-Banking, and using the QR service in instant transfer, and launching the e-wallet service and Instant Payment System (CliQ) among local banks. The Bank continued to provide services for customers from the corporations’ sector through the new version of Internet bank services for corporations. Based on the Bank’s commitment to implement the optimal standards for customers’ data protection, the Bank gained the (ISO 27001) Certificate in the Implementation of Information Security Management. It also renewed the annual reliability certificate for the Payment Card Industry Data Security Standard (PCI-DSS), which relates to the security and protection of card industry information to maintain reliability in dealing with the cards. In 2020, the Bank gained notable rankings from various international rating agencies. It got “B+/ Stable/ B” from Standard & Poor’s and “BB- / Negative/ B” ranking from Fitch Rating, which are the same as the Jordan rating from both agencies. Despite the surrounding circumstances resulting from the pandemic, we allowed our employees to participate in training programs and seminars, whether face to face or online directly or indirectly via electronic training licenses, to improve their performance levels. Lastly, on behalf of the Executive Management, I would like to thank the chairman and the Board of Directors’ members and the Supervisory Sharia Board members for the continuation of their full support and trust in our performance. I’d also like to thank all the staff and employees in the Bank, who exerted the group effort needed to achieve these results despite the difficult circumstances the pandemic imposed. We also wish to continue our work to achieve the utmost interest of the shareholders and customers alike. Dr. Hussein Said CEO/ General Manager 17
  19. Board of Directors ’ Report for 2020
  20. In the Name of Allah , Most Merciful, Most Compassionate «Our Lord! Make not our hearts to deviate after Thou hast guided us aright, and grant us from Thee mercy; surely Thou art the most liberal Giver, » Allah the Almighty has spoken the truth Verse No, 8, Surat Al-Emran Board of Directors’ Report for 2020 Peace be upon you, so as Allah Blessings and Mercy All Praise be to Allah, Lord of the Worlds, And Prayers and Peace be upon Mohammed His Servant and Messenger and all his family and companions. Dear Shareholders, During 2020, the world has faced an unprecedented economic crisis since the Great Depression, which happened around a century ago. The crisis of 2020 resulting from Covid-19 is yet more challenging than the Great Depression of 2009, affecting many business sectors. Therefore, the Great Lockdown of 2020 led to stopping most economic sectors worldwide and causing massive damage. Also, global consumption declined, costs of the assets lessened, the total demand decreased, the loan crisis increased, and the WTI Crude Oil fell below zero, which is an unprecedented historical price. In return, the gold prices also reached unprecedented levels. Coronavirus represents a worldwide threat because it can spread quickly and easily in a whole country if it contaminates a small area, making it hard to avoid. As a result, all countries have taken strict measures to prevent the spread of the virus and attempt to reduce the number of cases. Such measures include closing the air, sea, and land borders, and each country imposed various types of lockdowns. Later on, countries gradually reopened as the number of cases and deaths reported reduced. Thus, they set less strict measures as a new way to deal with the pandemic even though many warnings indicated that the virus might be reintroduced worse than ever. Well, this is what already happened later. As for the Arab region, it is affected equally as the rest of the world. The Arab Gulf countries were affected the most by the virus. Therefore, Saudi Arabia has taken many preventative measures; most importantly, it limited the Hajj season in 2020 for a minimal number of people inside the Kingdom. It also closed the Two Holy Mosques and banned prayers there for some time before deciding to reopen them while imposing precautionary measures. It temporarily suspended the Umrah rituals until new strict measures were set to perform the routines again. In light of the pandemic and its effect on the region and the world, the Jordanian government has taken many preventive measures to organize life in different fields amidst exceptional circumstances to contain the virus’s repercussions. Such efforts include activating the Law of Defense and forming the Crisis Management Cell. The Central Bank of Jordan took precautionary and preventative measures, such as generating additional cash flow to the economy and making decisions to protect the banking sector and help small and medium enterprises. Also, this pandemic has reduced the sales of companies, 20
  21. which in return reduced their cash flow . It also reduced the prices of returns on deposits and facilities, increased unemployment rates, reduced revenues of tourism and transfers from employees outside Jordan, reduced the government’s revenues, increased budget deficit, thus raising the net public debt, and reduced the growth rates in gross domestic product. Amid the last year’s events, Gross Domestic Product declined by (1.5%) in the first three quarters of 2020, compared to Gross Domestic Product growth of (1.9%) recorded for the same period in 2019. Estimates also indicate that the decline in 2020 will reach about (3%) and the growth in 2021 will reach about (2.5%). However, unemployment increased in the fourth quarter of 2020 to reach about (24.7%) compared to about 19.0 % during the same quarter of 2019. The inflation rate has increased by (0.3%) during 2020, compared to a growth of (0.8%) during the same period in 2019. The net public debt of Jordan has risen during the first 11 months of 2020 (except for the investments carried out by the Social Security Finance Investment Fund in government bonds) compared with its level recorded at the end of 2019 by about JD (2.4) billion, to reach about JD (26.4) billion, at (84.4%) of the Gross Domestic Product. The reserve of foreign currencies stood at about $ 15.9 billion at the end of 2020. During 2020, Amman Stock Exchange’s trading volume recorded about JD (1) billion, with a decrease of around JD (600) million compared to the level recorded in 2019. The market-value weighted index of free shares has decreased at the end of 2020 by around (158) points or at (8.7%) compared to the score of last year, to reach about (1657.2) points. The market value of the shares listed on the Stock Exchange amounted to about JD (12.9) billion by the end of 2020, with a decrease of about (13.5%) compared to the record during 2019. In March 2020, the Central Bank of Jordan (CBJ) decreased the interest rate two times on the monetary policy instruments by 150 base points, so the repurchase price per night reached (3.25%) and the rediscount rate reached (3.50%). Regarding the interest rate in the Jordanian banking market, the weighted average of interest rates on loans and advances decreased at the end of 2020 by (129) base points to reach (7.17%) compared to the level recorded in the previous year. Meanwhile, the weighted average of interest rates on time deposits for the same period increased by (127) base points to reach (3.65%). At the end of 2020, the net balance of the credit facilities granted by licensed banks amounted to about JD (28.6) billion, with an increase of about JD (1.6) billion or a rate of around (5.7%) compared to the level recorded at the end of 2019. The total balance of the deposits with licensed banks reached about JD (36.8) billion at the end of 2020, with an increase of about JD (1.5) billion, or (4.2%) compared to the level recorded at the end of 2019. Despite the current surrounding obstacles, our Bank managed by the success granted by Allah achieved new growth in its various activities. The Board of Directors is pleased to introduce you to the most important achievements in 2020 as well as the future ambitions. 21
  22. First : Branching During the year 2020, three offices were transformed into branches; Al-Madina Alriyadiah/ Amman, Free Zone / Al Zarqa, Ebbin Ebalin/ Ajloun. Thus, the Bank’s Branching network has become of 83 branches and 25 bank offices at the end of 2020. On the other hand, three offices have been moved to new locations; Hai Ma’soum/ Al Zarqa, AlHashmi Street/ Irbid, Mu’ta/ Al Karak, where the recent locations provide better convenience for the customers and provide them with banking services quickly and conveniently. The services were also continued during the official holidays and on Friday, Saturday, and evening periods in some branches and offices of the Bank as follows: • City Center/Irbid branch and Al Istiklal Mall and Al Arifa Mall, Amman Mall and Pavilion Mall offices in the evening period and on Saturday and Friday. • Abdulla Ghousha and new Zarqa branches for the evening period and Saturday. • Free zone office / Al Zarqa on Saturday. Second: Staff At the end of 2020, the number of the Bank’s staff reached (2434). Below is a figure showing the development in the employees’ number over the past ten years: No. of Employees No of branches and offices 86 93 97 100 105 108 108 2,148 2,434 80 2,051 2,440 79 1,979 2,405 75 1,904 2,000 2,236 2,335 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Stemming from its interest to improve its employees’ performance, the Bank has enrolled employees in training courses and seminars, face to face or online, directly or indirectly via electronic training licenses, organized by the Bank’s Academy for training and human resources development and internal and external specialized parties. 22
  23. The Bank , during 2019, has enrolled (6,390) employees in training courses and seminars. Comparatively, the Bank during 2020 has enrolled (3917) employees in such courses and seminars, as indicated in the table below: 2020 Description 2019 No. of courses and seminars No. of participants No. of courses and seminars No. of participants the Bank’s Academy for training and human resources development 136 2127 331 4756 Face-to-Face 94 1217 331 4756 Online 42 910 0 0 Training Centers in Jordan 65 196 208 564 Face-to-Face 45 116 208 564 Online 20 80 0 0 Training Centers abroad 26 92 27 35 1 2 27 35 Online 25 90 0 0 E-training Licenses 38 1502 5 1035 Total 265 3917 571 6390 Face-to-Face The above training courses and seminars have reinforced the (basic) functional and (auxiliary) institutional training needs in accordance with the enhanced training programs for the functional and institutional training competencies approved for the Bank: - Functional training competencies (leadership skills, banking portal, credit implementation, cash, external transactions, administrative affairs, implementation and achievement and accounting competencies). - Institutional training competencies (Sharia, compliance, institutional awareness, time management, work pressure, security, training and development, digital banking, occupational safety and health, risk management, performance management, legal, marketing, treasury and corporate relations competencies). The Bank continued to enroll the employees in training programs and activities that serve the topics of social responsibility and sustainability towards society. Such programs include analyzing the social and environmental hazards for banks, the Islamic frameworks for banking awareness and protection of the financial customer, Women Day, National Program for self-employment “Inhad” and protecting the financial consumer for customers with disabilities, further those related to occupational health and safety which focused this year on the Novel Corona Virus. The Bank also continued to provide training opportunities and introduce its business to new groups of educational institutions students. The number of those students reached (383) throughout 2020, compared to (670) students in 2019. Moreover, practical online training was provided to some of those students in line with the current circumstances arising from the covid-19 pandemic and dealing with them by taking the preventative and precautionary measures and the requirements of general safety. In addition, (3) employees coming from non-Jordanian banks received training on the work of our Bank during 2019. 23
  24. Third : Banking Techniques During 2020, the Bank accomplished further developments and updates in the field of banking techniques, most notably of which are: • Launching more services provided through the Mobile Banking application, such as international and local transfer, opening an additional account, applying an e-finance application, requesting a cheques’ book, and others. • Launching an updated version of the I-Banking application provides new services, such as online services for customers of corporate sector, LCs / LGs requests, inquiries about credit cards, and other services. • Launching the Bank website on Facebook and the digital assistant “Islami Messenger” for the Bank customers, which provide instant services without waiting for a response. • Providing the Quick Response QR service for instant transfer processes. • Launching the e-wallet service and the instant transfer feature CLiQ services among local banks. • Renewal of the PCI-DSS certification. • Taking the “ISO 27001” Certificate on applying the information security management system. • Development, creation, and accomplishment of several systems and services. • Installation and operation of new ATMs in 2020, rendering the Bank’s network of ATMs consisting of 266 units (i.e., 13% of the number of ATMs operating in the Kingdom), all linked to customer accounts and with the Middle East Payment Services (MEPS) as well as with the Jordanian Joint Network for ATMs (JONET), which consists of approximately 2000 ATMs and through which with the Visa International network outside Jordan through JONET. Fourth: Incentive Rewards • Since 1997, the Bank has continued to distribute awards to holders of Savings Accounts with a total value of around JD (135) thousand in the year to cover Hajj and Umra’s costs. • Since 2008, the Bank has continued to introduce awards to the users of all types of bank cards, for local or online purchases, in addition to allocating cash awards for the services provided through Mobile Banking application and I-Banking. Total prizes amounted to about JD (149) thousand. It is known that the Bank incurs the value of all these awards from the funds of shareholders per the Sharia opinion (Fatwa) given in this regard. Fifth: Social Role of the Bank The Bank has continued to assume its social responsibilities, consolidate Islamic values in regular banking transactions, and positively interact with social nature activities. Below are some examples of the Bank’s activities in this field during 2020: A. Conferences and Seminars Throughout 2020, the Bank continued to participate in conferences and seminars that aim to disseminate and develop Islamic banks’ operations. 24
  25. B . Scientific Research and Professional Training The Bank continued its activities in scientific research and training. The total expenditures on such activities in 2020 reached around JD (72) thousand distributed as follows: Description Thousand JD Expenditures of the Bank Training Academy and the employees’ study and training 52139 Participation in the expenses of the Institute of Banking Studies affiliated to the CBJ 17371 Sponsorship of scientific conferences and educational institutions 2418 Total 71928 C. Donations The Bank continued to support many social and cultural events and provide donations for different relevant activities. Those events include the Jordanian Hashemite Fund for Human Development (JHFHD), Al Aman Fund for the Future of Orphans, Societal Financial Culture Dissemination Project, and the competitions organized by the Ministry of Awqaf and Islamic Holly Places, Associations of Holy Quran Memorization, and other social activities organized in Jordan. The total donations provided by the Bank during 2020 for such events and activities reached around JD 2.8 million, distributed as follows: Description Number Thousand JD “Hemmat Watan” Fund 1 2000.0 Crown Prince Foundation 1 50.0 Ministry of Health 1 100.0 Jordanian Hashemite Fund for Human Development (JHFHD) 1 6.0 The Hashemite Charity Association 2 5.5 Princess Aliaa Foundation 1 20.2 Al Aman Fund for the Future if Orphans 1 42.5 King Hussain Cancer Center 1 25.0 Associations and competition of Holy Quran Memorization 1 5.0 Charity Associations and Organizations and Zakah committees 22 189.1 Scientific Conferences and educational and cultural programs 4 118.2 Mosque Commissions 3 6.3 Tkiyet Um Ali 1 5.0 Societal Financial Culture Dissemination Project 1 149.1 Fund of Supporting the Military Forces Martyrs’ Families 1 100.0 42 2821.9 Total 25
  26. D . Al Qard Al Hasan The Bank continued to receive deposits in “Al-Qard Al Hasan” from those wishing to lend such deposits through the Bank as good loans. At the end of 2020, the balance of this account reached around JD (1.9) million. The Bank also continued to provide Al Qard Al Hasan for justified social purposes, such as education, medical treatment, and marriage. The loans provided by the Bank in 2020 reached around JD (79.6) million (including the Central Bank Loans to face covid crisis and the medium-term agreement), benefiting nearly (20) thousand citizens, compared to JD (20.4) million in 2019, helping about (24) thousand citizens. It is worth mentioning that the Bank has been granting such loans since its incorporation, where the granted loans amounted to JD (382) millions till the end of 2020, benefiting about (516) thousand citizens. Some of these loans were granted for youth who were about to get married in cooperation with Al Afaf Charity Association. The total of such loans in 2020 reached about JD (310) thousand, benefiting (311) young people compared to about JD (347) thousand, helping (347) youngsters in 2019. A number of these loans are granted to teachers through the agreement signed with the Jordan Teachers Association. In 2020, the total of such loans reached about JD (1.2) million, benefiting (2.1) thousand persons, compared to JD (2) million in 2019, helping (3.7) thousand persons. The Bank also granted good loans that amounted to about JD 63 million to 845 customers during 2020, as a response to the program that the Central Bank of Jordan launched to face the Corona crisis and the medium-term agreement. E. Funding Professionals and Craftsmen: The Bank was keen from the beginning to fund the projects and requirements of professionals and craftsmen by way of Murabaha. In 1994, the Bank developed a particular program to finance this category by way of diminishing Partnership ending with the transfer of title (Musharakah Muntahia BetTamleek) according to which financing is paid from the revenues generated by the project. The Bank also finances small and medium enterprises by funding such projects through the joint investment funds or the funds of Wakala investment accounts (investment portfolios) or through the special agreements signed with the Central Bank of Jordan. To give more attention to these projects, in 2013, the Bank increased the capital of its subsidiary Al Samaha Financing and Investment Company to JD (8) million and amended its memorandum and articles of association to include funding projects and small craftsmen, then increased its capital to JD (12) Million in 2016. The subsidiaries’ funds to projects, craftsmen, professionals, and projects in the women sector contribute to eliminating unemployment, preserving the existent job opportunities, and providing new job opportunities. In 2020, the subsidiary financed (191) projects for approximately JD (3.6) million. 26
  27. F . Mutual Insurance Fund: This Fund was created in 1994. Through this fund, participants share in indemnifying the damage that may be inflicted on any of them to repay all or some of their debt to the Bank in case of death, permanent disability, or permanent insolvency. Also, as of 2014, this Fund kept mitigating the risks after the approval of the Central Bank of Jordan. Throughout 2020, the number of indemnified cases reached (218), and the compensations paid this year amounted to nearly JD (1.5) million. Since the Fund establishment until the end of 2020, the total compensation cases reached (3135) cases, and the amount of compensations paid reached around JD (14.5) million. At the end of 2020, the Fund’s balance amounted to around JD (54.8) million, with about (165) thousand participants and a total balance of indebtedness of around JD (1.5) billion. It’s worth mentioning that the Bank has expanded the umbrella of the insured people to cover all persons with indebtedness of JD (150) thousand or less (and as of 2013, the umbrella was expanded to cover the Ijara Muntahia Bittamleek clients in addition to Murabaha clients), instead of (100) thousand or less. The Bank expanded the umbrella of the insured several times insurance started with a ceiling of JD 25,000 or less. G- Interaction with the Local Community Stemming from the social responsibility of Jordan Islamic Bank and its commitment to support the national efforts exerted by the government and various official authorities to face and fight the Novel Corona Virus pandemic and decrease its spread; as well as its cooperation to support the homeland and citizens, and provide the various medical and health forms to the positive and suspected cases, the Bank has made donations to: –– Hemmat Watan Fund of JD 2 million –– Crown Prince Foundation/ Naua for Sustainable Development Company- paying assistance for Day Laborers and provide the support and assistance for the national campaign held by the foundation to face Corona Virus with JD 50 thousand. –– Ministry of Health of JD 100 thousand The Bank also sponsored targeted programs in many TV and radio stations, sponsoring a page on Islamic banking, Islamic finance, money, and AL-Islam in several newspapers and donating to the Hussein Cancer Center and some associations concerned with people with special needs and the elderly, in addition to contributing to the Jordanian Hashemite Charitable Organization for Relief, Development and Arab and Islamic Cooperation, donating to Al-Aman Fund for the Future of Orphans, ornamenting the Capital Amman as part of Amman Chamber of Commerce initiative. This is also supporting the rehabilitation program to those about to get married through the Supreme Judge Department/ Sharia Judiciary Institute, presenting monetary gifts to the wedding couples participating in the collective wedding ceremony / Al Afaf Charity Association. 27
  28. H . Energy and Environment The Bank started providing alternate energy in July 2013 by utilizing electric power generation using solar cells, taking advantage of the spaces on the roofs of the branches for the installation of those cells, rendering the Bank the first Jordanian Bank to enter renewable energy into its business, reducing the electricity consumption and related invoices, as well as decreasing the high electric loads in the Kingdom, thus contributing to the national economy and the environment protection. The Bank continued to provide renewable energy at some of its headquarters by utilizing solar power generation using solar cells or through the plant operated at the Bondad Center, subordinate to the Bank, since May 2018, to generate solar electricity. This plant covers part of the electricity consumption in the branches and offices of the Bank in the central governorates (Amman, Zarqa, Madaba, and Salt) with a generating capacity of 2.7 MWP at the cost of JD 1.5 million. Thus, the number of branches and offices benefiting from the solar system reached 52 branches and offices, in addition to the general administration building, the Information Technology building, and the Disaster Recovery Center, which are all fed by the solar cells installed on the roofs of the buildings and/or the plant. 28
  29. Financial Position 29
  30. Sixth : Financial Position A. Total Assets: At the end of 2020, the total assets amounted to around JD (5427) million (including off-balance sheet items), compared to JD (4970) million (including off-balance sheet items) at the end of 2019. Following are the relevant details in a million JD: Off-Balance Sheet Items Year Total Balance Sheet Items Restricted Investments Wakala investment (investment portfolio) Wakala investment Total Total 2020 4844.5 49.1 448.5 84.4 582.0 5426.5 2019 4449.2 43.6 416.0 61.4 521.0 4970.2 395.3 5.5 32.5 23.0 61.0 456.3 Increase (Decrease) Total Assets (Million JD) 4,666 3,127 2011 3,256 2012 3,522 2013 3,855 4,170 2014 2015 4,618 4,970 5427 4,503 2016 2017 2018 2019 2020 B. Cash on Hand and at Banks At the end of 2020, total cash on hand and at banks amounted to about JD (915) million, compared to about JD (994) million at the end of 2019. C. Financing and Investment At the end of 2020, total balances of financing and investment amounted to around JD (4282) million (including off-balance sheet items), distributed to (231.5) thousand transactions, compared to around JD (3817) million (including off-balance sheet items) at the end of 2019, distributed to (222.9) thousand transactions. 30
  31. Total Financing and Investment Balances (Million JD) 3153 2468 179,4 185,8 200,8 217,1 225,4 222,8 222,9 231,5 2630 161,3 2495 3363 3243 148,2 1784 4282 3817 3551 No. of Transactions (Thousands) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 The financing operations carried out by the Bank in the domestic market during 2020 included various social and economic activities and utilities. Such finances were provided to some health facilities (hospitals, clinics, and pharmaceutical companies), educational facilities (universities, schools, and institutes), many industrial and real-estate projects and transportation means, and the finances provided by the Bank to the commercial sector. Year Agriculture Industry & Mining General Trade Construction and housing sector Transportation Services and car financing Tourism, Hotels, & Restaurants Public Services & Facilities Other Purposes Total The shares of economic sectors from the financing balances (in a million JD) were as follows: 2020 39.9 224.6 372.6 1211.0 508.4 30.3 973.9 148.5 3509.2 2019 30.3 148.4 378.9 1097.3 464.5 30.7 799.1 73.6 3022.8 Other Purposes 2.43% Public Services & Facilities 26.44% Tourism, Hotels, & Restaurants 1.02% Industry & Mining 4.91% Industry & Mining 6.40% Public Services & Facilities 27.75% 2019 Construction and housing sector 36.30% Transportation Services and car financing 15.37% Agriculture 1.00% Other Purposes 4.23% Tourism, Hotels, & Restaurants 0.86% 2020 Construction and housing sector 34.51% Transportation Services and car financing 14.49% General Trade 12.53% Agriculture 1.14% General Trade 10.62% 31
  32. The Bank pays special attention to the basic needs of citizens in the financing operations . Following is a description of Murabaha financing provided from the funds of joint investment and Wakala Investment accounts (investment portfolios) during 2020 for the most significant needs: JD (Million) Number of beneficiaries of Financing Land, housing and construction materials 169.0 14347 Transportation means and construction vehicles 163.5 15184 Furniture 15.6 5657 Financed Needs of Individuals The outstanding balance of Murabaha financing allocated for such needs from the funds of joint investment and Wakala Investment accounts (investment portfolios) by the end of 2020 was as follows: JD (Million) Number of beneficiaries of Financing Land, housing, and construction materials 424.9 63784 Transportation means and construction vehicles 424.9 75867 Furniture 36.0 18976 Financed Needs of Individuals Moreover, the Bank continued to direct a part of its self-funds, joint investment funds, and Wakala Investment accounts (investment portfolios) funds to be invested in the capitals of national companies whose primary business does not include any Sharia non-compliant activities and which produce commodities and provide services useful to the society and the national economy. At the end of 2020, the number of companies whose capitals are invested in by the Bank reached (33), and the volume of such investment reached nearly JD (100) million. D. Attracting Savings: At the end of 2020, the total balances of saving schemes amounted to around JD (4803) million (including the off-balance sheet items), distributed to (1080) thousand active accounts, compared to around JD (4395) million (including the off-balance sheet items) at the end of 2019, distributed to (951) thousand active accounts. Saving Schemes Total Balances (Million JD) No. of Active Accounts (Thousands) 32 629,4 776,8 816,1 902,5 926,7 941,8 951,0 1080,0 3,746 4,803 887,3 2,952 3,471 4,163 4,395 828,5 2,858 3,190 4,038 4,086 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
  33. E . Shareholders’ Equity: By the end of 2020, shareholders’ equity reached around JD (474) million compared to JD (422) million at the end of 2019. The details are as follows in million JD: Paid-up Capital Statutory Reserve Voluntary Reserve Reserve of Fair ValueNet Retained Earnings Shareholders’ Equity 2020 200.00 101.26 45.47 2.89 124.73 474.35 2019 200.00 92.88 37.09 2.24 89.39 421.60 Increase (decrease) 0.00 8.38 8.38 0.65 35.34 52.75 Increase (decrease) rate 0.0% 9.0% 22.6% 29.0% 39.5% 12.5% Year Capital Adequacy Ratio (CAR) at the end of 2020 and 2019 amounted to about (23.74%) and (24.33%) respectively, according to the Islamic banks CAR standards issued by CBJ. Shareholders’ Equity (Million JD) 206.9 2011 228.8 2012 282.2 255.5 2013 2014 342.7 311.2 2015 2016 375.0 2017 393.4 2018 421.6 474.4 2019 2020 F. Profits of Joint Investment: The total profits of joint investment during 2020 reached around JD (200) million compared to around JD (197) million during 2019. Rates of profits distribution over accounts of 2020 were as follows: Currency Jordanian Dinar Foreign Currencies General Percentage Term Notice Savings 2.90-5.00% 2.61-4.5% 2.03-3.5% 1.16-2.5% 1.74% 1.57% 1.22% 0.70% G. Bank Profits: In 2020, the Bank’s profits before tax amounted to around JD (83.8) million, while the profits after tax amounted to around JD (52.1) million. 33
  34. 3127 .0 3255.5 3522.4 3855.2 4169.8 4502.7 4665.6 4617.6 4970.1 5426.5 Fiscal year 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Balances 4802.5 4395.4 4085.9 4163.3 4037.5 3745.7 3470.8 3190.4 2952.0 1080 951.0 941.8 926.7 902.5 816.1 776.8 (4) 629.4 887.3 828.5 Total Balances 4282.0 3817.0 3551.5 3362.7 3243.3 3152.8 2630.0 2495.2 2468.4 1784.1 231.5 222.9 222.8 225.4 217.0 200.8 185.8 179.4 161.3 148.2 No. of Active Accounts (thousands) 2858.3 Paid-up Capital 200.0 200.0 180.0 180.0 150.0 150.0 150.0 125.0 125.0 100.0 Shareholders’ Equity 474.4 421.6 393.4 375.0 342.7 311.2 282.2 255.5 228.8 206.9 Joint Investment Profits 200.2 196.7 191.8 191.2 197.9 177.4 166.4 166.1 144.6 109.7 26.0 30.0 31.7 36.4 29.6 19.9 17.3 8.0 14.5 7.3 Joint investment risks fund (5) 1. This includes the total balance sheet and the balances of accounts managed in favor of third parties, which appear as off-balance items (restricted investments, Wakala investment (Investment Portfolios), and Wakala investment accounts. 2. This includes the balances of trust (Amanah), unrestricted investments, cash deposits, banks, restricted investments, Wakala investment (Investment Portfolios), and Wakala investment accounts. 3. Including the balances of financing, self-investment, receivables, joint investment, investment deposits with the Islamic banks, and the invested balances of accounts managed in favor of third parties, “restricted investments and Wakala investment “investment portfolios”. 4. The decrease in the number of active accounts in 2013 is attributed to applying the unified number to the clients in the new banking system. 5. Deduction to the Investment Risk Facility Fund has been canceled as of 1/5/2019 in response to the amended Banking Law. The fund’s remaining balance is kept under the new title of “Provision for Facing Future Risks”. Total Assets (1) 2011 Financing & Investment (3) Thousand transaction Saving Schemes (2) Profit Before Tax 83.8 88.6 75.4 80.9 83.7 74.7 64.0 64.7 51.2 39.7 Profit After Tax The general percentage of profit distribution to local currency accounts 2.9-5.0% 3.0-5.0% 3.10% 3.20% 3.39% 3.40% 3.52% 4.29% 3.94% 3.35% The general percentage of profit distribution to foreign currency accounts 1.74% 1.50-2.0% 1.10% 1.04% 0.92% 0.61% 1.45% 1.67% 0.83% 0.69% 80 15% in cash 20% bonus shares (7) 2148 93 97 15% in cash 15% in cash 20% bonus shares (8) 2440 2434 105 108 108 15% in cash 11.11% bonus shares (9) 12% in cash(11) (10) 2405 100 15% in cash 2335 2236 2051 1979 2000 1904 86 13% in cash 79 15% in cash 75 15% in cash 25% bonus shares (6) Number of employees Bonus shares distributed on 20/6/2012. Bonus shares distributed on 10/6/2014. Bonus shares distributed on 5/6/2017. Bonus shares distributed on 26/6/2019. Pursuant to the circular issued by the CBJ governor No. 1/1/4693 on 9/4/2020, the licensed Jordanian Banks shall postpone the distribution of dividends to shareholders is to be postponed in 2019. 11. Proposed to be distributed, and abiding by the CBJ’s decision in its letter No. 10/3/1228 on 20/1/2021 circulated to Jordanian Banks operating in the Kingdom: the percentage of cash dividends to shareholders shall not be less than 12% in light of the local and international economy developments and the cash flow levels, as well as the convenient solvency which the banks enjoy and maintaining them. 6. 7. 8. 9. 10. 52.1 54.3 49.8 54.1 54.0 48.7 45.1 45.1 36.4 28.3 Percentage of dividends to shareholders Development of the Bank’s operations in the past ten years (Amounts in Million JD) Number of branches and offices 34
  35. Future Plan of the Bank for the year 2021 35
  36. Seventh : Future Plan of the Bank for the Year 2021 1. Continuing the introduction of new financial products that meet the desires and the needs of the banking market, provided obtaining Sharia approval, and hardly seeking to create more authentic products which reflect the Islam economy and its essence in constructing the earth, as well as continuing to meet the market requirements for services in line with the technological development. 2. Continuing to extend the offering of financing facilities to individuals on Murabaha, Ijarah Muntahia Bittamlik, considering the negative impacts of Corona Pandemic and focusing on the quality of the Bank customers. 3. Continuing to expand in financing SMEs while focusing on the quality of customers and sectors that are the least harmed or unharmed by the pandemic. 4. Continuing to implement the Digital Transformation Plan, introducing new e-banking services, and improving services through electronic channels on Mobile Banking app and I-Banking and urging customers to use these services. 5. Seeking to provide the appropriate circumstances to improve the revenues, especially the bank services revenues, as well as taking advantage of the Corona pandemic to urge the customer to use I-Banking and Mobile Banking application and to use the Bank cards, especially the cards with the “contactless” technology for purchases. 6. Continuing to develop staff competencies and skills. 7. Continued commitment to governance, asset quality improvement, risk management, and compliance monitoring. 8. Continuing to undertake social responsibility in different areas. 36
  37. The Ordinary General Assembly Agenda 37
  38. Eighth : Ordinary General Assembly Agenda Dear Shareholders, We hope that this report gave an overview of the Bank’s activities and achievements during 2020. The Board of Directors is pleased to present the following agenda to the General Assembly: 1. Reciting the minutes of the General Assembly’s previous meeting and a summary of some committees’ works stemming from the Board of Directors in 2020. 2. Listening to the Bank’s Sharia Supervisory Board report for the fiscal year ended on 31/12/2020. 3. Listening to, discussing, and approving the company’s auditor’s report for the fiscal year ended on 31/12/2020. 4. Voting on the board’s report for the fiscal year ended on 31/12/2020 as well as approving the company’s future plan. 5. Voting on and approving the annual balance sheet of the Bank, the profit and loss account and recommending the distribution of dividends at (12%) of the Bank’s capital to the shareholders, abiding by the CBJ’s decision in its letter No. 10/3/1228 on 20/1/2021 circulated to Jordanian Banks operating in the Kingdom: the percentage of cash dividends to shareholders shall not be less than 12% in light of the local and international economic developments and the cash flow levels, as well as the convenient solvency which the banks enjoy and maintaining them. 6. Discharging the Board members for the previous fiscal year 2020. 7. Electing the company’s auditor for the upcoming year 2021 and determine their remuneration or delegate the Board of Directors to determine the same. 8. Acknowledging H.E Dr. Hatem Hafiz Rahseed Halawani Al Tamimi’s election as a member of the Board of Directors (then sending an introduction about him) instead of the deceased previous member/ Saleh Yaqoub Muhammad Hussain, or electing a person for the vacant position. In conclusion, we thank Allah for His grants and donations and the success He granted us. We provoke Allah the Glorious to give us assistance, help, and constant success. We have trust in Allah, and we ask His help in achieving our goals and objectives. We would like to thank the Bank’s shareholders who have participated and are still participating in its development, as well as our generous clients for their trust in the Bank and their eagerness to deal with it to support and consolidate its position. We would also like to thank the executive management and staff who spare no effort to operate, manage, and promote the Bank position. We again thank the CBJ for their care and understanding of the Islamic banks’ particularity and business nature regarding the regulations and instructions issued thereby. Finally, we proudly and appreciably indicate our respected jurisprudent scholars’ critical role for their efforts in promoting public awareness of dealing with the Bank. May Allah reward them the best. We ask Allah to grant us mercy and prepare us from our affair’s right guidance and guide us to the right path. Board of Directors 38
  39. Annexes to Board of Directors Report of the Year 2020 39
  40. 40
  41. Annex I “Disclosure Requirements in Corporate Governance Guide of the Bank” 41
  42. Annex I “Disclosure Requirements in Corporate Governance Guide of the Bank” 1- Extent of compliance with the Corporate Governance Guide Jordan Islamic Bank always endeavors to provide the best and highest-level Islamic Banking services and products and seeks to innovate and develop new services compliant with the principles and teachings of the Islamic Sharia. As corporate governance provides the best rules, regulations, and procedures which achieve and sustain trust in the Bank and its various activities, Jordan Islamic Bank has decided to adopt the sound practices of corporate governance and prepare the corporate governance guide per the best related international practices and in consistence with the CBJ amending Instructions for corporate governance No. (64/2016) dated 25/9/2016, noting that the Bank had, in 31/12/2007, issued its first Corporate Governance Guide. The Bank has also prepared and updated the Corporate Governance Guide and published it on its website (www.jordanislamicbank.com) to comply with it concerning the Board of Directors (in terms of composition, suitability, meetings, secretary’s duties, Board of Director’s responsibilities and tasks, duties of the Board of Directors members and chairman, responsibility and accountability, and the committees of the Board of Directors), Top Executive Management (in terms of the role of the CEO/ General Manager, tasks, suitability, and responsibility), Sharia Supervisory Board ( concerning the appointment of the Board, practicality, independence, meetings, tasks, obligations, and organization of the Board’s works), monitoring and internal & Sharia control environment (monitoring and internal control systems, internal auditing department, internal Sharia auditing department, external auditing, risks department, and compliance department), relation with shareholders and the Joint Investment Account holders. 2- Relationships with Shareholders All legal steps are taken to encourage shareholders, including the small ones, to attend the Ordinary and Extraordinary meetings of the General Assembly to discuss and vote either in person or by proxy. The Board of Directors members, the Sharia Supervisory Board, the external auditors and representatives of regulatory and official authorities also attend the annual meeting of the General Assembly in order to answer any questions that might be raised. Minutes of the meeting are prepared to the General Assembly to brief the shareholders on the comments that have been made in the meeting and the conclusions reached, including the results of voting and shareholders’ questions and responses to them. The invitation and the agenda of the General Assembly and the minutes of the meetings of the General Assembly will be posted on the Bank’s website: (www.jordanislamicbank.com). 3- The Joint Investment Accounts Holders Equities and their Relationship with the Shareholders The Bank reserves the rights of the joint investment accounts holders. They can be accessed by various means such as the corporate governance guide and/or the annual report and / or the Bank’s website 42
  43. (www.jordanislamicbank.com) which also includes the policy governing the relation between the owners of the joint investment accounts with the shareholders. 4- Monitoring and Internal Control Systems First: The executive management responsible for setting up and maintaining monitoring and internal control systems in the Bank and maintain those systems: • The Bank’s Board of Directors and top executive management are responsible for the development of internal control procedures capable of achieving the following: –– Accuracy and integrity of financial and operational data issued by the Bank. –– Efficient and effective performance of the Bank’s operations. –– Effectiveness of the Bank’s assets and property protection procedures. –– Compatibility with the internal working procedures and policies and laws, legislation, and regulations in force. Second: The internal audit provides emphatic and advisory independent and objective services to the Board of Directors and executive management to help them achieve the established objectives, which would improve the effectiveness of risk management and internal control and corporate governance. Third: The Internal Audit Department provides reasonable assurance over the effectiveness and efficiency of the monitoring and internal control systems of the Bank and its ability to achieve the following: • • • • • • Accuracy and reliability of the financial statements. Operations efficiencies. Compliance with regulations, instructions, and laws in force. Preserve the Bank’s assets and properties. Work continuity under all circumstances. Improvement and development of monitoring and internal control, risk management, and corporate governance operations systems. • Improvement and development of the operations and products to achieve the Bank’s goals. Fourth: The Internal Audit Department’s scope of work covers all work centers, activities, and operations of the Bank, including its subsidiaries; it enables the Bank to assess the appropriateness and effectiveness of internal control and risk management processes and corporate control systems and cope with all its tasks and responsibilities. Also, the Internal Audit Department carries out several tasks, including the following: • Performing periodic audits based on a risk-based audit approach. • Carrying out any special assignments or consultations based on the directives of the audit committee of the Board of Directors or Chief Executive Officer/ General Manager. Fifth: The Top Executive Management evaluates the effectiveness of the internal control systems through the following: • The reports presented by the Internal Audit Department to the Audit Committee of the Board of Directors at its regular meetings about the most important observations and recommendations. • Managing the significant risks facing the Bank through the Risk Management Department and the 43
  44. Risk Committee of the Board of Directors . • Setting up and developing the strategies and policies and implementing the same after the board of directors’ approval. • Adopting the Bank’s organizational structure, approving the same by the Board of Directors, ensuring actual compliance with the organizational structure, forming committees, and delegating powers and authorities. • Preparing and approving the annual budget by the Board of Directors and providing periodic performance reports to the Board of Directors showing the deviation between the actual and projected performance. • Detailed job description for the tasks and responsibilities of each position and the activity of each organizational unit. • Implementing dual control for each activity or operation. • Segregating and identifying duties to avoid conflict of interests and reduce risks. • The Board and/or the Board committees’ review of the reports of supervisory authorities and external and internal auditing, follow up on violations and relevant comments, and ensure that the Bank’s management remedies such violations and takes the necessary measures to ensure that such abuses are not repeated. Sixth: The Top Executive Management affirms that the monitoring & internal control systems on the date of preparing the financial statements contained in the annual report of the Board of Directors are sound, and the Management enforces the internal control systems continually. Also, the Board of Directors acknowledges the adequacy of the internal control and monitoring and Sharia supervisory systems. 5- Board meetings and details of the Board committees: A. The Board held (7) meetings in 2020. B. The following is information on the current Board Committees: Current Members Names Formation Tasks and responsibilities No. of meetings Corporate Governance Committee H.E. Mr. Ayman Abdel Karim Bashir Hatahet (Chairman) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh (Vice Chairman) H.E. Mr. Hamad Abdulla Ali Al-Oqab (Member) H.E. Dr. Hatim Hafez Al Halawani Al Tamimi (Member) (1) H.E. Mr. Issa Haider Issa Murad (Member) H.E. Mr. Saleh Yaqoub Mohamed Hussein (Member)(2) Formed in response to the requirements of the Corporate Governance Guide Ensuring the application of the Corporate Governance Guide 2 Audit Committee H.E. Mrs. Malak F. R. Ghanem (Chairman) H.E. Mr. Adnan Abdulla Al-Suleiman Al-Bassam (Vice-Chairman) H.E. Dr. Nabih Ahmad Salameh Alzenat (Member) Already formed in accordance with the Banks Law and the instructions of Jordan Securities Commission Ensuring the adequacy of the external and internal auditing monitoring and control systems, and the compliance with the related financial and accounting regulations 4 Description 44
  45. Description Current Members Names Formation Tasks and responsibilities No . of meetings Credit Facilities Committee H.E. Mr. Hamad Abdulla Ali Al-Oqab (Chairman) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh (Vice Chairman) H.E. Mr. Adnan Abdullah Al-Suleiman Al-Bassam (Member) H.E. Mr. Hood Hashem Ahmed Hashem (Mmember) H.E. Dr. Nour “Moh’d Shaher” “Moh’d Lutfi” Mahayni (Member) Formed in the first years of the Bank’s establishment Approving the Banking facilities, financing and investment agreements within the authorities delegated to it by the Board 6 Formed in response to the requirements of the Corporate Governance Defining the capacity of the independent member, evaluating the Board and Board committee’s efficiency, providing Board members with information on the important issues of the Bank, and ensuring the availability of sufficient remunerations policy, and identifying the qualified persons to join the Board, the Sharia Supervisory Board and the top executive management 3 Risk Management Committee H.E. Mr. Salem Ahmad Jameel Al Khaza’leh (Chairman)(1) H.E. Mr. Saleh Yacoub Mohamed Hussein (Chairman) (2) H.E. Mr. Adnan Abdullah Al-Suleiman Al-Bassam (Vice Chairman) H.E. Mr. Hood Hashem Ahmed Hashem (Member) H.E. Dr. Hussein Said Mohammad Saifan (Member) H.E. Dr. Minwer Atallah Hassan Masadeh (Member) Formed in response to the requirements of the Corporate Governance Guide Ensure that policies and strategies for risks management are in place 4 Social Responsibility and Sustainability Committee H.E. Dr. Nour “Moh’d Shaher” “Moh’d Lutfi” Mahayni (Chairman) H.E. Mr. Issa Haider Issa Murad (Vice Chairman) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh (Member) H.E. Mr. Ayman Abdel Karim Bashir Hatahet (Member) H.E. Dr. Hussein Said Mohammad Saifan (Member) Formed to confirm the Bank’s care of the social and sustainability sides Supervise the Bank’s implementation of the social responsibility and sustainability 1 H.E. Mr. Hood Hashem Ahmed Hashem (Chairman) H.E. Mr. Salem Ahmed Jamil Alkhaza’leh (Vice Chairman) H.E. Mr. Issa Haider Issa Murad (Member) Formed as a response to governance instructions and management of information and the associated technology General supervision and monitoring the operations and IT projects to ensure their adequacy and effective contribution in achieving the works and requirements of the Bank 4 Nominations and Remunerations Committee IT Governance Committee H.E. Mr. Issa Haider Issa Murad (Chairman) H.E. Mr. Ayman Abdel Karim Bashir Hatahet (Vice Chairman) H.E. Mr.Musa Abdul Aziz Shihadeh (Member) H.E. Mr. Hamad Abdulla Ali Al-Oqab (Member) H.E Mrs. Malak Fawzi Ragheb Ghanem (Member) 45
  46. Description Compliance Committee Current Members Names H .E. Dr. Hatem Hafiz AL-Halwani AL-Tamimi (Chairman) (1) H.E. Mr. Salem Ahmad Jamil Alkhaza’leh (Chairman) (3) H.E. Mr. Adnan Abdulla Alsulaiman Albassam (Vice-Chairman) H.E. Dr. Nabih Ahmad Salameh Alzenat (Member) Formation Tasks and responsibilities No. of meetings Formed in response to the instructions of dealing with the domestic banks of systemic interest Ensuring that there are adequate internal control and monitoring systems in the Bank to implement the requirements of the Compliance Monitoring Policy. and be informed about the assessment carried out by the Executive Management on the relevance of the Bank’s compliance procedures and guidelines, tracking any deficiencies discovered and drafting the appropriate proposals for amendments. 2 (1). As of 29/12/2020 (2) Passed away on 30/11/2020 (3) Until 29/12/2020 C. Summary of the meetings attended by the Board of Directors and its committees during 2020: Annex III includes a table indicating the number of the meetings of the Board of Directors and its committees held during 2020 and the number of meetings attended by the members. D. Authorities delegated by the Board of Directors to its Committees: • Corporate Governance Committee: –– Guiding and overseeing the Corporate Governance Guide’s preparation, updating it as required, making a recommendation to the Board in light of that, and monitoring the implementation of that Guide. –– Ensuring the application of Corporate Governance Guide. • Risk Management Committee: –– Reviewing risk management policies and proposing them to the Board of Directors for approval. –– Assisting the Board of Directors in managing the Bank’s risks (such as credit risk, market risk, operational risk, liquidity risk). –– Ensuring that suitable risk management systems are in place, such as operational risk management and customers’ credit rating systems, etc. –– Mointering risk exposure at the country’s level, currency, time limits, counterparty, instrument, market, and sector. –– Studying risks acceptable limits (risk appetite) and proposing them to the Board of Directors for approval. –– Following-up on measuring and controlling the risks facing the Bank. • Nominations and Remunerations Committee: –– Determining independent members of the Board of Directors in accordance with the independent member conditions. –– Identifying the persons eligible for membership in the Board of Directors, top Executive Management, 46
  47. and Sharia Supervisory Board . –– Appraising the performance of the Board, the Chief Executive Officer/ General Manager of the Bank, Sharia Supervisory Board, and the Top Executive Management and giving recommendation to the Board accordingly. –– Proposing to the Board of Directors to grant annual increase, bonuses, etc. to all Bank’s employees. • Audit Committee: –– Reviewing the financial statements of the Bank prior to submission to the Board; in particular, to verify the implementation of the Central Bank instructions on the required provisions. –– Reviewing accounting issues that have significant impact on the financial statements. –– Reviewing the monitoring and internal control systems of the Bank. –– Reviewing the external auditor’s report on the internal control systems and information system and providing recommendations to the Board accordingly. –– Giving recommendations to the Board regarding the appointment of external auditor, the remunerations thereof, and any conditions in the contract therewith in addition to evaluating the independence thereof, taking into account any other work entrusted to him outside the scope of the audit mandate. –– Ensuring the ability of the external auditor to verify the Bank’s compliance with the legal controls in accordance with the conditions stipulated in the engagement letter thereof. –– Providing recommendations to the Board concerning matters related to the internal audit procedures and the work of the external auditor. • Credit Facilities Committee: –– Studying the applications to obtain direct and indirect banking facilities within the Committee’s powers and approving the same. • The Social Responsibility and Sustainability Committee: –– Reviewing the Social Responsibility And Sustainability Report of the Bank and proposing the approval thereof to the Board. –– Leading the social responsibility and sustainability program of the Bank. –– Following up on the work of the social responsibility and sustainability committee of the executive management. • IT Governance Committee: General supervision on the IT operations, resources, and projects to ensure their adequacy and effective contribution in meeting the Bank’s requirements and operations. • Compliance Committee: –– Observing and monitoring the application of compliance policy, anti-money laundering and terrorist financing policy, economic and trade sanctions policy for the Bank, the Foreign Account Tax Compliance Act (FATCA) ... etc. –– Ensuring that there are adequate internal control and monitoring systems in the Bank to implement the Complaince Monetring Policy requirements. –– Be informed about the assessment carried out by the Executive Management on the relevance of the Bank’s compliance procedures and guidelines, tracking any deficiencies discovered, and drafting the appropriate proposals for amendments. 47
  48. 6- Sharia Supervisory Board Meetings : A. Sharia Supervisory Board held (6) meetings in 2020. B. Summary of the meeting attendance of the Sharia Supervisory Board members: No. of meetings attended Remarks Prof. Dr. Mahmoud Ali Mosleh Sartawi (Chairman) 6 - Prof. Dr. Abdul Rahman Ibrahim Zaid Al Kelani (Vice-Chairman) 6 - Dr. “Mohammad Khair” Mohammad Salem Al-Issa (Member) 6 - 4 Apologized for attending the meeting No. (5/2020) for being sick Moved to the mercy of Almighty Allah on 23/10/2020 Current Members Prof. Dr. Abdul Sattar Abdul Karim Abu Ghoddeh (Member) 7- Risk Management Department The Bank manages its various banking risks by following comprehensive risk management procedures, including appropriate oversight by the Board of Directors and the senior management to identify, measure, follow-up, and monitor the relevant risk categories and prepare reports thereon, maintaining, where necessary, sufficient capital to address these risks. These procedures take into consideration adherence to the provisions and principles of Islamic Sharia. A. According to the organizational structure of the Bank, the Risk Management Department directly reports to the Risk Management Committee of the Board and indirectly to the CEO/ General Manager as shown below: Risk Management Department Risk Management Department Manager Administrative Assistant Credit risk management division 48 Risk Management Department’s second Officer Market risk management division Operating risk management division Credit Control division IT risk management division Risk Analysis division
  49. B . The Risk Management Department performs many daily and periodic tasks, notably: • Supervising the Risk Management Process in the Bank. • Learning about the risks that the Bank might be exposed to and evaluating them to determine the material risks. • Developing and updating material risk management policies that include the acceptable level of risk and risk management strategies. • Following up on the entities concerned with risk management to implement their specific tasks in the Risk Governance as included in the risk management policies of approved importance. • Analyzing the operations carried out in the Bank and ensuring that the necessary controls are identified in proportion to the acceptable level of risk, type of risk, and amount of risk. • Monitoring all risks that the Bank may be exposed to continuously and preparing the risk profile in accordance with the kind of risk and its criticality. • Participating with Risk Management Department in preparing the strategic plan for the Bank by determining the acceptable level of risk. • Supervising the Enterprise Risk Management Solutions (ERM), which help in managing the risks. • Creating an effective reports system that meets the requirements of the Basel Committee on Banking Supervision” principles for effective risk data aggregation and risk reporting”. • Supervising the systems used in calculating the Estimated Credit Loss ECL. • Spreading the culture of risk management to all different levels of management in the Bank. C. Bank risks are stated in Note No. 62 to the Bank’s Financial Statements for the year 2020. 8. Remuneration policy: A. The remunerations of the Board of Directors and committees of the Board: • The provisions of this policy shall apply in consistency with the regulations in force at the Bank and as per the instructions of the Central Bank of Jordan, the Jordanian Companies Law and the instructions of the Securities Commission. • The scope of application includes annual bonuses, transportation allowance, members’ per diem (in particular non-resident members), and committees’ membership allowances. B. The remunerations of the top executive management, and employees’ incentives and bonuses: • The provisions of this policy shall apply to the extent it is in line with the regulations in force by the Bank, such as Jordan Islamic Bank Staff Regulation and the Jordanian Labor Law No. 8 of 1996, as amended. • The work scope includes profit bonus, end of service remuneration, special work bonus, and annual raises, which are linked to the performance appraisal, end of service benefits, moral bonus, and inkind bonus. • In light of the results achieved by the Bank in the previous year, bonuses are paid to the top executive management as follows: (50%) of the bonus in the year in which a decision has been made to disburse the bonus and the other (50%) shall be paid in the next year. Regarding the employees’ bonuses, they are paid as a lump sum without delay in the year in which a decision has been made to disburse the bonus. 49
  50. 9 . Transparency and Disclosure: A. Annex IV contains the organizational structure of the Bank. B. The Board of Directors acknowledges their responsibility for the accuracy and adequacy of the Bank’s financial statements and any information included in this report. C. Annex IV contains the information required concerning each member of the Board of Directors (qualifications, experience, share in the capital of the Bank, independence, date of appointment, any memberships in boards of directors of other companies, remunerations obtained from the Bank, funds provided thereby to the Bank, and any other transaction between the Bank and the member or the associated persons). D.Annex IV contains the information required concerning each of the Sharia Supervisory Board members, as well as the annual remuneration thereof, and the amounts paid to each of them in the form of travel expenses inside and outside the Kingdom. E. Annex IV contains the benefits and bonuses earned by the top executive Management in the form of wages, remunerations, salaries, and bonuses ….etc, and payments made for each of them as travel and transport expenses inside the Kingdom. F. Annex IV includes the names of shareholders who hold (1%) or more of the Bank’s capital. G.The Board of directors has reviewed the consolidated report, which shows the complaints of the customers during 2020; the results of the complaints evaluation report by the Board were as follows: 1. There is a clear reduction in the number of complaints received by customers during 2020 of about 35% compared to the number of complaints received during 2019 despite the Corona pandemic and the difficulties resulting thereof. These numbers indicate the executive management’s interest in such complaints and the effectiveness of the measures taken to improve the level of services and include the relevant studies by creating and developing products and services according to the clients’ notes, even if they are simple. 2. The periodic reports written on the complaints received by clients’ and submitted to the Board of Directors and Executive Management were characterized by transparency and neutrality, which contributed to mitigating the loads on clients even if no complaints are submitted by the; as well as the clients’ getting a fair treatment. The Bank overlooked significant cases that might influence the Bank’s reputation and/or its development and growth. 3. The number of complaints received compared to the volume of the work provided (services/ products) and the volume of the Bank’s customer base is acceptable. The studies carried out by the concerned departments of the Bank to identify the repeated complaints on the same subject, their grounds and the actions taken, and the powers granted to the concerned parties and requesting the necessary information to complete their work; including sending the internal audit to verify cases that require the same, to achieve the validity of the procedures. 50
  51. 51
  52. 52
  53. Annex II Disclosure Requirements According to the IT Governance Guide and the Associated Technology 53
  54. Annex II “Disclosure Requirements According to the IT Governance Guide and the Associated Technology” Compliance with the terms of the IT Governance Guide and the associated technology: The concept of IT Governance is of great interest to all levels of government, legislation, supervisors, regulators, and business organizations alike. The studies and research revealed the advantages and benefits gained on the macroeconomic level and the economic units as a result of applying the rules and standards of sound governance. Moreover, the profound attempts to fix the pillars of corporate governance showed the critical role of IT governance. The proper application of the principles, rules, and methodology of IT governance is a means to protect information security and privacy in economic institutions. That’s why the Bank decided to implement the corporate governance practices related to this subject, along with the preparation of the IT Governance Guide and the associated technology based on the instructions of the Central Bank of Jordan No (65/2016) dated 25/10/2016 and publish the guide on the Bank’s website (www.jordanislamicbank.com). In accordance with the latest report issued by the Bank’s external adviser on October 2010, the level of achievement of the terms of the IT Governance Guide and the associated technology No. (65/ 2016) is as shown in the table below. Based on the pre-set plan, the following evaluation date agreed upon will be during February 2021: Accomplished Partially Accomplished Not Accomplished Total Item 4: Development of the IT Governance Guide and assistant technology 2 0 0 2 Item 5: Dissemination of the IT Governance Guide and assistant technology 2 0 0 2 Item 6: Goals of the IT Governance Guide and the assistant technology 14 0 0 14 Item 7: Committees 32 0 0 32 Item 8: IT governance and administrative processes 5 0 0 5 Item 9: Internal and External Audit 18 0 0 18 Item Item 10: Principles, Policies, and work frames 3 1 0 4 Item 11: Organizational Structure 2 0 0 2 Item 12: Information and Reports 4 0 0 4 Item 13: Services, Infrastructure, and Applications 2 0 0 2 Item 14: Employees, Skills and Competencies 4 0 0 4 Item 15: Culture, Ethics and behavior 3 0 0 3 Total 91 1 0 92 Compliance level in % 99% 1% 0 100% * the “not accomplished item” is related to the requirement that says: upon establishing policies, the contribution of internal and external partners shall be taken into consideration, and the best international practices and their updates shall act as references to said policies. Such policies include (COBIT5, ISO/IEC 27001/2, ISO31000, ISO/IEC 38500, ISO/IEC 9126, ISO/IEC 15504, ISO 22301, PCIDSS, ITIL… etc). Also, the total application of instruction will not exceed the first quarter of 2021. 54
  55. Annex III “The Governance Report” According to the instructions issued by Jordan Securities Commission for the Public Shareholding Companies Listed for 2017 55
  56. Annex III “The Governance Report” According to the instructions issued by Jordan Securities Commission for the Public Shareholding Companies Listed in Amman Stock Exchange for 2017 1. The information and details related to the application of the provisions of the instructions and rules of corporate governance: Jordan Islamic Bank decided to adopt the sound Corporate Governance Practices and prepare the “Corporate Governance Guide” in accordance with the best international practices in the field, and in consistence with Islamic banks, corporate governance amended instructions No. (64/2016) dated 25/09/2016 issued by the Central Bank of Jordan; it is noteworthy to mention that The Bank prepared the corporate governance guide on 31/12/2007 for the first time. The Bank prepared and updated a corporate governance guide and published it on its website (www.jordanislamicbank.com) to comply with it in terms of the Board of Directors (composition, suitability, meetings, secretary’s duties, Board of Director’s responsibilities and tasks, duties of the Board of Directors’ members and chairman, responsibility and accountability, and the committees of the Board of Directors), top executive management (The executive role of the CEO/General Manager, tasks, suitability, and responsibility), Sharia Supervisory Board (appointment of the Board, practicality, independence, meetings, tasks, obligations, and organization of the Board’s works), monitoring and internal control environment (monitoring and internal control systems, internal auditing department, internal Sharia auditing department, external auditing, risk management department, and compliance department), and last but not least, relations with shareholders and the Joint Investment Account Holders. The Bank applies all the guidelines provided in the “Guidelines for Corporate Governance for Public Shareholding Companies Listed in Amman Stock Exchange in 2017, issued by the Securities Commission. 56
  57. 2 . The table below provides the names of the current legal members of the Board of Directors, the representatives of the legal members, showing those nonexecutives and executives and independent or not independent and the board memberships of other public Shareholding Companies and resignations during 2020: Names of the members of the board of directors H.E. Mr. Musa Abdulaziz Mohammad Shihadeh. Chairman of Board of Directors Messrs./ Al Baraka Banking Group (Non-Independent Member) H.E Dr. Hatem Hafez Al Halawani Al Tamimi. Member since 28/12/2020 H.E Mr. Salem Ahmad Jamil Alkhaza’leh, Member Executive / nonexecutive and independent / not independent Membership in the board of directors of other public shareholding companies in the kingdom - Non-executive and not an independent member - Islamic Insurance Company. - Petra Investment and Education Company. - Al-Amin Investment Company. (Until the company’s liquidation date 25/11/2020) Arab Metal Pipes Manufacturing Company. H.E Mr. Hamad Abdulla Ali Al Oqab, Vice-Chairman Non-executive and not independent member None H.E Mr. Adnan Abdulla Alsulaiman AL Bassam, member Non-executive and not independent member None H.E Mr. Hood Hashem Ahmed Hashem, member Non-executive and not independent member None H.E Dr. Nour “Moh’d Shaher” “Moh’d Lutfy” Mahayeni, member Non-executive and not independent member - Agricultural Industrial Commercial Company (Production). - Non-executive and independent member None Non-executive and independent member - Real Estate Development Co. - Arab Union International Insurance Company - Arab East for Real Estate Investment. Names of the legal entities representing the board of directors - H.E Mr. Ayman Abdel Karim Bashir Hatahet. Member. - Non-executive and independent member - Silica International Company. - Travertine Company. - Islamic Insurance Company. H.E Mr. Issa Haidar Issa Murad. Member - Non-executive and independent member None H.E. Mrs. Malak F. R. Ghanem. Member - Non-executive and independent member None H.E Dr. Nabeeh Ahmad Salama Al Zinat. Member - Non-executive and independent member None - Non-executive and independent member None H.E Mr. Saleh Yacoub Moh’d Hussein, Member. Moved to the Mercy of Almighty Allah on 30/11/2020 57
  58. 3 . (A) Names of the executive persons: Names of the top executive management persons Dr. Hussein Said Mohammed Saifan Position CEO – General Manager Dr. (Moh’d Fahmi) (Moh’d Khaleel) F. Al Jabari Assistant General Manager Dr. Abdel-Hamid Abdalla Ahmad Abu-Saqri Assistant General Manager Dr. Musa Omar Mubarak Abu Muhaimeed Assistant General Manager Mr. Mohammed Ahmed Mohamed Jibril Assistant General Manager Mr. Moh’d Fawaz Sudqi Sadeq Imam Assistant General Manager Mr. Ali Jamil Allan Hindi Mr. Amjad Khalil Mahmoud Al Sawalha Dr. Abdullah Attieh Abdullah Attieh Executive Manager of the Treasury “moved to the Mercy of Almighty Allah on 9/12/2020. Manager of Credit Department Manager of the Internal Control Department Mr. Ra’fat I. M. Abu-Afifeh Manager of the Information Security Department Mr. Mansour Mahmoud Mohammed Akel Manager of the External Operations Department Dr/ Minwer Atallah Hassan Al Massadeh Manager of Risks Management Department Mr. Khalil Rebhy Khalil Al Baik Manager of the Shareholders Relations Unit Mr. Raed Sobhi Mohamed Atta Manager of the Central (local) Operations Department Mr. Musa “Hussein Akram” Mohamed Minawi Manager of Finance Department, resigned on 18/10/2020 Mr. Ashraf “Muhammad Sa’eed” Hasan Qa’dan Manager of Finance Department as of 18/10/2020 Mr. Samer Ahmed Shehadeh Odeh Manager of the Internal Audit Department Mr. Ahmed Tawfiq Younis Tawfiq Manager of the Treasury Department as of 27/12/2020. Before moving, he was the Manager of Compliance Department. Dr. Ali Mohamad Ahmad Abu Al Ezz Manager of Internal Sharia Audit Department, and Secretary of the Sharia supervisory board Mr. Fadi Ali Shehadeh Abd Alraheem Secretary of the board of directors 3. (B) Legal Advisor of the Bank Name Mr. Muhammad Jabr Hasan Mut’eb Position Legal Advisor 4. Officer for Governance Applications Compliance with the Jordan Securities Commission: 58 Name Position Mr. Bassam Ahmad Abdulla Abu Ghazaleh Manager of the Studies and Social Responsibility and Sustainability Department
  59. Board of Directors Audit Committee Risks Management Committee Nomination and Remuneration Committee Social Responsibility and Sustainability Committee Corporate Governance Committee Credit Facilities Committee IT Governance Committee Compliance Committee 5 . Committees of the Board of Directors, the number of the Board and Committees’ meetings and summary of meetings’ attendance as of 2020: No of members 11 3 5 5 5 5 5 3 3 No of meetings 7 4 4 3 1 2 6 4 2 Description Member No of meetings attended Musa Abdulaziz Mohammed Shihadeh 7 Not a member Not a member 3 1 2 6 Not a member Not a member Hamad Abdulla Ali Al Oqab 7 Not a member Not a member 3 Not a member 2 6 Not a member Not a member Adnan Abdulla Alsulaiman Albassam 7 4 4 Not a member Not a member Not a member 6 Not a member 2 Hood Hashem Ahmed Hashem 7 Not a member 4 Not a member Not a member Not a member 6 4 Not a member Nour (Moh’d Shaher) (Moh’d Lutfi) Mahayni 7 Not a member Not a member Not a member 1 Not a member 6 Not a member Not a member Dr. Hatem Hafez Al Halawani Al Tamimi as of 28/12/2020 He did not attend any meetings held by the Board or commissions, which he is a member thereof; none were held as of his membership date. Salem Ahmad Jamil Alkhaza’leh 7 Not a member Not a member Not a member Not a member Not a member Not a member 4 2 Ayman Abdel Karim Bashir Hahtat 7 Not a member Not a member 3 1 2 Not a member Not a member Not a member Issa Haider Issa Murad 7 Not a member Not a member 3 1 2 Not a member 4 Not a member Malak Fawzi Ragheb Ghanem 7 4 Not a member 3 Not a member Not a member Not a member Not a member Not a member Nabih Ahmad Salameh Alzenat 7 4 Not a member Not a member Not a member Not a member Not a member Not a member 2 Saleh Yacoub Moh’d Hussein, moved to the Mercy of Almighty Allah on 30/11/2020 6 Not a member 4 Not a member Not a member 2 Not a member Not a member Not a member Dr. Hussein Said Saifan Not a member Not a member 4 Not a member 1 Not a member Not a member Not a member Not a member Dr. Minwer Atallah Hassan Al Massadeh Not a member Not a member 4 Not a member Not a member Not a member Not a member Not a member Not a member 59
  60. 6 . The chairman and members of the audit committee and a brief about their qualifications and experience: Chairman and members of the audit committee H.E. Mrs. Malak F. R. Ghanem, Committee Chairperson H.E. Mr. Adnan Abdulla Alsulaiman Albassam Member H.E. Dr. Nabih Ahmad Salameh Alzenat Member Academic qualification Practical experience - Master’s Degree in Banks and Finance, Italy, 1987. - Bachelor’s in Accounting, University of Jordan, 1976 Financial consultant at Jordan Securities Commission. Chairperson of the Instructions Preparation Committee of the Islamic finance Sukuk law in Jordan. Former expert in the International Monetary Fund (IMF), training expert, she worked for the Central Bank of Jordan in the position of the Banks Control Department Manager, former Board member of the Islamic Insurance Company. - Bachelor’s in Buisness Adminstration, specialized in Accounting from Southern Oregon University, USA, 1994 - Certified Public Accountant (CPA), Oregon State, USA, 1999. - PhD, in Economy, Arab Institute of Research and Studies, Cairo, 2002. - Program in Investment Assessment and Management, Harvard University, 1988. - Master’s in Economy, University of Jordan, 1982. - Bachelor’s in Economy, University of Jordan, 1969. He worked in the field of accounting and auditing. He is currently a delegated member in Al-Bassam Investment Company. He is a Chairman / board member in many companies. He is also a board member in a number of Albaraka Banking Group banks. Former General Manager of Jordanian Investment Corporation, former Chairman of the Board of Arab Potash Company, chairman and board member in many industrial, financial, and service companies, and public institutions. 7. Chairpersons and committee members of corporate governance, nomination and remunerations, and risks management committees: Committee Corporate Governance Committee 60 Names of current members H.E. Mr. Ayman Abdel Karim Bashir Hathat (Chairman) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh (Vice Chairman) H.E. Mr. Hamad Abdullah Ali Al-Oqab (Member) H.E Dr. Hatim Hafez Al Halawani Al Tamimi (Member as of 29/12/2020) H.E. Mr. Issa Haider Issa Murad (Member) H.E. Mr. Saleh Yaqoub Mohamed Hussein (member, moved to the Mercy of Almighty Allah on 30/11/2020) Nomination and Remunerations Committee H.E. Mr. Issa Haider Issa Murad (Chairman) H.E. Mr. Ayman Abdel Karim Bashir Hathat (Vice-Chairman) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh (Member) H.E. Mr. Hamad Abdullah Ali Al-Oqab (Member) H.E. Mrs. Malak Fawzi Ragheb Ghanem (member) Risks Management Committee H.E Mr. Salem Ahmad Jamil AlKhaza’leh (Chairman, as of 29/12/2020) H.E. Mr. Saleh Yacoub Mohamed Hussein (Chairman, moved to the Mercy of Almighty Allah on 30/11/2020) H.E. Mr. Adnan Abdullah Al-Suleiman Al-Bassam (Vice-Chairman) H.E. Mr. Hood Hashem Ahmed Hashem (member) H.E. Dr. Hussein Said Mohammad Saifan (Member) H.E. Dr. Minwer Atallah Hassan Masadeh (Member)
  61. 8 . Meetings of the audit committee with the external auditor during 2020: • The audit committee of the board of directors met the external and internal auditors and the compliance control department officer once during the year, and the top executive members did not attend the meeting. 9. Meetings of the Sharia Supervisory Board with the Board of Directors, the audit committee, and the external auditor during 2020: • The Sharia Supervisory Board held two meetings with the Board of Directors, the audit committee of the board, and the external auditor during the year to discuss issues of mutual concern. Musa Abdulaziz Mohammad Shihadeh Chairman of the Board of Directors 61
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  63. Annex IV “Disclosure Requirements in the Instructions of Jordan Securities Commission” 63
  64. Annex IV “Disclosure Requirements in the Instructions of Jordan Securities Commission” 1. A. The main activity of the Bank is Islamic Banking. B. The statement included at the end of the report indicates the addresses of the Head Office, branches, offices, and the number of employees in each of them. C. By the end of 2020, the volume of the Bank’s capital investment (property and equipment, net) reached about JD 94.6 millions. Name of Company Legal Form Type of Activity Paid-in Capital (Million JD) Percentage of the Bank’s Contribution % Number of employees Auditing fees (JD) 2. The table below provides the information related to subsidiaries: Address Al Omariah Schools Co Limited Liability Education 16.0 99.8% 815 5510 Al Barakah Quarter, Wasfi Attal St,/ Amman Al Samaha Funding and Investment Limited Liability Financing 12.0 100% 31 3480 Al Madina Al Munawarah Street / Amman Future Applied Computer Technology Co. Limited Liability Services 5.0 100% 116 2900 Wasfi Attal St,/ Amman Sanabel AlKhair For Financial Investments Co. Limited Liability Brokerage 5.0 100% 11 3770 Housing Bank Complex/ Amman 3. A. The table below provides the names of the natural current members of the Board of Directors, the representatives of the legal members, and an overview about each of them, showing those executives/ nonexecutives and/or independent/not independent and the date of membership: Name of Board Member H.E. Mr. Musa Abdel-Aziz Mohammad Shihadeh Jordanian Citizen, Chairman, non-executive, non-independent member Chairman since 29/4/2019 Date of birth: 12/12/1941 64 Academic Qualification –– Master’s in Business Administration 1979, University of San Francis Co., / USA –– Bachelor’s in Commerce, Arab University of Beirut, 1969 Practical Experience He joined the Banking sector in 1961 and worked as a General Manager of Jordan Islamic Bank from 01/11/1982 till 30/04/2019. He is a Chairman and Board member in a number of industrial, trading, investment, educational, and insurance shareholding companies and banks. He is a member of economic and social societies, committees, and forums.
  65. Name of Board Member Academic Qualification Practical Experience –– Bachelor’s in Accounting, University of Bahrain, 1993 –– Certified Public Accountant (CPA), 1996 –– Certified Global Management Accountant (CGMA), 2012 Various banking experiences in the internal and external auditing, and financial control. He is currently the Senior Vice Chairman at Albaraka Banking Group and the CEO of Albaraka Islamic Bank in Bahrain . He is a Board member in many of Albaraka Banking Group Banks, and the chairman of the Accounting and Auditing Standards Board at the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) / Bahrain. H.E. Mr. Adnan Abdulla Alsulaiman Albassam Bahraini citizen, Board member Representative of Albaraka Banking Group / Bahrain Non-executive and nonindependent member. Board member as of 26/4/2011 Date of birth: 12/10/1968 –– Bachelor’s in Business Administration, specializing in Accounting from Southern Oregon University, USA, 1994 –– Certified Public Accountant (CPA), Oregon, USA, 1999 He worked in the field of accounting and auditing, He is currently a delegated member in Al-Bassam Investment Company. He is a Chairman / board member in many companies. He is also a board member in a number of Albaraka Banking Group banks. H. E. Mr. Hood Hashem Ahmed Hashem Bahraini citizen, Board member, Representative of Albaraka Banking Group / Bahrain Non-executive and nonindependent member Board member as of 26/4/2011 Date of birth: 15/5/1965 –– Master’s in Business Administration, Britain, 2005 –– Bachelor’s in Computer Science and Engineering, Saudi Arabia, 1989 –– Certified International Projects Manager (CIPM), 2008 –– Certified Information Systems Auditor (CISA), 2007 He worked in the field of information technology management and systems analysis. He is currently the consultant for information technology management at Albaraka Banking Group. He is a consultant member of the Information Governance Committee of the Board of Directors of Al Baraka Turk Participation Bank. H.E. Mr. Hamad Abdulla Ali Al Oqab Bahraini citizen, Vice-Chairman of the Board of Directors, dated 29/04/2019, representative of Al Baraka Banking Group / Bahrain. Non-executive and nonindependent member. Board member as of 29/04/2007. Date of birth: 01/01/1970. –– PhD in Economy and Islamic Businessman, CEO, board member, chairman Banking. and a board member in more than one –– American University for company. Humanitarian Studies, H.E. Dr. Nour (Moh’d Shaher) California, 2019 (Moh’d Lutfi) Mahayni –– Master’s of Islamic economy Jordanian citizen, American Open University, Board member, Representative of Washington 2016. Albaraka Banking Group / Bahrain –– Bachelor’s in Islamic and Non-executive and independent Arabic Studies, American Open member University, Washington 2013 Board member as of 26/04/2011 –– Diploma degree in Accounting, Date of birth: 01/01/1956 Damascus 1981 –– Studied in the Faculty of Civil Engineering, Damascus University, 1977 65
  66. Name of Board Member Practical Experience H .E. Dr. Hatem Hafez Al-Halawani Al -Tamimi Jordanian Citizen, Vice-Chairman. Non-executive and independent member. Board Member as of 28/12/2020 Date of birth: 7/2/1948 –– PhD. in Industrial and Energy Management, University of Stirling, Scotland, 2001 –– Bachelor’s in Mechanical Engineering, Egypt, 1971 Former Minister of Industry, Trade and Supply, Former Minister of Information Technology and Communications, former Minister of Water and Irrigation, Former chairman and board member in some major companies and organiztions. H.E. Mr. Salem Ahmad Jamil Alkhaza’leh Jordanian citizen, Board member Non-executive and independent member Board member as of 28/4/2015 Date of birth: 1/2/1963 –– Master’s in Philosophy, University of Jordan, 1992 –– Higher Diploma in philosophy studies, University of Jordan, 1987. –– Bachelor’s in Law, University of Jordan, 1985 Former Minister of Legal Affairs, former Minister of Industry and Trade, former Minister of Public Sector Development, Former President of the audit bureau, in addition of many other positions in the public and private sectors. H.E. Mr. Ayman Abdel Karim Bashir Hatahet Jordanian citizen, board member. Non-executive and independent member. Board Member as of 29/4/2019. Date of birth: 29/4/1962. –– BA in Business Administration - Businessman, chairman and board member London 1982. / board of directors for several companies, former Minister of Transport and a member of the Senate. H.E. Mr. Issa Haidar Issa Murad Jordanian Citizen, Board member Non-executive and independent member Board member as of 28/4/2015 Date of birth: 23/6/1964 –– Bachelor’s in Economy, Business Management and Accounting, University of Jordan, 1985. Member in the Jordanian Senate, President of Amman Chamber of Commerce, member of many economic and social institutions, member of Board of Directors in a number of companies. –– Master’s Degree in Banks and Finance, Italy, 1987. –– Bachelor’s in Accounting, University of Jordan, 1976 Former Financial consultant at Jordan Securities Commission. Chairperson of the Instructions Preparation Committee of the Islamic finance Sukuk law in Jordan. Former expert in the International Monetary Fund (IMF), training expert, she worked for the Central Bank of Jordan in the position of the Banks Control Department Manager, former Board member of the Islamic Insurance Company. –– PhD, in Economy, Arab Institute of Research and Studies, Cairo, 2002. –– Program in Investment Assessment and Management, Harvard University, 1988. –– Master’s in Economy, University of Jordan, 1982. –– Bachelor’s in Economy, University of Jordan, 1969. Former General Manager of Jordanian Investment Corporation, former Chairman of the Board of Arab Potash Company, chairman and board member in many industrial, financial, and service companies, and public institutions. H.E. Mrs. Malak F. R. Ghanem, Committee Chairperson Jordanian Citizen, Board member. Non-executive and independent member. Board Member as of 28/4/2015. Date of Birth: 28/10/1954 H.E. Dr. Nabih Ahmad Mahmoud Salameh Alzenat Jordanian Citizen, Board member. Non-executive and independent member. Board Member as of 28/4/2015. Date of Birth: 7/11/1946. 66 Academic Qualification
  67. Name of Board Member Academic Qualification Practical Experience H .E. Mr. Saleh Yacoub Moh’d Hussein Jordanian Citizen, Board member Non-executive and independent member Board member as of 28/4/2015, moved to the Mercy of Almighty Allah on 30/11/2020. Date of birth: 25/6/1949. –– Higher Studies Diploma in Finance and Economy, 1977, Sorbonne University, Paris. –– Diploma degree in finance and economy, Institute of Public Administration, 1977, Paris. –– Bachelor’s in Economy and Statistics, 1970, University of Jordan Former Deputy Governor of the Central Bank of Jordan, former director of Securities Depository Centre, former advisor at the Jordan Securities Commission and the International Monetary Fund, former board member of the Social Security Corporation, former executive director at the Islamic Development Bank, Jeddah, Chairman and member of the boards of directors in many companies and enterprises. B. Below are the names and positions of the Sharia Supervisory Board and an overview about each of them and the date of membership: Names of the Sharia Supervisory Board Members Academic Qualification Practical Experience H.E. Prof. Dr. Mahmoud Ali Mosleh Al Sartawi Chairman of the Sharia Supervisory Board since 26/5/2015. Member of the Sharia Supervisory Board since 26/4/2005. Date of birth: 22/9/1943 –– PhD. in (comparative jurisprudence), Al-Azhar University, 1976, –– Master’s in comparative jurisprudence, Al-Azhar University, 1972. –– Bachelor’s in Islamic Sharia, Al-Azhar University, 1967. Professor of Comparative Jurisprudence at the World Islamic Sciences and Education University previously, Former Dean of Faculty of Sharia and Former Professor in the comparative Jurisprudence at University of Jordan, lecturer in many universities, member of the Sharia supervisory board at the Islamic Insurance Company and Jordan Engineers Association, member in the Jordan Academy of Arabic. He is a former Member of the Supervisory Board of Accounting and Auditing Organization (AAIOFI), member in many committees, advisor to the authorship of Islamic Education books at the Ministry of Education, he was awarded Al Hussein Medal of First Class in serving Islam and Da’wa. H.E. Dr. Abdul Rahman Ibrahim Zaid Al Kelani Vice Chairman since 8/5/2019 Sharia Supervisory Board member since 28/4/2015 Date of birth: 14/8/1970. –– PhD. in jurisprudence, University of Jordan, 1996. –– Master’s in jurisprudence, University of Jordan, 1993. –– Bachelor’s in jurisprudence, University of Jordan, 1990. Dean of Islamic Jurisprudence, University of Jordan, expert at the International Islamic Fiqh Academy, member of the central Sharia supervisory board of the Islamic Sukuk, member of the supervisory board in Orphans Fund Development Foundation, head of Jordan Islamic Scholars League, former member, president, and teacher at many institutions and universities. He has many researches and books. H.E. Dr.” Mohammad Khair” Mohammad Salem Al-Issa Sharia Supervisory Board member since 25/4/2012 Date of birth: 8/4/1957. –– PhD. in the Holy Quran Interpretation and Science, Omdurman University, 1999. –– Master’s in the Holy Quran Interpretation and Science, University of Jordan, 1990. –– Bachelor’s in Religion Principles, Islamic University in Madinah, 1979 Member of General Iftaa Department in Jordan, former Mufti for the Public Security, Assistant Professor at the World Islamic Sciences and Education University, former religion preacher and lecturer at the Police Academy, lecturer in many universities, he has many books and researches, former member of the Sharia supervisory board at an Islamic Insurance Company (Albarakah for Takaful). 67
  68. Names of the Sharia Supervisory Board Members H .E. Dr. Abdul Sattar Abdul Karim Abu Goddeh, Member of Sharia Supervisory Board since 27/9/1994, moved to the Mercy of Allah on 23/10/2020 Vice-Chairman of Sharia Supervisory Board from 26/5/2015 to 8/5/2019 Date of Birth: 28/1/1940 Academic Qualification –– PhD. in Islamic Sharia (comparative jurisprudence), Al-Azhar University, 1975 –– Master’s in Hadith Science, Al-Azhar University, 1967. –– Master’s in Islamic Sharia, Al-Azhar University, 1966 –– Bachelor’s in Law, Damascus University, 1965. –– Bachelor’s in Islamic Sharia, Damascus University, 1964 Practical Experience Advisor and manager of development and research, and the former chairman of the unified Sharia supervisory board of Albaraka Banking Group, chairman/member of a number of international financial institutions, member of the International Islamic Fiqh Academy, Jeddah, member of the International Sharia Zakat Board, Sharia Board member at the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). He is an author of many books. C. Below are the names and positions of the senior management with executive authorities and an overview of each of them: Names of the Senior Management Members 68 Academic Qualification Practical Experience Dr. Hussein Said Moh’d Saifan CEO/General Manager since 1/5/2019 Date of birth: 26/11/1963 –– PhD, Islamic Banks, 2006 Master’s in Banking and Finance Sciences / Islamic Banks, 1994 –– Bachelor’s in Accounting / Economics and Statistics, 1985 He joined the Bank in 1987 and currently holds the position of CEO/General Manager. He is also a Board/ Board of Directors’ member in more than one company, Former Member of the Board of Accounting Standards in the Accounting and Auditing Organization for Islamic Financial Institutions/ Bahrain (AAOFI). Former Member of the Board of Standards for Governance and Ethics in the Accounting and Auditing Organization for Islamic Financial Institutions/ Bahrain(AAOIFI), Former Board Member of the Securities Depository Center، Board member of Hajj Fund and a member of the Board of Directors of the Jordanian Endowments Council. Dr. “Moh’d Fahmi” “Moh’d Khaleel” F. Al Jabari Assistant General Manager Date of birth: 16/10/1964 –– PhD in Islamic Banks, 2016, –– Master’s in Business Administration, 2011 –– Bachelor’s in Financial and Banking Sciences, 2007 –– Diploma in Financial and Banking Sciences, 1985 –– Certified Islamic Public Accountant (CIPA), 2009 –– Certified Control Systems Auditor (CICA), 2008 –– Certified Control System (CCS), 2008 He joined the Bank in 1988. He currently holds the position of Assistant General Manager. He is a Board member in more than one company.
  69. Names of the Senior Management Members Academic Qualification Practical Experience Dr . Abdel-Hamid Abdalla Ahmad Abu-Saqri Assistant General Manager Date of birth: 6/10/1963 –– PhD, Islamic Banks, 2010 –– Master’s in Islamic Banks, 2001 –– Bachelor’s in Accounting and Economics, 1986 –– Islamic Certified Public Accountant (CIPA) in 2016. –– Certified Public Accountant (JCPA), 2005 He started the Banking work in 1988. He joined the Bank in 1992 and currently holds the position of Assistant General Manager. He is a Board/ Board of Directors member in more than one company. Dr. Musa Omar Mubarak Abu Muhaimed. Assistant General Manager Date of Birth: 20/8/1966. –– PhD of Islamic Banking in 2008 –– Master’s in Islamic Banking in 1999 –– Bachelor’s in Business Administration in 1988 He joined the Bank in 1990 and resigned in 2005 to rejoin the Bank in 2006. He currently serves as Assistant General Manager and is a board member/ board of directors in more than one company. Mr. Mohamed Ahmed Mohamed Jibril. Assistant General Manager Date of birth: 20/4/1962. –– Bachelor’s in Business Administration in 2002. –– Diploma in programming and systems analysis 1985. He joined the Bank in 1987 and worked in the Information Technology Group for 18 years, then worked at Al Rajhi Bank/ Saudi Arabia. In 2009, he rejoined the Bank and he is currently holding the position of Assistant General Manager. He is a member of the Board of Directors of more than one company. Mr. “Muhammad Fawaz” Sudqi Sadiq Imam Assistant General Manager Date of birth: 15/12/1962. –– Master’s in Banking and Finance Business Administration in 2006. –– Bachelor’s degree in Accounting, 1985, USA. He started his banking business in 1985, joined the Bank in 1995, worked in the branches for 17 years, then worked for Al Wahda Bank/Libya. In 2012 he returned to the Bank and currently holds the position of Assistant General Manager and he is a member of the board of directors of a company. Names of the Senior Management Members Academic Qualification Practical Experience Mr. Ali Jamil Allan Hindi. Executive Director. Date of Birth: 14/10/1971. –– Master’s in Financial Management in 2008. –– Bachelor’s in Accounting and Economics in 1993. He started his banking career in 1994 and joined the Bank in 2005. He was the Executive Director of Treasury Department before moving to the Mercy of Almighty Allah on 9/12/2020 Mr. Amjad Khalil Mahmoud Al-Sawalha. Date of Birth: 27/8/1968. –– Bachelor’s in Accounting in 2001. –– Diploma of Islamic Banking and Financial Studies in 1997. –– Accounting Diploma in 1988. –– Certified international lender in Commercial Banks in 2004. –– Certified Islamic Banking Certificate (CIB) in 2011. He joined the Bank in 1992 and is currently the Manager of the Credit Department . He is a member of the Board of Directors in more than one company. 69
  70. Names of the Senior Management Members Dr . Abdullah Atiyeh Abdullah Atiyeh Date of birth: 21/5/1969 Mr. Ra’fat Ismail Mohammad Abu Afifeh Date of birth: 27/6/1979 Mr. Mansour Mahmoud Mohammed Akel Date of birth: 10/9/1966 Dr. Minwer Atta Allah Hassan Al Mossada Date of birth: 10/1/1963 Practical Experience –– PhD. in Philosophy, Islamic Banking, 2015. –– Master’s in Business Administration, Finance and Banks, 2007. –– Bachelor’s in Banking and Finance, 2005, Diploma in Banking, financial, and Islamic studies, 2002. –– Diploma in Banking and Finance, 1989. –– CAMS certificate, 2017 –– CICS certificate, 2014. –– CSAA, 2019 He joined the Bank in 1993. He currently holds the position of Internal Control Department Manager. –– –– –– –– –– –– –– Master’s in Computer Science, 2005 Bachelor’s in Computer Science, 2002. CDPSE Certificate, 2020. CRISC Certificate, 2020. CISM Certificate, 2020. PCI ISA Certificate, 2015. CIISA certificate, 2006. –– Bachelor’s in Accounting, 1999. –– Diploma in Accounting, 1987. –– CIB Certificate, 2011. –– –– –– –– PhD. in Islamic Banks, 2013 Master’s in Accounting, 2006 Bachelor’s in accounting, 2004 Bachelor’s in economics, 1986 He worked in the Banking sector inside and outside Jordan. He joined the Bank in 2008. He currently holds the position of Information Security Department Manager. He joined the Bank in 1989. He currently holds the position of Foreign Operations Department Manager He started working in the Banking sector in 1988, he joined the Bank in 2006, he is currently the manager of the Risks Management Department. Mr. Khalil Rebhi Khalil Al Baik Date of birth: 15/10/1965 –– Master in Islamic Banking 2008 –– Bachelor’s in Banking and Finance, 2003. –– Certified Islamic Public Accountant (CIPA), 2009 He joined the Bank in 1990 and is currently the Manager of the Shareholders Relations Unit. Mr. Raed Subhi Mohammad Atta Date of birth: 23/9/1973 –– Master’s in Islamic Banks, 2008 –– Bachelor’s in Accounting, 1995. –– CIB Certificate, 2010. He joined the Bank in 1995. He holds the position of Central (Local) Operations Department Manager. Mr. Mousa “Hussein Akram” Mohamed Minawi. Date of birth: 15/1/1974. Mr. Ashraf “Muhammad Said” Hasan Qa’dan. Date of birth: 26/1/1977 70 Academic Qualification –– Master of Business Administration in 2017. –– Bachelor’s in Accounting 2012. –– Diploma in accounting of Islamic banks in 2000. –– Diploma of Accounting in 1995. –– Certified Islamic Accountant (CIPA) in 2014. –– –– –– –– –– Master of Finance and Banks, 2014. BA in Banking and Financial Siences, 2004. Diploma in Banking Studies Academy, 2001. CIPA Certificate, 2013. CIP Certificate, 2011. He joined the Bank in 1995 and was the Manager of the Finance Department before resigning on 18/10/2020 He joined the bank in 1995, and currently he is the Manager of the Finance Department, as of 18/10/2020.
  71. Names of the Senior Management Members Academic Qualification Practical Experience Mr . Samer Ahmed Shehadeh Odeh. Date of birth: 21/5/1973. –– High Diploma in Business Administration in 2006. –– Bachelor’s in Accounting in 1996. –– Certified Administrative Accountant (CMA) in 2011. –– Certified Internal Auditor (CIA) in 2009. –– Certified Islamic Accountant (CIPA) in 2006. He joined the Bank in 1997 and worked in its branches prior he resigned in 2007 to work as a consultant in several companies. He rejoined the Bank in 2011 and currently he is the Manager of Internal Audit Department, and a Board of Directors’ member in a company. Mr. Ahmed Tawfiq Younis Tawfiq. Date of birth: 23/12/1981. –– Bachelor’s in Administrative Sciences and Information Systems 2005 - UK. –– The International Foundation Year Program (IFY), economy in 2002. –– Anti-Money Laundering (CAMS) 2013. –– International Diploma in Governance, Risks, and Compliance (ICA), 2019. He started his banking career in 2006 and joined the Bank in 2010. He is currently the Manager of Treasury Department after holding the position of the Manager of Compliance Department until 27/12/2020 Dr. Ali Mohamamd Ahmad Abu El Izz Date of birth: 22/10/1979 –– PhD. In jurisprudence, 2010 –– Master’s in jurisprudence and legal studies, 2006. –– Bachelor’s in jurisprudence, 2001. –– CIMA Certificate, 2016. –– Professional executive Master’s in Islamic finance, 2015 –– CIPA certificate, 2013 –– CIB certificate, 2011. –– CSAA certificate, 2010 He joined the Bank in 2009. He currently holds the position of the Sharia Internal Auditing Department Manager, and the Secretary of the Sharia Supervisory Board. Mr. Fadi Ali Shehadeh Abdulrahim Date of birth: 1/6/1978 –– Diploma of Secretariat and Office Management, 1998 He joined the Bank in 1999. He currently holds the position of the Secretary-General of the Bank’s Board of Directors. D. Profile of the Legal Counselor of the Bank: Name Mr. Mohammad Jabr Hassan Mite’b Date of birth: 5/2/1967 Academic qualification –– Bachelor’s in Law, 1994 Practical experience He practiced the attorney profession since 1995. He is a local and international arbitrator. He became the legal advisor of the Bank in 2011. E. Profile of the Officer for Governance applications Compliance with the Jordan Securities Commission: Name Bassam Ahmad Abdulla Abu Ghazaleh Date of birth: 12/9/1971 Academic qualification –– Master’s in financial management, 2008. –– Bachelor’s in statistics and computer, 1993 Practical experience He joined the Bank in 1994, he is currently the manager of the Studies and Social Responsibility and Sustainability Department, and is a board of directors’ member in a company. 71
  72. Bahrain Jordan Saudi Arabia Jordan Jordan Shareholder Name Social Security Corporation Hussein bin Mohsen bin Hussein Al Harthy Hani Masoud Darwish Ahmed Hajj Fund No . of Shares 2,536, 576 2,654,835 4,233,315 11,639, 153 132 010 000 Share of capital 1.268% 1.327% 2.117% 5.819% 66.005% 0 0 Itself (related to the government - the Ministry of Awqaf, Islamic Affairs and Holy Sites). 0 Himself Himself 0 1- Shaikh Saleh Abdulla Kamel *. 2- Dallah Albaraka Holding Co. (Shaikh Saleh Abdulla Kamel). 3- Tawfeek Co. for Investment Funds (Shaikh Saleh Abdulla Kamel). 4- Abdulla Abdul Aziz Saleh AlRajhi. 5 - Other shareholders: - Emirates NBD. - Mohammed Abdul Aziz Ateeq. - Barwa Real Estate Company. - Other. Itself (governmentrelated). 0 Final beneficiary * Moved to the Mercy of Allah on 18/5/2020 Nationality Albaraka Banking Group Co., / Bahrain No. of Mortgaged shares By the end of 2020 0 0 0 0 0 Mortgaged Shares compared to total shares 4. Following are the names of shareholders holding 1% or more: Mortgage Party - - - - - No. of Shares 2,536,576 2,654,835 4, 233,315 11,543,153 132 010 000 Share of capital 1.268% 1.327% 2.117% 5.772% 66.005% By the end of 2019 Itself (related to the government - the Ministry of Awqaf, Islamic Affairs and Holy Sites). Himself Himself Itself (governmentrelated). 1- Shaikh Saleh Abdulla Kamel. 2- Dallah Albaraka Holding Co. (Shaikh Saleh Abdulla Kamel). 3- Tawfeek Co. for Investment Funds (Shaikh Saleh Abdulla Kamel). 4- Abdulla Abdul Aziz Saleh AlRajhi. 5 - Other shareholders: - Emirates NBD. - Mohammed Abdul Aziz Ateeq. - Barwa Real Estate Company. - Other. Final beneficiary 72 No. of Mortgaged shares 0 0 0 0 0 Mortgaged Shares compared to total shares 0 0 0 0 0 - - - - - Mortgage Party
  73. 5 . The Bank’s share of banking business in Jordan by the end of 2019 and 2020 was as follows: Item End of 2020 End of 2019 Total Assets at the Bank/ Total Assets of the Banks 9.4% 9.1% Total Balances of savings schemes at the Bank/ Total client deposits at banks 12.7% 12.1% Total balances of financing and investment at the Bank/ total direct credit facilities of banks 14.7% 13.7% 6. There is no reliance on particular suppliers and/or significant clients (locally and abroad), constituting 10% and more of the total purchases and/or sales or revenues. 7. The Bank does not enjoy any government protection or privileges, and it did not obtain any patent or franchise. 8. The Government, international organizations, or any other institutions have not issued any decisions with any material impact on the Bank’s business, products, or competition capacity. It is worth mentioning that Jordan Islamic Bank obtained many distinguished ratings in 2020 from many international rating agencies, including: –– Standard & Poor’s: (B+/stable/B), the same rating of the Kingdom. –– Fitch rating: (BB-/negative/B), the same rating of the Kingdom. –– Islamic International Rating Agency (IIRA): “Stable (BB+/A3” at the international level of foreign currencies, “Stable/ A+ (jo)/ A1 (jo)” at the local level. AA +(SQR) for Sharia Quality Rating, indicating the Bank’s compliance with the Islamic Sharia rules in its transactions as the first and biggest Islamic bank in Jordan, observing the application of the Sharia aspects. The Bank also obtained many international awards and certificates of appreciation in 2020, notably: • –– • –– • –– –– –– –– –– • –– • –– An award form Banking Executive Magazine: The best trademark of an Islamic Bank – Jordan, 2020 An award from the Banker Magazine – London Best Islamic Bank- Jordan, 2020. Several Awards from World Finance Magazine- London: The best banking group – Jordan 2020. The best Islamic Bank – Jordan 2020. Best Corporate Governance - Jordan 2020. Best bank in the sustainability field- Jordan 2020. Business Leadership and Prestigious Contribution Award in Islamic Finance – 2020 to the Chairman of the Board of Directors/ Mr. Musa Shihadeh. Several awards from Cambridge IF Anna Latika Foundation - UK: Strongest Islamic bank for retail services - Jordan 2020. Award from the Regional Network for Social Responsibility: Remarkable performance in the social responsibility for financial institutions and Islamic banks, 2020. 73
  74. Information Technology Projects Department Planning and Governance Department Executive Manager Digital Banking & Digital Transformation Digital Products and Services Department Strategic Planning Procedures and Business Analysis Department Strategic Planning Unit Information Technology Infrastructure Department Technical purchases Committee Executive Manager Digital Operations Department Technical Support Department Applications Department Assistant General Manager SMEs Department Applications Examination and Acceptance Department Cards and Electronic Services Business Unit Executive Manager Assistant General Manager Information Security Department Sale, purchase &monitoring shares portfolio of sukuk & investment portfolios Real- Estate investment Committee Facilities Restructuring Committee Products Development Department ATMs Committee Call Center and Customer Service Credit Department Sukuk & Investment Portfolios Department Internal Control Department Real- Estate Department Digital Transformation Committee Individual Banking Consultants Procurement and Tenders Committee Corporate Department Credit Facility Scheduling Committee Banking Marketing Unit CEO / General Manager Executive Manager Assistant General Manager Board of Directors Secretariat Financial Institutions Department IT steering committee Treasury Department Internal Audit Department Social Responsibility and Sustainability Committee Bank's portfolio for trading and investment in shares and Sukuk from the Bank’s self funds and the joint investment accounts committee Procurement and Tenders Committee Risk Management Department Studies & Social Responsibility and Sustainability Department Internal & sharia Audit Department Department Executive Management facility committee Public relations Assets and liabilities committee Foreign Operations Department Risk Management Committee Executive Manager Credit Facilities Committee Assistant General Manager Shareholders Relationship Unit Social Responsibility and Sustainability Committee Department Nomination and Remunerations Committee Branches Affairs IT governance Committee Engineering Corporate governance Committee Change Consultation Committe The Documents Destruction Committee Human Resources Development Committe Total Quality Committee Supreme Committee Compliance control Department Compliance Committee HR Department Audit Committee Administrative Affairs Department Board of Directors Assistant General Manager Central Operations (local) Department Sharia Supervisory Board Beneficiaries Services Department Organizational Structure of Jordan Islamic Bank Legal Department 74 Department (9) A. Follow-up and Collection Department Department Financial
  75. 75 Administrative Affairs Accounting Financial & Administrative Affairs Department Compliance Officer Investment Secretariat Section Financial Consultations Section Financial Analysis Section Financial Analysis and Consultations Department Manager General Manager Board of Directors Investment Management Section Trading / Brokerage Service Section Customer Service Section Financial Brokerage and Investment Department Manager Internal Auditing The Organizational Structure of Sanabel AlKhair For Financial Investments Co. Ltd
  76. 56 Total General Secondary Certificate 289 Service workers Diploma 1563 Office boys / Guards Bachelor 80 Professionals/ Technicians Master 9 Below General Secondary Certificate level Employees PhD (B) By the end of 2020, the total number of employees was (2434) employees distributed by academic qualification as follows: 7 109 233 88 437 Total 2434 PhD Master Higher Diploma Bachelor Diploma General Secondary Certificate Below General Secondary Certificate Total While the distribution of the subsidiaries employees at the end of 2020 was as follows: Al Omariah Schools Co. Ltd. 8 68 35 394 75 140 95 815 Al Samaha Funding and Investment Co. Ltd. 1 1 - 23 3 - 3 31 Future Applied Computer Technology Co. Ltd. - 5 - 96 13 1 1 116 Sanabel AlKhair For Financial Investments Co. Ltd. - - - 6 3 - 2 11 Company (C) The Board’s report included qualification and training programs for the Bank staff. 10. The Bank is exposed to some risks due to the nature of its business. Such risks are outlined in note No (62) of 2020 in the consolidated financial statements. 11. The Board’s report included the achievements accomplished by the Bank supported by numbers and a description of the important events of the Bank during the fiscal year 2020. 12. There is no financial effect of operations of non-recurrent nature, which are not part of the Bank’s main activity. 76
  77. 13 . Below are the details of the realized distributed profits, net shareholders equity as well as the prices of securities during the years 2016-2020: Year Realized profits (Before Tax) (JD) Dividends distributed for the year (JD) Net shareholders equity at the end of the year (JD) Prices of issued securities/closing rate at the end of the year JD Fils 2016 83 747 933 Distributing JD 22,500,000 in cash at 15% of the capital and bonus shares at 20%*. 342 719 762 860 3 2017 80 938 755 Distributing JD 27,000,000 in cash at 15% of the capital 374 958 618 650 3 2018 75 404 005 Distributing JD 27,000,000 in cash at 15% of the capital and bonus shares at 11.11%** 393 393 779 880 2 2019 88 554 031 - *** 421 604 008 800 2 2020 83 765 268 12% in cash **** 474 354 279 080 3 * Bonus shares were distributed on 5/6/2017. ** Bonus shares were distributed on 26/06/2019. *** Pursuant to the circular issued by the CBJ governer No. 1/1/4693 dated 9/4/2020, it was decided that the Jordanian licensed banks shall postpone the distribution of dividends on shareholders for the year 2019. **** Suggested for distribution, and compliant to the CBJ’s decision by according to its letter No. 10/3/1228 dated on 20/1/2021 circulated to Jordanian Banks operating in the Kingdom: the percentage of cash dividends to shareholders shall not be more than 12% in light of the local and international economic developments and the cash flow levels, as well as the convenient solvency which the banks enjoy and maintaining them. Year Shareholders Equity/ Deposits financing & Investment/ Deposits financing & Investment/ Assets Deposits/ Assets Profits before Tax/ Average Assets Profits before tax/ Average Shareholders’ Equity Profits after Tax/ Average Shareholders’ Equity Profits after Tax/ Average Paid-up Capital 14. Analysis of the Bank’s financial position and the results of its operations: 2020 11.22% 88.81% 77.47% 87.23% 1.80% 18.70% 11.63% 26.06% 2019 10.86% 85.98% 74.99% 87.22% 2.06% 21.73% 13.34% 28.60% 15. The Board’s report provided the future plan of the Bank. 16. The auditing fees of the Bank in 2020 reached JD 120 thousand, while the auditing fees of subsidiaries are disclosed in item 2 above. 77
  78. 17 . A. Following is a detailed description of the number of securities issued by the company and owned by the Board members and their relatives (wife and minor children): Position Nationality Number of shares at the end of 2020 Number of shares at the end of 2019 Chairman Jordanian 200 000 200 000 Wife of Mr. Musa Abdel-Aziz Mohammad Shihadeh - Jordanian 16 666 16 666 Al-Baraka Banking Group Company, represented by: - Bahraini 132 010 000 132 010 000 H.E. Mr. Hamad Abdullah Ali Al-Oqab ViceChairman Bahraini 0 0 H.E. Mr. Adnan Abdullah Al-Sulaiman Al-Bassam member Bahraini 0 0 H.E. Mr. Hood Hashem Ahmed Hashem member Bahraini 0 0 H.E. Dr. Nour (Moh’d Shaher) (Moh’d Lutfi) Mahayni member Jordanian 20 000 20 000 H.E. Dr. Hatem Hafez Al Halawani Al Tamimi, as of 28/12/2020 member Jordanian 13 333 12 000 H.E. Mr. Salem Ahmad Jamil Alkhaza’leh member Jordanian 6 666 6 666 H.E. Mr. Ayman Abdel Karim Bashir Hatahet member Jordanian 21 536 21 536 H.E. Mr. Issa Haider Issa Murad member Jordanian 222 22 22 222 - Jordanian 5 746 5 746 H.E. Mrs. Malak Fawzi Ragheb Ghanem member Jordanian 666 6 6 666 H.E. Dr. Nabih Ahmad Mahmoud (Salameh Alzenat) member Jordanian 23 333 23 333 - Jordanian 2 605 2 605 member Jordanian 5 000 5 000 Name H.E. Mr. Musa Abdel-Aziz Mohammad Shihadeh Wife of Mr. Issa Haider Issa Murad Wife of Dr. Nabih Ahmad Mahmoud (Salameh Alzenat) H.E. Mr. Saleh Yacoub Mohamed Hussein, moved to the Mercy of Almighty Allah on 30/11/2020 78
  79. B . Below is a statement for the number of securities issued by the Company and owned by the senior management with executive authority and their relatives “wife and minor children” in details: Position Nationality Number of shares at the end of 2020 Number of shares at the end of 2019 Dr. Hussein Said Mohammad Saifan CEO / General Manager Jordanian 0 0 Wife of Dr. Hussein Said Mohammad Saifan - Jordanian 16,000 16,000 Dr. (Moh’d Fahmi) (Moh’d Khaleel) F. Al Jabari Assistant General Manager Jordanian 0 0 Dr. Abdul Hamid Abdullah Ahmed Abu Saqri Assistant General Manager Jordanian 0 0 Dr. Musa Omar Mubarak Abu Muhaimid Assistant General Manager Jordanian 0 0 Mr. Mohamed Ahmed Mohamed Gabriel Assistant General Manager Jordanian 0 0 Mr. Muhammad Fawaz Sudqi Sadiq Imam Assistant General Manager Jordanian 0 0 Treasury Department Executive Director, moved to the Mercy of Almighty Allah on 9/12/2020 Jordanian 0 0 Mr. Amjad Khalil Mahmoud Al Sawalha Credit Department Director Jordanian 0 0 Dr. Abdullah Attia Abdullah Attia Internal Control Department Director Jordanian 0 0 Mr. Raafat Ismail Muhammad Abu Afifa Information Security Department Director Jordanian 0 0 Mr. Mansour Mahmoud Mohamed Aql External Operations Department Director Jordanian 0 0 Dr. Minwer Atallah Hasan Almasa’deh Risk Management Department Director Jordanian 0 0 Shareholders Relations Unit Director Jordanian 0 0 Central Local Operations Department Director Jordanian 0 0 Financial Department Director, resigned from the Bank on 18/10/2020 Jordanian 0 0 Mr. Ashraf “Muhammad Said” Hasan Qa’dan Financial Department Director, as of 18/10/2020 Jordanian 0 0 Mr. Samer Ahmed Shehadeh Odeh Internal Audit Department Director Jordanian 0 0 Treasury Department Director, as of 27/12/2020 after he was the Compliance Control Department Director Jordanian 0 0 Internal Sharia Auditing Department Director and Secretary of the Sharia Supervisory Board Jordanian 0 0 Secretary - General of the Board Jordanian 0 0 Name Mr. Ali Jamil Allan Hindi Mr. Khalil Ribhi Khalil Al-Beik Mr. Raed Subhi Muhammad Atta Mr. Musa “Hussein Akram” Muhammad Minawi Mr. Ahmed Tawfik Younis Tawfik Dr. Ali Mohamed Ahmed Abu Al-Ezz Mr. Fadi Ali Shehada Abdul Rahim 79
  80. C . Below is a statement about the number of securities issued by the Company and owned by the legal counselor and his relatives “wife and minor children” in details: Name Nationality Number of shares at the end of 2020 Number of shares at the end of 2019 Jordanian 0 0 Mr. Mohamad Jabr Hassan Mot’ab D. There are no companies controlled by the Board members or senior management staff with executive authority and their relatives. E. The Sharia Supervisory Board members do not hold shares in the Bank. F. Below are the Bank’s finances to each member of the Board of Directors and any other transactions made between the Bank and the member or related persons. Names of the Current Board Members Direct Financing (JD) Indirect Financing (JD) H.E. Mr. Musa Abdulaziz Mohammad Shihadeh 0 0 Al-Baraka Banking Group Company, represented by: 0 0 H.E. Mr. Hamad Abdullah Ali Al-Oqab 0 0 H.E. Mr. Adnan Abdullah Al-Suleiman Al-Bassam 0 0 H.E. Mr. Hood Hashem Ahmed Hashem 0 0 0 7 320 353 0 2 785 150 H.E. Dr. Hatem Hafez Al-Halawani Al-Tamimi, as of 28/12/2020 0 0 H.E. Mr. Salem Salem Jameel Al-Khazaleh 0 0 H.E. Mr. Ayman Abdel Karim Bashir Hahtat - Jordan Carbonate Company 0 217 061 0 39 137 H.E. Mr. Issa Haider Issa Murad Issa Murad & Sons Trading Company / Vice Chairman of the Board of Directors 0 471 305 0 34 940 2 625 0 0 0 4 723 0 H.E. Dr. Noor “Muhammad Shaher” “Muhammad Lutfi” Mahayeni - The Agricultural Industrial Commercial Company Production / full-time Vice Chairman Mrs. Malak F. R. Ghanem Dr. Nabih Ahmad Salameh Alzenat Mr. Saleh Yacoub Moh’d Hussein, moved to the Mercy of Almighty Allah on 30/11/2020 80
  81. Transportation Allowances 3 333 12 000 39 000 H .E. Mr. Hamad Abdullah Ali Al-Oqab 5 000 11 000 36 000 H.E. Mr. Adnan Abdullah Al-Sulaiman Al-Bassam 5 000 16 000 H.E. Mr. Hood Hashem Ahmed Hashem 5 000 H.E. Dr. Nour (Moh’d Shaher) (Moh’d Lutfi) Mahayni Total - 150 000 204 333 1 738 959 - 54 697 36 000 1 148 959 - 59 107 14 000 36 000 2 425 959 - 58 384 5 000 7 000 36 000 - - - 48 000 H.E. Dr. Hatem Hafez Al Halawani Al Tamimi until 29/4/2019 (member since 28/12/2020) 1 667 - - - - - 1667 H.E. Salem Ahmad Jamil Alkhazaleh 5 000 10 000 36 000 - - - 51 000 H.E. Mr. Ayman Abdel Karim Bashir Hatahet 3 333 6 000 36 000 - - - 45 333 H.E. Mr. Issa Haider Issa Murad 5 000 10 000 36 000 - - - 51 000 H.E. Mrs. Malak Fawzi Ragheb Ghanem 5 000 7 000 36 000 - - - 48 000 H.E. Dr. Nabih Ahmad Mahmoud (Salameh Alzenat) 5 000 6 000 36 000 - - - 47 000 H.E. Mr. Saleh Yacoub Mohamed Hussein, moved to the Mercy of Almighty Allah on 30/11/2020 5 000 6 000 33 000 - - - 44 000 H.E. Mr. Adnan Ahmed Youssef Abdel Malek, until 29/4/2019 1 667 - - - - - 1667 Travel Expenses Rewards Board Committees Membership Remuneration H.E. Mr. Musa Abdel-Aziz Mohammad Shihadeh Per diem Allowances Name Board Membership Remuneration 18- A. Below are the benefits and remunerations that the Board Chairman and members received as salaries, fees, remunerations…etc., and the amounts paid for each one of them as travel and transportation expenses inside and outside the Kingdom during the fiscal year 2020 in (Jordanian Dinars): Al-Baraka Banking Group Company, represented by: 81
  82. Total Salaries Remunerations Travel and Transportation Expenses Per diem Board Committees ’ members wages Total B. Below are the benefits and remunerations that the senior management staff of the Bank, with executive authorities, received as wages, salaries, and remunerations…etc., and the amounts paid for each as travel and transportation expenses inside and outside Jordan during the fiscal year 2020 (in Jordanian Dinars): Dr. Hussein Said Muhammad Saifan/ CEO- General Manager* 512 100 215 600 6 838 - 5 000 739 538 Dr. (Moh’d Fahmi) (Moh’d Khaleel) F. Al Jabari/ Assistant General Manager 114 668 17 663 - - - 132 331 Dr. Abdul Hamid Abdullah Ahmed Abu Saqri/ Assistant General Manager 122 499 18 963 - - - 141 462 Dr. Musa Omar Mubarak Abu Muhaimid/Assistant General Manager 114 828 17 663 - - - 132 491 Mr. Mohamed Ahmed Mohamed Gabriel/ Assistant General Manager 130 256 20 363 3 000 - - 153 619 Mr. Muhammad Fawaz Sudqi Sadiq Imam/ Assistant General Manager 126 839 19 763 - - - 146 602 Mr. Ali Jamil Allan Hindi/ Treasury Department Executive Director, moved to the Mercy of Almighty Allah on 9/12/2020 39 602 4 700 - - - 44 302 Mr. Amjad Khalil Mahmoud Al Sawalha/Credit Department Director 36 647 3 650 - - - 40 297 Dr. Abdullah Attia Abdullah Attia/ Internal Control Department Director 35 720 3 675 - - - 39 395 Mr. Raafat Ismail Muhammad Abu Afifa/Information Security Department Director 59 454 3 675 610 - - 63 739 Mr. Mansour Mahmoud Mohamed Aql/External Operations Department Director 31 610 3 230 - - - 34 840 Dr. Minwer Atallah Hasan, Masa’deh/ Risk Management Department Director 39 731 3 850 - - 4 000 47 581 Mr. Khalil Ribhi Khalil Al-Beik/Shareholders Relations Unit Director 29 763 2 100 - - - 31 863 Mr. Raed Subhi Muhammad Atta/Central (Local) Operations Department Director 32 241 3 150 16 - - 35 407 Mr. Musa “Hussein Akram” Muhammad Minawi/Financial Department Director, resigned from the Bank on 18/10/2020 32 271 32 450 - - - 64 811 Mr. Ashraf “Muhammad Said” Hasan Qa’dan/ Financial Department Director, as of 18/10/2020 26 402 2 000 - - - 28 402 Mr. Samer Ahmed Shehadeh Odeh/Internal Audit Department Director 36 284 3 450 - - - 39 734 Mr. Ahmed Tawfiq Younis Tawfiq/ Treasury Department Director, as of 27/12/2020 after he was the Compliance Department Director 34 988 3 800 - - - 38 788 Dr. Ali Mohamed Ahmed Abu Al-Ezz/ Internal Sharia Auditing Department Director 35 925 3 125 - - - 39 050 Mr. Fadi Ali Shehada Abdul Rahim/Board Secretary-General 42 462 3 438 - - - 45 900 Name * He uses a private car from the Bank 82
  83. C . Below are the benefits and remunerations that the legal counselor of the Bank, received as wages, salaries and remunerations…etc., and the amounts paid as travel and transportation expenses inside and outside Jordan during the fiscal year 2020 (in Jordanian Dinars): Name Mr. Mohamed Jabr Hassan Moteb Total Wages and Fess Travel and Transportation Expenses Total 75 000 - 75 000 D. Below are the annual remunerations of the Sharia Supervisory Board chairman and members, and the amounts paid to each of them as travel and transportation expenses inside and outside the Kingdom in 2020 (in Jordanian Dinars): Annual Allocations Daily Allowances Travel expenses Total H.E. Prof. Mahmoud Ali Mosleh Al Sartawi 24 000 - - 24 000 H.E. Prof. Abdul Rahman Ibrahim Zaid Al Kelani 24 000 - - 24 000 24 000 - - 24 000 19 419 320 365 20 104 Name H.E. Dr. “Mohammad Khair” Mohammad Salem Al-Issa H.E. Prof. Abdul Sattar Abdul Karim Abu Goddeh, moved to the mercy of Almighty Allah on 23/10/2020 19. The Board’s report included a statement of donations and grants paid by the Bank during the fiscal year 2020. 20. Note No; (59) in the Bank’s consolidated financial statements shows the contracts, projects and agreements signed by the company with other subsidiaries, sister companies, affiliates, Chairman, Board members, General Manager, or any employee in the company or their relatives. 21. The Board’s report included details on the Bank’s contribution to protect the environment and local community through its different activities. 83
  84. 84
  85. 85
  87. Report of the Sharia Supervisory Board for the Fiscal Year Ending 31 /12/2020
  88. Report of the Sharia Supervisory Board for the Fiscal Year Ending 31 /12/2020 Jordan Islamic Bank Head office Date: 11 Jamada ∏, 1442 H Corresponding to 24th January 2021 Report of Sharia Supervisory Board For the fiscal year ending on 31/12/2020 AD All Praise be to Allah, Lord of the Worlds, And Prayers and Peace be upon our Prophet Mohammed and his Family and Companions To: Messrs./ Shareholders of Jordan Islamic Bank. Peace be Upon You, so as Allah’s Mercy and Blessings, As per the Banks Law of Jordan No. 28 of the Year 2000 and the amended Law No. (7) of 2019 thereof, and the provisions thereof concerning Islamic Bank, and the Bank’s Articles of Association, the Sharia Supervisory Board hereby provides the following report: • The Sharia Supervisory Board has supervised the principles and the contracts used concerning the transactions and the applications that the Bank made available during the fiscal period ending on 31/12/2020, and conducted the needed supervision to give the opinion thereof as regards the Bank’s compliance with the teachings of Islamic Shari’a, the specific fatwas, decisions, and guidelines that we had issued to verify the Bank’s compliance therewith. • It is the management’s duty to exercise the Bank’s business in accordance with the provisions of Islamic Sharia and to ensure that our responsibility is limited to giving independent opinion based on our observance of the Bank’s operations and reporting this to yourselves. • We have done our audit, which consisted of examining the authentication and the procedures applied by the Bank, we examined each type of the transactions through the Internal Sharia Audit Department. • We planned and performed our supervision to receive all information and clarifications that we deemed necessary to give us reasonably sufficient evidence that the Bank did not breach the teachings and principles of Islamic Sharia. 88
  89. In our opinion : A. Contracts, operations, and transactions of the Bank during the year ending on 31/12/2020 that we reviewed was made in accordance with the teachings and principles of Islamic Sharia B. Distribution of profit and charging the loss to the Investment Profit Accounts and the Investment Risks Fund and/or the provision of expected credit losses and/or Mutual Credit Fund is consistent with the fundamentals that we approved in accordance with the teachings and principles of Islamic Sharia. C. All amounts that the Bank received from sources or in manners that are not consistent with the teachings and principles of Islamic Sharia were excluded from the Bank’s revenues, and they were given to charity. D.The duty of dispensing Zakat is vested with shareholders, no authorization is given to the Bank to dispense it directly, there exist no law for this regard, nor the Articles of Association or the General Assembly decisions provides so, nor there is any authorization given by the shareholders in this regard. Therefore, a shareholder shall dispense the Zakat imposed on the shares thereto when the Sharia conditions and requirements for this regard are met, taking into consideration the following: • Where intention upon share purchase or subscription was trading, Zakat shall be based on the market value of the shares and the dividends distributed. • Where intention upon share purchase or subscription was to receive dividend and not to trade, Zakat is imposed on the distributed dividends, in addition to the Zakat, given that Zakat is (26 Fils/ share), Twenty-Six Fils per share. • In the event the necessary amounts of cash is not available, Zakat or part thereof might be deferred and so it becomes a debt to be settled as soon as the amount of money is available. The Sharia Supervisory Board would like to thank the Bank’s management and staff for giving due attention to the observance of the teachings and principles of Islamic Sharia, for their good management, and for the good results of the Bank. Grace be to Allah, the Lord of Worlds Date: 11 Jamada ∏, 1442 H Corresponding to: 24th January, 2021 Chairman Vice-Chairman Dr. Mahmoud Ali Mosleh Al Sartawi Dr. Abdul Rahman Al Kelani Board Member Dr. “Mohammad Khair” Mohammad Salem Al-Issa 89
  91. Auditor ’s Report
  92. 92
  93. 93
  94. 94
  95. 95
  96. 96
  97. Consolidated Financial Statements 31 December 2020 97
  98. Jordan Islamic Bank – Public Shareholding Company Amman – Jordan Table of Contents Auditor’s Report Statement Consolidated Statement of Financial Position A Consolidated Income Statement B Consolidated Statement of Other Comprehensive Income C Consolidated Statement of Changes in Owner’s Equity D Consolidated Statement of Cash Flows E Consolidated Statement of Sources and Uses of Al Qard Al Hasan Fund F Page Notes to the Consolidated Financial Statements 98 108-222
  99. Statement (A): Consolidated Statement of Financial Position As at 31 December, 2020 Notes 31 December 2020 31 December 2019 JD JD Assets Cash and balances with central bank 4 828,778,523 906,069,815 Balances at banks and financial institutions 5 50,600,540 69,991,662 Investment accounts at banks and financial institutions 6 35,252,012 17,681,535 Deferred sales receivables and other receivables –net 7 2,590,162,404 2,252,319,691 Ijarah Muntahia Bittamleek assets – net 8 705,745,523 629,600,753 Financing – net 9 33,157,539 31,874,382 Financial assets at fair value through owner’s equity – self financed 10 12,975,052 12,042,273 Financial assets at fair value through joint investment accounts holders’ equity 11 36,883,870 36,923,829 Financial assets at amortized cost 12 195,873,199 199,360,095 Investments in associates 13 8,316,058 8,211,186 Investments in real estate 14 107,608,263 111,190,169 Al Qard Al Hasan – net 15 77,503,021 16,356,549 Property and equipment – net 16 94,554,705 93,102,868 Intangible assets 18 3,153,822 2,536,389 Right of use assets 19A 12,656,099 14,279,403 Other assets 20 51,278,229 47,631,549 4,844,498,859 4,449,172,148 Total Assets Liabilities, Joint Investment Accounts Holders’ Equity, Non-Controlling interests and Owner’s Equity Liabilities Banks and financial institutions’ accounts 21 66,792,542 4,670,837 Customers’ current and on demand accounts 22 1,265,246,862 1,204,999,670 Cash margins 23 51,423,067 46,510,226 Accounts payable 24 1,441,976 462,318 Other provisions 25 14,052,116 13,549,609 Income tax provision 26A 26,142,445 29,999,703 Deferred tax liabilities 27B 1,770,260 1,370,697 Lease obligations 19B 12,396,749 13,777,285 Other liabilities 28 36,774,199 27,984,067 1,476,040,216 1,343,324,412 Total Liabilities 99
  100. Description Notes 31 December 2020 31 December 2019 JD JD 2 ,842,574,747 2,624,431,578 15,761,428 16,765,391 Joint Investment Accounts Holders’ Equity Unrestricted investment accounts 29A Investment accounts holders’ reserve in subsidiaries and associates 29B Fair value reserve – net 30A 5,246,821 6,625,649 Provision for contingent liabilities 30E 1,284,360 760,429 Deferred tax liabilities 27A 3,215,793 4,060,883 2,868,083,149 2,652,643,930 41,206 132,814 2,868,124,355 2,652,776,744 Total Joint Investment Accounts Holders’ Equity Non-controlling interests 29B Total joint investment accounts holders’ equity and noncontrolling interest Provision for future expected investement risks 31A 25,980,009 30,016,131 Provision for income tax on investment risk fund 31B - 1,450,853 Paid-in capital 32 200,000,000 200,000,000 Statutory reserve 33 101,261,327 92,879,300 Voluntary reserve 33 45,472,758 37,093,762 Fair value reserve 30B 2,888,319 2,236,401 Retained earnings 34 124,731,875 89,394,545 474,354,279 421,604,008 4,844,498,859 4,449,172,148 Equity Owner’s equity Total Owner’s Equity – Bank’s shareholders Total Liabilities, Joint Investment Accounts Holders’ Equity, Non-Controlling Interests and Owner’s Equity Accounts Managed for Others: . 100 Restricted investments 56 49,097,937 43,558,349 Al Wakala Bi Al Istithmar (Investments portfolio) 57 448,498,162 415,969,375 Al Wakala Bi Al Istithmar 58 84,438,487 61,431,719
  101. Statement (B): Consolidated Income statement For the Year Ended December 31, 2020 Description Notes 31 December 2020 31 December 2019 JD JD Deferred sales revenues 35 140,923,017 139,995,864 Financing revenues 36 486,435 545,759 Gain from financial assets at fair value through joint investment accounts holders’ equity 37 565,576 776,629 Gain from financial assets at amortized cost 38 9,924,573 8,138,703 Dividends from subsidiaries and associates 39 1,754,479 1,904,452 Revenues from Investments In Real Estate 40 995,072 953,271 Revenues from Ijarah Muntahia Bittamleek assets 41 43,783,234 42,249,023 Revenues from other investments 42 1,787,310 2,167,442 Expected Credit Losses- Joint 31E (8,000,000) - 192,219,696 196,731,143 513,641 1,312,539 Revenues from joint investment accounts Net income of subsidiaries 43 Share of profit from investments in associates Total revenues from joint investment accounts 704,407 639,634 193,437,744 198,683,316 Deposits gurantee fees – Joint Investment accounts 2 (4,366,607) (2,793,987) Share of unrestricted investment account holders’ 44 (56,279,960) (52,486,088) (513,843) (1,308,556) Share of investment accounts holders’ from income of subsidiaries Share of non-controlling interests from income of subsidiaries Share of profit from investments in associates Share of investment risk fund 202 (3,983) (704,407) (639,634) - (6,468,523) 131,573,129 134,982,545 Bank’s share of the joint investment accounts revenues as Mudarib and Rab AL - Mal 45 Bank’s self-financed revenues 46 31,511 31,223 Bank’s share of restricted investments revenues as Mudarib 47 184,985 367,744 Bank’s share of restricted investments revenues as Wakeel 47 5,681,764 5,455,357 Banking services revenues 48 21,172,814 20,293,179 Foreign currency gain 49 2,055,464 2,078,802 Other income 50 2,187,018 2,292,091 162,886,685 165,500,941 Gross income Employees expenses 51 (41,506,574) (41,437,917) Depreciation and amortization 17 (8,324,180) (8,842,934) Other expenses 52 (28,725,730) (24,770,466) Provision for expected credit loss –self 15 (64,933) (1,177,862) Other provisions 53 (500,000) (717,731) Total Expenses (79,121,417) (76,946,910) Profit before income tax 83,765,268 88,554,031 (31,643,599) (34,204,739) 52,121,669 54,349,292 JD/Fils JD/Fils 0/261 0/272 Income tax 26B Profit after income tax Basic Earnings per Share for the Year 54 101
  102. Statement (C): Consolidated Statement of Other Comprehensive Income For the Year Ended December 31, 2020 31 December 2020 31 December 2019 JD JD 52,121,669 54,349,292 Change in fair value reserve of financial assets – net 651,918 860,937 Realized losses from sale of financial assets at fair value through owner’s equity - self (23,316) - Total other comprehensive income for the year 52,750,271 55,210,229 Description Profit after income tax Other comprehensive income items, net after tax: 102
  103. 103 - Change in fair value reserve Total comprehensive income for the year after tax Transferred to (from) reserves 101,261,327 8,382,027 - - - - 92,879,300 45,472,758 8,378,996 - - - - 37,093,762 JD Voluntary reserve 2,888,319 - 651,918 628,602 23,316 - 2,236,401 JD Fair value reserve* JD Total - 52,750,271 628,602 - 52,121,669 124,731,875 474,354,279 (16,761,023) 52,098,353 - (23,316) 52,121,669 89,394,545 421,604,008 JD Retained earnings** According to circular no. 1/1/4693 by the Central Bank of Jordan on April 9, 2020, it was decided to postpone the distribution of dividends by Jordanian banks to shareholders for the year 2019. ** An amount of JD 1,000,000 from retained earnings, which was transferred from general banking risk reserve, is restricted from use without prior approval from the Central Bank of Jordan. * The fair value reserve balance of JD 2,888,319 as at 31 December 2020 is restricted from use. 200,000,000 - Profits (losses) realized from sale of financial assets at fair value through owner’s equity - self Balance at 31 December 2020 - 200,000,000 JD JD Profit after income tax Balance at 1 January 2020 For the year ended 31 December 2020 Statutory reserve Paid-in capital Statement (D): Consolidated Statement of Changes in Owner’s Equity For the Year Ended 31 December, 2020
  104. 104 - Total comprehensive income for the year after tax 92 ,879,300 - 8,860,903 - - - - 84,018,397 37,093,762 - 8,859,677 (10,000,000) - - - 38,234,085 JD Voluntary reserve 2,236,401 - - - 860,937 860,937 - 1,375,464 JD Fair value reserve* 89,394,545 (27,000,000) (17,720,580) (10,000,000) 54,349,292 - 54,349,292 89,765,833 JD Retained earnings** 421,604,008 (27,000,000) - - 55,210,229 860,937 54,349,292 393,393,779 JD Total *** The General Assembly approved on 29 April 2019 the distribution of cash dividends to shareholders at a percentage of 15% from the paid-in-capital of JD 180 milion/ share, amounted to JD 27 milion and approved the distribution of share dividends with an amount of JD 20 milion/ share through the capitalization of JD 10 milion from the retained earnings and JD 10 milion from the voluntary reserve. ** An amount of JD 1,000,000 from retained earnings, which was transferred from general banking risk reserve, is restricted from use without prior approval from the Central Bank of Jordan * The fair value reserve balance of JD 2,236,401 as at 31 December 2019 is restricted from use. 200,000,000 - Distributed dividends*** Balance at 31 December 2019 - Transferred to (from) reserves 20,000,000 - Change in fair value reserve Increase in capital*** - 180,000,000 JD JD Profit after income tax Balance at 1 January 2019 For the year ended 31 December 2019 Statutory reserve Paid-in capital
  105. Statement (E): Consolidated Statement of Cash Flows For the Year Ended December 31, 2019 31 December 2020 31 December 2019 JD JD 83,765,268 88,554,031 17 8,324,180 8,842,934 19B 697,126 748,158 (4,036,122) (1,224,458) Notes Description Cash flows from Operating Activities Profit before tax Adjustments to non-cash items: Depreciation and amortization Cost of lease obligation Provision for future risks Employees’ end of services provision 53 500,000 617,731 Employees’ vacation provision 53 - 100,000 Provisions of expected credit loss for contingent liabilities Provision expected credit loss- self 15 Impairment provision for repossessed assets 14,805,853 - 64,933 1,177,862 (678,592) - (12,235) (4,175) Effect of exchange rate fluctuations on cash and cash equivalents (1,267,033) (1,488,856) Profit before change in assets and liabilities 102,163,378 97,323,227 Gain on sale of property and equipment Change in assets and liabilities Increase in investment accounts at banks and financial institutions maturing after 3 months (17,725,000) - Increase in deferred sales receivables and other receivables (351,514,822) (202,673,198) (Increase) decrease in financing (1,526,077) 757,958 Increase in Ijarah Muntahia Bittamleek Assets (76,144,770) (23,798,991) Increase in Al Qard Al Hasan (61,094,749) (5,833,722) 690,356 (3,665,832) 60,247,192 128,991,600 Decrease (Increase) in other assets Increase in customers’ current and on demand accounts Increase in accounts payable Increase in cash margins Increase in other liabilities Net change in assets and liabilities Net cash flows used in operating activities before income tax and other payments Income tax paid 26 979,658 62,091 4,912,841 1,300,008 8,790,132 2,777,297 (432,385,239) (102,082,789) (330,221,861) (4,759,562) (35,500,857) (26,664,409) Provision for income tax on investment risk fund 31B (1,450,853) - Payment of lease liabilities 19B (2,034,383) (2,103,263) End-of-service provision 25 Net cash flows used in operating activities - (1,067,731) (369,207,954) (34,594,965) Cash flows from Investing Activities Sale of financial assets at fair value through owner’s equity - self Purchase of financial assets at fair value through owner’s equity - self 126,393 101,566 (7,727) (57,423) Sale of financial assets at fair value through joint investment accounts holders’ equity 2,600,000 42,859 Purchase of financial assets at fair value through joint investment account holders’ equity (1,388,142) (4,156,866) (34,686,681) (39,636,701) 38,046,199 32,999,880 Purchase of financial assets at amortized cost - net Sale of financial assets at amortized cost - net Sale of real estate investments 1,487,845 57,812 Purchase of real estate investments (1,310,275) (788,875) Purchase of repossessed assets (7,338,569) (15,840,367) Sale of repossessed assets 3,649,808 229,886 Sale of property and equipment Purchase of property and equipment 13,017 99,566 (7,153,090) (16,190,413) Purchase of intangible assets (1,643,457) (1,175,023) Net cash flows used in investing activities (7,604,679) (44,314,099) Cash flows from Financing Activities Increase in unrestricted investment accounts holders’ equity 216,749,458 114,052,715 - (27,000,000) Net cash flow from financing activities 216,749,458 87,052,715 Net (decrease) increase in cash and cash equivalents (160,063,175) 8,143,651 Effect of exchange rate on cash and cash equivalents 1,267,033 1,488,856 Distributed dividends Cash and cash equivalents at the beginning of the year 55 971,483,065 961,850,558 Cash and cash equivalents at the end of the year 55 812,686,923 971,483,065 105
  106. Statement (F): Consolidated Statement of Sources and Uses of Al Qard Al Hasan Fund For the Year Ended December 31, 2020 31 December 2020 31 December 2019 JD JD 20,114,216 14,280,494 Central bank account / Al Qard Al Hasan Fund 64,908,095 - Sources the Bank is authorized to use 24,314,107 18,291,786 Sources outside the Bank 1,934,535 1,822,430 Total sources of the Fund’s assets for the year 91,156,737 20,114,216 Education 1,465,015 1,897,157 Medical treatment 831,884 862,210 Marriage 570,170 624,780 Overdraft accounts 11,238,735 14,515,380 Social advances for the Bank’s employees 2,478,683 2,474,311 Centeral Bank’s programe for facing Corona pandemic & med-term crisis agreement 63,055,499 - Total uses for the year 79,639,986 20,373,838 Settled for the year (18,545,237) (14,540,116) Balance at the end of year 81,208,965 20,114,216 Less: Provision for expected credit loss – self (3,705,944) (3,757,667) 77,503,021 16,356,549 Description Balance at the beginning of the year Sources of the Fund: Uses of the Fund: Balance at the end of year – net 106
  107. Notes to the Consolidated Financial Statements 107
  108. 1 . General Information Jordan Islamic Bank (“the Bank’) was established as a Jordanian public shareholding company on 28 November 1978 pursuant to the provisions of the companies law No. (12) of 1964. Head office is located in Amman. The Bank offers banking, financial, and investment services in compliance with the rules and principles of the Islamic Shari’a through its head office, 83 branches and 25 banking offices in the Kingdom as well as its subsidiaries. The Bank’s transactions are governed by the applicable Bank’s Law. Jordan Islamic Bank shares are listed on the Amman Stock Exchange – Jordan. The consolidated financial statements were authorized for issue by the Bank’s Board of Directors in their meeting No. (1) held on 8 February 2021 and it is subject to the approval of the General Assembly and the Central Bank of Jordan. The Bank’s Shari’a Supervisory Board reviewed the consolidated financial statements on its meeting No. (1/2021) held on 24 January 2021 and issued their annual report thereon. According to the Bank’s articles of association and in compliance with the principles and rules of the Islamic Shari’a and the general Banks’ Laws, the Shari’a Supervisory Board is constitute of three members according to the shareholder’s General Assembly decision. The opinion of Shari’a Supervisory Board shall be binding to the Bank, and it is responsible for monitoring the Bank’s activities and operations in terms of compliance with Shari’a principles and is responsible for furnishing a Shari’a opinion on the format of contracts necessary to undertake the Bank’s activities, and issue an annual report for the shareholder’s General Assembly. 2-1. Basis of preparation of the financial statements: The accompanying consolidated financial statements of the Bank and its subsidiaries financed from the Bank’s funds and the joint investment funds have been prepared in accordance with the Financial Accounting Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and in the absence of Financial Accounting Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions relating to financial statements items, the International Financial Reporting Standards and related interpretations are applied in conformity with the Shari’a standards, pending the promulgation of Islamic Standards therefor. The Bank complies with applicable local laws and the instructions and regulations of the Central Bank of Jordan. The consolidated financial statements are prepared on the historical cost basis except for the financial assets at the fair value through owner’s equity, the financial assets at the fair value through the joint investment account holders’ equity, financial assets at amortized cost and investment in real estate. The consolidated financial statements are presented in Jordanian Dinars (JD) which is the functional currency of the Bank. A distinction should be made between owner’s equity and joint investment accounts holders’. The term unrestricted investment accounts, wherever mentioned, refers to joint investment accounts. 108
  109. 2-2 . Basis of consolidation of the financial statements: The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries financed from the Bank’s funds and the joint investment funds and subject to the Bank’s control. Control exists when the Bank has power to govern the financial and operational policies of subsidiaries in order to obtain benefit from their activities. All intra-company transactions, balances, revenues and expenses are eliminated. The financial statements of subsidiaries are prepared for the same reporting period as the Bank, using consistent accounting policies. The results of subsidiaries operations are consolidated in the consolidated income statement from the acquisition date, being the date the Bank obtains control over subsidiaries. The results of operations for disposed subsidiaries shall be consolidated within the consolidated income statement until the date of disposal, which is the same date on which the Bank’s loses control over subsidiaries. The non-controlling interests represent the portion not owned by the Bank or by the unrestricted investment accounts of the subsidiaries owner’s equity. Investments in subsidiaries are accounted for at cost when the Bank issues separate financial statements. The Bank has the following subsidiaries as at 31 December 2020: Paid-in capital JD Bank’s ownership percentage Nature of business Country of incorporation Acquisition date Al Omariah Schools Company Ltd. 16,000,000 99.8% Education Amman 1987 Al Samaha Financing and Investment Company Ltd. 12,000,000 100% Financing Amman 1998 Future Applied Computer Technology Company Ltd. 5,000,000 100% Services Amman 1998 Sanabel Al-Khair for Financial Investments Company Ltd. 5,000,000 100% Brokerage Amman 2005 Company name 2-3. Changes in accounting policies The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the Bank’s consolidated financial statements for the year ended 31 December 2019, except for the adoption of the following standards: Islamic Financial Accounting Standard 30 (Impairment and Credit Losses and Onerous Commitments) • The 2014 International Financial Reports Standard (9) was implemented on the date of the mandatory application of the standard on January 1, 2018, where the Group applied the requirements of the expected credit loss model under the instructions of the Central Bank of Jordan No. (13/2018) on June 6, 2018. • On January 1, 2020, the Group applied the requirements of The Islamic Financial Accounting Standard 109
  110. (30) in compliance with the instructions of the Central Bank of Jordan (6/2020) on 5 July 2020 and did not result in any material differences from the International Financial Reporting Standard (9). • This standard defines accounting principles and disclosure requirements for reduced financial assets and expected credit losses on various credit exposures, investments, and other assets of Islamic financial institutions and related allocations in accordance with the best practices followed globally. • This standard also resulted in recommendations for changes and improvements in reserve accounting represented by risk reserves in accordance with Financial Accounting Standard 35”, which must be adopted simultaneously with the same effective date as the 30 th financial accounting standard. Both financial accounting standard 30 and Financial Accounting Standard 35 replace the previous financial accounting standard No. 11 for “allocations and reserves.” Islamic Financial Accounting Standard 35 (Risk Reserves) • The standard provides a comprehensive model for recognition, measurement, presentation and clarification sought regarding risk reserves. The standard applies to risk reserves of Islamic financial institutions to mitigate exposure to credit risk, market risk, equity investment risk, rate of return or movable business risks face stakeholders. • The Group has implemented the requirements of Financial Accounting Standard 35 on risk reserves and the implementation did not have an impact on the Group’s consolidated financial statements. Islamic Financial Accounting Standard 33 (Investing in Sukuk, Shares and Similar Instruments) • Financial Accounting Standard (33) “Investing in Sukuk, Shares and Similar Instruments” replaces Islamic Financial Accounting Standard No. 25, which identifies the types of main instruments for Shariah compliant investments and identifies accounting processes in accordance with the characteristics of the bank’s business model under which investments are managed, and aims to establish principles for classification, recognition, measurement, presentation, disclosure of investment in sukuk, shares and other similar instruments. • The Group has implemented the requirements of Islamic Financial Accounting Standard 33 for investments in sukuk, shares and similar instruments and the implementation did not have an impact on the Group’s consolidated financial statements. Financial Accounting Standard 34 for the preparation of financial reports for sukuk-holders • This standard defines the accounting principles and financial reporting requirements for the underlying assets of the Sukuk instrument. It requires the source to prepare funding reports or asking to prepare it as needed under this standard. • The Group has implemented the requirements of Islamic Financial Accounting Standard 34 for the preparation of financial reports for sukuk holders and the implementation did not have an impact on the Group’s consolidated financial statements. 110
  111. 2-4 . Significant Accounting Policies Segment Information: • Business segment represents a group of assets and operations of the Bank that are engaged together in providing products or services that are subject to risks and rewards different from those related to other business sectors, and are measured in accordance with the reports used by the General Manager and operating decision maker of the Bank. • Geographical segments are associated to products and services in a specific economic environment subject to risks and rewards different from those sectors operating in other economic environments. Basis of distributing joint investments profit between owner’s equity, unrestricted investment accounts holders’ , restricted investments accounts holders’ and Al-Wakala Bi Al Istithmar accounts holders’ (Investment portfolio): • The Bank share as Mudarib was 50% for Jordanian dinar and 55% for foreign currency from total joint investment profit. (2019 : 45% for Jordanian dinar, 50% for foreign currency), and starting from 1 May 2019 the bank share as mudarib was amended to be 50% for Jordanian dinars and 55% for foreign currency from total joint investment profit as result to the suspension the deduction from the investment risk fund the remaining balance was distributed between the unrestricted investment accounts and the Bank’s invested funds, each according to its percentage of contribution, taking into consideration that the priority for funds investment relates to the unrestricted investment accounts holders’. • The bank waived a portion of its share as Mudarib to become 45.56% instead of 50% to improve the overall share of profits distributed to all of the joint investment accounts holders with an amount of JD 4,784,506 and some of the joint investment accounts holders with an amount of JD 3,380,330 based on tiers (segments) in accordance with the Central Bank instructions Number (10/1/9173) dated of 27 June 2019. • The joint investment accounts share in the investment profits, which are distributed to all investors each by its percentage of participation and conditions of the account agreement signed between the Bank and the investor. Joint investment accounts participate in the profit as follows: • 40% of the annual average balance of saving accounts. • 70% of the annual average balance of notice accounts. • 90% of the minimum balance of term deposit accounts. • The Bank bears all administrative expenses except for the insurance expense of Ijarah Muntahia Bittamleek assets which are allocated to the joint investment accounts profit. • The Bank’s fees as an agent (wakeel) were deducted at a rate of 1.5% of the Al Wakala Bi Al Istithmar account’s Capital (Investment Portfolio) as at 30 June 2020. The Bank waived (as an agent – Wakeel) a portion of its share of the increase in net profit over 3.5% after deducting the income tax on the agreed distributed dividends under the prospectus of an amount of JD 733,417. 111
  112. • The Bank fees as an agent (wakeel) was deducted at a rate of 1.5% of the Al Wakala Bi Al Istithmar account’s Capital (Investment Portfolio) on 31 December 2020. The Bank waived a portion of its share as agent (Wakeel) with an amount of JD 860,538. • Profit was distributed to Al Wakala Bi Al Istithmar (Investment Portfolio) accounts holders’ after deducting the Bank’s fees as an agent (wakeel). • Restricted investment accounts are managed through Mudaraba contracts. • Bank’s share as Mudarib was deducted at a rate ranging between 7.7% - 25% of restricted investment accounts in Jordanian Dinars profit and at a rate of 45% of restricted investment accounts’ in foreign currencies profit. Additionally, general profit rate distributed to restricted investment accounts in Jordanian Dinars was 2% and foreign currencies restricted investments accounts was between 0.7% - 1% as at 31 December 2020 (2019: 1% and 1.25% respectively). • Profit was distributed after deducting the Bank’s share as Mudarib on the restricted investment accounts each according to its contribution percentage. Shari’a non-compliant revenues, gains, expenses and losses: • The Bank recognize these amounts in a separate account within the other liabilities and shall be distributed to charitable activities as determined by the Shari’a Supervisory Board. Zakah: • The responsibility of Zakah payment rests on the shareholders, unrestricted and restricted investment accounts holders’ and participants in Al Wakala Bi Al Istithmar (Investments Portfolio) upon the fulfilment of Zakah required conditions. Deferred sales receivables: 1- Murabaha Contracts: Murabaha: is selling a commodity for the same purchase price plus an agreed predetermined profit margin computed based on a percentage of the price or fixed amount, and it represent one of Boy’ou Amanah types that depends on disclosing the purchase price or cost. Murabaha to the purchase orderer: is the transaction whereby the Bank sells a commodity to its customer (purchase orderer) with a markup on its purchase price (or cost) after identifying that increment (Murabaha profit). It’s also called Banking Murabaha. • The Bank applies the commitment to the promise principle in Murabaha to the purchase orderers contracts in accordance with the standards issued by Accounting and Auditing Organization for Islamic Financial Institutions. • Deferred sales profit (by which the buyer will pay a lump sum price that matures at a future date or instalments paid at various subsequent dates) is recognized through the proportional allocation of this profit to the future financial periods until the maturity date of the contract, regardless whether the payment is settled or not. • Deferred sales receivables are recognized when the transaction takes place at its face value, and are measured at the end of the financial period on the basis of the net realizable expected cash value, which is the amounts owed by customers at the end of the financial period less expected credit loss. 112
  113. 2- Istisna ’a contracts: Istisna’a: is a sale contract between Al-Mustasni’ (the buyer) and Al-Sani’ (the seller) whereby Al-Sani’ based on the order of Al-Mustasni’ under takes to have manufactured or otherwise acquire a prescribed commodity (Al- Masnoo’) upon delivery in return for an agreed upon price and method of settlement, whether at the time of contracting, by instalments or deferred to specific future time. It’s a condition that Al- Sani’ provide the material and/or labor of Al - Masnoo’. Parallel Istisna’a: is conducting two separate contracts, one with the customer in which the Bank represents Al-Sani’ and the other with Al-Sani’ (contractor) in which the Bank represent Al- Mustasni’. Profit is achieved through the price difference in the two contracts, in most cases one contract is immediately effective (with Al-Sani’) and the second is deferred (with the customer). • Istisna’a costs include direct and indirect costs of the Istisna’a activities that can be allocated on objective basis for certain contracts. General and administrative expenses, marketing expenses, and research and development costs shall not be included in Istisna’a costs. • Istisna’a costs incurred during the financial period, as well as pre-contract costs shall be recognized in Istisna’a in progress account in (Istisna’a) or in Istisna’a cost account (in Parallel Istisna’a). • In cases where Al-Mustasni’ (the buyer) fails to settle the agreed upon price in full and agree to make repayment through instalments during the execution of the contract or after the completion of the contract, deferred profit shall be recognized and offset against Istisna’a receivables balance in the Bank’s statement of financial position. This treatment shall be applied whether the percentage of completion method or completed contract method is used in recognising Istisna’a revenues. Deferred profit recognized shall be allocated over the future financial periods whereby each financial period shall carry its portion of profit irrespective of whether cash is received or not. • Istisna’a contracts are presented in the total amounts paid by the Bank since contract inception, while parallel Istisna’a contracts are presented in the net contractual value. impairment provision is calculated as expected credit loss with forward looking charactaristics in relation to obligors and financial environment. • Any additional costs paid by the Bank in Parallel Istisna’a as a result of breaching the contractual obligations are recognized as losses in the consolidated income statement and shall not be recognized in the calculation of the Istisna’a costs account. • In case the bank retains Al- Masnoo’, the asset is measured at the lower of expected realizable cash value or cost. Any difference between these values shall be recognized in consolidated income statement for period in which it was occurred. 3- Assets available for deferred sale: • This item represent assets acquired by the Bank for the purpose of selling these assets on a deferred basis (instalments). This type of selling assets is also called instalment-bargain sale to distinguish it from Murabaha to the purchase orderer. • At contract inception, the assets available for deferred sale shall be recognized and measured at cost (purchase price and any direct expenses related to acquisition of the assets). • Assets available for deferred sales shall be revaluated at fair value at the end of the financial period, the change in the value, if any shall be measured as the difference between the book value and the 113
  114. fair value . Unrealized profits (losses) shall be recognized in the fair value reserve account. • Profits of the deferred sales shall be recognized on an accrual basis and proportionally allocated over the period of the contract. Profits related to future financial periods shall be recognized in deferred sales profit account. • Deferred sales receivables shall be recognized at contract inception and measured at their face value (contracted value). Musharaka financing: • It is the provision of funds by the Bank and customer equally or differently in order to set up a new project or participate in an existing one, whereby each of them would own a share in the capital either on a fixed or diminishing basis and would been titled to its share of the gains. Losses are divided proportionate to the partner’s share in capital, whereby it would be inappropriate to stipulate otherwise, Musharke is divided into fixed or diminishing Musharka Muntahia Bittamleek. • The Bank’s share in Musharaka capital is recorded upon delivery to the managing partner or when it is deposited in Musharaka account, as it is measured at the cash paid value or at fair value if in-kind. If a difference results from the evaluation of the in-kind item between fair value and book value, it is recognized as a profit or a loss. • The capital in the diminishing Musharaka is measured at the end of the financial year at the historical value less the historical value of the share sold at the agreed upon fair value, and the difference between both values is recorded as a profit or loss in the consolidated statement of income. • The Bank’s share of the gains or (losses) of Musharaka financing which arises or expires during the financial year is recorded after settlement. In the event that Musharaka continues for more than a financial year, the Bank’s share of the profits is recorded upon their realization by accounting for them, in whole or any part thereof, between the Bank and the partner in the financial year in which the profits occur to the extent of the distributed profits. Moreover, losses for a financial year are recorded in that year to the extent of the losses by which the Bank’s share in the Musharaka capital is reduced. • An additional provision of expected credit losses for deferred sale receivable and other receivables in case there is an indication of a significant increase in credit risk. • In the event that losses occur due to the partner’s wrongdoing or default, the partner shall bear the losses and they will be recorded as a liability against them. • At the end of the financial year, the financing assets are recorded at cost or at cash value expected to be realized, whichever is lower, and the difference is recorded as an expected credit losses provision. • Deferred sales receivables and funding financed from unrestricted investment accounts are written off in the event that the measures taken to collect them are not feasible and is recorded on expected credit losses provision account, and the proceeds from the receivables / finances that were previously written off are added to the investment profit account. Deferred sales receivables and finances that are self funded are written off in the event that the measures taken to collect them are not feasible and is recorded on expected credit losses provision account - slef, and the proceeds from the receivables / finances that were previously written off are added to the revenues account. Any surplus in the gross provision - if any - is transferred to the consolidated income statement. 114
  115. Financial assets at fair value through profit or loss : • Financial assets at fair value through profit or loss, are those purchased with the intent to resell in the near future to generate gains as a result of changes in market prices of such investments. • They are initially recognized at the fair value of consideration given (transaction costs are recorded in the consolidated income statement at the point of purchase) and subsequently re-measured at fair value. All realized and unrealized gains or losses are transferred to the consolidated income statement including any gains or losses resulting from the translation of such assets held in foreign currencies to the functional currency. • Profits realized and dividends received are recorded in the consolidated income statement. Financial assets at fair value through owner’s equity– self financed: • These assets represent investments in equity instruments funded by the Bank’s self funds in order to hold them in the long term. • These assets are initially recognized at fair value plus acquisition expenses, and subsequently measured at fair value. The change in fair value is presented in the fair value reserve within owner’s equity. • Gains and losses resulting from the sale of these assets is recognized within the retained earnings in accordance with FAS 33 and the Central Bank of Jordan regulations. • Any impairment loss in the value of these assets shall be recognized within the consolidated income statement. • Impairment losses previously recognized in the consolidated income statement can be retrieved if it is objectively evidenced that the increase in the fair value occurred in the period subsequent to the recording of impairment losses through the fair value reserve within the shareholders’ equity. • Gains derived from these financial assets is recognized within the consolidated income statement at the date of distribution. • Gains and losses resulting from foreign currency translation differences for these assets are recognized within the fair value reserve. • Financial assets which fair value cannot be determined reliably are stated at cost, and tested for impairment at the end of each financial period and any impairment is recognized in the consolidated income statement, and cannot be retrieved in subsequent periods. Financial assets at fair value through joint investment account holders’ equity: • These assets represent investments in equity instruments and funded by joint investments accounts in order to hold them in the long term. • These assets are initially recognized at fair value plus acquisition expenses, and subsequently measured at fair value. The change in fair value is presented in the fair value reserve within joint investment account holders’ equity. • Gains and losses resulting from the sale of these assets and impairment losses is recognized within the consolidated income statement including amounts previously recognized in joint investments accounts holders’ equity in accordance with the Central Bank of Jordan regulations. 115
  116. • The impairment losses previously recognized in the consolidated income statement can be retrieved if it is objectively evidenced that the increase in the fair value occurred in the period subsequent to the recording of impairment losses through the fair value reserve within the joint investment accounts. • Gains derived from these financial assets is recognized within the consolidated income statement at the date of distribution. • Gains and losses resulting from foreign currency translation differences for these assets are recognized within the fair value reserve. • Financial assets which fair value cannot be determined reliably are stated at cost, and tested for impairment at the end of each financial period and any impairment is recognized in the consolidated income statement, and cannot be retrieved in subsequent periods. Financial assets at amortized cost: • This item represent financial assets invested based on contractual cash flows and is not held for trading or recognized as financial assets at fair value through income statement. Cash flows constituting of variable or constant return on the outstanding principal amount and profit. • These instruments are initially measured at cost plus acquisition expenses. • These assets are measured using the effective profit method at the end of financial period. All gains and losses arising from amortization process are recognized in the consolidated income statement. • Financial assets at amortized cost book value are reduced by the expected credit loss and are recognized within the consolidated income statement (in case the investment is self-financed) and within investment risk fund revenues (in case the investment is jointly financed). Investments in associates: • An associate is an entity in which the Bank has significant influence over its financial and operating policies and is not controlled by the Bank, where the Bank hold a rate between 20% to 50% of the voting rights. • The Bank’s investment in associates is accounted for using the equity method of accounting. • In case of preparing the Bank’s separate financial statements, the investment in associates is presented at fair value. Ijarah and Ijarah Muntahia Bittamleek: Ijarah is the transfer of ownership of the right to benefit of using an asset for a consideration and is divided into: Operating Ijarah: is Ijarah contract that do not end up with the transfer of ownership of leased assets to the lessee. Ijarah Muntahia Bittamleek: is Ijarah contract that end up with the transfer of ownership of the leased assets to the lessee and might take more than one form in accordance with the Financial Accounting Standard issued by the Accounting and Auditing Organization for Islamic Financial Institutions. 116
  117. • Assets acquired for Ijarah shall be recognized upon acquisition at historical cost including all expenditures necessary to bring the asset to its intended use. Leased assets are depreciated according to the depreciation policy used by the Bank. • When the recoverable amount from assets acquired for Ijarah is lower than its carrying amount, the assets are written down to its recoverable amount, and an impairment is recognized in the consolidated income statement. • Ijarah revenues shall be allocated proportionately to the financial periods of the Ijarah contract. • Maintenance expenses incurred in relation to the leased assets are recognized when incurred. Investments in real estate: • It is the acquisition of real estate or land or part of it for the purpose of obtaining periodic income or keeping it for the purpose of anticipating an increase in its future value or for both. • Investments in real estate are recorded at cost and include expenditures whose origin can be directly determined, and subsequent measurements of these investments are done at fair value. Unrealized profits resulting from the change in the fair value of investment in real estate are directly recognized in owner’s equity under the category of fair value reserve for investments, taking into account the separation between owner’s equity and what is related to investment account holders, and unrealized losses resulting from the re-evaluation of the fair value of investments in real estate must be adjusted to the extent that the balance of that reserve permits, and in the event that unrealized losses exceed the reserve balance, what exceeds the reserve balance shall be recorded in the income statement Under the item unrealized losses from the valuation of investments in real estate, taking into account the ownership of the funds invested in the real estate. • In the event that there are unrealized losses that were proven in a previous financial period and evaluation profits (unrealized) occurred in a subsequent financial period, then these profits are recorded in the income statement to the extent that equals the unrealized losses that were recorded in the previous financial periods in the income statement and any surplus in this profit is added to the fair value reserve for investments in real estate. • Periodic income from investments in real estate is recognized in the income statement according to accrual, taking into account the ownership of the funds invested in real estate. • Maintenance costs for investments in real estate are recorded in the income statement upon incurring them, and the purpose of these expenses is defined under the name (real estate repair and maintenance), taking into account the ownership of the money invested in real estate. Repossessed assets by the Bank against debts • They are the assets that are repossessed by the Bank against debts with no intentions to own them by the Bank. The Bank has no intention to hold the repossessed assets in order to earn income or for capital appreciation. • Repossessed items appears in the balance sheet items in order assets items. 117
  118. Deposit insurance corporations law • On 1 April 2019, an amendment was issued for the Deposit Insurance Corporations law to include Islamic banks to the Jordan Depository insurance company’s laws and regulations, the amendment specified that the contribution fees related to the bank’s self-deposits (Credit accounts and it’s equivalent and the Bank’s share of the unrestricted investment accounts) shall be borne by the Bankself and contribution fees related to the joint investment accounts are borne by the investors – joint accounts. Islamic Financial Accounting Standard 30 (Impairment and Credit Losses and Onerous Commitments) • According to the instructions of the Central Bank of Jordan No. (6/2020) dated July 5, 2020 regarding the impairment and credit losses and onerous commitments (FAS 30), the requirements of FAS 30 measuring the expected credit loss (loss of credit impairment / provisions) should be presented, for credit exposures that fall within the scope of (FAS 30), in terms the mechanism of listing debt instruments / credit exposures as well as the methodology for calculating the expected credit loss. Provision for future expected investment risks • The Bank suspended deducting 10% from the joint investment accounts net profit according to law amending banking law no 28 for the year 2000 starting from 1 May 2019 and the Fund’s balance was transferred to other required provisions. • The investment risk fund surplus was held as a provision for future expected investment risks in accordance with the Central Bank of Jordan circulation no. (10/1/9173) dated 27 June 2019. • When an additional provision is needed the additional provision will be charged against the assets financed by the joint investment accounts on the joint investment profit and on the consolidated income statement if the assets were self financed by the Bank, it shall be by the financial assets from joint investment accounts, and on income statements if the asset was Bank-self shares. Fair value of financial assets: • Closing prices (purchasing assets/ selling liabilities) on the date of consolidated financial statements in active markets represents the fair value of quoted financial instruments. In the absence of quoted prices or when there is no active market, fair value is normally based on comparison with the current market value of a highly similar financial instruments. When the fair value of an investment cannot be reliably measured, it is stated at cost after the writing down any impairment. Fair value of non-financial assets measured at fair value: • Market prices represent the fair value for non-financial assets at the date of consolidated financial statements (when active markets of such assets are available). In cases where market prices are not available, they are assessed by taking average value of three assessments of experienced and certified parties. 118
  119. Depreciation : A- Depreciation of assets available for investment • Assets available for investment shall be depreciated in accordance with the Bank’s adopted policy for the investment in these assets. These assets shall be depreciated over its useful life using straightline basis. B- Property and Equipment • Property and equipment are measured at cost less accumulated depreciation and any impairment. Depreciation is calculated (except for lands) using the straight-line method over their estimated useful lives when property and equipment are ready for use Item Depreciation rate Buildings 2% Equipment, furniture and fixtures 5%-20% Vehicles 15% Computers 35% • The useful lives of property and equipment are reviewed annually. If expected useful lives vary from the estimated ones; the change in estimate is adjusted prospectively. • The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amount, and the impairment is recorded in the consolidated income statement. Intangible assets: • Intangible assets are classified based on the assessment of their useful lives to definite and indefinite. Intangible assets with definite lives are amortized over the useful economic life, and amortization is recognized in the consolidated income statement, while intangible assets with indefinite useful lives are assessed for impairment at the date of consolidated financial statements and any impairment in their value is recorded in the consolidated income statement. • Intangible assets arising from the Bank’s operations are not capitalized and are recorded in the consolidated income statement for the same year. • Any indications of impairment of intangible assets are reviewed at the date of consolidated financial statements; in addition, the useful lives of these assets are reviewed annually. If expected useful lives vary from the estimated ones; the change in estimate is adjusted prospectively. Item Software Amortization rate 50% 119
  120. Provisions : • Provisions are recognized when the Bank has a present obligation (legal or constructive) at the date of the consolidated financial statements arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured. End of service indemnity provision • End of service indemnity provision shall be calculated pursuant to the provisions of the labor law and the Bank’s bylaws. Employees’ vacation provision • Employees’ vacation provision shall be calculated pursuant to the Bank’s bylaws, and shall be calculated in accordance with the accrual basis. Income tax: • Tax expense comprises current taxes and deferred taxes. • Current tax is calculated based on taxable profits, which may differ from accounting profits published in the consolidated financial statements. Accounting profits may include non-taxable profits or nondeductible expenses which may be exempted in the subsequent financial years. • The Bank has booked provision for income tax in accordance with Income Tax Law No. (34) of 2014 and its amendments, and International Accounting Standard No. (12) which provides for the recognition of deferred taxes resulting from time differences in the fair value reserve. As a result, the Bank may have deferred tax liabilities. • Deferred tax is the amounts expected to be paid or received as a result of temporary timing differences at the consolidated financial statements date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on laws that have been enacted or substantially enacted at the reporting date. • The carrying values of deferred income tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Costs of issuing or purchasing the Bank’s Stocks: 120
  121. • Any costs resulting from issuing or purchasing the Bank’s stocks shall be charged to the retained earnings (on a net basis after the tax effect of these costs, if any). If the issuance or purchasing is not completed, these costs shall be recorded as expenses in the consolidated income statement. Accounts managed for customers: • This item represent the accounts managed by the Bank on behalf of its customers and shall not be recognized as part of the Bank’s assets. Charges and commissions of managing these accounts shall be recognized in the consolidated income statement. Offsetting: • Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position only when there is a legally enforceable right 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. Revenues and expenses recognition: • Revenues and expenses are recognized based on accrual basis except for revenue on non- performing deferred sales and non-performing facilities which transferred to the revenue in suspense account and not recognized within the consolidated income statement. • The commissions shall be recognized as revenues when service is rendered, and the dividends of companies’ stocks shall be recognized upon realization (approved by the General Assembly of Shareholders). Timing of financial assets recognition: • Sale or purchase of financial assets is recognized at the trade date (the date that the Bank commits to purchase or sell the asset). Foreign Currencies: • Transactions in foreign currencies during the year shall be recorded at the prevailing exchange rate at the date of the transaction (Al Taqabud). • Monetary assets and liabilities in foreign currencies are translated to the functional currencies at the rates of exchange prevailing at the consolidated statement of financial position date as published by the Central Bank of Jordan. • Non-monetary assets and liabilities in foreign currencies carried at fair value are translated at the date in which the fair value was determined. • Any gains or losses are recognized within the consolidated income statement. • Translation gains or losses on non-monetary items carried at fair value (such as shares) are recognized within the fair value reserve. 121
  122. Cash and cash equivalents : • Cash and cash equivalents consists of cash and balances with central banks and balances at banks and financial institutions with a maturity of three months, net of due to banks and financial institutions that matures within three months and restricted balances. 2-5. The repercussions of Corona virus (Covid 19) on the Group: On 21 May 2020, the Board Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) issued a statement “of the accounting effects and consequences of the Corona epidemic” to provide clarifications and explanations regarding the accounting treatment in accordance with the financial accounting standards issued by AAOIFI. The following are the most important of these explanations that had an impact on the Group’s consolidated financial statements: 1- Postponement of payments without adding any returns The Group postponed / structured / rescheduled the financing installments of clients in impacted economic sectors from companies and individuals without adding any returns, and considered the contractual financing period as the extended period after taking into account the deferral of installments, as the deferred profits are amortized over the extended contractual period of the financing. Additionally, the statement noted that it is impermissible to calculate the current value of the finances or to apply the concept of opportunity cost. 2- Granting Qard Hasan loans The Group granted Qard Hasan loans through the Central Bank of Jordan / Corona program to support small and medium-sized companies and collected administrative fees (in segments according to the amounts) based on the fatwa of the Sharia Supervisory Board, totaling about one million dinars. 3- The impact on expected credit losses The impact of the Coronavirus pandemic on the calculation of expected credit losses is explained in Note No. (62). This was also accompanied by some of the measures taken by the Government of the Hashemite Kingdom of Jordan and the Central Bank of Jordan (which had an impact on the banking sector and the Group’s business), which most importantly are: –– Allowing the postponement of financing installments for clients in impacted economic sectors, including companies and individuals, and allowing banks to postpone the installments of retail customers and to conduct scheduling / restructuring of clients’ finances on flexible terms. –– Reducing the rates of return on monetary instruments at the Central Bank of Jordan by a total of 1.5% during March 2020. –– Pumping additional liquidity to banks in the amount of JD 1,050 million by reducing the mandatory cash reserve ratio and making a buy-back agreement with traditional banks with the aim of reducing financing costs and providing financing needs for the public and private sectors. 122
  123. –– Reducing financing costs for the Central Bank of Jordan program to finance and support developmental economic sectors. –– Supporting small and medium companies with an amount of JD 500 million through a facilitated financing program guaranteed by the Jordanian Company to Guarantee Loans at a rate of 85% in order to enable these companies to maintain their businesses and employees. –– Reducing loan guarantee commissions and increasing coverage of the domestic and export sales guarantee program. –– Clients who are bounced checks for financial reasons are not included in the list of clients who are in default and are not charged with the resulting commissions and fees. These measures imposed by the Central Bank of Jordan and the statement issued by the Accounting and Auditing Organization for Islamic Financial Institutions affected the results of the Group’s business for the fiscal year ending on 31 December 2020. 3. Use of estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of financial assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the revenues and expenses and the resultant provisions as well as fair value changes reported in shareholders’ equity and unrestricted account holders’ equity. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty and actual results may differ as a result of changes in conditions and circumstances of those estimates in the future. We believe that our estimates in consolidated financial statements are reasonable and detailed as follows: Impairment provision of deferred sales receivables and financing: in determining impairment of financial assets, judgment is required in the estimation of the amount and timing of future cash folws as well as an assessment of whether the credit risk on the financial assets has increased significantly since initial recognition and incorporation of forward looking information in the measurement of ECL. The methodology for applying FAS 30 Impairment and Credit Losses and onerous commitments: The inputs assumptions and techniques for ECL calculation is disclosed in note (62). Income tax provision: the fiscal year is charged with its related income tax according to the laws and accounting standards. Also, the deferred tax assets and liabilities as well as the required tax provision are estimated and recorded. Fair value measurement: The standard requires determination and disclosure of the level in the fair value hierarchy into which the fair value measurements are categorized in their entirety, segregating fair value measurements in accordance with the levels defined in IFRSs. The difference between level (2) and level (3) of the fair value measurements, i.e., assessing whether the inputs are observable and whether the unobservable inputs are significant. This may require judgement and careful analysis of the inputs used to measure fair value, including consideration of factors specific to the asset or liability. 123
  124. Useful lives of tangible and intangible assets : Management estimates the useful lives of tangible and intangible assets upon initial recognition. Moreover, Management periodically re-assesses the useful lives of tangible and intangible assets to calculate annual depreciation and amortization based on the general status of such assets and the estimates of the productive activities expected in the future. The impairment loss (if any) is charged to the statement of income. The factors that affect the estimation of the useful lives of property, equipment and intangible assets include management’s estimates for the period expected to use these assets by the Bank, technological development and obsolescence. In the event that the useful lives of property, equipment and intangible assets differ from management’s estimates, due to an event that resulted in a change in the useful life, the effect of that event will affect the income statement materially. Determining the provision for impairment of financial assets requires the Bank’s management to issue important judgments to estimate the amounts of future cash flows and their timing, in addition to estimating any material increase in the credit risk of financial assets after their initial recognition, in addition to taking into account future measurement information for expected credit losses. Management periodically reviews the financial assets carried at cost in order to assess any ECL. ECL is allocated in accordance to the financing party. A provision is set for the lawsuits raised against the Group. This provision is based to an adequate legal study prepared by the Bank’s legal advisor. Moreover, the study highlights potential risks that the Bank may encounter in the future. Such legal assessments are reviewed periodically. Important estimates related to determining the duration of the lease contract for contracts that include the option to renew the contract. The Group determines the duration of the lease contract as the non-cancellable period, taking into account the periods covered by the option to extend the lease if this option is certain to be exercised, or any periods related to the option to terminate the lease, if it is certain that the Group does not exercise this option. Under some lease contracts, the Group has the right to lease the assets for additional periods, The Bank makes some estimates when assessing whether it is certain to exercise the renewal option. This means that the Group takes into account all relevant factors that constitute an economic incentive to exercise the option of renewal. Subsequently, the Group reassesses the term of the lease in the event of a significant event or change in the conditions under its control, which may affect its ability to exercise (or not exercise) the renewal option (for example, a change in the business strategy). The Group has included the renewal period as part of the lease duration due to the importance of these assets in its operating operations. The contract term that is not subject to termination for some of these assets is considered to be relatively short and in the event that these contracts are canceled, the operational process will be negatively affected in the absence of alternatives to these assets . 124
  125. 4 . Cash and balances with central bank This item consists of the following: 31 December 2020 31 December 2019 JD JD 179,417,479 163,859,470 Current accounts 493,754,543 483,605,361 Statutory cash reserve * 155,606,501 258,604,984 Total balances at the Central Bank of Jordan 649,361,044 742,210,345 828,778,523 906,069,815 Description Cash in vaults Balances at the Central Bank of Jordan: Total In compliance with Islamic Shari’a rules and the Bank’s Articles of Association and bylaws, the Bank does not earn any interest on balances and current accounts held with the Central Bank of Jordan. Amounts of JD 53,027,314 and JD 40,613,181 were deducted as at 31 December 2020 and as at 31 December 2019 respectively, which represent cash balances for accounts managed on behalf of others. There are no balances maturing within more than three months as at 31 December 2020 and 31 December 2019. There were no restricted balances except for the statutory cash reserve as at 31 December 2020 and 31 December 2019. * According to the Central Bank of Jordan Circular No. 10/5/8772 on 20 July 2020, the calculation of the mandatory cash reserve has been amended starting from 1 August 2020. 125
  126. 5 . Balances at banks and financial institutions This item consists of the following: Local banks and financial institutions Foreign banks and financial institutions Total 31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD JD JD Current and on demand accounts 1,550 1,419,560 23,579,885 31,158,107 23,581,435 32,577,667 Less:provision for expected credit loss (6) (2,137) (76,013) (25,506) (76,019) (27,643) 1,544 1,417,423 23,503,872 31,132,601 23,505,416 32,550,024 Unrestricted accounts maturing within 3 months or less - - 27,119,507 37,506,420 27,119,507 37,506,420 Less: provision for expected credit loss - - (24,383) (64,782) (24,383) (64,782) Net unrestricted accounts maturing within 3 months or less - - 27,095,124 37,441,638 27,095,124 37,441,638 Total 1,544 1,417,423 50,598,996 68,574,239 50,600,540 69,991,662 Description Net Current and on demand accounts In compliance with Islamic Shari’a rules and the Bank’s Articles of Association bylaws, the Bank does not earn any interest on current and on demand accounts at local and foreign banks and financial institutions. There were no restricted balances at the local and foreign banks and financial institutions as at 31 December 2020 and 31 December 2019. 6. Investment accounts at banks and financial institutions This item consists of the following: Foreign banks and financial institutions Description 31 December 2020 31 December 2019 JD JD Within (3-6) months 17,725,000 - Maturing within more than one year 17,725,000 17,725,000 Less: expected credit loss (197,988) (43,465) 35,252,012 17,681,535 Total 126
  127. There were no restricted balances at the foreign banks and financial institutions as at 31 December 2020 and 31 December 2019 . Movement on balances and accounts with banks and financial institutions Notes (5,6): Stage 1 Individual Stage 2 Individual Stage 3 Total JD JD JD JD Beginning balance 87,809,087 - - 87,809,087 New balances and accounts during the year 43,603,500 - - 43,603,500 Balances and accounts paid (45,261,645) - - (45,261,645) (439,470) 439,470 - - Ending balance 85,711,472 439,470 - 86,150,942 As of 31 December 2019: Stage 1 Individual Stage 2 Individual Stage 3 Total JD JD JD JD Beginning balance 111,730,596 - - 111,730,596 New balances and accounts during the year 104,960,470 - - 104,960,470 Balances and accounts paid (128,881,979) - - (128,881,979) 87,809,087 - - 87,809,087 As of 31 December 2020: Transferred to stage 2 Ending balance Movement on expected credit loss: Stage 1 Individual Stage 2 Individual Stage 3 Total JD JD JD JD Beginning balance 135,890 - - 135,890 Expected credit loss on new balances and accounts during the year 86,678 - - 86,678 (128,620) - - (128,620) Transferred to stage 2 (3,896) 3,896 - - Adjustments due to changes 204,442 - - 204,442 Ending balance 294,494 3,896 - 298,390 As of 31 December 2019: Stage 1 Individual Stage 2 Individual Stage 3 Total JD JD JD JD Beginning balance 172,808 - - 172,808 Expected credit loss on new balances and accounts during the year 103,621 - - 103,621 (140,539) - - (140,539) 135,890 - - 135,890 As of 31 December 2020: Expected credit loss recovered from balances and accounts paid Expected credit loss recovered from balances and accounts paid Ending balance 127
  128. 7 . Deferred sales receivables and other receivables –Net This item consists of the following: Joint Self Total 31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD JD JD Murabaha to the purchase orderer 719,214,708 663,840,916 - - 719,214,708 663,840,916 Description Individuals (Retail): Deferred sales 11,649,897 9,012,319 - - 11,649,897 9,012,319 Ijarah Mawsoofa Bil Thimma 6,828,157 5,675,826 - - 6,828,157 5,675,826 Ijarah Muntahia Bittamleek receivables 6,676,919 6,603,421 - - 6,676,919 6,603,421 251,574 280,004 - - 251,574 280,004 6,438,509 5,007,706 4,502,743 5,006,529 10,941,252 10,014,235 487,839,216 455,538,029 50,000 100,000 487,889,216 455,638,029 21,864,113 26,298,815 - - 21,864,113 26,298,815 512,071,042 420,430,463 - - 512,071,042 420,430,463 3,029 6,354 - - 3,029 6,354 Istisna’a Customers’ receivables Real estate financing Corporate: International Murabaha Murabaha to the purchase orderer Deferred sales Ijarah Muntahia Bittamleek receivables Istisna’a Musharaka receivables 312,253 324,604 - - 312,253 324,604 27,978,417 16,306,663 - - 27,978,417 16,306,663 130,453 504,125 - - 130,453 504,125 159,650,015 165,484,425 - - 159,650,015 165,484,425 Small and Medium Enterprises (SME’s): Murabaha to the purchase orderer Deferred sales 27,190 36,800 - - 27,190 36,800 Ijarah Mawsoofa bil Thimma 135,516 190,270 - - 135,516 190,270 Ijarah Muntahia Bittamleek receivables 227,482 174,249 - - 227,482 174,249 - 193,000 - - - 193,000 73,423 18,840 2,276,146 2,046,313 2,349,569 2,065,153 Istisna’a Customers’ receivables Government and public sector 1,064,969,843 879,184,944 209,428 176,972 1,065,179,271 879,361,916 Total 3,026,341,756 2,655,111,773 7,038,317 7,329,814 3,033,380,073 2,662,441,587 Less: deferred revenues* (306,534,351) (291,681,762) (2,000) (6,000) (306,536,351) (291,687,762) Less: suspended revenues** (11,391,754) (11,035,839) - - (11,391,754) (11,035,839) Less: deferred mutual insurance*** (14,963,358) (10,609,414) - - (14,963,358) (10,609,414) (109,864,166) (96,065,775) (462,040) (723,106) (110,326,206) (96,788,881) 2,583,588,127 2,245,718,983 6,574,277 6,600,708 2,590,162,404 2,252,319,691 Less: expected credit loss Net deferred sales and other receivables * Deferred revenues include the deferred revenues of Murabaha to the purchase orderer, deferred sales, Ijarah Mawsoofa Bil Thimma and Istisna’a. ** Suspended revenues include the suspended revenues of Murabaha to the purchase orderer, deferred sales, Ijarah Mawsoofa Bil Thimma and Istisna’a. *** Deferred mutual insurance includes insurance installments of Murabaha to the purchase orderer, deferred sales and deferred Ijarah Mawsoofa Bil Thimma. 128
  129. Movements on expected credit losses for deferred sales receivables , other receivables and financing self: Retail Real estate financing Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD JD 725,764 - - - - 725,764 As at 31 December 2020 Balance at beginning of the year Transfer to during the year 65,774 - - - - 65,774 Used during the year (write-offs) (325,933) - - - - (325,933) Balance at the end of the year 465,605 - - - - 465,605 Retail Real estate financing Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD JD Expected credit loss of non-performing receivables on individual customer basis 284,383 - - - - 284,383 Expected credit loss of watch list receivables based on individual customer basis 95,534 - - - - 95,534 Expected credit loss of watch list receivables on portfolio basis 85,688 - - - - 85,688 465,605 - - - - 465,605 Retail Real estate financing Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD JD 643,323 - - - - 643,323 Transfer to during the year 105,487 - - - - 105,487 Used during the year (write-offs) (23,046) - - - - (23,046) Balance at the end of the year 725,764 - - - - 725,764 Retail Real estate financing Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD JD Expected credit loss of non-performing receivables on individual customer basis 259,206 - - - - 259,206 Expected credit loss of watch list receivables based on individual customer basis 277,546 - - - - 277,546 Expected credit loss of watch list receivables on portfolio basis 189,012 - - - - 189,012 725,764 - - - - 725,764 As at 31 December 2020 Balance at the end of the year As at 31 December 2019 Balance at beginning of the year As at 31 December 2019 Balance at the end of the year There are no longer provisions required as a result of settlement or repayment transferred to other receivables, financing, and Ijarah as at 31 December 2020 and 31 December 2019. 129
  130. Movements on the deferred sales receivables were as follow : 31 December 2020 Deferred sales receivables Deferred revenues JD JD Balance at the beginning of the year 9,055,473 749,351 Additions 7,459,511 1,043,962 Disposals (4,834,868) (750,612) 11,680,116 1,042,701 Description Balance at the end of the year Movements on the suspended revenues were as follows: Joint For the year ended 31 December 2020 Retail Real estate financing Large corporates Small and Medium Enterprises Total JD JD JD JD JD Balance at the beginning of the year 5,585,554 1,977,433 2,185,547 1,287,305 11,035,839 Add: suspended revenues during the year 3,342,435 1,183,310 1,307,847 770,333 6,603,925 Less: revenue in suspense reversed to income (2,859,638) (1,493,793) (486,386) (829,396) (5,669,213) Less: suspended revenues written off (237,195) - - (341,602) (578,797) Balance at the end of the year 5,831,156 1,666,950 3,007,008 886,640 11,391,754 Description Joint For the year ended 31 December 2019 Retail Real estate financing Large corporates Small and Medium Enterprises Total JD JD JD JD JD Balance at the beginning of the year 5,072,691 2,434,091 2,295,464 1,577,850 11,380,096 Add: suspended revenues during the year 2,847,028 1,366,124 1,288,320 885,562 6,387,034 Less: revenue in suspense reversed to income (1,972,172) (1,822,782) (1,036,262) (959,133) (5,790,349) Less: suspended revenues written off (361,993) - (361,975) (216,974) (940,942) Balance at the end of the year 5,585,554 1,977,433 2,185,547 1,287,305 11,035,839 Description 130
  131. 8 . Ijarah Muntahia Bittamleek assets - Net This item consists of the following: Joint 31 December 2020 Description Ijarah Muntahia Bittamleek assets - real estate Cost Accumulated Depreciation Net Book Value JD JD JD 893,340,158 (187,594,635) 705,745,523 Joint 31 December 2019 Description Ijarah Muntahia Bittamleek assets - real estate Cost Accumulated Depreciation Net Book Value JD JD JD 815,312,778 (185,712,025) 629,600,753 The accrued Ijarah instalments amounted to JD 7,216,654 as at 31 December 2020 (2019: JD 7,102,274) were included in deferred sales receivables and other receivables (Note 7). 9. Financing - Net This item consists of the following: Joint Description Self Total 31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD JD JD     Individuals (Retail): Diminishing Musharaka 33,963,533 32,417,488 214,215 234,183 34,177,748 32,651,671 Total 33,963,533 32,417,488 214,215 234,183 34,177,748 32,651,671 Less: provision for expected credit loss (1,016,644) (774,631) (3,565) (2,658) (1,020,209) (777,289) Net Financing 32,946,889 31,642,857 210,650 231,525 33,157,539 31,874,382 Non-performing deferred sales receivables, Ijarah Muntahia Bittamleek receivables, other receivables, financing and Al Qard Al Hasan amounted to JD 107,423,085 as at 31 December 2020, representing 3.41% of deferred sales receivable, Ijarah Muntahia Bittamleek receivables, other receivables, financing and Al Qard Al Hasan balance compared to JD 117,038,239 as at 31 December 2019, representing 4.31% of the utilized balance. 131
  132. Non-performing deferred sales receivables , Ijarah Muntahia Bittamleek receivables, other receivables, financing and Al Qard Al Hasan after deducting suspended revenues amounted to JD 98,341,001 as at 31 December 2020, representing 3.13% of deferred sales, Ijarah Muntahia Bittamleek receivables, other receivables, financing and Al Qard Al Hasan balance, compared to JD 107,313,727 as at 31 December 2019, representing 3.97% of the utilized balance. Deferred sales, other receivables, and financing granted to and guaranteed by the Government of Jordan amounted to JD 1,068,174,355 as at 31 December 2020, representing 33.92% of deferred sales, other receivables and financing balance, compared to JD 882,357,000 as at 31 December 2019, representing 32.50 % of the utilized balance. Cumulative movement on direct facilities: Stage 1 As of 31 December 2020 Stage 2 Stage 3 Total JD JD Individual Collective Individual Collective JD JD JD JD Balance at the beginning of the year 1,161,083,136 785,854,552 272,160,723 23,773,484 New facilities during the year 590,122,267 328,839,589 144,798,762 8,354,998 (215,100,450) (96,570,644) (5,888,272) (19,821,226) (656,273,143) Settled facilities (318,892,551) 159,002,564 2,401,874,459 2,902,964 1,075,018,580 Transferred to stage 1 24,770,276 8,586,155 (13,884,867) (5,420,263) (14,051,301) - Transferred to stage 2 (93,100,412) (23,061,167) 107,202,178 27,841,787 (18,882,386) - Transferred to stage 3 (9,395,287) (14,612,107) (16,812,535) (6,928,467) 47,748,396 - - - - - (4,744,573) (4,744,573) Written of facilities Balance at the end of the year 1,354,587,429 870,506,572 396,893,617 Stage 1 As of 31 December 2019 41,733,267 Stage 2 Stage 3 Total JD JD JD 355,273,752 29,342,304 133,017,744 2,194,125,497 118,646,928 6,582,536 6,012,008 1,130,422,416 Individual Collective Individual Collective JD JD JD Balance at the beginning of the year 791,196,230 885,295,467 New facilities during the year 651,768,495 347,412,449 Settled facilities 152,154,438 2,815,875,323 (329,683,012) (432,945,423) (110,296,555) (12,977,453) (29,096,239) (914,998,682) Transferred to stage 1 122,931,907 15,011,153 (119,108,198) (10,109,560) (8,725,302) - Transferred to stage 2 (61,873,141) (14,216,429) 68,306,885 17,674,244 (9,891,559) - Transferred to stage 3 (13,257,343) (14,702,665) (40,662,089) (6,738,587) 75,360,684 - - - - - (7,674,772) (7,674,772) 272,160,723 23,773,484 Written off facilities Balance at the end of the year 132 1,161,083,136 785,854,552 159,002,564 2,401,874,459
  133. Distribution of large corporate facilities according to the bank internal credit rating : As of 31 December 2020 Stage 1 Stage 2 Individual Individual JD Internal Rating from 1 to 6- Description As of 31 December 2019 Stage 3 Total Total JD JD JD JD 249,190,119 149,961,595 - 399,151,714 249,154,550 Internal Rating from 7+ to 7- - 94,867,612 - 94,867,612 119,264,634 Internal Rating from 8 to 10 - - 38,208,039 38,208,039 42,162,678 21,864,113 - - 21,864,113 26,298,816 271,054,232 244,829,207 38,208,039 554,091,478 436,880,678 External Credit Rating Total Cumulative movement on large corporate facilities: Stage 1 Stage 2 Individual Individual JD Balance at the beginning of the year New facilities during the year Stage 3 Total JD JD JD 218,932,372 175,785,628 42,162,678 436,880,678 228,817,698 96,073,415 - 324,891,113 (146,279,952) (60,302,709) (1,097,652) (207,680,313) Transferred to stage 1 13,574,085 (6,841,138) (6,732,947) - Transferred to stage 2 (41,965,807) 46,122,270 (4,156,463) - Transferred to stage 3 (2,024,164) (6,008,259) 8,032,423 - 271,054,232 244,829,207 38,208,039 554,091,478 Stage 1 Stage 2 Individual Individual Stage 3 Total JD JD JD JD Balance at the beginning of the year 128,167,694 215,164,153 23,836,080 367,167,927 New facilities during the year 207,019,984 87,628,026 1,120,900 295,768,910 (144,989,614) (71,839,910) (5,052,997) (221,882,521) Transferred to stage 1 66,364,133 (64,339,251) (2,024,882) - Transferred to stage 2 (33,486,526) 35,056,102 (1,569,576) - Transferred to stage 3 (4,143,299) (25,883,492) 30,026,791 - Adjustments - - - - Written off facilities - - (4,173,638) (4,173,638) 218,932,372 175,785,628 42,162,678 436,880,678 As of 31 December 2020 Settled facilities Balance at the end of the year As of 31 December 2019 Settled facilities Balance at the end of the year 133
  134. Distribution of SME ’s facilities according to the bank internal credit rating: As of 31 December 2019 As of 31 December 2020 Stage 1 Description Stage 2 Stage 3 Total Total JD JD JD JD 37,291,449 - - 104,248,543 72,949,823 - 15,860,196 - - 15,860,196 26,439,460 - - - 21,188,549 21,188,549 22,400,344 Individual Collective Individual Collective JD JD JD Internal Rating from 1 to 6- 66,957,094 - Internal Rating from 7+ to 7- - Internal Rating from 8 to 10 - Collective portfolio Total - 31,953,030 - 3,918,871 9,121,174 44,993,075 37,964,691 66,957,094 31,953,030 53,151,645 3,918,871 30,309,723 186,290,363 159,754,318 Cumulative movement on SME’s facilities: As of 31 December 2020 Stage 1 Description Balance at the beginning of the year Stage 2 Stage 3 Total Individual Collective Individual Collective JD JD JD JD JD JD 58,351,519 27,125,527 41,037,764 1,788,428 31,451,080 159,754,318 New facilities during the year 60,862,368 20,343,649 34,225,215 1,596,242 1,074,098 118,101,572 Settled facilities (43,194,150) (12,541,479) (28,506,852) (666,807) (5,092,928) (90,002,216) Transferred to stage 1 3,766,286 333,948 (2,298,125) (145,132) (1,656,977) - Transferred to stage 2 (10,076,376) (1,724,975) 13,799,169 1,942,744 (3,940,562) - Transferred to stage 3 - (2,752,553) (1,583,640) (5,105,526) (596,604) 10,038,323 Adjustments from exchange rates effect - - - - - - Written of facilities - - - - (1,563,311) (1,563,311) 66,957,094 31,953,030 53,151,645 3,918,871 30,309,723 186,290,363 Stage 3 Total JD Balance at the end of the year As of 31 December 2019 Stage 1 Stage 2 Description Individual Collective Individual Collective JD JD JD JD JD Balance at the beginning of the year 54,930,849 18,790,772 42,725,248 2,490,190 28,182,011 147,119,070 New facilities during the year 59,553,211 20,337,463 28,398,344 1,300,736 1,182,047 110,771,801 (53,224,160) (10,450,341) (28,166,252) (1,444,264) (3,517,450) (96,802,467) Settled facilities Transferred to stage 1 14,790,448 1,577,018 (14,021,868) (1,092,019) (1,253,579) - Transferred to stage 2 (14,318,939) (1,270,621) 17,208,949 1,357,187 (2,976,576) - Transferred to stage 3 (3,379,890) (1,858,764) (5,106,657) (823,402) 11,168,713 - Adjustments - - - - - - Written off facilities - - - - (1,334,086) (1,334,086) Adjustments from exchange rates effect Balance at the end of the year 134 - - - - - - 58,351,519 27,125,527 41,037,764 1,788,428 31,451,080 159,754,318
  135. Distribution of individuals facilities according to the bank internal credit rating : As of 31 December 2019 As of 31 December 2020 Stage 1 Description Stage 2 Stage 3 Total Total JD JD JD JD 20,258,205 - - 59,857,771 56,998,194 5,702,692 - - 5,702,692 9,806,800 - - - 19,061,653 19,061,653 20,562,542 542,418,573 - 26,582,620 39,736,095 608,737,288 539,341,185 25,960,897 26,582,620 58,797,748 693,359,404 626,708,721 Individual Collective Individual Collective JD JD JD Internal Rating from 1 to 6- 39,599,566 - Internal Rating from 7+ to 7- - - Internal Rating from 8 to 10 - Collective portfolio - Total 39,599,566 542,418,573 Cumulative movement on individuals facilities: As of 31 December 2020 Description Stage 1 Stage 2 Stage 3 Total JD JD JD 17,526,463 14,305,952 57,568,546 626,708,721 10,119,823 4,990,820 1,436,130 304,095,252 Individual Collective Individual Collective JD JD JD Balance at the beginning of the year 49,278,530 488,029,230 New facilities during the year 32,708,048 254,840,431 Settled facilities (37,223,885) (180,505,806) (5,476,514) (3,493,638) (8,418,596) (235,118,439) Transferred to stage 1 3,378,475 5,198,993 (2,260,929) (3,428,202) (2,888,337) - Transferred to stage 2 (5,495,703) (15,295,309) 9,357,966 18,521,754 (7,088,708) - Transferred to stage 3 (3,045,899) (9,848,966) (3,305,912) (4,314,066) 20,514,843 - - - - - (2,326,130) (2,326,130) 39,599,566 542,418,573 25,960,897 26,582,620 58,797,748 693,359,404 Written off facilities Balance at the end of the year Cumulative movement on individuals facilities: As of 31 December 2019 Description Stage 1 Individual Stage 2 Collective Individual Collective Stage 3 Total JD JD JD JD JD JD Balance at the beginning of the year 33,526,422 579,653,911 19,873,132 18,662,872 51,138,309 702,854,646 New facilities during the year 34,970,321 236,653,607 499,074 4,948,902 3,568,966 280,640,870 (12,799,343) (319,267,809) (2,742,594) (9,584,912) (10,225,089) (354,619,747) Transferred to stage 1 Settled facilities 4,567,906 8,554,986 (4,567,906) (5,713,219) (2,841,767) - Transferred to stage 2 (7,404,663) (8,352,327) 9,129,726 10,534,730 (3,907,466) - Transferred to stage 3 (3,582,113) (9,213,138) (4,664,969) (4,542,421) 22,002,641 - - - - - (2,167,048) (2,167,048) 49,278,530 488,029,230 17,526,463 14,305,952 57,568,546 626,708,721 Written off facilities Balance at the end of the year 135
  136. Distribution of real estate facilities according to the bank internal credit rating : As of 31 December 2019 As of 31 December 2020 Stage 1 Description Stage 2 Individual Collective Individual Collective JD JD JD JD Stage 3 Total Total JD JD JD Internal Rating from 1 to 6- 53,820,190 - 48,879,328 - - 102,699,518 88,987,849 Internal Rating from 7+ to 7- - - 24,072,540 - - 24,072,540 29,126,488 Internal Rating from 8 to 10 - - - - 12,702,529 12,702,529 15,955,743 Collective portfolio - 296,134,969 - 11,231,776 12,136,399 319,503,144 290,243,416 53,820,190 296,134,969 72,951,868 11,231,776 24,838,928 458,977,731 424,313,496 Total Cumulative movement on real estate facilities: As of 31 December 2020 Description Stage 1 Stage 2 Stage 3 Total JD JD JD 37,810,868 7,679,104 27,820,260 424,313,496 53,655,509 4,380,309 1,767,936 392,736 76,273,643 Individual Collective Individual Collective JD JD JD 80,303,469 270,699,795 New facilities during the year 16,077,153 Settled facilities Balance at the beginning of the year (9,476,665) (22,053,165) (2,284,569) (1,727,827) (5,212,050) (40,754,276) Transferred to stage 1 4,051,430 3,053,214 (2,484,675) (1,846,929) (2,773,040) - Transferred to stage 2 (35,562,526) (6,040,883) 37,922,773 7,377,289 (3,696,653) - Transferred to stage 3 (1,572,671) (3,179,501) (2,392,838) (2,017,797) 9,162,807 - - - - - - - Adjustment Written off facilities Balance at the end of the year - - - - (855,132) (855,132) 53,820,190 296,134,969 72,951,868 11,231,776 24,838,928 458,977,731 Stage 3 Total As of 31 December 2019 Stage 1 Description Individual Collective Individual Collective JD JD JD JD JD JD Balance at the beginning of the year 43,892,991 286,850,784 77,511,219 8,189,242 29,861,344 446,305,580 New facilities during the year 16,374,979 90,421,379 2,121,484 332,898 140,095 109,390,835 Settled facilities (8,358,867) (103,227,273) (7,547,799) (1,948,277) (10,300,703) (131,382,919) Transferred to stage 1 37,209,420 4,879,149 (36,179,173) (3,304,322) (2,605,074) - Transferred to stage 2 (6,663,013) (4,593,481) 6,912,108 5,782,327 (1,437,941) - Transferred to stage 3 (2,152,041) (3,630,763) (5,006,971) (1,372,764) 12,162,539 - 80,303,469 270,699,795 37,810,868 7,679,104 27,820,260 424,313,496 Balance at the end of the year 136 Stage 2
  137. Distribution of government and public sector facilities according to the bank internal credit rating : As of 31 December 2019 As of 31 December 2020 Description Internal Rating from 1 to 6Total Stage 1 Stage 2 Individual Individual JD Stage 3 Total Total JD JD JD JD 923,156,347 - - 923,156,347 754,217,246 923,156,347 - - 923,156,347 754,217,246 Cumulative movement on government and public sector facilities: Stage 1 Stage 2 Individual Individual JD Balance at the beginning of the year Stage 3 Total JD JD JD 754,217,246 - - 754,217,246 New facilities during the year 251,657,000 - - 251,657,000 Settled facilities (82,717,899) - - (82,717,899) 923,156,347 - - 923,156,347 Stage 1 Stage 2 Individual Individual Stage 3 Total JD JD JD JD Balance at the beginning of the year 530,678,274 - - 530,678,274 New facilities during the year 333,850,000 - - 333,850,000 Settled facilities (110,311,028) - - (110,311,028) 754,217,246 - - 754,217,246 As at 31 December 2020 Balance at the end of the year As at 31 December 2019 Balance at the end of the year 137
  138. Cumulative movement on the expected credit loss for direct facilities : Large corporates SMEs Individuals Real estate financing Total JD JD JD JD JD Balance at the beginning of the year 28,116,550 14,955,167 31,963,874 26,288,246 101,323,837 Expected credit loss on the new facilities during the year 11,240,939 5,276,654 10,112,332 5,488,918 32,118,843 Expected credit loss recovered from settled facilities (7,517,801) (2,795,786) (6,176,842) (1,356,543) (17,846,972) Transferred to stage 1 4,258,983 1,140,089 476,817 810,801 6,686,690 Transferred to stage 2 1,399,352 1,159,389 925,334 230,835 3,714,910 Transferred to stage 3 (5,658,334) (2,299,478) (1,402,152) (1,041,636) (10,401,600) Impact on ending balance provision due to change in staging classification (4,360,641) (1,010,435) 581,176 276,624 (4,513,276) 2,493,102 456,128 3,761,729 2,003,541 8,714,500 - (1,563,311) (2,326,130) (855,132) (4,744,573) 29,972,150 15,318,417 37,916,138 31,845,654 115,052,359 Individual level provision 29,972,150 11,398,671 10,424,075 7,581,551 59,376,447 Collective level provision - 3,919,746 27,492,063 24,264,103 55,675,912 As of 31 December 2020 Adjustments Written off facilities Balance at the end of the year Reallocated: Large corporates SMEs Individuals Real estate financing Total JD JD JD JD JD Balance at the beginning of the year 19,130,680 16,141,515 29,190,855 31,451,615 95,914,665 Expected credit loss on the new facilities during the year 21,165,022 3,690,721 6,768,910 2,439,641 34,064,294 Expected credit loss recovered from settled facilities 22,415,785) (6,361,479) (13,051,173) (6,784,601) (48,613,038) Transferred to stage 1 382,188 55,185 52,553 83,866 573,792 Transferred to stage 2 499,635 234,322 216,919 129,267 1,080,143 Transferred to stage 3 21,648,823 4,150,523 8,347,708 2,347,790 36,494,844 - - - - - Adjustments (8,447,348) (1,621,534) 1,760,944 (3,379,332) (11,687,270) Written off facilities (3,846,665) (1,334,086) (1,322,842) - (6,503,593) Balance at the end of the year 28,116,550 14,955,167 31,963,874 26,288,246 101,323,837 Individual level provision 28,116,550 11,498,351 10,271,866 7,315,932 57,202,699 Collective level provision - 3,456,816 21,692,008 18,972,314 44,121,138 As of 31 December 2019 Impact on ending balance provision due to change in staging classification Reallocated: 138
  139. 10 . Financial assets at fair value through owner’s equity – self financed This item consists of the following: 31 December 2020 31 December 2019 JD JD Companies shares 4,900,392 4,210,885 Total financial assets – quoted 4,900,392 4,210,885 Companies shares 2,242,103 1,891,480 Al Wakala Bi Al Istithmar (investment portfolio) 5,832,557 5,939,908 Total financial assets - unquoted 8,074,660 7,831,388 Total financial assets at fair value through owner’s equity – self financed 12,975,052 12,042,273 Description Unquoted financial assets 11. Financial assets at fair value through investment accounts holders’ equity joint This item consists of the following: 31 December 2020 31 December 2019 JD JD Companies shares 18,776,497 17,834,665 Total quoted financial assets 18,776,497 17,834,665 Companies shares 7,934,540 6,399,800 Islamic banks portfolio 820,584 709,000 9,352,249 11,980,364 Total unquoted financial assets 18,107,373 19,089,164 Total financial assets at fair value through the investment accounts holders’ equity - joint 36,883,870 36,923,829 Description Quoted financial assets: Unquoted financial assets: Al Wakala Bi Al Istithmar (investment portfolio ) 139
  140. 12 . Financial assets at amortized cost This item consists of the following: 31 December 2020 31 December 2019 JD JD Islamic Sukuk 12,762,000 12,762,000 Provision for expected credit losses (568,408) (441,028) Net quoted financial assets 12,193,592 12,320,972 180,824,159 182,792,530 4,715,538 6,106,684 185,539,697 188,899,214 Quoted financial assets Unquoted financial assets Islamic Sukuk Islamic banks portfolio Total unquoted financial assets Provision for expected credit loss for financial assets (1,860,090) (1,860,091) Net unquoted financial assets 183,679,607 187,039,123 195,873,199 199,360,095 Total Financial Assets at amortized cost Islamic Sukuk rate of return ranges between 2.8% - 5.47% payable on a semi-annual basis, with a maturity of less than 3 years. Islamic Sukuk in US Dollars rate of return ranges between 6.5% - 9.37% payable on a semi annual basis, with a maturity of 5 years. Short term Islamic Sukuk in US Dollars rate of return ranges between 1.97% - 2.37%,with a maturity of 3 to 6 months. Cumulative movement on investments: Stage 1 Stage 2 Individual Individual JD Balance at the beginning of the year Stage 3 Total JD JD JD 192,752,841 7,090,000 1,818,373 201,661,214 New investments during the year 14,839,124 - - 14,839,124 Matured investments (18,198,641) - - (18,198,641) 189,393,324 7,090,000 1,818,373 198,301,697 Stage 1 Stage 2 Individual Individual Stage 3 Total JD JD JD JD Balance at the beginning of the year 186,116,202 7,090,000 1,818,191 195,024,393 New investments during the year 27,674,027 - - 27,674,027 (21,037,388) - - (21,037,388) - - 182 182 192,752,841 7,090,000 1,818,373 201,661,214 As of 31 December 2020 Balance at the end of the year As of 31 December 2019 Matured investments Adjustments Balance at the end of the year 140
  141. Cumulative movement on the expected credit loss : Stage 1 Stage 2 Individual Individual JD Balance at the beginning of the year Expected credit loss on new investments during the year Stage 3 Total JD JD JD 68,120 414,626 1,818,373 2,301,119 41,718 - - 41,718 Expected credit loss recovered from matured investments (41,719) - - (41,719) Adjustments 38,516 88,864 - 127,380 106,635 503,490 1,818,373 2,428,498 Stage 1 Stage 2 Individual Individual Stage 3 Total JD JD JD JD Balance at the beginning of the year 101,584 1,431,239 1,818,191 3,351,014 Expected credit loss on new investments during the year 67,299 - - 67,299 (100,763) - - (100,763) - (1,016,613) 182 (1,016,431) 68,120 414,626 1,818,373 2,301,119 As of 31 December 2020 Balance at the end of the year As of 31 December 2019 Expected credit loss recovered from matured investments Adjustments Balance at the end of the year 141
  142. 142 28 .4 Jordan Jordan Jordan Center for International Trading Co. Islamic Insurance Co. Insurance Commercial Nature of activity 31 December 31 December Date of preparing financial statements 1995 1983 Acquisition date Joint 5,696,415 4,625,908 5,696,415 4,625,908 1,070,507 JD JD 1,070,507 31 December 2019 31 December 2020 Cost 8,316,058 6,825,796 1,490,262 JD 31 December 2020 8,211,186 6,732,538 1,478,648 JD 31 December 2019 Value under equity method Investments in associates are measured using equity method. Fair value of these investments as at 31 December 2020 amounted to JD 6,907,390 compared to JD 6,374,820 as at 31 December 2019. Total associates 33.3 % Country of incorporation Percentage of ownership Associates Company Name This item consists of the following: 13. Investments in associates
  143. 14 . Investments in real estate This item consists of the following: Joint Investments in real estate * Total 31 December 2020 31 December 2019 JD JD 107,608,263 111,190,169 107,608,263 111,190,169 * Investments in real estate are presented at fair value, with a cost of JD 95,078,917 as at 31 December 2020 compared to JD 95,256,486 as at 31 December 2019. - Movements on investments in real estate were as follow: 31 December 2020 Lands Buildings Total JD JD JD 80,764,574 30,425,595 111,190,169 Additions 494,930 786,405 1,281,335 Disposals (1,393,309) (353,943) (1,747,252) Revaluation difference (1,476,072) (1,639,917) (3,115,989) Net Investments in real estate at the end of the year 78,390,123 29,218,140 107,608,263 Description Balance at the beginning of the year 31 December 2019 Lands Buildings Total JD JD JD 77,619,856 29,874,546 107,494,402 Additions 318,933 551,049 869,982 Disposals (329,830) - (329,830) Revaluation difference 3,155,615 - 3,155,615 80,764,574 30,425,595 111,190,169 Description Balance at the beginning of the year Net Investments in real estate at the end of the year - The fair value of real estate investments is based on the average of the valuations made by independent appraisers who have the professional qualifications and experience to evaluate the location and type of properties subject to appraisal as on 31 December 2020 and 31 December 2019. The fair value was determined based on recent market transactions as well as independent appraisers’ information and professional judgments. 143
  144. 15 . Al Qard Al Hasan - Net This item consists of the following: 31 December 2020 31 December 2019 JD JD Al Qard Al Hasan 81,208,965 20,114,216 Less: provision for expected credit loss - self* (3,705,944) (3,757,667) Al Qard Al Hasan - Net 77,503,021 16,356,549 Description * Movements on assets expected credit loss - self were as follows: Beginning balance Appropriated during the year Transferred during the year Ending balance JD JD JD JD 3,757,667 64,933 (116,656) 3,705,944 Total 3,757,667 64,933 (116,656) 3,705,944 Description Beginning balance Appropriated during the year Transferred during the year Ending balance JD JD JD JD 2,554,737 1,072,576 130,354 3,757,667 2,554,737 1,072,576 130,354 3,757,667 Description 31 December 2020 Expected credit loss-Self 31 December 2019 Expected credit loss-Self Total 144
  145. 16 . Property and equipment - Net This item consists of the following: 31 December 2020 Description Land Buildings Equipment, Furniture and Fixtures Vehicles Computers Total JD JD JD JD JD JD Cost Beginning balance 35,636,218 48,077,653 55,539,685 1,985,459 15,707,593 156,946,608 Additions 2,057,156 3,315,163 1,759,183 - 2,591,670 9,723,172 Disposals - - (277,526) (242,571) (397,668) (917,765) Ending balance 37,693,374 51,392,816 57,021,342 1,742,888 17,901,595 165,752,015 Accumulated Depreciation - (8,234,878) (46,250,310) (1,047,975) (14,259,685) (69,792,848) Depreciation of the year - (1,006,297) (3,036,330) (95,031) (1,562,813) (5,700,471) Disposals - - 183,187 9,798 310,804 503,789 Ending balance - (9,241,175) (49,103,453) (1,133,208) (15,511,694) (74,989,530) 37,693,374 42,151,641 7,917,889 609,680 2,389,901 90,762,485 Payments on purchase of property and equipment - - 1,532,645 - 234,010 1,766,655 Projects in progress - 2,025,565 - - - 2,025,565 37,693,374 44,177,206 9,450,534 609,680 2,623,911 94,554,705 Net book value of property and equipment Net property and equipment at the end of the year 31 December 2019 Land Buildings Equipment, Furniture and Fixtures Vehicles Computers Total JD JD JD JD JD JD Beginning balance 32,296,206 41,455,814 54,123,294 2,459,399 15,454,249 145,788,962 Additions 4,465,995 6,621,839 2,273,104 22,584 311,750 13,695,272 Description Cost Disposals (1,125,983) - (856,713) (496,524) (58,406) (2,537,626) Ending balance 35,636,218 48,077,653 55,539,685 1,985,459 15,707,593 156,946,608 Accumulated Depreciation - (7,309,475) (43,289,995) (1,072,914) (12,750,779) (64,423,163) Depreciation of the year - (925,403) (3,756,449) (110,632) (1,510,882) (6,303,366) Disposals - - 796,134 135,571 1,976 933,681 Ending balance - (8,234,878) (46,250,310) (1,047,975) (14,259,685) (69,792,848) 35,636,218 39,842,775 9,289,375 937,484 1,447,908 87,153,760 Payments on purchase of property and equipment - - 933,060 - 2,227,365 3,160,425 Projects in progress - 2,788,683 - - - 2,788,683 35,636,218 42,631,458 10,222,435 937,484 3,675,273 93,102,868 Net book value of property and equipment Net property and equipment at the end of the year Fully depreciated property and equipment amounted to JD 69,592,959 as at 31 December 2020 compared to JD 55,223,480 as at 31 December 2019. 145
  146. 17 . Depreciation and amortization This item consists of the following: 31 December 2020 31 December 2019 JD JD Property and equipment depreciation (note 16) 5,700,471 6,303,366 Intangible assets amortization (note 18) 1,026,024 937,770 Depreciation of right of use assets 1,597,685 1,601,798 8,324,180 8,842,934 Description Total 18. Intangible assets This item consists of the following: 31 December 2020 31 December 2019 Computer systems and softwares Computer systems and softwares JD JD Balance at the beginning of the year 1,022,543 529,225 Additions 1,090,843 1,431,088 Amortization (1,026,024) (937,770) Total 1,087,362 1,022,543 Payments on softwares purchases 2,066,460 1,513,846 Ending balance at the end of the year 3,153,822 2,536,389 Description 19. Right of use assets / Lease Obligiations This item consists of the following: Right of use Assets 31 December 2020 31 December 2019 JD JD 14,279,403 13,482,026 Additions 70,729 2,524,494 Payments in advance 30,316 - (1,724,349) (1,727,117) 12,656,099 14,279,403 Description Balance at the beginning of the year Depreciation for the year Ending balance at the end of the year 146
  147. Lease Obligations Description 31 December 2020 31 December 2019 JD JD 13 ,777,285 12,730,935 Additions 70,729 2,524,494 Lease Obligation finance cost 739,138 797,251 (2,190,403) (2,275,395) 12,396,749 13,777,285 Balance at the beginning of the year Payments during the year Ending balance at the end of the year 20. Other assets This item consists of the following: Description Accrued revenues Prepaid expenses 31 December 2020 31 December 2019 JD JD 540,598 214,450 458,787 338,862 Temporary debit accounts 5,826,785 5,966,519 Stationery and publications 606,162 610,689 Stamps 116,961 634,042 Credit card accounts 4,330,020 4,891,020 Settlement guarantee fund deposits 25,000 25,000 Refundable deposits 365,974 318,988 - 39,714 38,653,803 34,286,450 354,139 305,815 51,278,229 47,631,549 Acceptable notes Repossessed assets by the Bank against debts*- net Others Total * the following is a summary of the movement in the assets owned by the bank in settlement of Repossessed assets by the Bank against debts: Description 31 December 2020 31 December 2019 JD JD Beginning balance for the year 36,076,921 20,466,440 Additions 7,338,569 15,840,367 Disposals (3,649,808) (229,886) Ending balance for the year 39,765,682 36,076,921 (12,363) (12,363) (1,099,516) (1,778,108) 38,653,803 34,286,450 Provision for acquired assets * Impairment provision for repossessed assets Total * Provision for acquired assets was calculated accordance to the letter of the Central Bank of Jordan No. (10/1/2510) dated 14 February 2017 and its amendments. 147
  148. 21 . Banks and financial institutions accounts This item consists of the following: 31 December 2020 Description Current and on demand accounts Total 31 December 2019 Inside the Kingdom Outside the Kingdom Total Inside the Kingdom Outside the Kingdom Total JD JD JD JD JD JD 64,908,095 1,884,447 66,792,542 88,555 4,582,282 4,670,837 64,908,095 1,884,447 66,792,542 88,555 4,582,282 4,670,837 22. Customers’ current and on demand accounts This item consists of the following: 31 December 2020 Retail Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD Current accounts 753,196,870 15,378,785 214,609,785 39,883,930 1,023,069,370 On demand accounts 240,809,475 285,750 1,082,267 - 242,177,492 994,006,345 15,664,535 215,692,052 39,883,930 1,265,246,862 Description Total 31 December 2019 Retail Large corporates Small and Medium Enterprises Government and public sector Total JD JD JD JD JD Current accounts 706,247,317 21,015,941 204,038,550 48,674,042 979,975,850 On demand accounts 224,328,421 95,038 600,361 - 225,023,820 930,575,738 21,110,979 204,638,911 48,674,042 1,204,999,670 Description Total Government and public sector deposits inside the Kingdom amounted to JD 39,883,930 representing 3.15% of the total customers’ current and on demand accounts as at 31 December 2020 compared to JD 48,674,042 representing 4.04% as at 31 December 2019. Dormant accounts amounted to JD 42,273,892 as of 31 December 2020 compared to JD 37,063,637 as of 31 December 2019. The restricted accounts amounted to JD 6,877,913, representing 0.54% of the total customers’ current and on demand accounts as of 31 December 2020 compared to JD 7,232,462 representing 0.60% as of 31 December 2019 of the total customers’ current and on demand accounts. 148
  149. 23 . Cash margins The item consists of the following: 31 December 2020 31 December 2019 JD JD Cash margins against sales receivables, finances and other receivables 19,504,045 15,271,606 Cash margins against indirect facilities 25,409,142 24,638,357 Other margins 6,509,880 6,600,263 51,423,067 46,510,226 31 December 2020 31 December 2019 JD JD 1,441,976 462,318 1,441,976 462,318 Description Total 24. Accounts payable The item consists of the following: Description Customers’ accounts payable Total 25. Other provisions This item consists of the following: 31 December 2020 Beginning Balance Appropriated during the year Transferred during the year Utilized during the year Ending Balance JD JD JD JD JD 3,350,000 500,000 - - 3,850,000 75,000 - - - 75,000 Employees’ vacation provision 3,500,000 - - - 3,500,000 Contingencies provision 6,624,609 - 2,507 - 6,627,116 13,549,609 500,000 2,507 - 14,052,116 Description End of service indemnity provision Legal case held against bank provision Total 149
  150. 31 December 2019 Beginning Balance Appropriated during the year Transferred during the year Utilized during the year Ending Balance JD JD JD JD JD 3 ,800,000 617,731 - (1,067,731) 3,350,000 75,000 - - - 75,000 Employees’ vacation provision 3,400,000 100,000 - - 3,500,000 Contingencies provision* 6,712,106 - (87,497) - 6,624,609 13,987,106 717,731 (87,497) (1,067,731) 13,549,609 End of service indemnity provision Legal case held against bank provision Total * Beginning balance represents amounts transferred to retained earnings as a result of IFRS (9) implementation. 26. Income tax provision A. Bank’s income tax provision Movements on the Bank’s income tax provision were as follows: 31 December 2020 31 December 2019 JD JD 29,999,703 22,459,373 (23,833,923) (20,818,433) Income tax expense 31,643,599 34,204,739 Income tax paid for the years 2020, 2019 (11,666,934) (5,845,976) 26,142,445 29,999,703 Description Beginning balance for the year Income tax paid Ending balance for the year B. Income tax expense shown in the consolidated income statement represents the following: 31 December 2020 31 December 2019 JD JD Income tax for the profit of the year 31,643,599 34,204,739 Total 31,643,599 34,204,739 Description Income tax provision for the year ended 31 December 2020 was adjusted starting from 1 January 2019 to reach 35% in addition to a national contribution of 3% for a total of 38% in accordance with the income tax law No. (34) of 2014 amended by law No. (38) of the year 2018. The Bank reached a final settlment up to 2018 and the Bank submitted the income tax decleration for the year 2019. 150
  151. Subsidiaries : Al Samaha Financing and Investment Company Ltd: The Company reached a final income tax settlement up to 2018 and the Company submitted the income tax decleration for the year 2019, but the income tax departement has not reviewed the records up to the date these of financial statements. Sanabel Al-Khair for financial investment Company Ltd: The Company reached a final settlement with the income tax department up to to the year 2019. Omaryeh School Company Ltd: The Company reached a final income tax settlement up to 2018 and the Company submitted the income tax decleration for the year 2019, but the income tax departement has not reviewed the records up to the date of this financial statement. Future Applied Computer Technology Company Ltd: The Company reached a final settlement with the income tax department up to the year 2019. 27. Deferred tax liabilities This item consists of the following: 31 December 2019 31 December 2020 Beginning Balance Amounts released during the year Additions during the year Ending Balance Deferred Tax Deferred Tax JD JD JD JD JD JD Financial assets at fair value through the joint investment accounts holders’ equity (5,247,151) - 1,180,419 (4,066,732) (1,545,358) (1,993,917) Investments in real estate reserve 15,933,683 (253,953) (3,150,384) 12,529,346 4,761,151 6,054,800 Total 10,686,532 (253,953) (1,969,965) 8,462,614 3,215,793 4,060,883 3,607,098 23,316 1,028,165 4,658,579 1,770,260 1,370,697 3,607,098 23,316 1,028,165 4,658,579 1,770,260 1,370,697 Description A. Deferred tax liabilities –Joint* B. Deferred tax liabilities – self financed ** Financial assets at fair value through owner’s equity- self Total * Deferred tax liabilities - joint includes an amount of JD 3,215,793 as at 31 December 2020 compared to JD 4,060,883 as at 31 December 2019 resulting from the profits\ (losses) of evaluating financial and non-financial assets within the fair value reserve of the unrestricted investment accounts holders’. ** Deferred tax liabilities - self financed includes an amount of JD 1,770,260 as at 31 December 2020 compared to JD 1,370,697 as at 31 December 2019 resulting from the profits of evaluating financial assets within the fair value reserve of owner’s equity. 151
  152. Movements on deferred tax liabilities were as follows : 27-A. Joint 31 December 2020 31 December 2019 JD JD Beginning Balance 4,060,883 4,358,744 Disposals (845,090) (297,861) 3,215,793 4,060,883 31 December 2020 31 December 2019 JD JD Beginning Balance 1,370,697 843,026 Additions 399,563 527,671 1,770,260 1,370,697 Description Ending Balance 27-B. Self Description Ending Balance 26-C. Reconciliation between tax profit and accounting profit: 31 December 2020 31 December 2019 JD JD Accounting profit 83,765,268 88,554,031 Non-taxable profit (13,757,793) (1,071,748) Nondeductible expenses 13,290,780 2,619,417 Taxable profit 83,298,255 90,101,700 83,200,874 89,984,211 97,381 117,489 Statutory income tax rate - Bank 38% 38% Statutory income tax rate - Subsidiaries 28% 28% 37.98% 37.96% Description Attributable to: Bank Subsidiaries Effective income tax rate 152
  153. 28 . Other liabilities This item consists of the following: Description 31 December 2020 31 December 2019 JD JD 4,970,623 2,866,008 735,689 1,861,703 Accepted cheques Revenues received in advance Al Qard Al Hasan Fund 1,934,535 1,822,430 Temporary deposits 810,374 905,417 Miscellaneous credit balances 4,124,153 2,521,949 Cheques against notes payables 4,026,783 5,991,102 Banker’s cheques 7,539,533 4,062,119 Others 12,632,509 7,953,339 36,774,199 27,984,067 Total 29.A. Unrestricted investment accounts This item consists of the following: 31 December 2020 Retail Large corporates Small and Medium Enterprises Government and public sector Banks Total JD JD JD JD JD JD Saving accounts 595,191,177 158,765 8,342,365 150 21,434,705 625,127,162 Notice accounts 8,903,768 - 3,795,991 615,318 11,741,793 25,056,870 Term accounts 1,974,132,499 21,272,266 64,836,593 62,845,571 13,023,826 2,136,110,755 Total 2,578,227,444 21,431,031 76,974,949 63,461,039 46,200,324 2,786,294,787 Depositors’ share from Investment returns 51,124,204 542,510 2,637,328 1,288,122 687,796 56,279,960 Total unrestricted investment accounts 2,629,351,648 21,973,541 79,612,277 64,749,161 46,888,120 2,842,574,747 Description 31 December 2019 Retail Large corporates Small and Medium Enterprises Government and public sector Banks Total JD JD JD JD JD JD Saving accounts 558,350,672 351,217 11,100,439 262 16,792,915 586,595,505 Notice accounts 9,006,295 - 3,386,919 602,495 8,840,091 21,835,800 Term accounts 1,885,202,168 4,979,237 44,164,490 29,145,040 23,250 1,963,514,185 Total Description 2,452,559,135 5,330,454 58,651,848 29,747,797 25,656,256 2,571,945,490 Depositors’ share from investment returns 50,266,993 109,252 1,217,183 609,703 282,957 52,486,088 Total unrestricted investment accounts 2,502,826,128 5,439,706 59,869,031 30,357,500 25,939,213 2,624,431,578 153
  154. Unrestricted investment accounts share of profits is calculated as follows : –– 40% of the annual average balance of saving accounts. –– 70% of the annual average balance of notice accounts. –– 90% of the minimum balance of term accounts. Profit percentage for Jordanian Dinars deposits was (2.9% - 5.0%) as at 31 December 2020 compared to (3.0% - 5.0%) as at 31 December 2019, profit percentage of foreign currencies deposits was 1.74% as at 31 December 2020 compared to (1.5% - 2%) as at 31 December 2019. Unrestricted investment accounts (Government of Jordan and Public Sector) inside the Kingdom amounted to JD 64,749,161, representing 2.28 % of the total unrestricted investment accounts as at 31 December 2020 compared to JD 30,357,500, representing 1.16 % as of 31 December 2019. The withdrawal restricted investment accounts were amounted to JD 5,403,427 representing 0.19 % of the total unrestricted investment accounts as at 31 December 2020 compared to JD 3,117,003, representing 0.12 % as at 31 December 2019. 29.B. Investment accounts holders’ reserve and non- controlling interest – in subsidiaries and associates This item consists of the following: Joint Description 31 December 2020 31 December 2019 JD JD Investment accounts holders’ reserve – Subsidiaries 13,141,785 14,250,620 Investment accounts holders’ reserve – Associates 2,619,643 2,514,771 Total 15,761,428 16,765,391 41,206 132,814 Non-Controlling Interests 30. Fair value reserve This item consists of the following: 30-A. Joint Joint Description Financial assets at fair value through joint investment accounts holders’ equity reserve Investments in real estate reserve Total 154 31 December 2020 31 December 2019 JD JD (2,521,374) (3,253,234) 7,768,195 9,878,883 5,246,821 6,625,649
  155. 30-B . Self Self Description 31 December 2020 31 December 2019 JD JD 2,888,319 2,236,401 2,888,319 2,236,401 Financial assets at fair value through owner’s equity - self Total 30-C. Movements on the fair value reserve for the unrestricted investment accounts holders’ equity were as following: 31 December 2020 Financial assets at fair value Investments in real estate Total JD JD JD Beginning Balance* (5,247,151) 15,933,683 10,686,532 Unrealized (loss) profits 1,180,419 (3,150,384) (1,969,965) Deferred tax assets (liabilities) 1,545,358 (4,761,151) (3,215,793) Profits transferred to the consolidated income statement - (253,953) (253,953) Ending Balance (2,521,374) 7,768,195 5,246,821 Description 31 December 2019 Financial assets at fair value Investments in real estate Total JD JD JD Beginning Balance * (1,344,483) 12,814,862 11,470,379 (Loss) unrealized profits (3,902,668) 3,408,270 (494,398) 1,993,917 (6,054,800) (4,060,883) - (289,449) (289,449) (3,253,234) 9,878,883 6,625,649 Description Deferred tax (liabilities) assets Profits transferred to the consolidated income statement Ending Balance * The fair value reserve beginning balance includes the prior year deferred tax liabilities of JD 4,060,883. 155
  156. 30-D . Movements on the fair value reserve / owner’s equity were as follows: Financial assets at fair value Description 31 December 2020 31 December 2019 JD JD 3,607,098 2,218,490 Beginning Balance* Unrealized profits Deferred tax liabilities 1,028,165 1,388,608 (1,770,260) (1,370,697) 23,316 - 2,888,319 2,236,401 losses transferred to the consolidated income statement after tax Ending Balance * The fair value reserve beginning balance includes the prior year deferred tax liabilities of JD 1,370,697. 30-E. Provision for probable contingencies: Movements on probable contingent provisions were as follows: 31 December 2020 31 December 2019 JD JD Beginning balance for the year 760,429 1,042,517 Movement during the year 523,931 (282,088) 1,284,360 760,429 31 December 2020 31 December 2019 JD JD Transferred from investment risk fund 30,016,131 31,963,981 Transfer to expected credit losses provision (4,036,122) (1,947,850) 25,980,009 30,016,131 31 December 2020 31 December 2019 JD JD 1,450,853 3,455,761 (1,450,853) (3,455,761) Description Ending Balance for the year 31. Provission for expected future risks: Movements on the provision for expected future risks were as follows: Description Ending Balance Provission for investment risk fund tax: Description Beginning balance for the year Paid income tax Accrued income tax - 2,529,560 Tax payment for the year 2019 - (1,078,707) - 1,450,853 Ending balance for the year 156
  157. Mutual Insurance Fund Movements on the mutual insurance fund were as follows : 31 December 2020 31 December 2019 JD JD 53,065,605 75,372,392 Add: profits for the years 2018 and 2019 1,987,034 2,336,439 Add: insurance premiums collected during the year 4,710,496 2,603,011 63,985 94,599 (4,746,297) (4,527,471) (16,000) (16,000) Less: consulting fees (1,740) (1,740) Less: Insurance paid for the dissolution of contracts before 2018 (21,815) (69,458) (220,486) (726,167) (6,000,000) (22,000,000) 48,820,782 53,065,605 Description Beginning balance Add: amounts recovered from prior years losses Less: insurance premiums paid during the year Less: fund’s committee members remunerations Less: losses written off during the year Less: Expected credit losses provision during the year Ending balance The mutual insurance fund was established based on Article (54) - paragraph (D/3) of the Banks Law No. (28) for the year 2000. Prior approval of the Central Bank of Jordan must be obtained in case of any changes to the mutual insurance fund policies. In case of discontinuing the mutual insurance fund for any reason, the Board of Directors shall determine the way of spending the fund’s sources for charity. The Central Bank of Jordan approved considering the Mutual Insurance Fund as mitigating risk exposure according to its letter No. (10/1/12160) dated 9 October 2014. Compensation payment for the subscriber is made from the Fund as determined by the Bank from the subscriber’s outstanding debt insured in Murabaha or in any other form of deferred sales or as determined by the Bank from the debt and/or the remaining amount from the Ijarah asset in the following cases: –– Death of subscriber. –– The subscriber’s physical disability, fully or partially. –– The subscriber’s insolvency due to lack of income sources for at least one year, without having an assets or possessing the leased estate to settle his debt and has no opportunity to obtain income source in the upcoming year that enable the debtor to settle his debt or to continue in the finance lease. As of the beginning of 2018, the group has applied the accrual basis instead of cash basis with regards to insurance premiums received from subscribers, additionally, it was approved to increase the ceiling of coverage to become JD 150 thousand instead of JD 100 thousand. Mutual insurance fund covers financing granted by Bank (financing granted from joint investment account and Al Wakala Bi Al Istithmar accounts (investments portfolio). 157
  158. Subsidiaries expected credit loss 31 December 2020 31 December 2019 JD JD Al Samaha Funding and Investment Company Ltd . - (Note 7) 509,036 485,783 Al Omariah Schools Company Ltd. - (Note 7) 706,752 595,236 1,215,788 1,081,019 Description Total Movement on the provision for expected credit losses and the Impairment provision for repossessed assets - joint: 31 December 2020 Description JD Balance at the beginning of the year 101,800,672 Provision during the year through the consolidated income statement 8,000,000 Transferred from mutual insurance fund (Note 31(C)) 6,000,000 Transferred from provision of expected future risk (Note 31(A)) 4,036,122 Provision from subsidiaries 134,769 Written-off facilities (4,043,645) Balance at the end of the year 115,927,918 32. Paid-In Capital: The authorized and paid-in capital amounted to JD 200 million as at 31 December 2020 (2019: JD 200 million) consisting of 200 million shares (2019: 200 million shares). 33. Reserves Statutory reserve: The accumulated amounts in this account represent the transferred 10% of annual profits before taxes during the current and previous years, in accordance with Banks Law. This reserve is not available for distribution to shareholders. Voluntary reserve: The accumulated amounts in this account represent the transferred 20% of annual profits before taxes during the current and previous years and is used for purposes determined by the Board of Directors. General Assembly is entitled to fully or partially distribute the reserve as dividends. Restricted reserves are as follows: Description Statutory reserve 158 JD Nature of Restriction 101,261,327 Banks Law
  159. 34 . Retained earnings The item consists of the following: 31 December 2020 31 December 2019 JD JD Balance at the beginning of the year 89,394,545 89,765,833 Profit after income tax 52,121,669 54,349,292 (23,316) - Transferred to statutory reserve (8,382,027) (8,860,903) Transferred to voluntary reserve (8,378,996) (8,859,677) Dividends distributed to shareholders - (27,000,000) Transferred to increase capital - (10,000,000) 124,731,875 89,394,545 Description Realized losses from sale of financial assets at fair value through owner’ equity - self Balance at the end of the year Proposed Dividends According to the Central Bank of Jordan Circular No. (10/3/1228) dated January 20, 2021 which permits all banks operating in the Kingdom to distribute cash dividends to shareholders not exceeding 12% of the paid-in-capital. Accordingly, the cash dividends proposed to be distributed to shareholders during the current year is 12% of the paid-in-capital which amounts to JD 24 million, and this percentage is subject to the approval of the Central Bank of Jordan and the General Assembly. 159
  160. 35 . Deferred sales revenues This item consists of the following: Joint Self-financed Total 31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD JD JD 44,626,203 43,666,084 - - 44,626,203 43,666,084 Deferred sales 775,047 677,725 - - 775,047 677,725 Ijarah Mawsoofa Bil Thimma 440,009 401,251 - - 440,009 401,251 18,915 26,670 - - 18,915 26,670 28,981,390 38,397,816 4,000 6,000 28,985,390 38,403,816 International Murabaha 465,305 977,394 - - 465,305 977,394 Istisna’a 3,179,600 666,031 - - 3,179,600 666,031 18,822,548 18,612,894 - - 18,822,548 18,612,894 487 759 - - 487 759 8,221,973 8,802,967 - - 8,221,973 8,802,967 Istisna’a 1,999 16,798 - - 1,999 16,798 Deferred sales 2,674 926 - - 2,674 926 35,386,867 27,748,549 - - 35,386,867 27,748,549 140,923,017 139,995,864 4,000 6,000 140,927,017 140,001,864 Description Individuals (Retail): Murabaha to the purchase orderer Istisna’a Real Estate Financing Corporate: Murabaha to the purchase orderer Deferred sales Small and Medium Enterprises: Murabaha to the purchase orderer Government and public sector Total 36. Financing revenues This item consists of the following: Joint Description Self-financed Total 31 December 2020 31 December 2019 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD JD JD 486,435 463,995 3,524 3,876 489,959 467,871 - 81,764 - - - 81,764 486,435 545,759 3,524 3,876 489,959 549,635 Individuals (Retail): Diminishing Musharaka Corporate Diminishing Musharaka Total 160
  161. 37 . Gain from financial assets at fair value through the joint investment accounts holders’ equity This item consists of the following: Joint Description 31 December 2020 31 December 2019 JD JD 565,576 776,629 565,576 776,629 Dividends income Total 38. Gain from financial assets at amortized cost The item consists of the following: Joint Description 31 December 2020 31 December 2019 JD JD Islamic Sukuk 9,657,628 7,829,918 Islamic banks portfolio revenues 266,945 308,785 9,924,573 8,138,703 Total 39. Dividends from subsidiaries and associates This item consists of the following: Distributed dividends Ownership percentage Distribution percentage 31 December 2020 31 December 2019 % % JD JD Al Samaha Financing and Investment Company Ltd. 100 5.0 600,000 600,000 Al Omariah Schools Company Ltd 99.8 3.0 477,359 637,722 Future Applied Computer Technology Company Ltd. 100 6.0 300,000 299,250 Jordanian Center for International Trading Co. 28.4 8.0 77,120 67,480 Islamic Insurance Co. 33.3 6.0 300,000 300,000 1,754,479 1,904,452 Joint Subsidiaries Associates Total 161
  162. 40 . Revenues from investments in real estate This item consists of the following: Joint Description 31 December 2020 31 December 2019 JD JD 964,291 839,499 (277,504) (188,930) (6,175) (2,886) Net rent income from investing in real estate 680,612 647,683 Income from sale transactions 314,460 305,588 Revenues from investments in real estate 995,072 953,271 Total rent income from investments in real estate Less: operating expenses Generating rent income Not generating rent income 41. Revenues from Ijarah Muntahia Bittamleek assets This item consists of the following: Joint Description Ijarah Muntahia Bittamleek Total 31 December 2020 31 December 2019 JD JD 43,783,234 42,249,023 43,783,234 42,249,023 31 December 2020 31 December 2019 JD JD 1,787,310 2,167,442 1,787,310 2,167,442 42. Revenues from other investments The item consists of the following: Description Revenue from investment deposits at Islamic financial institutions Total 162
  163. 43 . Net income of subsidiaries This item consists of the following: 31 December 2020 31 December 2019 JD JD 8,988,304 10,169,413 Al Wakala Bi Al Istithmar (Investment portfolio) 252,298 298,719 Finance revenues 1,273,754 1,259,422 Projects revenues 1,742,454 1,944,802 Other revenues 319,195 372,413 Total Revenues 12,576,005 14,044,769 Administrative expenses (8,880,248) (9,946,253) Depreciation (1,079,249) (1,088,624) (136,570) (456) (1,966,297) (1,696,897) Total expenses (12,062,364) (12,732,230) Net income 513,641 1,312,539 Description Revenues School instalments and transportation Expenses Provision for expected credit loss Other expenses 44. Share of unrestricted investment accounts holders’: This item consists of the following: 31 December 2020 31 December 2019 JD JD 687,796 282,957 Saving accounts 5,675,652 5,347,601 Notice accounts 259,656 224,893 49,656,856 46,630,637 56,279,960 52,486,088 Description Banks and financial institutions Customers: Term accounts Total 163
  164. 45 . Bank’s share of the joint investment accounts revenues as Mudarib and Rab Mal The item consists of the following: 31 December 2020 31 December 2019 JD JD Bank’s share as Mudarib 88,351,146 95,490,789 Bank’s share as fund owner (Rab Mal) 43,221,983 39,491,756 131,573,129 134,982,545 31 December 2020 31 December 2019 JD JD Deferred sales revenues – (Note 35) 4,000 6,000 Financing revenues – (Note 36) 3,524 3,876 Dividend from financial assets at the fair value through owner’s equity 23,987 21,347 31,511 31,223 Description Total 46. Bank’s self- financed revenues This item consists of the following: Description Total 46. Bank’s share of restricted investment revenues as Mudarib and Wakeel: This item consists of the following: Wakeel Description Wakeel 31 December 2020 Mudarib 31 December 2019 JD JD JD JD Restricted investment revenues - 1,631,923 - 1,633,035 Less: Share of restricted investment accounts holders’ - (1,446,938) - (1,265,291) Net - 184,985 - 367,744 3,120,889 - 3,220,526 - (2,531,304) - (2,560,229) - 589,585 - 660,297 - Al Wakala Bi Al Istithmar revenues (Investment portfolio) 24,549,395 - 20,561,441 - Less: share of Al Wakala Bi Al Istithmar accounts holders’ (Investment portfolio) (19,457,216) - (15,766,381) - 5,092,179 - 4,795,060 - 5,681,764 184,985 5,455,357 367,744 Al Wakala Bi Al Istithmar revenues Less: share of Al Wakala Bi Al Istithmar accounts holders’ Net Net Total 164 Mudarib
  165. 48 . Banking services revenues This item consists of the following: Description Letters of credit commissions 31 December 2020 31 December 2019 JD JD 553,654 616,572 2,496,069 2,639,027 Collection bills commission 431,170 459,252 Transfers commission 792,815 779,392 Guarantees commissions 4,754,044 4,626,066 Returned cheques commission Salary transfer commission 661,589 1,974,140 Account management commission 835,803 836,853 Cheques books commission 256,967 327,417 Foreign currencies cash deposits commission 54,157 81,120 Brokerage commission 200,101 242,874 Cheques collection commission 133,486 98,544 Credit cards commission 7,013,389 5,502,233 Other commissions 2,989,570 2,109,689 21,172,814 20,293,179 31 December 2020 31 December 2019 JD JD 788,431 589,946 1,267,033 1,488,856 2,055,464 2,078,802 31 December 2020 31 December 2019 JD JD Total 49. Foreign currency gain This item consists of the following: Description Resulting from trading Resulting from valuation Total 50. Other incomes The item consists of the following: Description Rents 77,806 117,190 Bonded revenues 622,724 269,700 Postage and telephone 373,981 405,174 Safe box leasing 251,490 262,113 Others 861,017 1,237,914 2,187,018 2,292,091 Total 165
  166. 51 . Employees expenses This item consists of the following: 31 December 2020 31 December 2019 JD JD Salaries, benefits and allowances 31,983,135 32,034,855 Bank’s contribution in Social Security 3,960,726 3,876,367 Medical expenses 3,228,568 3,159,078 Training expenses 47,939 148,102 Per diem 109,952 162,614 84,172 133,947 1,845,285 1,681,474 246,797 241,480 41,506,574 41,437,917 Description Meals End of service benefits Takaful insurance Total 166
  167. 52 . Other expenses This item consists of the following: 31 December 2020 31 December 2019 JD JD Postage and telephone 1,842,780 1,744,143 Printings and stationery 1,135,316 1,346,881 System maintenance and licenses 3,374,096 3,087,174 Credit Cards 3,065,885 2,206,978 41,619 35,598 Water, electricity and heating 1,698,988 1,484,830 Repair, maintenance and cleaning 2,008,025 1,911,124 Insurance premiums 1,088,475 844,711 Travel and transportation 1,262,042 1,355,855 Legal and consulting fees 377,831 477,792 Professional fees 126,170 126,170 Subscriptions and memberships 1,083,373 1,339,260 Donations 2,821,869 810,751 Licenses, governmental fees and taxes 835,087 1,001,199 Hospitality 101,859 158,366 Advertising and promotion 677,939 1,317,180 Saving accounts rewards 135,000 145,000 Board committees remunerations 114,000 131,000 Master card and visa accounts rewards 149,289 226,309 Board members remunerations 55,000 55,000 Overdraft accounts coverage 568,618 286,182 3,994,097 2,474,879 Cheques collection 319,301 197,183 Lease obligation cost 697,126 748,158 1,151,945 1,258,743 28,725,730 24,770,466 Paid rent Deposit insurance subscription fees Others Total 167
  168. 53 . Other provisions The item consists of the following: 31 December 2020 31 December 2019 JD JD 500,000 617,731 - 100,000 500,000 717,731 31 December 2020 31 December 2019 52,121,669 54,349,292 200,000,000 200,000,000 0.261 0.272 31 December 2020 31 December 2019 JD JD Cash and balances with Central Bank maturing within 3 months 828,778,523 906,069,815 Add: Balances at banks and financial institutions maturing within 3 months 50,700,942 70,084,087 Less: Balances at banks and financial institutions maturing within 3 months (66,792,542) (4,670,837) Total 812,686,923 971,483,065 Description End of service indemnity provision Employees’ vacation provision Total 54. Basic earnings per share (EPS) The item consists of the following: Description Profit for the year after income tax (JD) Weighted average number of shares Basic earnings per share (JD/Fils) 55. Cash and cash equivalents This item consists of the following: Description 168
  169. 169 - - 311 ,641 Less: Mutual Insurance fund Ending balance, Net - Bank’s fees as Mudarib Less: suspended deferred profits - Investment profits 311,641 - Withdrawals Ending balance - 311,641 - - 311,641 - - - - 311,641 JD JD 311,641 31 December 2019 31 December 2020 Deposits Beginning balance Description Real estate trading This item consists of the following: 56. Restricted investments 9,325,613 14,404,109 JD 31 December 2019 6,423,378 8,341,251 JD 31 December 2020 3,184,697 6,284,280 JD 31 December 2019 Deferred sales receivables 5,994,375 14,511,391 JD 31 December 2020 19,992,791 - - 19,992,791 (26,051) 224,988 20,665,122 - - 20,665,122 (238,929) 494,556 9,528,457 (963,196) (1,680,943) 12,172,596 (60,675) 523,134 6,543,957 (546,156) (1,251,138) 8,341,251 (46,658) 399,895 18,665,979 - - 18,665,979 (98,259) 883,801 14,511,391 - - 14,511,391 (82,157) 738,584 (1,570,679) 3,560,134 11,865,509 JD 31 December 2019 Ijarah Muntahia Bittamleek (116,608,496) (3,320,227) (3,054,492) (1,480,963) (2,625,329) 115,737,228 20,665,122 JD 31 December 2020 International Murabaha 4,079,458 3,932,356 JD 31 December 2019 134,022,075 45,355,643 JD 31 December 2020 20,149,902 36,797,895 JD 31 December 2019 Total 599,069 - - 599,069 - - 1,526,238 - - 1,526,238 - - 49,097,937 (963,196) (1,680,943) 51,742,076 (184,985) 1,631,923 43,558,349 (546,156) (1,251,138) 45,355,643 (367,744) 1,633,035 (6,794,263) (6,485,576) (129,082,580) (12,857,445) 5,867,094 1,526,238 JD 31 December 2020 Cash balances
  170. 170 JD - - 386 ,822 Less: expected credit loss provision Impairment provision for repossessed assets Deferred tax (liabililties) assets - Deferred sales receivables Ijarah Muntahia Bittamleek * Cash balances Total - (560,039) - (212,815) (347,224) - - - - - - - - - - - - - - - - - - - JD JD JD JD JD JD JD JD JD 1,008,365 - - - - - - - - - - - - - - - (958,721) - - - - - 405,986 (187,646) 17,131,920 16,549,258 5,633,051 4,548,241 (3,581,337) (3,394,902) (1,126,000) (1,212,512) - - - - - (1,199,429) - - - (10,025,025) (9,122,910) (1,692,794) (36,368,596) (39,563,722) - - - - - - - - - - - - - - 599,974 42,000 - 557,974 - 1,352,922 42,000 498,150 812,772 - 2,620,319 - - - 2,620,319 2,221,492 - - - 2,221,492 - - - - - - - - - - - - - - - 33,999,032 34,216,640 246,191,580 248,874,364 96,077,452 69,601,981 46,713,840 (341,984) (392,357) - - - - - 31,760,324 104,822,970 39,333,500 18,792,184 107,810,500 126,817,459 - - JD 14,748,806 JD JD 825,910 180,910,495 282,448,235 445,909,000 412,955,000 891,818 465,855,436 393,875,230 - - - - - 35,196,463 - - - - - 35,196,463 - - 20,561,441 (4,795,060) 825,910 415,969,375 - - (9,122,910) (1,199,429) 42,000 285,335 465,548 2,221,492 448,498,162 415,969,375 42,000 - (73,157) 2,620,319 445,909,000 412,955,000 891,818 448,498,162 44,838 (392,357) (10,025,025) (1,692,794) (36,368,596) (39,563,722) 496,932,096 465,855,436 (5,092,179) 24,549,395 (2,715,835) (49,793,337) (73,719,223) (17,365,080) (10,854,022) (96,293,123) (106,369,802) (169,291,051) (226,234,410) 1,238,549 - - 34,733,373 34,216,640 294,277,995 298,760,425 96,077,452 69,601,981 46,713,840 (85,000) 368,165 (31,825,461) (774,797) 1,963,756 - - 30,820,426 34,216,640 35,475,586 298,760,425 254,502,322 69,601,981 58,328,090 35,196,463 * On November 4, 2020, assets and receivables of Ijarah Muntahia Bittamleek were transferred between restricted investment accounts (from Al Wakala Bi Al Istithmar to Al Wakala Bi Al Istithmar (investment portfolios)) due to the availability of liquidity in this portfolio and the desire of the Al Wakala Bi Al Istithmar holders to liquidate part of their investment. These assets were transferred at book value, which is equivalent to the recoverable value, and no impairment provisions were recorded on them at the date of transfer. These assets are divisible and did not result in any foreign currency differences. (631,131) - Other liability Ending Balance - (631,131) (Assets) liabilities deferred tax Fair value reserve Investment risk reverse Value of investment units at end of year Number of investment units at end of year - - - - - 25,516,258 28,079,927 - Less: Deferred mutual insurance Ending Balance, Net - 25,129,436 28,079,927 Less: deferred profits Total - 16,677 1,416,259 (299,842) Investment profits (losses) Bank’s Fees as Wakeel (5,064,714) (750,067) 28,813,317 - - - JD Withdrawals 997,806 - Value of investment units at beginning of the year 28,079,927 - Deposits Real estate trading 31 31 31 31 31 31 31 31 31 31 December 31 December 31 December 31 December 31 December December December December December December December December December December 2019 2020 2019 2020 2019 2019 2020 2020 2020 2019 2020 2019 2020 2019 Number of investment units at beginning of the year Beginning balance Description Financial assets through Financial assets through comprehensive income income statement statement This item consists of the following: 57. Al Wakala Bi Al Istithmar (Investments Portfolio)
  171. 58 . Al Wakala Bi Al Istithmar This item consists of the following: 31 December 2020 31 December 2019 JD JD Al Wakala Bi Al Istithmar accounts – Baraka Group * 65,136,892 44,064,464 Al Wakala Bi Al Istithmar accounts – Central Bank of Jordan 14,764,986 16,080,646 Al Wakala Bi Al Istithmar accounts – Islamic Insurance Company 1,286,609 1,286,609 Al Wakala Bi Al Istithmar accounts – Social Security 3,250,000 - 84,438,487 61,431,719 Description Total –– Wakala investments accounts represent cash amounts deposited at the Bank that are managed and invested in accordance with Islamic Shari’a compliant investment modes agreed upon with the Muwakkil in exchange of a lump sum or percentage of the invested funds mentioned in Wakala contract. Any losses incurred shall be borne by the Muwakkil unless arising from the Bank’s (Wakeel) negligence or misconduct. –– The Bank’s fee is 1% - 1.25% annually. * On November 4, 2020, assets and receivables of Ijarah Muntahia Bittamleek were transferred between restricted investment accounts (from Al Wakala Bi Al Istithmar to Al Wakala Bi Al Istithmar (investment portfolios)) due to the availability of liquidity in this portfolio and the desire of the Al Wakala Bi Al Istithmar holders to liquidate part of their investment. These assets were transferred at book value, which is equivalent to the recoverable value, and no impairment provisions were recorded on them at the date of transfer. These assets are divisible and did not result in any foreign currency differences. 59. Related parties transactions The consolidated financial statements include the financial statements of the Bank and the following subsidiaries: Paid - in Capital Company Name Ownership 31 December 2020 31 December 2019 JD JD Al Omariah Schools Company Ltd. 99.8% 16,000,000 16,000,000 Al Samaha Financing and Investment Company Ltd. 100% 12,000,000 12,000,000 Future Applied Computer Technology Company Ltd. 100% 5,000,000 5,000,000 Sanabel Al-Khair for Financial Investments Company Ltd. 100% 5,000,000 5,000,000 171
  172. The Bank entered into transactions with the parent Company , subsidiaries, associates, major shareholders, board members and senior executive management within the Bank’s ordinary course of business using normal Murabaha rates and commercial commissions. All deferred sales receivables, financing and Ijarah Muntahia Bittamleek granted to related parties are considered performing and within the first stage. Below is a summary of transactions with related parties: Associates Subsidiaries Board members and Senior Executive management Description Total Parent Company Related parties 31 December 2020 JD JD JD JD JD JD 31 December 2019 Consolidated statement of financial position items: Deferred sales receivables - - 2,011,671 8,319,471 10,331,142 12,344,167 Financing of employees housing/ Musharaka - - - 1,066,880 1,066,880 1,245,098 82,242 6,557,255 1,580,005 4,132,724 12,352,226 11,514,123 633,597 2,859,227 3,511,574 3,938,573 31 December 2020 31 December 2019 Deposits Off consolidated statement of financial position items: Guarantees and Letters of credit - 18,750 Consolidated income statement items: Paid expenses - 5,602,766 2,068,971 2,591,337 10,263,074 11,497,599 Received revenues - 50,540 141,679 358,365 550,584 745,349 Paid Profits - 156,989 6,001 5,187 168,177 177,947 • Murabaha rate on granted financing ranged between 3.5% - 4.75% annually as at 31 December 2020 (2019: 4% - 5.5%). • Musharaka profit rate of financing granted to the employees ranged between 2% - 4.8% annually as at 31 December 2020 (2019: 2% - 4.8%). • Guarantees commission rate ranged between 1% - 4% annually as at 31 December 2020 (2019: 1% - 4%). Letters of credit commission rate ranged between 1/4% - 3/8% quarterly as at 31 December 2020 (2019: 1/4% - 3/8% quarterly). • Individuals and corporate deposits profit’s percentages equals to the related parties profit percentages. 172
  173. Summary of the Bank ’s senior executive management benefits (salaries, remuneration and other benefits) were as follows: Description 31 December 2020 31 December 2019 JD JD 2,013,211 3,201,282 26,940 1,462,917 2,040,151 4,664,199 Salaries, remunerations and transportation End of service benefits Total 60. Fair value of financial instruments The Bank uses the following order of valuation methods and alternatives to determine and present the fair value of the financial instruments: Level 1 - Quoted market prices in active markets for identical assets or liabilities. Level 2 - Valuation techniques for which the inputs are significant to the fair value measurement is directly or indirectly observable. Level 3 - Valuation techniques for which the inputs are significant to the fair value measurement is unobservable. The table below illustrate the analysis of the financial instruments measured at fair value according to the aforementioned order: First Level Second Level Third Level Total JD JD JD JD Financial assets at fair value through joint investment accounts holders’ equity 18,776,497 18,107,373 - 36,883,870 Financial assets at fair value through owner’s equity – self financed 4,900,392 8,074,660 - 12,975,052 Financial assets at fair value through joint investment accounts holders’ equity 17,834,665 16,012,243 - 33,846,908 Financial assets at fair value through owner’s equity – self financed 4,210,885 7,831,388 - 12,042,273 31 December 2020 31 December 2019 173
  174. 61 . Fair value of financial assets and liabilities not measured at fair value in the consolidated financial statements • All financial assets appear at fair value as at December 31, 2020. The total financial assets that appear at cost due to the inability to determine their fair value as at 31 December 2019 are JD 3,076,921. 62. Risk Management • Banks are exposed to several risks as a result of the operations they provide to their customers and as a result, the need arose for banks to effectively and efficiently manage the risks that they may be exposed to by using the best available methods to manage risks in line with the nature and size of the risks they may be exposed to. • The Bank undertakes the risk management function through a comprehensive risk management framework approved by the Bank’s Board of Directors and senior management in order to identify, measure, follow up and monitor the relevant risk categories and prepare reports on them, and maintain where needed sufficient capital to meet these risks. These measures take into account the appropriate steps to adhere to the provisions and principles of Islamic law, and this had a great impact in mitigating the effects of the Coronavirus pandemic and the resulting impact on some sectors and increasing the likelihood of default for impacted customers through the necessary precautions to deal with the pandemic and taking adequate allocations for expected credit losses and to maintain sufficient capital to deal with these risks that the Bank may be exposed to. • The risks that the Bank may be exposed to are managed according to the general provisions for managing the risks approved by the Board of Directors according to the following principles: 1. Manage risk through a central, non-executive, independent of business and business support departments, which is the risk management department. 2. Use the three defense lines model to manage risks in our bank, so that it is the first line of defense from the business and support departments, which is the body responsible for the risks to which our bank may be exposed (Risk Owners) and the application of approved controls, and the second line of defense from the Risk Management Department Which defines the controls necessary for risk management in cooperation with the Compliance Control Department and the Internal Control Department, the third line of defense from the Internal Audit Department and the Internal Sharia Audit Department that ensures the application of the controls and their effectiveness. 3. Identify risks that our bank might be exposed to and determining the material risks based on the materiality test that is carried out by the Risk Management Department. 4. Determining the acceptable level of risk for all material risks that our bank may be exposed to, and it is prohibited to exceed it under any circumstances except with the approval of the Board of Directors. 5. Using highly efficient measurement methods to measure all material risks and determine the capital required. 6. Monitor all risks that our bank may be exposed to on an ongoing basis, and prepare the risk profile in accordance with the type of risk and the degree of its materiality. 7. Use of enterprise risk management systems (ERMs) which assist in dealing with risk management. 8. Applying the requirements of the Basel Committee on Banking Supervision Standards and best professional practices in risk management. 174
  175. 9 . Disseminating culture of risk management for all the different administrative levels in our bank. • The main objective of our bank’s risk management is to provide a safe business environment that works to achieve our bank’s strategic objectives, by achieving a set of goals as follows: 1. Capital: • Maintaining a safe level of capital through adhering to the minimum levels of capital adequacy in accordance with the instructions of the Central Bank of Jordan. • Maintaining high and high quality capital capable of absorbing losses at any time and in accordance with the requirements of Basel 3 and the relevant Central Bank of Jordan instructions. • Leverage ratio remains within safe levels by adhering to the minimum level in accordance with the instructions of the Central Bank of Jordan. 2. Quality of Assets: • The percentage of non-performing accounts remains within the limits set by the Board of Directors. • The absence of a concentration that exceeds the limits approved at the level of the customer/ investment/economic sector/period. 3. Liquidity: • Having sufficient levels of liquidity to meet the needs of customers in normal and stress conditions. • Commitment to the minimum levels of the legal liquidity ratio for total currencies, the Jordanian dinar, the liquidity coverage ratio, and the net stable funding ratio. 4. Internal Control and Control Systems: Meet the requirements mentioned in the Central Bank of Jordan instructions related to the internal control and control systems. Reviewing the operations carried out in our bank and ensuring that the necessary controls are specified in a manner commensurate with the approved risk appetite and the nature and size of risks that our bank may be exposed to. 5. An effective risk management reporting system: Having an effective system for risk data and preparing reports on risk management and submitting them to the senior executive management and the Board of Directors. Commitment to what is mentioned in the instructions of the Central Bank of Jordan regarding dealing with domestic systemically important banks (D-SIB’s) regarding data and preparing reports on risk management issued by the Basel Committee for Banking Supervision. 175
  176. 6 . Bank security and safety: • Laying down the necessary precautionary measures in coordination with the Bank’s occupational safety and health committee to maintain health and safety of the Bank employees and customers. • Setting a special approved guidance to use in the event of the spread of diseases and epidemics. • Availability of occupational safety and health manual and disaster and emergency response plans. • Readiness of a Bank’s alternative site (the disaster recovery site) in addition to other alternative sites. • The Risk Management Department reports directly to the Risk Management Committee of the Board of Directors and indirectly to the CEO / General Manager of the Bank, and defines the responsibilities of the Risk Management Department according to the following: 1. Supervising the stages of the risk management process in our bank. 2. Identify the risks that our bank might be exposed to and evaluating them to determine the material risks. 3. Preparing and updating material risk policies that include approved risk appetite and risk management strategies. 4. Define risk management strategies according to the type of risk, its size and the acceptable level for each of them, taking into account the levels of capital, liquidity and human resources available in terms of the efficiency and adequacy of staff to manage the risks to which our bank may be exposed. 5. Use and develop high-efficiency measurement methods to measure all material risks and determine the required capital. 6. Analyzing the operations carried out in our bank and ensuring that the necessary controls are determined in proportion to the approved risk appetite and the type and size of risks. 7. Monitor the risks that our bank may be exposed to on an ongoing basis, and prepare the risk structure according to the type of risk and the degree of its materiality. 8. Supervising Enterprise Risk Management Solutions (ERM). Quantitative and qualitative disclosures: 1. Managing credit risk system: • The main activity of our bank is the granting of funds and providing banking services to various customers. As a result, our bank is exposed to credit risk, which is defined as the inability or willingness of the customer to fulfill his contractual obligations to the bank. Credit risks are the main risks to which our bank is exposed to, which requires the availability of resources to manage these risks effectively. • Credit risk management based on several principles, most notably: 1. The segregation of duties between business, credit, and entities granting facilities in the core banking system. 2. Clearly define the criteria for granting credit to all customers in the credit policy, according to the nature of the customer. 3. Preparing the due diligence study for all credit applications, regardless of the nature of the customer, the amount of financing, the size and type of credit risk mitigations. 4. Determine the profit rate on facilities based on the degree of risk to which our bank is exposed to. 5. Determine the matrix of authorities granted to all related parties to the credit approval process according to the nature of the customer. 176
  177. 6 . Determine the role of all entities related to the credit approval process according to the nature of the customer, in a manner that enhances corporate governance for managing credit risk. 7. Implement the requirements of the Basel Committee on Banking Supervision Standards and Best Professional Practices in Credit Risk Management in line with the instructions of the Central Bank of Jordan in particular. 2. Credit study, Control and Follow-up: • The credit application is prepared by the business departments, and the credit department makes due diligence in studying credit applications, and then the credit application is presented to the credit authority body, in order to achieve the principle of segregation of duties. • The evaluation of customers of large, small and medium entities and high net worth individuals through the internal credit rating system (Moody’s), at the level of the Obligor Risk Rating (ORR), and at the level of Facility Risk Rating (FRR). • The customer level credit rating (ORR) represents the creditworthiness of the customer and reflects the probability of default (PD). • The credit rating at the level of Facility Risk Rating (FRR) represents the quality of the credit risk mitigations provided by the customer, which reflects the loss given default ratio (LGD). 3. Acceptable risk limits: • The Bank determines the acceptable level of risk and approves them by the Board of Directors. The actual level is monitored and compared with the acceptable level of risk on a regular basis. It is considered one of the most important elements of governance in the risk management process, in line with the business model approved by the Bank. • Methodology of applying the Islamic Accounting Standard (30) - impairment and credit losses and onerous commitments (FAS 30) 4. 1. Internal credit rating system: • The Bank has an internal rating system to improve the quality of the credit process, as the classification process relies on “operational” qualitative and “financial” quantitative criteria to assess the creditworthiness of customers. • –– –– –– –– The credit rating system aims to: Improving the quality of the credit decision by relying on the internal credit rating. Calculate the customer probability of default. Pricing credit facilities in a manner consistent with the size of the risks to which our bank is exposed. Measuring the credit risks to which our bank exposed to in a standard way at the customer level and at the level of the credit portfolio. –– Improving the quality of the credit portfolio by setting the limits on the credit portfolio according to the internal credit classification. –– Monitor the credit portfolio through the internal credit rating. 177
  178. • Internal credit rating system mechanism: • The classification process is carried out by analyzing basic inputs such as financial statements and customers’ descriptive data according to an approved classification and evaluation methodology to determine the creditworthiness of the customer. • The credit department confirms the customer’s credit rating with the customer’s current circumestances and approves the credit rating. • A second review of the compatibility of the credit rating with the credit risk of the customer is carried out by the risk management department for applications of high credit risk. • Ensure that customers’ information are updated when a new credit request is received, or at least annually. 4. 2. Scope of application / expected credit loss: • The expected credit loss measurement model was applied to the Bank according to the requirements of the standard as follows: 1. 1. Direct and indirect credit facilities. 2. 2. Sukuk recorded at amortized cost. 3. 3. Islamic finance products that bear the characteristics of debt (principal and return). 4. 4. Credit exposures to banks and financial institutions. 5. 5. Ijara receivables. 4. 3. Governance of Application of Islamic Accounting Standard (30): Board of Directors • The Bank’s board of directors and committees roles represented in the following: • Approve the methodology of applying the standard and related policies. • Approve the business model through which the objectives and principles of acquisition and classification of financial instruments are determined. • Ensuring the existence and implementation of effective control systems through which the roles of the related parties are defined. • Ensure the availability of infrastructure to ensure the application of the standard that includes (human resources / internal credit rating systems / automated systems to calculate expected credit losses, etc.), so that it is able to reach the results that ensure adequate hedging against expected credit losses. Executive Management • The role of the executive management is as follows: • Preparing the methodology for applying the standard according to the requirements of the regulatory authorities. • Preparing the business model in accordance with the bank’s strategic plan. • Ensure compliance with the approved methodology for applying the standard. • Supervising the systems used to implement the standard. 178
  179. • Calculating the necessary provisions to meet the expected credit losses according to the instructions of the Central Bank of Jordan. • Monitor the size of the expected credit losses and ensure the adequacy of its provisions. • Preparing the required reports for the relevant authorities. • Communicate with the company providing the system with any updates that may occur to the calculation forms and tools or any other inquiries in particular. 4. 4. Definition and mechanism for calculating and monitoring probability of default (PD), exposure at default (EAD), and loss given default (LGD): A. Default Definition: The concept of default has been defined for the purposes of applying the standard as follows: 1. The presence of past dues on the customer for a period of 90 days or more, or the presence of clear indicators of their near default or bankruptcy. 2. Delay in the payment of profits and / or principal of the sukuk by the issuer of the sukuk for a period of 90 days or more. 3. Default of the banks whom our bank maintains their balances. B. The mechanism for calculating expected credit losses (ECL) on financial instruments: • The external classification of international rating agencies was adopted to calculate the probability of default for the financial instrument, and the loss on default was calculated based on the best professional practices in this field, so that the geographical distribution, the economic sector and the capital structure of the issuer of this instrument are taken. C. Calculating Probability of Default: • Probability of default (PD): The percentage of the debtor’s probability of default or delay in fulfilling the payment of installments or obligations on the specified dates within the next 12 months. a. Individual basis: Banks and financial institutions: • The external credit rating used by international rating agencies is used, which expresses the probability of default through the economic cycle (PD TTC). Large, medium and small companies and high net worth individuals: • The probability of default through the economic cycle (PD TTC) is extracted from the internal credit rating system. • The probability of default through the economic cycle (PD TTC) is converted to probability of default to a specific point in time (PD PIT), using the system provided by the system provider. 179
  180. b . Collective Basis: The probability of default (PD PIT) calculated using the system provided by the provider company with analysis of historical data and additional data on customers such as gender, education, age and period of dealing with our bank, etc. D. Calculating Exposure at Default: A - Direct credit facilities The credit exposure value has been calculated at default, equal to the balance of the credit facilities (drawn and undrawn) as at the date of the financial statements. B - Indirect Credit Facilities: The credit exposure value was calculated at default, equal to the full indirect credit facilities (drawn and undrawn) without applying any credit conversion factor (CCF). E. Calculating Loss Given Default: It is the estimate of the amount of the potential loss on default and represents the difference between the contracted cash flows and those that the Bank expects to collect including the collaterals provided. It is often expressed as a percentage of the credit exposure amount at default. 1 - Banks and financial institutions: Loss given default for banks and financial institutions has been calculated by the RiskCalc LGD Model provided by the system provider. 2 - Large, medium and small companies and high net worth individuals: The model provided by the provider company was used to calculate the RiskCalc LGD Model, so that it is calculated in two parts: Part one: Collateralized covered facililties Part Two: Non-collateralized facilities according to the RiskCalc LGD Model. 5. Determinants of the significant increase in credit risk in calculating expected credit losses: • Significant Increase in Credit Risk is determined by comparing the customer’s current rating with the rating at the date the funds are granted, using Relative Staging Rules that determines the number of degrees of decline needed to classify accounts within the second stage or within The third stage of the initial classification date at the granting process is the common elements (specifications) that have been relied upon in measuring credit risk and expected credit loss on a collective basis. • Common elements and specifications were determined based on the historical analysis of default in the collective portfolio and linked to economic indicators and qualitative specifications for customers, and then taking elements that have an impact on default indicators. 180
  181. 6 . The main economic indicators that were used in calculating the expected credit loss (ECL): • When measuring the PD of different sectors, the historical information and financial conditions in addition to future events are taken into consideration according to reliable information or substantial estimaties by the Group. • A specialized model is used based on macroeconomic variables, which are represented in the growth rates of the Gross Domestic Product (GDP). The indicators used differ according to the type of portfolio and according to the qualitative specifications of the dealers within the portfolio. • The Impact of Coronavirus on the calculation of expected credit losses (ECL): –– As a result of recent developments of the COVID-19 pandemic, the management has done the below: –– Adjusting the macroeconomic scenarios by changing the weighted rates assigned to the three scenarios by giving a higher weight to the worst-case scenarios as follows: Scenario Weighting scenario Best scenario 20% Basic scenario 30% Worst scenario 50% –– The three scenarios are based on an assessment of the impact of the Covid-19 epidemic on the main economic indicators. –– Reflecting the Group’s management directives (Mangement Overlay) in evaluating the impact on certain sectors or specific customers based on studying each sector or customer separately to reach reasonable expectations for the outputs of this event. 1. Credit risk exposure (net of impairment provision and expected credit loss, deferred and suspended revenues, and before collaterals and other risk mitigation factors) 181
  182. Joint Self-financed 31 December 2020 31 December 2019 31 December 2020 31 December 2019 JD JD JD JD - - 649 ,361,044 742,210,345 Balances with banks and financial institutions 27,095,124 37,441,638 23,505,416 32,550,024 Investment accounts with banks and financial Institutions 35,252,012 17,681,535 - - Individuals 630,315,690 578,282,666 25,083,491 16,418,096 Real estate 393,970,663 366,101,059 47,960 93,894 Corporate 502,241,302 408,112,168 21,878,026 651,960 Small and Medium Enterprises (SMEs) 137,108,637 142,177,900 33,863,309 2,621,251 Government and public sector 919,951,835 751,045,190 3,204,512 3,172,056 Individuals - - 44,085 44,085 Real estates 32,946,889 31,642,857 166,565 187,440 - - - - - - 126,034,151 119,719,170 17,058,227 12,639,813 9,182,673 12,437,308 - - 2,669,858 2,179,369 117,604,857 114,205,450 - - - - 37,483,452 59,743,127 2,813,545,236 2,459,330,276 932,524,542 992,028,125 Description Items within the consolidated statement of financial position: Balances with central banks Deferred sales receivables and other receivables: Companies: Financing Musharaka: Corporate Off consolidated statement of financial position items: Guarantees Letters of credit Acceptances Unutilized limits-direct Unutilized limits-indirect Total Collaterals and other credit risk mitigation techniques against Credit Exposures: The quantity and quality of the required collaterals depends on the credit risk assessment of the counterparty. It is also possible to adjust or reduce the risk exposure related to the debtor, concerned party or any other obligor using the credit risk mitigation techniques applicable in the Islamic banks. These include (asset mortgage, third party guarantee, earnest sales, good faith deposit, cash margins, and shares mortgage). Credit risk mitigations against credit exposure in the aforementioned table were as follows: • • • • 182 Cash margins Bank guarantees Real estate collaterals Vehicles and machinery mortgages
  183. 183 - 30 ,804,919 1,124,454 70,331,184 5,831,156 9,743,538 34,838,196 Less: deferred revenues Less:suspended revenues Deferrd mutual insurance Less:Expected credit loss provission 31,842,049 5,219,820 1,666,950 56,156,378 521,802,749 29,038,639 29,669,215 - 3,007,008 27,441,782 562,359,307 27,710,498 - - - - - - - 1,064,969,843 14,531,350 - 886,640 7,586,999 Banks and other financial institutions 62,347,136 222,371 - - - 62,569,507 - - - - - - 62,569,507 - JD 2,678,882,152 111,103,181 14,963,358 11,391,754 306,534,351 3,122,874,796 95,020,808 4,031,361 5,991,206 145,548,588 5,892,385 186,219 1,781,010,073 1,091,272,760 JD Total 25,127,576 3,077,942 - - - 28,205,518 945,732 110,522 187,544 831,897 4,507 50 26,129,823 - JD * The whole receivable balance is considered payable if one instalment falls due. 919,951,835 - - - 145,018,008 160,113,626 1,064,969,843 14,887,419 308,296 630,315,690 426,917,552 502,241,302 137,108,637 751,059,764 Total Net 23,384,252 Loss 1,094,432 264,326 19,767,628 1,109,683 8,835 123,761,503 Government and public sector JD Individuals 214,525 3,605 - - 2,000 220,130 - - - - - - 220,130 - JD 787,067 - - - 34,650,376 856,602 8,188 3,953 545,803 - - 33,235,830 - JD - - - - 3,204,512 JD - - - - 3,204,512 - - 21,878,026 33,863,309 3,204,512 302,935 - - - 22,180,961 267,171 - - 148,344 - - 21,765,446 - JD - 3,781,830 2,628,633 Sub standard Doubtful - SMEs JD Real estate financing - 37,408,095 2,900,708 29,947 475,376,601 21,864,113 JD Companies SMEs Self – financed Government and public sector Non performing: 1,945,050 57,567,946 976,112 Watch list 905,882 21,724 Up to 30 days 125,713 432,156,682 From 31 to 60 Days Due: * 3,314,350 JD 687,145,780 JD Individuals Acceptable risk Real estate financing Low risk Description Corporate Companies Corporate Joint 672,866,460 76,019 - - - 672,942,479 - - - - - - - 23,581,435 649,361,044 JD Banks and other financial institutions 2. Credit exposures of deferred sales receivables and other receivables and financing are distributed according to the risk degree as illustrated in following table: 757,154,408 4,247,568 - - 2,000 761,403,976 2,069,505 118,710 191,497 1,526,044 4,507 50 104,932,664 652,565,556 JD Total
  184. 184 5 ,585,554 7,034,743 28,522,639 Less:suspended revenues Deferrd mutual insurance Less:Expected credit loss provission 26,285,482 3,574,671 1,977,433 58,374,015 487,955,517 32,117,368 2,142,866 1,595,111 50,363,498 1,016,182 95,764 408,112,168 28,056,833 - 2,185,547 25,516,476 463,871,024 12,894,664 14,791,151 - 61,294,899 4,539,286 - 348,591,495 26,298,815 JD Corporate - - - - - - - 879,184,944 JD Government and public sector - - - 128,139,754 142,177,900 751,045,190 13,975,452 - 1,287,305 8,656,927 166,097,584 879,184,944 15,932,407 1,042,953 715,510 17,180,404 757,415 2,632 130,128,504 1,097,806 JD SMEs Companies 114,846 JD Individuals 1,210,287 211,184 257,700 1,688,139 3,313 - 96,948,653 10,609,414 11,035,839 291,681,762 3,441,235 - - - 2,742,760,681 19,903,416 86,890,968 22,498,694 5,014,899 155,877,624 7,171,367 111,662 1,561,910,781 16,421,260 910,567,715 JD Total 55,123,173 2,332,485,013 16,462,181 108,247 - - - 55,231,420 - - - - - - 55,231,420 - JD Banks and other financial institutions *The whole receivable balance is considered payable if one instalment falls due 578,282,666 397,743,916 70,994,590 Less: deferred revenues Net 25,946,529 690,420,192 Total 4,521,724 Doubtful Loss 2,704,278 Sub standard Non performing: 27,038,823 858,484 From 31 to 60 Days Watch list 13,266 626,222,688 401,736,674 - JD JD 3,986,150 Real estate financing Individuals Up to 30 days Due: * Acceptable risk Low risk Description Joint 281,334 2,764 - - 6,000 290,098 - - - - - - 290,098 - JD 651,960 59,717 - - - 711,677 14,315 28 - 551,511 - - 145,823 - JD 2,621,251 979,715 - - - 3,600,966 824,927 76,291 38,947 671,310 - - 1,989,491 - JD Companies Real estate financing Corporate SMEs 3,172,056 - - - - 3,172,056 - - - - - - - 3,172,056 JD 774,760,369 27,643 - - - 774,788,012 - - - - - - 32,577,667 742,210,345 JD Banks and Government and public other financial sector institutions Self – financed 797,949,151 4,511,074 - - 6,000 802,466,225 2,049,529 287,503 296,647 2,910,960 3,313 - 51,424,339 745,497,247 JD Total
  185. 185 31 ,210,909 Watch list 20,145,130 404,173,497 Loss Total Cash margins - 289,414,037 Vehicles and machinery 111,445,110 - Traded shares Real estate Acceptable bank guarantees 3,314,350 2,026,442 Doubtful Of which : 3,252,612 Substandard Non performing: 344,224,054 7,848,363 - 257,744,033 - - 265,592,396 13,292,883 620,365 905,344 17,792,634 232,981,170 - JD JD 3,314,350 Real estate financing Individuals Acceptable risk Low risk Collaterals against: 31 December 2020- 22,533,886 2,588,514 217,185,101 21,864,113 - 264,171,614 10,593,482 - - 34,645,650 197,068,369 21,864,113 JD Corporate 19,155,295 362,029 89,694,683 - 1,124,454 110,336,461 11,067,217 270,275 327,282 15,807,752 81,739,481 1,124,454 JD SMEs - - - - - 1,064,969,843 - - - - - 1,064,969,843 JD 338,951,581 2,950,543 676,068,927 21,864,113 4,438,804 2,109,243,811 55,098,712 2,917,082 4,485,238 99,456,945 856,013,074 1,091,272,760 JD 1,872,051 3,952,322 3,070,762 - - 8,895,138 94,101 14,485 144,237 636,783 8,005,532 - JD Individuals - - 170,130 - - 170,130 - - - - 170130 - JD Real estate financing 608,094 - 1,341,857 - - 1,949,951 156 - - 170,955 1,778,840 - JD Corporate 1,144,770 1,814,573 4,154,690 - - 7,114,033 66,349 1,786 7,254 842,816 6,195,828 - JD SMEs Companies Total Companies Government and public sector Self – financed Joint - - - - - 3,204,512 - - - - - 3,204,512 JD Government and public sector 3,624,915 5,766,895 8,737,439 - - 21,333,764 160,606 16,271 151,491 1,650,554 16,150,330 3,204,512 JD Total The below table illustrate the distribution of the fair value of the collaterals against deferred sales receivables, other receivables, and financing:
  186. 186 24 ,656,902 Watch list 25,768,497 395,333,461 Loss Total - 281,970,581 Vehicles and machinery 109,376,730 - Traded shares Real estate Acceptable bank guarantees Cash margins 3,986,150 3,146,620 Doubtful Of which : 2,488,966 Substandard Non performing: 335,286,326 7,055,768 - 261,396,419 - - 268,452,187 14,981,678 876,630 881,652 29,868,629 221,843,598 - JD JD 3,986,150 Real estate financing Individuals Acceptable risk Low risk Collaterals against: 31 December 2019Corporate 21,709,182 1,803,053 213,469,238 26,298,815 - 263,280,288 7,792,409 4,534,329 - 31,838,249 192,816,486 26,298,815 JD SMEs Individuals Real estate financing 16,987,552 221,369 94,826,013 - 1,097,806 113,132,740 13,575,024 1,009,522 538,958 15,092,781 81,818,649 1,097,806 JD - - - - - 879,184,944 - - - - - 879,184,944 JD 327,723,083 2,024,422 679,068,400 26,298,815 5,083,956 1,919,383,620 62,117,608 9,567,101 3,909,576 101,456,561 831,765,059 910,567,715 JD 1,351,736 3,329,279 1,758,532 - 29,949 6,469,496 143,911 28,038 57,345 972,859 5,267,343 - JD - - 290,098 - - 290,098 - - - - 290,098 - JD 23,185 - 11,885 - - 35,070 154 - - - 34,916 - JD Corporate 54,222 2,010,556 242,966 - 2,300 2,310,044 201,309 9,368 56 658,980 1,440,331 - JD SMEs Companies Total Companies Government and public sector Self – financed Joint - - - - - 3,172,056 - - - - - 3,172,056 JD Government and public sector 1,429,143 5,339,835 2,303,481 - 32,249 12,276,764 345,374 37,406 57,401 1,631,839 7,032,688 3,172,056 JD Total
  187. Scheduled deferred sales receivables and other receivables and financing : These represent receivables/finances which have been classified as non performing and were set aside in terms of the non performing receivables/finances in accordance with a legal scheduling agreement and re-classified as watch list or performing receivables/finances with total amount of JD 47,231,833 as at 31 December 2020 against JD 41,878,759 as at 31 December 2019. Restructured deferred sales receivables and other receivables and financing: Restructuring means rearranging receivables/finances in terms of amending the instalments or extending the term of receivables/finances, deferring some instalments or extending the grace period, etc. and reclassifying these receivables/finances as watch list with total of JD 8,781,892 as at 31 December 2020 against JD 3,575,946 at 31 December 2019. Sukuk: The following table illustrate Sukuk rating presented within the financial assets at fair value through the joint investment accounts holders’ equity and financial assets at amortized cost according to external rating agencies: 31 December 2020 Rating Credit rating agency Financial assets at amortized cost JD AAA S&P 2,879,062 B- S&P - B+ S&P 186,407,627 CCC- S&P 6,586,510 Total 195,873,199 31 December 2019 Rating Credit rating agency Financial assets at amortized cost JD A S&P 4,277,905 B- S&P 170,946,400 B+ S&P 17,460,416 CCC- S&P 6,675,374 Total 199,360,095 187
  188. 3 . Concentration of credit exposure according to geographical area were as follows: Inside the Kingdom Other Middle East Countries Europe Asia* America Other Countries Total JD JD JD JD JD JD JD 649,361,044 - - - - - 649,361,044 1,545 32,274,331 4,719,903 260,538 13,168,730 175,493 50,600,540 - 35,252,012 - - - - 35,252,012 655,443,266 - - - - - 655,443,266 427,132,077 - - - - - 427,132,077 Large corporates 502,255,215 15,483,113 6,381,000 - - - 524,119,328 Small and Medium Enterprises (SMEs) 170,971,946 - - - - - 170,971,946 Government and public sector 923,156,347 - - - - - 923,156,347 Within financial assets at amortized cost 168,882,200 26,990,999 - - - - 195,873,199 Total as at 31December 2020 3,497,203,640 110,000,455 11,100,903 260,538 13,168,730 175,493 3,631,909,759 Total as at 31 December 2019 3,188,734,654 99,181,928 16,184,645 624,171 20,804,603 4,264,258 3,329,794,259 Description Balances with central bank Balances at banks and financial institutions Joint investment accounts at banks and financial institutions Deferred sales and other receivables and financing: Individuals Real estate financing Companies: Sukuk: *Except for Middle East Countries 4. Concentration of credit exposure according to economic sector were as follows: Financial Industrial Commercial Real estate Agriculture Individuals Government and public sector Total JD JD JD JD JD JD JD JD - - - - - - 649,361,044 649,361,044 Balances at banks and financial institutions 50,600,540 - - - - - - 50,600,540 Investment accounts at banks and financial institutions 35,252,012 - - - - - - 35,252,012 - 224,035,613 372,633,450 427,132,077 39,918,949 713,946,528 923,156,347 2,700,822,964 - - 195,873,199 - - - - 195,873,199 Total as at 31 December 2020 85,852,552 224,035,613 568,506,649 427,132,077 39,918,949 713,946,528 1,572,517,391 3,631,909,759 Total as at 31 December 2019 87,673,197 147,945,863 578,222,662 398,025,250 30,334,967 591,164,729 1,496,427,591 3,329,794,259 Description Balances with central bank Deferred sales and other receivables and financing Sukuk: Within financial assets at amortized cost 188
  189. Liquidity Risks Liquidity risk is defined as the Bank ’s inability to provide the required liquidity to cover its obligations at their respective due dates. Bank manage such risks throughout the following: 1. Analyze liquidity (maturity gaps). 2. Maintaining reasonable liquidity to cover outgoing cash flows. 3. Diversifing sources of financing. 4. Establishing the Assets and Liabilites committee . 5. Distribution of financing among various sectors and geographical areas to mitigate concentration risk. 6. Liquidity management is based on natural and emergency circumstances including using and analyzing assets and various financial ratios maturities. First: The below table summarize the maturity profile of the Bank’s liabilities based on contractual undiscounted repayment obligations at the date of the consolidated financial statements: Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 3 years More than 3 years Without maturity Total JD JD JD JD JD JD JD JD Due to banks and financial institutions 1,884,448 - - - 64,908,094 - - 66,792,542 Customers’ current accounts 469,559,394 181,388,725 143,431,319 105,473,913 109,618,053 255,775,458 - 1,265,246,862 12,429,217 5,936,123 5,563,673 5,581,306 6,573,825 15,338,923 Other provisions - - - - - - 15,336,476 15,336,476 Income tax provision - - 26,142,445 - - - - 26,142,445 Deferred tax liabilities - - - 952,230 1,597,022 - 2,436,801 4,986,053 Investment risk fund - - - - - - 25,980,009 25,980,009 5,771,859 11,593,840 1,105,760 20,887,608 17,112,098 7,955,897 7,194,111 71,621,173 41,206 2,842,615,953 31 December 2020 Liabilities: Cash margins Other liabilities Unrestricted investment 345,363,946 accounts holders’ equity Total Total assets (according to expected maturity date) 137,763,123 141,659,602 282,760,299 835,008,864 336,681,811 317,902,799 415,655,356 580,508,333 1,354,519,444 51,423,067 780,317,425 1,633,589,722 50,988,603 4,370,144,580 1,066,779,241 189,867,030 293,315,419 460,293,414 1,187,969,450 1,464,769,259 181,505,046 4,844,498,859 189
  190. Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year 1 to 3 years More than 3 years Without maturity Total JD JD JD JD JD JD JD JD Due to banks and financial institutions 4 ,670,837 - - - - - - 4,670,837 Customers’ current accounts 447,236,149 172,858,767 136,708,777 100,558,787 104,291,158 243,346,032 - 1,204,999,670 Cash margins 12,047,052 5,534,262 5,055,252 4,881,673 5,697,596 13,294,391 - 46,510,226 - - - - - - 14,310,038 14,310,038 Income tax provision 11,999,881 - 17,999,822 - - - - 29,999,703 Deferred tax liabilities - - - 1,210,960 1,349,025 - 2,871,595 5,431,580 Investment risk fund 580,341 - 870,512 - - - 30,016,131 31,466,984 Other liabilities 1,745,551 7,002,406 2,231,774 18,482,789 18,498,276 9,336,433 8,317,481 65,614,710 132,814 2,624,564,392 31 December 2019 Liabilities: Other provisions Unrestricted investment accounts holders’ equity 307,071,374 129,508,468 132,804,294 262,638,897 Total 785,351,185 314,903,903 295,670,431 387,773,106 667,558,619 1,520,662,837 55,648,059 4,027,568,140 1,174,597,756 199,620,377 236,480,616 378,184,560 968,315,255 1,313,852,663 178,120,921 4,449,172,148 Total assets (according to expected maturity date) 537,722,564 1,254,685,981 Second: Off consolidated financial position items: 31 December 2020 31 December 2019 Up to one year Up to one year JD JD Letters of credit and acceptances 28,910,758 27,256,490 Guarantees 126,034,151 119,719,170 Unutilized limits-direct 117,604,857 114,205,450 Unutilized limits-indirect 37,483,452 59,743,127 Capital liabilities 3,634,124 2,824,076 313,667,342 323,748,313 Description Total 3. Market Risks: Market risk is the risk of loss resulting from fluctuations in the market price, which relates to equity instruments in the trading book, exchange rates, market rate of return, commodity and inventory prices, the Bank seeks to mitigate these risks throughout the following: • Diversifying and distributing investments among various sectors and geographical areas. • Analyzing rate of returns trends and expected exchange rates and investments. • Establishing limits to investments on the level of the country, currency, market, instrument and counter party. 190
  191. • Adapting the currency positions in accordance with Central Bank of Jordan regulations. • Studying and analyzing the risks related to new investments and clearing them through detailed reports before accepting them. The Bank is using the sensitivity analysis to assess the market risks for each type of risk in addition to Value at Risk “VaR” to assess the change in equity price risk. Rate of return risks Rate of return risk results from the decline in the rate of return on investments compared to the local market increase in the rate of return “interest” and the Bank’s inability to increase the rate of return on granted facilities with fixed rate of return (Murabaha). The Bank manages these risks through out the following: 1. Managing the rate of return gaps and cost of assets and liabilities according to various maturity dates. 2. Studying the investments return trends. 31 December 2020 Description Jordanian Dinars Change (increase) in rate of return (1%) Sensitivity (profits and losses) Owner’s equity sensitivity Investment accounts holders’ equity sensitivity JD JD JD JD 8,233,504 - 5,635,780 2,597,724 31 December 2020 Description Jordanian Dinars Change (decrease) in rate of return (1%) Sensitivity (profits and losses) Owner’s equity sensitivity Investment accounts holders’ equity sensitivity JD JD JD JD (8,233,504) - (5,635,780) (2,597,724) 31 December 2019 Description Jordanian Dinars Change (increase) in rate of return (1%) Sensitivity (profits and losses) Owner’s equity sensitivity Investment accounts holders’ equity sensitivity JD JD JD JD 7,436,708 - 5,103,455 2,333,253 31 December 2019 Description Jordanian Dinars Change (decrease) in rate of return (1%) Sensitivity (profits and losses) Owner’s equity sensitivity Investment accounts holders’ equity sensitivity JD JD JD JD (7,436,708) - (5,103,455) (2,333,253) 191
  192. Foreign currency risks Foreign currency risk is the risk arising from the change in the foreign currency prices that the Bank maintains . Foreign currencies are managed on the basis of spot trading and foreign currencies positions are monitored on a daily basis against the approved limit for each currency, since the Bank’s policy in managing foreign currencies, is to clear customer’s current positions and cover required positions according to customer’s needs. Bank’s investment policy stipulate that the maximum limit of the foreign currencies positions shall not exceed 15% of the total owner’s equity or 50% of the bank’s total liabilities in foreign currencies, whichever is greater (at a maximum limit of 5% of the owner’s equity for each currency except for US Dollars) in order to cover the customers’ needs in terms of letters of credit, transfers and bills under collection and not for speculation or trading purposes. 31 December 2020 Net Position Change in the exchange rate (5%) Impact on profits and losses Impact on owner’s equity USD 33,149,244 - - - Euro 166,451 8,323 5,160 4,402 GBP 7,267 363 225 - JPY 7,794 390 242 - 671,690 33,585 20,822 - Currency Other Currencies 31 December 2019 Net Position Change in the exchange rate (5%) Impact on profits and losses Impact on owner’s equity USD 22,479,484 - - - Euro 187,512 9,376 5,813 4,016 GBP 20,116 1,006 624 - JPY (43,358) (2,168) (1,344) - Other Currencies 448,447 22,422 13,902 - Currency 192
  193. Concentration of foreign currency risks : 2020 USD Euro GBP JPY Others Total Cash and balances with central bank 83,235,452 10,541,192 4,127,053 - 1,605,399 99,509,096 Cash at banks and financial institutions 42,488,445 4,748,076 410,264 72,465 2,980,422 50,699,672 Investment accounts at banks and financial institutions 35,450,000 - - - Deferred sales receivables and other receivables 139,921,579 3,172,374 521,831 - Financial assets at fair value through the owner’s equity – self financed 821,759 88,047 - - - 909,806 Financial assets at fair value through joint investmentaccounts holders’ equity 1,657,204 - - - - 1,657,204 Financial assets at amortized cost 29,307,913 - - - - 29,307,913 30,618 - - - - 30,618 Assets: Other assets Total Assets 332,912,970 18,549,689 5,059,148 72,465 - 35,450,000 1,454,286 145,070,070 6,040,107 362,634,379 Liabilities: Due to banks and financial institutions 171,413 30,951 - - 31,379 233,743 3,657,962 171,617 - - - 3,829,579 Current accounts 65,095,466 3,895,025 960,832 86 951,326 70,902,735 Unrestricted investment accounts 230,486,513 14,119,836 4,091,049 Cash margins Other liabilities 352,372 165,809 - 64,585 - 4,385,712 253,147,695 - 518,181 Total liabilities 299,763,726 18,383,238 5,051,881 64,671 5,368,417 328,631,933 Net concentration in the consolidated financial position statement - 2020 33,149,244 166,451 7,267 7,794 671,690 34,002,446 Contingent Liabilities – off consolidated statement of financial position item – 2020 24,593,583 2,669,553 - 6,864 1,185,758 28,455,758 2019 Total Assets 321,622,692 18,846,928 4,355,456 17,238 6,563,676 351,405,990 Total Liabilities 299,143,208 18,659,416 4,335,340 60,596 6,115,229 328,313,789 Net concentration in the consolidated financial position statement – 2019 22,479,484 Contingent Liabilities – off consolidated statement of financial position item – 2019 23,803,623 187,512 20,116 (43,358) 448,447 23,092,201 2,044,589 - 46,314 1,018,154 26,912,680 193
  194. Equity price risks Equity price risks result from a change in the fair value of investments in equity . The Bank seeks to manage these risks through diversifying investments in various geographical areas and economic sectors. Description Change in index (5%) Impact on losses and profits Impact on owner’s equity Impact on investment account holders’ equity JD JD JD JD - - 241,467 - - 735,998 2020 Amman Stock Exchange Index 241,467 2019 Amman Stock Exchange Index 735,998 Commodity risks Commodity risks arise from the fluctuations in the value of marketable assets. These risks are related to the current and future fluctuations and market values of specific assets. The Bank is exposed to fluctuations of fully paid commodity prices after the commencement of Salam contracts and to the fluctuations in the remaining value of the leased assets at the end of the lease term. 4. Compliance risks • Compliance risks represents sanctions on matters related to legal or regulatory or financial losses or reputational risks which the Bank might face as a result of non compliance with laws, regulations, standards and proper financial practices. The primary non compliance risks are legal and regulatory sanctions risks, reputational risks, financial losses risks, financial crimes risks, anti-money laundry and fraud and corruption risks. • The Bank seeks to limit these risks through is Compliance Control Department that is concerned with reviewing the requirements of regulatory bodies and ensuring their application on the Bank’s internal procedures and policies throughout setting the compliance strategy and guidelines and establishing the policies related to anti-money laundry and establishing policies and procedures related to laws, regulations, internal and external instructions and holding the necessary training courses. 5. Operational Risks • Operational risks are the risks of loss arising from inadequacy or failure in internal operations, personnel or systems, or from external events. This includes legal risk and Islamic Shari’a noncompliance risk and excludes strategic and reputational risks. The Bank seeks to limit these risks throughout the following: • The existence of documented policies and procedures that mitigates the possibility of such operational risks. • Establishing a Business Continuity Plan (BCP) to mitigate exposure and discontinuity incidents faced by the Bank and a recovery plan. 194
  195. • Implementation of Risk and Control Self-Assessment ( RCSA) methodology, in order to improve the regulatory environment and assist senior management and internal audit in identifying areas of high risk and weaknesses in internal control systems. • Monitor the key Risk Indicators (KRI’s) of our bank’s core operations and develop action plans if they exceed their acceptable risk limits. • The bank prepares, update and examine the Business Continuity Plan (BCP) and Disaster Recovery Plan (IT DR) to reduce exposures and interruptions faced by the bank, and the recovery plan to reduce the effects and losses caused by crises and / or disasters . • Legal department reviews all contracts and related documents used by the Bank. • In coordination with the information security department, internal audit department and the internal control department, the Information Technology department establishes the necessary policies and procedures related to maintaining the information confidentiality in the Bank and managing the access rights to the Bank’s systems. 6. Reputational Risks • Reputational risks is being viewed by the Bank as negative impression on the Bank’s reputation which might lead to potential losses in the sources of funding and loss of customers to competitive banks. • The Bank seeks to limits these risks throughout a set of policies and procedures to enhance the customers’ confidenceh and providing a good banking services and maintaining banking confidentiality and avoid undertaking illegal acts or financing unfavorable sectors and provides suitable information security controls. 7. Information Technology risk: • The increased use of information technology has led to improvement in the effectiveness and efficiency of the operations and services provided by our bank, but it has also brought with it new risks related to information technology. • Under the supervision of the Information Technology Governance Committee and the Board Risk Committee, Our bank manages these risks to avoid exposure to them or mitigate their impact, through continuous monitoring and evaluation of the risks associated with information technology and its impact on banking operations and services in terms of the added value of technical solutions compared to their cost, In terms of quality and quality of projects with a technical basis and evaluation of their results on the bank’s business and improving the level of performance compared to security and technical events that may result from its operation. • There are a number of outputs for the information technology risk management process according to the instructions for governing information and accompanying technology issued by the Central Bank of Jordan and according to the instructions of COBIT 2019, the most important of which is the detailed risk reigester for each technical process or banking service, risk scenarios, risk indicators and risk assessment of outsourcing parties. 195
  196. 8 . Stress testing: Application methodology: • Our bank stress testing methodology includes identifying all types of risks our bank may face under stressful conditions, and assessing the Bank’s ability to withstand these risks according to stress scenarios. • Role and Integrity of stress tests with risk management governance, risk culture and capital planning: • The role of the Board of Directors and senior management is to establish test objectives, identify the scenarios required for each type of risk, and assess the results and needed actions based on the results, especially the ones which have an integral role in the decision-making (capital planning). • Scenario selection mechanism, including key assumptions related to macroeconomic variables: • The Bank carries out sensitivity scenarios analysis determined based on the Central Bank of Jordan instructions in addition to other scenarios based on the assumption and proposal of the Bank to measure the degree of tolerance. • The mechanism of using the tests results in decision making at the appropriate administrative level, including the strategic decisions of the Board of Directors and the senior executive management: • The Risk Management Department prepares a summary of the results of the stress tests and raises them to the concerned parties, indicating the final impact of the tests within specific grades (low / medium / high) and whom is authorized party to make related decisions. • Governance application of stress tests: • The Bank identifies parties related to stress testing (Board of Directors / Risk Management Committee, Assets and Liabilities Committee, Risk Management Department, Business and other supervisory departments) and their respective responsibility for achieving complementarity and judgment in carrying out the required tests. 196
  197. 63 . Risk management Expected credit losses distribution according to classification degree: Description Classification according to (47/2009) Total Exposure Expected credit losses (ECL) JD JD Propability of default (PD) External Crdit rating Exposure at default (EAD) Loss given default (LGD) JD Performing Exposures Internal Rating from 1 to 6- Low risk 922,946,919 - 4.3% 922,946,919 0% Internal Rating from 1 to 6- Acceptable risk 836,453,001 4,734,293 3.3% 836,453,001 25% Internal Rating from 1 to 6- Watch list 53,514,159 381,427 3.8% 53,514,159 28% Internal Rating from 7+ to 7- Acceptable risk 113,671,375 4,605,597 13.4% 113,671,375 23% Internal Rating from 7+ to 7- Watch list 39,588,886 6,424,647 14.2% 39,588,886 31% Internal Rating from 8 to 10 Acceptable risk 3,610,474 3,137,577 100.0% 3,610,474 46% Internal Rating from 8 to 10 Watch list 32,911,978 10,843,863 100.0% 32,911,978 31% External credit rating Low risk 854,957,672 - 0.0% BB- 854,957,672 18% External credit rating Acceptable risk 141,538,281 954,680 0.0% AA- to - CCC- 141,538,281 45% Collective Portfolio Acceptable risk 919,552,549 11,805,165 0.8% 919,552,549 66% Collective Portfolio Watch list 38,729,155 5,740,125 22.2% 38,729,155 57% Total Performing Exposures 3,957,474,449 Non-Performing Exposures Internal Rating from 8 to 10 Substandard 1,005,686 188,770 100% 1,005,686 36% Internal Rating from 8 to 10 Doubtful 997,504 251,720 100% 997,504 13% Internal Rating from 8 to 10 Loss 58,261,335 33,443,782 100% 58,261,335 47% External credit rating Loss 1,818,373 1,818,373 100% 1,818,373 100% Collective Portfolio Substandard 6,777,576 3,407,264 100% 6,777,576 75% Collective Portfolio Doubtful 3,078,298 1,341,246 100% 3,078,298 60% Collective Portfolio Loss 30,309,003 12,017,766 100% 30,309,003 61% D Total Non-Performing Exposures 102,247,775 Total Exposures 4,059,722,224 197
  198. Description Classification according to (47/2009) Total Exposure Expected credit losses (ECL) JD JD Propability of default (PD) External Crdit rating Exposure at default (EAD) Loss given default (LGD) JD Performing Exposures Internal Rating from 1 to 6- Low risk 754,040,274 - 4.3% 754,040,274 Internal Rating from 1 to 6- Acceptable risk 663,512,329 3,106,999 2.7% 663,512,329 24% Internal Rating from 1 to 6- Watch list 326,783 834 1.4% 326,783 27% Internal Rating from 7+ to 7- Acceptable risk 117,600,068 3,121,087 15.7% 117,600,068 22% Internal Rating from 7+ to 7- Watch list 89,255,252 8,083,154 8.3% 89,255,252 28% Internal Rating from 8 to 10 Acceptable risk 10,659,628 4,648,179 100% 10,659,628 44% Internal Rating from 8 to 10 Watch list 32,443,535 12,598,774 100% 32,443,535 39% External credit rating Low risk 913,156,745 - 2.8% B+ 913,156,745 External credit rating Acceptable risk 145,954,698 680,118 0.6% A+ to - CCC- 145,954,698 44% Collective Portfolio Acceptable risk 869,278,052 9,441,129 0.8% 869,278,052 58% Collective Portfolio Watch list 29,630,264 3,109,120 37% 29,630,266 48% Total Performing Exposures 3,625,857,630 Non-Performing Exposures Internal Rating from 8 to 10 Substandard 1,136,139 384,391 100% 1,136,139 43% Internal Rating from 8 to 10 Doubtful 16,572,049 13,099,902 100% 16,572,049 34% Internal Rating from 8 to 10 Loss 45,718,123 19,644,603 100% 45,718,123 79% External credit rating Loss 1,818,373 1,818,373 100% 1,818,373 100% Collective Portfolio Substandard 4,036,680 1,605,383 100% 4,036,680 50% Collective Portfolio Doubtful 5,636,602 2,278,187 100% 5,636,602 50% Collective Portfolio Loss 33,956,538 13,172,277 100% 33,956,538 51% D Total Non-Performing Exposures 108,874,504 Total Exposures 3,734,732,134 198
  199. 199 143 ,682,673 786,795,596 Other assets Grand total Other commitments Letter of credits Guarantees 789,023,046 10,100 - 2,217,350 - Encumbered financial assets (Debt instruments) Total - 29,419,497 201,325,702 37,672,611 12,865,782 7,104,636 - - - - - Within financial assets at amortized cost 29,419,497 Financial assets 143,682,673 - 21,864,113 Credit facilities - Within financial assets at fair value through other comprehensive income 62,569,507 Investment accounts at banks and financial institutions - - 23,581,435 Balances at banks and financial institutions - Within financial assets at fair value through income statement 649,361,044 JD JD Balances with central bank As at 31 December 2020 Industrial Financial Financial instruments total exposure distribution : 450,417,838 70,295,046 12,647,240 21,910,024 345,565,528 - - - - - - 345,565,528 - - - JD Commercial Distribution of exposure according to economic sector: 506,231,935 7,576,397 778,855 38,898,952 458,977,731 - - - - - - 458,977,731 - - - JD Real estate 50,374,456 4,376,525 1,872,366 1,059,104 43,066,461 - - - - - - 43,066,461 - - - JD Agriculture - - - - - - - - - - - - - - - JD Shares - - - - - - 186,203,066 - - - JD Others - - - 33,992,057 727,664 53,991,171 1,092,038,547 186,203,066 - - 168,882,200 - - 168,882,200 923,156,347 - - - JD Government and public sector 155,088,309 28,910,758 126,034,151 3,749,689,006 - - 198,301,697 - - 198,301,697 2,815,875,323 62,569,507 23,581,435 649,361,044 JD Total 695,396,742 1,092,038,547 274,913,958 4,059,722,224 1,165,573 18,851 852,914 693,359,404 - - - - - - 693,359,404 - - - JD Individuals
  200. 200 Grand total 892 ,472,898 178,061,572 38,127,794 9,226,540 5,000 - Other commitments Letter of credits 7,828,590 122,878,648 - 5,434,837 - Other assets - Guarantees - Encumbered financial assets (Debt instruments) - 887,033,061 30,714,814 Within financial assets at amortized cost - - - 122,878,648 - - Total - 30,714,814 Financial assets Within financial assets at fair value through other comprehensive income 26,298,815 Credit facilities - 55,231,420 Investment accounts at banks and financial institutions Within financial assets at fair value through income statement 32,577,667 Balances at banks and financial institutions - JD JD 742,210,345 Industrial Financial Balances with central bank As at 31 December 2019 430,780,894 54,067,391 9,104,787 15,044,964 352,563,752 - - - - - - 352,563,752 - - - JD Commercial 469,709,271 13,602,807 1,409,344 30,422,986 424,274,134 - - - - - - 424,274,134 - - - JD Real estate 36,326,961 5,113,355 464,879 838,184 29,910,543 - - - - - - 29,910,543 - - - JD Agriculture - - - - - - - - - - - - - - - JD Shares 686,121,314 40,373,896 5,330,148 28,113,050 612,304,220 - - - - - - 612,304,220 - - - JD Individuals 924,986,674 - - - 924,986,674 - - 170,946,400 - - 170,946,400 754,040,274 - - - JD Government and public sector 116,272,550 22,658,334 1,720,794 32,036,559 59,856,863 - - - - - - 59,856,863 - - - JD Others 3,734,732,134 173,948,577 27,256,492 119,719,170 3,413,807,895 - - 201,661,214 - - 201,661,214 2,382,127,249 55,231,420 32,577,667 742,210,345 JD Total
  201. Distribution of exposures according to the stages of classification in accordance with FAS 30 : As at 31 December 2020 Stage 1 Stage 2 Stage 3 Total JD JD JD 7,706,453 - - 789,023,046 5,922,920 98,018,193 701,666 4,335,123 201,325,702 191,263,827 23,768,613 178,978,162 3,497,240 52,909,996 450,417,838 Real estate 31,965,094 359,306,611 68,039,722 11,275,030 35,645,478 506,231,935 Agriculture 27,384,912 677,990 21,163,369 168,261 979,924 50,374,456 - - - - - - 110,623,799 469,446,506 29,164,468 27,331,970 58,829,999 695,396,742 1,092,038,547 - - - - 1,092,038,547 116,161,578 55,124,350 93,371,216 1,758,923 8,497,891 274,913,958 2,442,362,920 914,986,220 496,441,583 44,733,090 161,198,411 4,059,722,224 Stage 3 Total Description Individual Collective Individual Collective JD JD JD Financial 780,577,363 739,230 Industrial 92,347,800 Commercial Shares Individuals Government and public sector Others Total As at 31 December 2019 Stage 1 Description Stage 2 Individual Collective Individual Collective JD JD JD JD JD JD Financial 879,324,064 752,494 10,241,526 - 2,154,814 892,472,898 Industrial 92,432,363 5,519,911 71,804,230 258,116 8,046,953 178,061,573 Commercial 224,978,622 18,872,977 136,334,137 1,901,274 48,693,885 430,780,895 Real estate 77,909,908 280,108,822 59,488,502 8,158,228 44,043,811 469,709,271 Agriculture 28,399,242 1,194,376 4,654,366 5,821 2,073,156 36,326,961 - - - - - - 53,114,934 531,683,539 26,762,341 15,465,544 59,094,956 686,121,314 924,986,674 - - - - 924,986,674 54,414,167 18,181,013 39,001,070 411,569 4,264,729 116,272,548 2,335,559,974 856,313,132 348,286,172 26,200,552 168,372,304 3,734,732,134 Shares Individuals Government and public sector Others Total 201
  202. 202 - Other assets 122 ,276,250 28,910,758 155,088,309 Guarantees Letter of credits Other liabilities 3,918,531,321 3,612,256,004 Total for the year Grand total - Encumbered financial assets (Debt instruments) 168,882,200 - Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost - 168,882,200 Financial assets Within financial assets at fair value through income statement 2,794,011,210 - 1,550 108,211,311 - - 3,589,644 104,621,667 - - 17,613,959 - - 17,613,959 17,567,184 62,569,507 6,871,017 - JD JD 649,361,044 Other Middle East Countries Inside the Kingdom Credit facilities Investment accounts at banks and financial institutions Balances at banks and financial institutions Balances with central bank As at 31 December 2020 Geographic sector total exposure distribution : Distribution of exposure according to geographical sectors: 14,473,270 - - - 14,473,270 - - 7,090,000 - - 7,090,000 4,296,929 - 3,086,341 - JD Europe 2,911,311 - - 147,997 2,763,314 - - 2,502,086 - - 2,502,086 - - 261,228 - JD Asia 2,410,667 - - 20,260 2,390,407 - - 2,213,452 - - 2,213,452 - - 176,955 - JD Africa 13,184,344 - - - 13,184,344 - - - - - - - - 13,184,344 - JD America - - - - - - - - - - - - - - - JD Other countries 4,059,722,223 155,088,309 28,910,758 126,034,151 3,749,689,006 - - 198,301,697 - - 198,301,697 2,815,875,323 62,569,507 23,581,435 649,361,044 JD Total
  203. 203 173 ,948,577 Other liabilities 3,588,703,623 27,256,492 Letter of credits Grand total 117,093,816 Guarantees 3,270,404,738 - Other assets Total for the year - Encumbered financial assets (Debt instruments) 170,946,400 - Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost - 170,946,400 Financial assets Within financial assets at fair value through income statement 2,355,828,433 - 1,419,560 105,782,197 - - 2,525,233 103,256,964 - - 24,608,130 - - 24,608,130 20,907,146 55,231,420 2,510,268 - JD JD 742,210,345 Other Middle East Countries Inside the Kingdom Credit facilities Investment accounts at banks and financial institutions Balances at banks and financial institutions Balances with central bank As at 31 December 2019 8,346,477 - - - 8,346,477 - - - - - - 5,391,670 - 2,954,807 - JD Europe 2,370,617 - - 100,121 2,270,496 - - 1,646,325 - - 1,646,325 - - 624,171 - JD Asia 4,603,509 - - - 4,603,509 - - 4,460,359 - - 4,460,359 - - 143,150 - JD Africa 24,925,711 - - - 24,925,711 - - - - - - - - 24,925,711 - JD America - - - - - - - - - - - - - - - JD Other countries 3,734,732,134 173,948,577 27,256,492 119,719,170 3,413,807,895 - - 201,661,214 - - 201,661,214 2,382,127,249 55,231,420 32,577,667 742,210,345 JD Total
  204. Distribution of exposures according to the stages of classification in accordance with FAS 30 : As at 31 December 2020 Stage 1 Stage 2 Stage 3 Total JD JD JD 488,630,648 44,733,090 159,380,038 3,918,531,320 - 7,810,935 - - 108,211,311 14,473,270 - - - - 14,473,270 Asia 2,911,312 - - - - 2,911,312 Africa 592,294 - - - 1,818,373 2,410,667 13,184,344 - - - - 13,184,344 2,442,362,920 914,986,220 496,441,583 44,733,090 161,198,411 4,059,722,224 Stage 3 Total Description Individual Collective Individual Collective JD JD JD Inside the Kingdom 2,310,801,324 914,986,220 Other Middle East Countries 100,400,376 Europe America Total As at 31 December 2019 Stage 1 Description Stage 2 Individual Collective Individual Collective JD JD JD JD JD JD 2,198,443,193 856,313,130 341,192,819 26,200,551 166,553,930 3,588,703,623 98,688,843 - 7,093,354 - - 105,782,197 Europe 8,346,477 - - - - 8,346,477 Asia 2,370,617 - - - - 2,370,617 Africa 2,785,136 - - - 1,818,373 4,603,509 America 24,925,711 - - - - 24,925,711 2,335,559,977 856,313,130 348,286,173 26,200,551 168,372,303 3,734,732,134 Inside the Kingdom Other Middle East Countries Total Distribution of collaterals fair value against credits exposure This disclosure is prepared in two stages, the first one for total credit exposure while the second one for exposures under stage 3 according to FAS 30. 204
  205. 205 - 186 ,290,363 923,156,347 198,301,697 SME’s Government and public sector 155,088,309 Other Liabilities 4,059,722,224 28,910,758 Grand total 19,991,995 126,034,151 Gurantees Letters of credit 27,789,785 2,313,885 1,045,101 4,438,804 - - - - - - 1,124,454 - 3,749,689,006 - Other assets Total - Encumbered financial assets (Debt instruments) 198,301,697 Within financial assets at amortized cost - - Within financial assets at fair value through other comprehensive income Financial instrument - Within financial assets at fair value through income statement Sukuk: - 554,091,478 Large Corporate 1,124,454 458,977,731 740,381,841 Corporate 3,314,350 4,438,804 - - - JD 9,932,572 357,554 22,823 834,754 8,717,441 - - - - - - - - 2,176,602 2,588,514 4,765,116 - 3,952,325 8,717,441 - - - JD 21,864,113 - - - 21,864,113 - - - - - - - - - 21,864,113 21,864,113 - - 21,864,113 - - - JD - - - JD Vehicles - - - - - - - - 20,300,065 23,141,980 43,442,045 7,848,363 291,286,088 6,044,257 287,762 9,646,150 838,631,018 358,554,665 77,696,194 10,952,071 65,176,387 684,806,366 342,576,496 - - - - - - - - 93,849,373 218,526,958 312,376,331 257,914,163 114,515,872 684,806,366 342,576,496 - - - JD Real estate Gurantees Fair Value Cash Margins Traded shares Accepted LC’s Real estate loans 693,359,404 Individual 62,569,507 Investment accounts at banks and financial institutions 2,815,875,323 23,581,435 Balances at banks and financial institutions Credit facilities: 649,361,044 JD Total exposure Balances with central bank Description As of 31 December 2020 - - - - - - - - - - - - - - - - - - - - - - JD Others 1,256,772,153 86,411,890 12,307,757 95,649,286 1,062,403,220 - - - - - - - - 117,450,494 266,121,565 383,572,059 265,762,526 413,068,635 1,062,403,220 - - - JD Total Gurantees 2,802,950,071 68,676,419 16,603,001 30,384,865 2,687,285,786 - - - 198,301,697 - - 198,301,697 923,156,347 68,839,869 287,969,913 356,809,782 193,215,205 280,290,769 1,753,472,103 62,569,507 23,581,435 649,361,044 JD Exposure at default 102,774,082 1,844,814 217,978 5,848,686 94,862,604 - - - 2,428,499 - - 2,428,499 - 13,064,151 38,358,519 51,422,670 12,492,182 28,220,862 92,135,714 222,371 76,020 - JD ECL
  206. 206 - Other assets 173 ,948,577 Other Liabilities 3,734,732,134 27,256,492 Letters of credit Grand total 119,719,170 Gurantees 3,413,807,895 - - Financial instrument Encumbered financial assets (Debt instruments) Total - 201,661,214 Within financial assets at amortized cost 15,382,196 2,258,122 938,517 7,069,352 5,116,205 - - - - Within financial assets at fair value through other comprehensive income - - - - 1,100,106 - Within financial assets at fair value through income statement 201,661,214 Sukuk: 1,100,106 152,792,426 754,040,274 438,716,195 Large Corporate SME’s 591,508,621 Corporate Government and public sector - 424,274,134 Real estate loans 5,116,205 4,016,099 612,304,220 - 2,382,127,249 55,231,420 Investment accounts at banks and financial institutions - Credit facilities: 32,577,667 Balances at banks and financial institutions - JD 6,084,543 365,177 30,993 334,672 5,353,701 - - - - - - - - 221,369 1,803,053 2,024,422 - 3,329,279 5,353,701 - - - JD 26,298,815 - - - 26,298,815 - - - - - - - - - 26,298,815 26,298,815 - - 26,298,815 - - - JD 7,755,259 286,112 10,070,993 320,510,529 - - - - - - - - 13,045,374 21,732,367 34,777,741 7,055,768 278,677,020 320,510,529 - - - JD Vehicles 826,816,590 338,622,893 81,813,250 9,006,268 56,126,259 679,870,813 - - - - - - - - 93,697,205 213,481,123 307,178,328 261,641,732 111,050,753 679,870,813 - - - JD Real estate Gurantees Fair Value Cash Margins Traded shares Accepted LC’s Individual 742,210,345 JD Total exposure Balances with central bank Description As of 31 December 2019 - - - - - - - - - - - - - - - - - - - - - - JD Others 1,213,205,037 92,191,808 10,261,890 73,601,276 1,037,150,063 - - - - - - - - 108,064,054 263,315,358 371,379,412 268,697,500 397,073,151 1,037,150,063 - - - JD Total Gurantees 2,521,527,097 81,756,769 16,994,602 46,117,894 2,376,657,832 - - - 201,661,214 - - 201,661,214 754,040,274 44,728,372 175,400,837 220,129,209 155,576,634 215,231,069 1,344,977,186 55,231,420 32,577,667 742,210,345 JD Exposure at default 96,792,512 123,282 1,687,409 5,638,006 89,343,815 - - - 2,301,119 - - 2,301,119 - 13,323,462 38,258,396 51,581,858 9,403,460 25,921,488 86,906,806 108,247 27,643 - JD ECL
  207. 207 - Other assets 27 ,644,533 17,334,880 50,038,906 Guarantees Letter of credits Other liabilities 541,174,673 446,156,354 Total Grand total - Encumbered financial assets (Debt instruments) 7,090,000 - Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost - 7,090,000 Financial assets Within financial assets at fair value through income statement 438,626,884 - Accounts at banks and financial institutions Credit facilities 439,470 70,312,849 17,209,339 - 1,138,871 51,964,639 - - - - - - 51,525,169 - 439,470 - JD JD - Reclassified exposures Stage 2 Total exposure Balances at banks and financial institutions Balances with central bank As at 31 December 2020 Total reclassified exposures : E. Reclassified exposures: 161,198,411 528,688 52,590 6,644,322 153,972,811 - - 1,818,373 - - 1,818,373 152,154,438 - - - JD Total exposure 15,832,079 378,672 - 144,557 15,308,850 - - - - - - 15,308,850 - - - JD Reclassified exposures Stage 3 86,144,928 17,588,011 - 1,283,428 67,273,489 - - - - - - 66,834,019 - 439,470 - JD Total reclassified exposures 12% 40% 0% 4% 11% - - - - - - 11% - - - Percentage
  208. 208 - Other assets 23 ,310,300 10,259,847 37,892,371 Guarantees Letter of credits Other liabilities 374,486,725 303,024,207 Total Grand total - Encumbered financial assets (Debt instruments) 7,090,000 - Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost - 7,090,000 Financial assets Within financial assets at fair value through income statement 295,934,207 - Accounts at banks and financial institutions Credit facilities - Balances at banks and financial institutions 120,278,891 20,362,671 3,442,582 11,398,911 85,074,727 - - - - - - 85,074,727 - - - JD JD - Reclassified exposures Total exposure Balances with central bank As at 31 December 2019 Stage 2 168,372,304 612,402 - 6,938,965 160,820,937 - - 1,818,373 - - 1,818,373 159,002,564 - - - JD Total exposure 77,050,416 571,456 - 2,441,222 74,037,738 - - - - - - 74,037,738 - - - JD Reclassified exposures Stage 3 197,329,307 20,934,127 3,442,582 13,840,133 159,112,465 - - - - - - 159,112,465 - - - JD Total reclassified exposures 36% 54% 34% 46% 34% - - - - - - 35% - - - Percentage
  209. 209 - Financial assets Within financial assets at fair value through income statement Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost Encumbered financial assets (debt instruments) Other assets 17,209,339 Other liabilities 70,312,849 - 1,138,871 Guarantees Letter of credits 51,964,639 Total Grand total 51,525,169 - Accounts at banks and financial institutions Credit facilities 439,470 15,832,079 378,672 - 144,557 15,308,850 - - - - - - 15,308,850 - - - JD JD - Total reclassified exposures from stage 3 86,144,928 17,588,011 - 1,283,428 67,273,489 - - - - - - 66,834,019 - 439,470 - JD Total reclassified exposures Reclassified exposures Total reclassified exposures from stage 2 Balances at banks and financial institutions Balances with central bank As at 31 December 2020 Expected credit loss for reclassified exposures: 553,979 129,919 - 4,564 419,496 - - - - - - 419,496 - - - JD Individual 117,621 8,917 - 242 108,462 - - - - - - 108,462 - - - JD Collective Exposures within stage 2 3,582,883 155,776 - 25,683 3,401,424 - - - - - - 3,401,424 - - - JD Individual 3,751,329 30,688 - 51,561 3,669,080 - - - - - - 3,669,080 - - - JD Collective Exposures within stage 3 ECL for reclassified exposures 8,005,812 325,300 - 82,050 7,598,462 - - - - - - 7,598,462 - - - JD Total
  210. 210 - Within financial assets at fair value through income statement Within financial assets at fair value through other comprehensive income Within financial assets at amortized cost Encumbered financial assets (debt instruments) Other assets 11,398,911 3,442,582 20,362,671 Guarantees Letter of credits Other liabilities 120,278,891 85,074,727 Total Grand total - Financial assets - Accounts at banks and financial institutions 85,074,727 - Balances at banks and financial institutions Credit facilities - 77,050,416 571,456 - 2,441,222 74,037,738 - - - - - - 74,037,738 - - - JD JD Balances with central bank As at 31 December 2019 Total reclassified exposures from stage 3 Total reclassified exposures from stage 2 197,329,307 20,934,127 3,442,582 13,840,133 159,112,465 - - - - - - 159,112,465 - - - JD Total reclassified exposures Reclassified exposures 1,272,963 206,078 22,731 89,723 954,431 - - - - - - 954,431 - - - JD Individual 147,934 16,509 737 4,975 125,713 - - - - - - 125,713 - - - JD Collective Exposures within stage 2 29,995,154 87,816 - 959,707 28,947,631 - - - - - - 28,947,631 - - - JD Individual 8,214,684 137,588 - 529,883 7,547,213 - - - - - - 7,547,213 - - - JD Collective Exposures within stage 3 ECL for reclassified exposures 39,630,735 447,991 23,468 1,584,288 37,574,988 - - - - - - 37,574,988 - - - JD Total
  211. 64 . Segment information A. Information about the Bank’s activities The Bank is organized for administrative purposes based on the reports submitted to the General Manager and the chief decision maker into four main business sectors: Retail accounts: These encompass following up on the unrestricted investment accounts, deferred sales receivables and other financing and banking services related to individuals. Corporate accounts: These encompass following up on the unrestricted investment accounts, deferred sales receivables and other financing and banking services related to the institutions. Investment in assets: This includes investing in real estate and leasing. Treasury: This includes trading services and managing the Bank’s funds. 211
  212. 212 43 ,470,467 (15,437,992) 28,032,475 1,535,249,882 Profits before tax Income tax Profit after tax Sector assets - Depreciation and amortization 3,623,357,993 Capital expenditures Total Liabilities - 3,623,357,993 Segment liabilities Unallocated liabilities 1,535,249,882 Total assets - (44,447,392) Allocated expenses Unallocated assets 87,917,859 Segment results - (30,658,181) Share of the unrestricted investment accounts and non-controlling interests from the net income of associates Investment in associates (2,367,542) - Investment risk fund share from the revenues of joint investment accounts holders’ Deposits gurantee fees – joint investment accounts - 120,943,582 - - 484,463,616 - 484,463,616 1,165,573,082 - - 1,165,573,082 15,571,356 (12,064,583) 27,635,939 (25,060,848) 52,696,787 (21,177,953) (1,471,021) - - 75,345,761 JD JD Net income of subsidiaries and share of profit from investments in associates Total revenues (joint and self financed) Description Corporate Retails - - - - - 1,067,401,965 - 8,316,058 1,059,085,907 5,166,297 (1,216,379) 6,382,676 (3,200,999) 9,583,675 (1,218,048) (172,118) - 1,218,048 9,755,793 JD Investment in assets - - 66,792,542 - 66,792,542 914,631,075 - - 914,631,075 2,960,920 (2,757,236) 5,718,156 (6,412,178) 12,130,334 (4,443,826) (344,784) - - 16,918,944 JD Treasury 161,642,855 8,316,058 4,674,539,946 52,121,669 (31,643,599) 83,765,268 (79,121,417) 162,886,685 (57,498,008) (4,366,607) - 1,218,048 223,533,252 JD 2020 8,324,180 8,796,547 195,530,429 195,530,429 - 8,324,180 8,796,547 4,370,144,580 195,530,429 4,174,614,151 JD 2019 8,842,934 17,365,436 4,027,568,140 193,466,055 3,834,102,085 4,449,172,148 157,550,209 8,211,186 4,283,410,753 54,349,292 (34,204,739) 88,554,031 (76,946,910) 165,500,941 (54,438,261) (2,793,987) (6,468,523) 1,952,173 227,249,539 Total 161,642,855 4,844,498,859 161,642,855 - - 390,621 (167,409) 558,030 - 558,030 - (11,142) - - 569,172 JD Others The below table illustrate the information on the Bank’s business sectors distributed according to its activities:
  213. B . Geographical Distribution Information: This sector represents the geographical distribution of the Bank’s activities. The Bank undertakes its activities primarily inside the Hashemite Kingdom of Jordan. The below table illustrate the distribution of the Bank’s revenues, assets and capital expenditures according to the geographical area and the internal policy of the Bank based on the method of measurement and as viewed by the General Manager and the chief decision makers: Inside the Kingdom Description Total revenues Total assets Capital expenditures Outside the Kingdom Total 2020 2019 2020 2019 2020 2019 JD JD JD JD JD JD 219,665,721 222,266,703 3,867,531 4,982,836 223,533,252 227,249,539 4,709,792,740 4,308,112,543 134,706,119 141,059,605 4,844,498,859 4,449,172,148 8,796,547 17,365,436 - - 8,796,547 17,365,436 65. Capital management The Bank’s capital consists of the paid-in capital, statutory reserve, voluntary reserve, other reserve, and retained earnings. The Bank achieves its capital objectives throughout the following: • Achieving a satisfactory return on capital without affecting the financial stability of the Bank and achieving acceptable return on owner’s equity. • Achieving the required level of capital according to Basel Committee requirements and the supervisory bodies instructions. • Providing an adequate capital to expand the granting of financing and large investments in consistency with the Central Bank of Jordan regulations as well as facing any future risks. Capital adequacy ratio was calculated as at 31 December 2019 in accordance with Central Bank of Jordan instruction number (72/ 2018) dated 4 February 2018 and in accordance with standard number (15) issued by Islamic Financial Services Board: According to circular no (1/1/4693) by the Central Bank of Jordan on April 9,2020, it was decided to postpone the distribution of dividends by Jordanian banks to sharholders for the year 2019. 213
  214. 31 December 2020 31 December 2019 Thousands JD Thousands JD Common Equity Tier I 443 ,333 414,887 Paid-in capital 200,000 200,000 Statutory reserve 101,261 92,879 Voluntary reserve 45,473 37,094 Retained earnings 100,732 89,395 Accumulated change in full fair value 1,698 714 Intangible assets (3,154) (2,536) 10% of less of investments in Banks, financial institutions and Takaful companies capital, (494) (494) 10% or more of investments in Banks, finanical institutions and Takaful companies capital, beyond unified regulatory scope (2,183) (2,165) Additional Tier I - - Additional Tier II 7,799 5,747 - - 7,799 5,747 451,132 420,634 Risk Weighted Assets (RWA) 1,900,264 1,728,627 Common Equity Tier I Ratio 23.33% 24% - - Tier I Ratio 23.33% 24% Tier II Ratio 0.41% 0.33% Capital Adequacy Ratio 23.74% 24.33% Description Bank’s share from the the investment risks fund surplus General banking risks reserve / self and bank share of general banking risk reserve- joint (not to exceed 1.25%) of risky assets Total regulatory capital Additional Tier I Ratio –– Financial leverage percentage has reached 18.98% as of 31 December 2020 (2019: 17.34%). 66. Accounts managed for customers Accounts managed for customers amounted to JD 582,034,586 as at 31 December 2020 compared to JD 520,959,443 as at 31 December 2019. These accounts are not presented within the Bank’s assets and liabilities in the consolidated financial statements. 67. Maturity analysis of assets and liabilities The table below summarizes the expected maturity of the Bank’s assets and liabilities. The maturities of assets and liabilities have been determined according to when they are expected to be recovered or settled. 214
  215. 31 December 2020 Within 1 year More than 1 year Total JD JD JD Cash and balances with central bank 828 ,778,523 - 828,778,523 Balances at banks and financial institutions 50,600,540 - 50,600,540 Unrestricted investment accounts at banks and financial institutions 17,655,395 17,596,617 35,252,012 884,767,864 1,705,394,540 2,590,162,404 58,313,105 647,432,418 705,745,523 Assets: Deferred sales receivables and other receivables –Net Ijarah Muntahia Bittamleek assets – Net Financing – Net 2,871,113 30,286,426 33,157,539 11,189,428 1,785,624 12,975,052 Financial assets at fair value through– joint investment accounts holders’ equity 29,385,527 7,498,343 36,883,870 Financial assets at amortized cost 44,300,607 151,572,592 195,873,199 6,237,043 2,079,015 8,316,058 Financial Assets at fair value through owner’s equity – self financed Investments in associates Investment in real estate 21,521,652 86,086,611 107,608,263 Al Qard Al Hasan – Net 32,798,835 44,704,186 77,503,021 Property and equipment- Net - 94,554,705 94,554,705 Intangible assets – Net - 3,153,822 3,153,822 Other assets 21,835,470 42,098,858 63,934,328 Total assets 2,010,255,102 2,834,243,757 4,844,498,859 1,884,448 64,908,094 66,792,542 899,853,351 365,393,511 1,265,246,862 Cash margins 29,510,319 21,912,748 51,423,067 Accounts payable 1,441,976 - 1,441,976 Other provisions - 15,336,476 15,336,476 Income tax provision 26,142,445 - 26,142,445 Deferred tax liabilities - 1,770,260 1,770,260 Liabilities and unrestricted investment accounts holders’ equity: Due to banks and financial institutions Customers’ current and on demand accounts-trusteeship Other liabilities 36,363,452 12,807,496 49,170,948 Unrestricted investment accounts 907,546,970 1,935,027,777 2,842,574,747 1,553,639 3,693,182 5,246,821 Investment accounts holders’ reserve in subsidiaries and associates - 15,761,428 15,761,428 Non-controlling interests - 41,206 41,206 Future risks provision - 25,980,009 25,980,009 Deferred tax liabilities 952,230 2,263,563 3,215,793 1,905,248,830 2,464,895,750 4,370,144,580 105,006,272 369,348,007 474,354,279 Fair value reserve Total liabilities and unrestricted investment accounts and holders’ equity Net 215
  216. 31 December 2019 Within 1 year More than 1 year Total JD JD JD Cash and balances with central bank 906 ,069,815 - 906,069,815 Balances at banks and financial institutions 69,991,662 - 69,991,662 - 17,681,535 17,681,535 Deferred sales receivables and other receivables –Net 837,834,792 1,414,484,899 2,252,319,691 Ijarah Muntahia Bittamleek assets – Net 51,410,284 578,190,469 629,600,753 Assets: Unrestricted investment accounts at banks and financial institutions Financing – Net 2,737,771 29,136,611 31,874,382 Financial Assets at fair value through owner’s equity – self financed 10,516,682 1,525,591 12,042,273 Financial assets at fair value through– joint investment accounts holders’ equity 30,156,213 6,767,616 36,923,829 Financial assets at amortized cost 18,188,235 181,171,860 199,360,095 Investments in associates 6,158,389 2,052,797 8,211,186 Investment in real estate 22,238,034 88,952,135 111,190,169 Al Qard Al Hasan – Net 11,898,760 4,457,789 16,356,549 Property and equipment- Net - 93,102,868 93,102,868 Intangible assets – Net - 2,536,389 2,536,389 Other assets 21,682,674 40,228,278 61,910,952 Total assets 1,988,883,311 2,460,288,837 4,449,172,148 4,670,837 - 4,670,837 857,362,480 347,637,190 1,204,999,670 Liabilities and unrestricted investment accounts holders’ equity: Due to banks and financial institutions Customers’ current and on demand accounts-trusteeship Cash margins 27,518,239 18,991,987 46,510,226 Accounts payable 462,318 - 462,318 Other provisions - 14,310,038 14,310,038 Income tax provision 29,999,703 - 29,999,703 Deferred tax liabilities - 1,370,697 1,370,697 Other liabilities 27,024,425 14,736,927 41,761,352 832,023,033 1,792,408,545 2,624,431,578 1,975,777 4,649,872 6,625,649 Investment accounts holders’ reserve in subsidiaries and associates - 16,765,391 16,765,391 Non-controlling interests - 132,814 132,814 Future risks provision - 30,016,131 30,016,131 Deferred tax liabilities 1,210,960 2,849,923 4,060,883 Income tax provision of investment risks fund 1,450,853 - 1,450,853 1,783,698,625 2,243,869,515 4,027,568,140 205,184,686 216,419,322 421,604,008 Unrestricted investment accounts Fair value reserve Total liabilities and unrestricted investment accounts and holders’ equity Net 216
  217. 68 . Contractual Commitments and Contingent Liabilities (Off consolidated statement of financial position) Contingent credit commitments 31 December 2020 31 December 2019 JD JD Letters of credit 26,240,900 25,077,121 Acceptances 2,669,858 2,179,369 Guarantees: 126,034,151 119,719,170 Payment 35,809,959 35,484,631 Performance 59,522,876 55,571,232 Others 30,701,316 28,663,307 Unutilized Limits/ Direct 117,604,857 114,205,450 Unutilized Limits/ Indirect 37,483,452 59,743,127 310,033,218 320,924,237 31 December 2020 31 December 2019 JD JD 3,634,124 2,824,076 3,634,124 2,824,076 Description Total Contractual commitments Description Property, equipment and softwares contracts Total The above contractual commitments mature within one year. Indirect facilities expected credit loss: 1. Cumulative movement on indirect facilities as of 31 December 2020: Stage 1 Stage 2 Stage 3 Total JD JD JD 2,427,067 69,035,450 7,551,367 320,924,237 77,920,336 2,260,721 38,779,085 6,486,401 179,817,738 (65,147,190) (81,502,516) (1,640,321) (35,649,571) (6,769,159) (190,708,757) Transferred to stage 1 561,931 5,326,598 (509,930) (4,962,671) (415,928) - Transferred to stage 2 (349,482) (17,848,418) 363,783 17,984,427 (150,310) - Transferred to stage 3 (128,109) (232,756) (11,166) (151,198) 523,229 - 67,544,132 147,337,810 2,890,154 85,035,522 7,225,600 310,033,218 As at 31 December 2020 Collective Individual Collective Individual JD JD JD Balance at the beginning of the year 78,235,787 163,674,566 New exposures during the year 54,371,195 Matured exposures Balance at the end of the year 217
  218. as of 31 December 2019 : Stage 1 Stage 2 Stage 3 Total JD JD JD 1,762,522 81,521,230 4,042,709 321,946,898 77,882,879 1,644,240 28,871,665 6,814,282 180,465,824 (68,863,245) (59,990,348) (1,337,704) (45,377,298) (5,919,890) (181,488,485) Transferred to stage 1 1,476,783 28,075,758 (1,205,125) (27,949,005) (398,411) - Transferred to stage 2 (1,790,242) (33,105,504) 1,845,864 33,049,882 - - Transferred to stage 3 (1,000,690) (648,233) (282,730) (1,081,024) 3,012,677 - Balance at the end of the year 78,235,787 163,674,566 2,427,067 69,035,450 7,551,367 320,924,237 As at 31 December 2019 Collective Individual Collective Individual JD JD JD Balance at the beginning of the year 83,160,423 151,460,014 New exposures during the year 65,252,758 Matured exposures Cumulative movement on the expected credit loss for indirect facilities as of 31 December 2020: Stage 1 As at 31 December 2020 Stage 2 Stage 3 Total JD JD JD 33,800 779,940 4,919,807 7,448,695 552,806 38,433 273,434 4,730,115 6,526,724 (494,414) (16,991) (489,396) (4,438,925) (6,063,940) Collective Individual Collective Individual JD JD JD Balance at the beginning of the year 982,764 732,384 Expected credit loss on new exposures during the year 931,936 (624,214) Expected credit loss from matured exposures Transferred to stage 1 5,071 119,759 (1,164) (48,925) (74,741) - Transferred to stage 2 (1,125) (91,627) 1,635 108,379 (17,262) - Transferred to stage 3 (742) (1,336) (6) (1,467) 3,551 - 1,293,690 817,572 55,707 621,965 5,122,545 7,911,479 Stage 3 Total Balance at the end of the year Stage 1 As at 31 December 2019 Collective Individual Collective Individual JD JD JD JD JD JD Balance at the beginning of the year 905,039 541,164 13,424 1,331,129 5,127,127 7,917,883 Expected credit loss on new exposures during the year 965,793 1,334,473 113,473 503,702 6,720,886 9,638,327 Expected credit loss from matured exposures (297,799) (626,094) (19,675) (527,429) (8,636,518) (10,107,515) Transferred to stage 1 20,357 133,267 (16,990) (132,705) (3,929) - Transferred to stage 2 (21,806) (315,943) 22,220 318,283 (2,754) - Transferred to stage 3 (588,820) (334,483) (78,652) (713,040) 1,714,995 - 982,764 732,384 33,800 779,940 4,919,807 7,448,695 Balance at the end of the year 218 Stage 2
  219. Distribution of unutilized limits balance according to the bank internal credit rating 31 December 2019 31 December 2020 Stage 1 Description Stage 2 Stage 3 Total Total JD JD JD JD 36 ,478,253 - - 117,743,643 118,187,487 - 4,632,834 - - 4,632,834 16,907,672 - - - - 364,839 364,839 179,374 - 30,347,969 - 1,835,175 163,849 32,346,993 38,674,044 81,265,390 30,347,969 41,111,087 1,835,175 528,688 155,088,309 173,948,577 Individual Collective Individual Collective JD JD JD Internal Credit rating from 1 to 6- 81,265,390 - Internal Credit rating from 7+ to 7- - Internal Credit rating from 8 to 10 Collective portfolio Total Distribution of Letters of credit and acceptance according to the bank internal credit rating 31 December 2019 31 December 2020 Stage 1 Description Stage 2 Stage 3 Total Total JD JD JD JD 14,255,935 - - 24,387,161 22,375,057 - 3,063,701 - - 3,063,701 2,815,798 - - - - 52,590 52,590 - - 1,392,062 - 15,244 - 1,407,306 2,065,635 10,131,226 1,392,062 17,319,636 15,244 52,590 28,910,758 27,256,490 Individual Collective Individual Collective JD JD JD Internal Credit rating from 1 to 6 10,131,226 - Internal Credit rating from 7+ to 7- - Internal Credit rating from 8 to 10 Collective portfolio Total 219
  220. Distribution of Gurantees according to the bank internal credit rating 31 December 2019 31 December 2020 Stage 1 Description Stage 2 Stage 3 Total Total JD JD JD JD 21 ,262,649 - - 73,402,405 59,305,738 - 5,060,686 - - 5,060,686 10,167,908 - - - 5,208,781 5,208,781 5,268,793 3,801,438 - 281,464 - - 4,082,902 42,026,378 - 35,804,101 - 1,039,735 1,435,541 38,279,377 2,950,354 55,941,194 35,804,101 26,604,799 1,039,735 6,644,322 126,034,151 119,719,171 Individual Collective Individual Collective JD JD JD Internal Credit rating from 1 to 6- 52,139,756 - Internal Credit rating from 7+ to 7- - Internal Credit rating from 8 to 10 - Collective portfolio External credit rating Total Detailed Indirect facilities 31 December 2020 Description Stage 1 Stage 2 Stage 3 Total JD JD JD 1,835,175 41,111,087 528,688 155,088,309 55,941,194 1,039,735 26,604,799 6,644,322 126,034,151 1,392,062 10,131,226 15,244 17,319,636 52,590 28,910,758 67,544,132 147,337,810 2,890,154 85,035,522 7,225,600 310,033,218 Stage 3 Total Collective Individual Collective Individual JD JD JD Unutalized limits 30,347,969 81,265,390 Banking Guarantees 35,804,101 Letters of credit Total 31 December 2019 Description Stage 2 Collective Individual Collective Individual JD JD JD JD JD JD Unutalized limits 36,658,089 98,785,715 1,582,926 36,309,445 612,402 173,948,577 Banking Gurantees 39,578,281 49,891,625 777,924 22,532,376 6,938,964 119,719,170 Letters of credit 1,999,418 14,997,225 66,217 10,193,630 - 27,256,490 78,235,788 163,674,565 2,427,067 69,035,451 7,551,366 320,924,237 Total 220 Stage 1
  221. Detailed expected credit loss for indirect facilities 31 December 2020 Description Stage 1 Stage 2 Stage 3 Total JD JD JD 39 ,948 296,077 261,675 1,844,815 258,819 15,485 168,269 4,844,316 5,848,685 24,870 18,662 274 157,619 16,554 217,979 1,293,690 817,572 55,707 621,965 5,122,545 7,911,479 Stage 3 Total Collective Individual Collective Individual JD JD JD Unutalized limits 707,024 540,091 Banking Gurantees 561,796 Letters of credit Total 31 December 2019 Description Stage 1 Stage 2 Collective Individual Collective Individual JD JD JD JD JD JD Unutalized limits 550,872 441,429 26,789 421,137 247,180 1,687,407 Banking Gurantees 414,736 263,934 6,274 280,435 4,672,627 5,638,006 17,156 27,021 737 78,368 - 123,282 982,764 732,384 33,800 779,940 4,919,807 7,448,695 Letters of credit Total 69. Lawsuits filed against the Bank The lawsuits filed against the Bank (self) amounted to JD 10,296,910 as of 31 December 2020 with a required provision of JD 31,489 (provision booked amounted to JD 75,000 instead of JD 31,489) (noting that on 2 February, subsequent to the financial statements date, a lawsuit against the Bank was withdrawn which amounts to JD 10,150,486 without any fees, expenses, legal fees or legal benefits) compared to JD 10,341,217 as of 31 December 2019 with a provision of JD 37,568. The lawsuits filed against the Bank (joint) as of 31 December 2020 amounted to JD 288,952 with a provision of JD 45,767 compared to JD 10,084,339 as of 31 December 2019 with a provision of JD 39,495. The Bank’s management and its legal advisor believe that any obligations that may arise from the lawsuits against joint investments will be recognized within the investment risk fund, while the lawsuits against the Bank (self) will be covered by the established provision. 70. New accounting standards issued but not yet effective The standards and interpretations that are issued but not yet effective, up to the date of issuance of the consolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. 221
  222. Financial Accounting Standard 31 Investment Agency (Al-Wakala Bi Al-Istithmar) This standard intends to define the accounting principles and reporting requirements for investment agency (Al-Wakala Bi AlIstithmar) transactions and instruments, in the hands of both the Rab Al-Mal and the (Wakeel). this standard shall be effective beginning on or after 1 January 2021, with early adoption permitted. The standard requires the Rab Al-Mal to evaluate the nature of the investment as either a) a pass-through investment or b) Wakala venture. • A pass-through investment is an investment in which the involvement of the Wakeel, as well as, the options for transferability of the instrument are limited and the investor (Muakel) principally takes a direct exposure on the underlying assets. An investor (Muakel) shall apply the pass-through investment approach for its investments in an investment agency instruments; unless it opts to apply the Wakala venture approach. • Under this approach, the principal (Muakel) shall initially recognize the assets underlying the Wakala arrangement in its books of account applying the initial recognition principles as applicable in line with respective FAS. • The principal (Muakel) may opt to apply the Wakala venture approach if, and only if, the investment agency contract meets any of the conditions required under certain conditions. • Under this approach, an investment shall be accounted for in the books of the investor (Muakel) who applying the “equity method of accounting”; where the investment shall be recognized initially at cost and subsequently shall be measured at the end of the financial period at carrying amount and shall be adjusted to include the investor’s share (Muakel) in profit or loss of the Wakala venture. • From the agent (Wakeel) perspective, the standard requires that at inception of the transaction the agent (Wakeel) shall recognize an agency arrangement under off-balance sheet approach since the agent does not control the related assets / business. However, there are exceptions to off-balance sheet approach where by virtue of additional considerations attached to the instrument based on investment agency may mandate the same to be accounted for as on-balance sheet. Financial Accounting Standard FAS 32 (Ijarah) • This standard supersedes FAS 8 “Ijarah and Ijarah Muntahia Bittamleek”. The standard aims at setting out principles for the classification, recognition, measurement, presentation and disclosure of Ijarah type transactions including their different forms entered into by an institution, in both the capacities of lessor and lessee. • This standard shall be effective beginning or after 1 January 2021, with early adoption permitted. 71. Comparative figures Some of the 2019 figures were reclassified to correspond with period ended 31 December 2020 presentation with no effect on equity or income for the year 2019. 222
  223. The Data of the Bank ’s Headquarters, Branches, and Offices
  224. The Data of the Bank ’s Head Office, Branches, and Offices Website www.jordanislamicbank.com e-mail jib@islamicbank.com.jo Contact Centre Tel: +962 6 5680001 facebook.com/JordanIslamicBankOfficial HO/ Branch Address Tel. Fax P.O. Box Postal Code No. of Employees Head Office Culture Street/ Shmaisani / Amman +962 6 5677377 +962 6 5666325 +962 6 5666326 +962 6 5684755 926225 11190 713 Shmaisani Branch Culture Street / Shmaisani / Amman +962 6 5677107 +962 6 5623613 +962 6 5691700 +962 6 5623612 925997 11190 41 Amman Branch King Faisal Str./ Amman +962 6 4638306 +962 6 4653306 +962 6 4652400 +962 6 4614299 7987 11118 23 Jabal AlHussein Branch Khalid bin Al Walid Str. / Amman +962 6 5694403 +962 6 5673408 +962 6 5692057 926943 921047 11110 30 Zarqa Branch King Hussein Str. Zarqa +962 5 3981401 +962 5 3984667 +962 5 3930911 5753 13111 37 Wehdat Branch Prince Hassan Str./ Amman +962 6 4744361 +962 6 4778101 +962 6 4789144 +962 6 4751645 16165 11152 28 Irbid Branch/ Baghdad St. Baghdad Str./ Irbid +962 2 7245151 +962 2 7240728 +962 2 7247051 +962 2 7240730 1950 21110 38 Bayader Wadi Essir Branch Main Street / Al Bayader +962 6 5816152 +962 6 5859662 +962 6 5824162 140223 11814 27 Aqaba Branch Al Darb – Princess Haya Circle / Aqaba +962 3 2014315 +962 3 2014317 +962 3 2014313 1048 77110 23 Ma’adaba Branch Petra Str./ Ma’adaba +962 5 3242802 +962 5 3248898 +962 5 3244702 695 17110 26 Sweileh Branch Queen Rania Str./ Sweileh +962 6 5341563 +962 6 5359879 +962 6 5349461 717 11910 17 Ma’an Branch King Hussein Str./ Ma’an +962 3 2132235 +962 3 2131799 +962 3 2131733 204 71111 21 Kerak Branch Castle Str. Kerak +962 3 2353513 +962 3 2352636 +962 3 2353508 +962 3 2353484 220 61110 24 Jerash Branch King Abdullah St./ Jerash +962 2 6352652 +962 2 6352653 +962 2 6352654 +962 2 6352264 32 26110 29 224
  225. Address Tel . Fax P.O. Box Postal Code No. of Employees Mafraq Branch King Faisal Str./ Mafraq +962 2 6231974 +962 2 6230381 +962 2 6232212 68 25110 26 Salt Branch Al Bayyadah Str./ Salt +962 5 3553790 +962 5 3557985 +962 5 3553792 1035 19110 17 Municipality Str./ Tafileh +962 3 2242647 +962 3 2242648 +962 3 2242650 42 66110 22 Al Wefak Str./ Amman +962 6 5159721 +962 6 5152774 +962 6 5151773 961155 11196 17 King Hussein Str./ Rusifeh +962 5 3744756 +962 5 3743698 +962 5 3744758 1138 13710 21 Saqf Al-Seel/ Amman +962 6 4614801 +962 6 4615974 +962 6 4614805 +962 6 4616256 182059 11118 28 +962 2 7279401 +962 2 7279405 501 21101 35 Opposite to the Consumers Corporation / Ajloun +962 2 6420777 +962 2 6421004 +962 2 6420700 167 26810 24 Al-Weibdeh Branch King Hussein str./ Amman +962 6 4616420 +962 6 4616340 +962 6 4616450 927988 11190 14 Deir Abi Said Branch King Hussein Str./ Deir Abi Said +962 2 6521551 +962 2 6521654 +962 2 6521553 45 21710 22 Yarmouk St. Branch Yarmouk Str./ Amman +962 6 4757161 +962 6 4757162 +962 6 4757169 620823 11162 18 Branch Address Tel. Fax P.O. Box Postal Code No. of Employees Ring Road/ Amman +962 6 4162001 +962 6 4162973 +962 6 4162971 742 11592 22 Behind the vegetable market / Sahab +962 6 4023801 +962 6 4023804 +962 6 4023803 647 11511 19 King Abdullah Str./ Amman +962 6 4889311 +962 6 4894399 +962 6 4886633 340965 11134 25 University Str./ Mu’tah +962 3 2370001 +962 3 2370285 +962 3 2371804 50 61621 30 HO/ Branch Tafileh Branch Al Rawdah Branch Rusifeh Branch Saqf Al-Seel Branch Irbid Branch / AlHashmi Str. Ajloun Branch Abu Alanda Branch Sahab Branch Marka Al Shamalia Branch Mu’tah Branch Al-Hashmi Str./ Irbid Safariyat Bushra Complex Entrance - Sal Gwairieh Branch King Ghazi Str./ Zarqa +962 5 3930901 +962 5 3930902 +962 5 3930903 150266 13115 13 Ramtha Branch Banks Str./ Ramtha +962 2 7380490 +962 2 7380493 +962 2 7380494 546 21410 25 225
  226. Branch Al-Hashmi AlShamali Branch Jabal Al Hashmi AlShamali / Amman Tel. Fax P.O. Box Postal Code No. of Employees +962 6 5052111 +962 6 5051117 +962 6 5055114 230693 11123 18 Al- Hashmieh Branch Al Hashmieh / Zarqa +962 5 3811701 +962 5 3811705 +962 5 3811709 185 13125 16 Irbid Branch / Hakama Str. Hakama Str./ Irbid +962 2 7401352 +962 2 7401357 +962 2 7401361 230101 21110 19 Al – Baqa’a Branch Main str. / Al-Baqa’a Camp +962 6 4726333 +962 6 4726335 +962 6 4726334 825 19381 18 Jabal Attaj Branch Haouz Str./ Amman +962 6 4752300 +962 6 4755644 +962 6 4752302 410676 11141 17 Kufranja Branch Main Str./ Kufranja +962 2 6454501 +962 2 6454609 +962 2 6454510 61 26873 14 Al Nasr Branch Assayeda Hajar Str./ Amman +962 6 4921400 +962 6 4921406 +962 6 4921409 425838 11140 20 Yajooz Branch Main Street / Yajooz +962 5 3745150 +962 5 3745152 +962 5 3745153 120032 13712 17 Hai Nazal Branch Al Dostor Str./ Amman +962 6 4397930 +962 6 4397931 +962 6 4397937 710999 11171 24 Tla’ Al-Ali Branch Tla’ Al-Ali / Amman +962 6 5333184 +962 6 5340255 +962 6 5342744 1582 11953 19 Hai Ma’ssoum Branch Al-Farouq Str./ Zarqa +962 5 3935401 +962 5 3935418 +962 5 3935427 11897 13118 16 Abdullah Gosheh Str./ Branch Umn Al-Sumaq / Amman +962 6 5857520 +962 6 5857521 +962 6 5857529 709 11821 18 Irbid Branch/ Eidoun St. Eidoun / Irbid +962 2 7254756 +962 2 7254760 +962 2 7254763 620595 21162 20 Wasfi Al-Tal Str., Branch Wasfi Al-Tal Str./ Amman +962 6 5528102 +962 6 5528095 +962 6 5528075 961021 11196 24 Al- Nuzha Branch Jabal Al-Nuzha / Amman +962 6 5673325 +962 6 5673397 +962 6 5673635 240448 11124 19 Assem bin Nayef Str./ Amman +962 6 5714077 +962 6 5714556 +962 6 5715538 1093 11732 18 Wadi Musa Branch Main Street, Wadi Musa +962 3 2157919 +962 3 2157920 +962 3 2157922 53 71810 14 Al Jeibiha Branch Yajouz Street / Amman +962 6 5344261 +962 6 5344237 +962 6 5344239 874 11941 17 Tareq Branch/ Tabarboor Shehab Al-Habri Str./ Amman +962 6 5060436 +962 6 5060541 +962 6 5060548 295 11947 24 Marj Al Hamam Branch 226 Address
  227. Branch Address Tel . Fax P.O. Box Postal Code No. of Employees Irbid Branch / Palestine Street Palestine Str./ Irbid +962 2 7262101 +962 2 7262105 +962 2 7262109 3922 21110 22 Al-Zarqa AlJadeedah Branch Makka Mukarama Str./ Zarqa +962 5 3852402 +962 5 3852405 +962 5 3852410 150472 13115 18 Deir Alla Branch Main Street / Deir Alla +962 5 3573520 +962 5 3573521 +962 5 3573525 44 18210 18 Address Tel. Fax P.O. Box Postal Code No. of Employees Al-Sweifeh Branch Al-Sweifeh / Amman +962 6 5812226 +962 6 5812227 +962 6 5812029 142643 11844 16 Abu Nsair Branch Abu Nsair/ Amman +962 6 5236325 +962 6 5236326 +962 6 5236329 541405 11937 18 Al-Thaniya Branch Al-Thaniya / Kerak +962 3 2386626 +962 3 2386627 +962 3 2386632 15 61151 17 Khraibt Essouq Branch Khraibt Essouq / Amman +962 6 4120846 +962 6 4120928 +962 6 4120894 987 11621 21 Khalda Branch Amer bin Malek Str./ Amman +962 6 5545948 +962 6 5536296 +962 6 5542813 4428 11953 16 Main Street / AlShoneh Al-Shamalieh +962 2 6580282 +962 2 6580275 +962 2 6580298 15 28110 14 Al-Qasr / Kerak +962 3 2315050 +962 3 2315590 +962 3 2315524 32 61210 15 Jabal Amman Branch Jabal Amman / Amman +962 6 4633016 +962 6 4633017 +962 6 4633048 840610 11180 14 Al-Dlail Branch Tareq Complex / Al-Dlail +962 5 3825179 +962 5 3825180 +962 5 3825181 190 13136 13 Wadi Al Hajar Branch Zarqa / Highway Street +962 5 3651990 +962 5 3652304 +962 5 3651034 1927 13110 13 Irbid Branch/ Al Hosn Al Hosn/ Irbid +962 2 7012401 +962 2 7012402 +962 2 7012404 357 21510 15 King Abdullah II Street, Opposite to the Justice Palace/ Salt +962 5 3530591 +962 5 3530639 +962 5 3550453 484 19110 14 Branch Al-Shoneh AlShamalieh Branch Al-Qasr Branch Bawabit Al Salt Branch 227
  228. Branch Address Tel . Fax P.O. Box Postal Code No. of Employees Naur Branch Western Madaba Street – Martyr Circle / Amman +962 6 5725861 +962 6 5725864 +962 6 5725870 114 11710 14 Isalmic Hospital Branch King Hussein St. Amman +962 6 5657261 +962 6 5657262 +962 6 5657264 928430 11190 14 Al-Huriah Street / AlMuqableen +962 6 4205617 +962 6 4206259 +962 6 4205769 606 11623 17 Al Yasmin District/ Amman +962 6 4205413 +962 6 4205347 +962 6 4205386 710068 11117 17 King Hussein Bridge Street / Al Shouneh Al Janoubayeh +962 5 3581173 +962 5 3581175 +962 5 3581194 23 18110 12 Saleh Al Hamalan Street (previously Al Feda’), Marka / Amman +962 6 4900205 +962 6 4900193 +962 6 4900208 420300 11142 16 Desert Road – Jizah +962 6 4460159 +962 6 4460165 +962 6 4460166 282 16010 12 Main Street – Departments Complex / Shawbak +962 3 2165460 +962 3 2165467 +962 3 2165461 66 71910 12 Sama Al- Rosan Intersectoin Bani Kenanah / Irbid +962 2 7585150 +962 2 7585152 +962 2 7585124 25 21129 15 Irbid City Centre Branch Prince Hasan Str. City Centre/ Irbid +962 2 6911305 +962 2 6911306 +962 2 6911309 1233 21110 15 Abdoun Branch Abdoun – North Abdoun neighbourhood – Fawzi Al Qawqji – building No (5) +962 6 5922782 +962 6 5922645 +962 6 5922834 852745 11185 15 Bawabt Jerash Branch Main Street - Towards Ajloun City - Opposite Jerash Secondary School For Boys +962 2 6340115 +962 2 6340122 +962 2 6340130 1003 26110 15 Zarqa – Al Zawahra District - Birin Street Opposite to Cordoba College (formerly) +962 5 3924805 +962 2 3924829 +962 5 3924836 5016 13111 12 Al-Huriah Street Branch Al Yasmin District Branch Al Shouneh Al Janoubiah Branch Marka Al Janoubiah Branch Jizah Branch Shawbak Branch Irbid Branch/ Bani Kenanah Zarqa Al Gharbia Branch 228
  229. Branch Address Tel . Fax P.O. Box Postal Code No. of Employees Ain Al Basha Branch Al Balqa Governorate Ain Al Basha Municipality – opposite Ain Al Basha Gas Station - near the traffic light +962 6 4726834 +962 6 4726894 +962 6 4726904 77 19384 12 Madaba Al Gharbi Branch Madaba - Amman Madaba Western Road opposite the Electricity Company +962 5 3241731 +962 5 3241764 152 17110 14 Al Badia Al Shamalia Branch Mafraq - Salhiya Municipality - Baghdad International Street +962 2 6282369 +962 2 6282882 60 54510 11 Sports City Branch Queen Rania Al Abdullah Street- Hajj Investemnt Fund Complex +962 6 5656872 +962 6 5657912 +962 6 5658097 19197 11196 11 Free Zone Branch Gate No. (1) – Free Zone, Zarqa +962 5 3826739 +962 5 3826741 186 13134 10 Ebbien Ebilleen Branch Ishtafina Junction, Ebien Ebilleen Region, Ajloun +962 2 6440369 +962 2 6440375 +962 2 6440372 28 26833 11 Office Address Tel. Fax P.O. Box Postal Code No. of Employees Industrial City Office / Sahab Industrial City/ Sahab +962 6 4029720 +962 6 4029722 +962 6 4029725 259 11512 4 C-Twon Office Amman Mall/ Amman +962 6 5528394 +962 6 5528395 +962 6 5528397 1582 11953 4 Hettein Camp Office Hettein Camp Rusaifa +962 5 3611253 +962 5 3611254 +962 5 3611328 2720 13713 5 Awjan Office Main St./ Awajan +962 5 3656663 +962 5 3656664 +962 5 3655029 8545 13162 4 Istiqlal Mall Office Istiqlal St./ Al Nuzha +962 6 5683936 +962 6 5683937 +962 6 5683897 922503 11192 5 Al Marj Office Al Marj / Al Kerak +962 3 2341494 +962 3 2341496 +962 3 2341495 14 61112 3 Basira Office Bsira/ Al Tafeila +962 3 2267082 +962 3 2267087 +962 3 2267105 54 66610 4 Irbid Office/ Al Tayybeh Al Tayybeh/ Irbid +962 2 7330039 +962 2 7330041 +962 2 7330456 17 21810 4 Al-Sbeihi Office Downtown – Al – Arda Region, Al-Sbeihi +962 5 3523466 +962 5 3523495 +962 5 3523510 484 19110 5 Al Shajara Office King Hussein Street – Al Shajara, Ramtha +962 2 7359348 +962 2 7359377 +962 2 7359366 42 21382 5 229
  230. Office Address Tel . Fax P.O. Box Postal Code No. of Employees Aqaba Office Tunisian Baths Street / Aqaba +962 3 2014665 +962 3 2014687 +962 3 2031706 1048 77110 6 +962 3 2332709 +962 3 2332711 +962 3 2332712 50 61621 4 Balama – Next to Balama Judicial Department / Mafrqa +962 2 6203931 +962 2 6203932 +962 2 6203937 185 13125 5 Martyr Street, Commercial Complex – Areefah Mall / Amman +962 6 5066236 +962 6 5065730 +962 6 5066779 295 11947 5 Wadi Essir Office Iraq Al Amir Street – Wadi +962 6 5865424 Essir / Amman +962 6 5864780 +962 6 5864891 140223 11814 3 Wasfi Tal Str. Office Wasfi Tal Str. (Prev. Gardens Str.) Bulding No. 94, besides Al Tabba’a Mosque +962 6 5693372 +962 6 5693465 +962 6 5693469 961021 11196 5 Theban Office Main Str. (Royal RoadTheban - Kerak)- ThebanMadaba +962 5 3207466 +962 5 3207467 +962 5 3207469 695 17110 5 Shafa Badran Office Baladyet shafa Badran – Beren road – near Amman playgrounds - Amman +962 6 5231048 +962 6 5231085 +962 6 5231287 49 11934 5 Lewaa Al Hassa- Desert road – near al Istiklalia military institution +962 3 2277251 +962 3 2277269 +962 3 2277274 55 64610 4 Al Torra Office Irbid governorate – lewaa Al Ramtha – Al Tarra – the main street – Dewar martyr Moaz Al Kassasba +962 2 7361090 +962 2 7361094 +962 2 7361096 2 52110 4 Bawabet Al Mafraq office Al Mafraq governorate – Dr. Khaled Abu Samaka +962 2 6236754 Street – in the direction of +962 2 6236765 Al Al Baiet university +962 2 6236766 563 25110 5 Al Jubiha Office Capital Governorate Jubaiha - Abdullah Al Lozi Street - Near Al Jubaiha Municipality Building Building No. (36) +962 6 5334597 874 11941 5 Al Huseiniyah Office Balama Office Sameh Mall Office Al Hassa office 230 Al Huseiniyah – South Mazar/ Karak +962 6 5334043 +962 6 5334016
  231. Address Tel . Fax P.O. Box Postal Code No. of Employees Dahyet Al Rasheed Office Capital Governorate Jubaiha - Al Rasheed Suburb- Akef Al Fayez Street - Next to Omaima Housing - Building No. (70) +962 6 5150065 +962 6 5150056 +962 6 5159821 961155 11196 5 Irbid Office/ Al Mazar Al Shamali Irbid Governorate Northern Mazar Province - Main Street - Near AlMazar Al-Kabeer Mosque +962 2 7034026 +962 2 7034023 +962 2 7034041 8 21610 6 Capital Governorate Jasmine Suburb - Badr District - Al-Hamraniya District - Muhammad Al-Fateh Street - Pavilion Mall Complex +962 6 4393511 +962 6 4393512 +962 6 4393566 710068 11117 4 Sahab Industrial City / Sahab +962 6 4029727 +962 6 4029728 +962 6 4029729 259 11512 14 Office Pavilion Mall office Al-Bonded Office * The Bank has not any branches or offices outside the Kingdom. 231