Download pdf - Sri Lanka Annual Report 2011

BRAC LANKA

(GUARANTEE LIMITED)

Sri LankaWonder of Asia

An Indian Ocean island republic famous for its tea, coffee and cinnamon, Sri Lanka bore the brunt of the 2004 Asian tsunami. BRAC quickly responded to the disaster by setting up relief and emergency operations in 2005. Since then, BRAC has expanded its outreach, touching the lives of an estimated 527,000 Sri Lankans, helping to improve livelihoods through rigorous capacity development training and providing over USD 74.2 million in microloans, with 74,000 active borrowers across the country’s 15 most vulnerable districts.

What started out in 1972 in a remote village of Bangladesh as a limited relief operation BRAC - has turned into the largest development organisation in the world. Of major nongovernmental organisation, it is one of the few based in the global south.

Today, BRAC is a development success story, spreading solutions born in Bangladesh to 10 other countries around the world – a global leader in creating opportunity for the world’s poor. Organising the poor using communities’ own human and material resources, it catalyses lasting change, creating an ecosystem in which the poor have the chance to seize control of their own lives. We do this with a holistic development approach geared toward inclusion, using

services, community empowerment and more.

Our work now touches the lives of an estimated 126 million people, with staff and BRAC-trained entrepreneurs numbering in the hundreds of thousands – a global movement bringing change to 10 countries in Asia, Africa and the Caribbean, with operations in our 11th country, Philippines, being launched in 2012.

40th Year Special Edition

Contents

Our Mission, Vision and Values 01Chairperson’s Statement 02

Governance 08Management 09 Development partners 09BRAC across the world 10Harnessing the past 12Financials 15

Harnessing the past

Enriching the future

1 BRAC Annual Report 2011

Vision

A world free from all forms of exploitation and discrimination where everyone has the opportunity to realise their potential.

Mission

Our mission is to empower people and communities in situations of poverty, illiteracy, disease and social injustice. Our interventions aim to achieve large scale, positive changes through economic and social programmes that enable men and women to realise their potential.

Values

InnovationFor forty years, BRAC has been an innovator in the creation of opportunities for the poor to lift themselves out of poverty. We value creativity in programme design and strive to display global leadership in groundbreaking development initiatives.

IntegrityWe value transparency and accountability in all our professional work, with clear policies and procedures, while displaying the utmost level of honesty in our financial dealings. We hold these to be the most essential elements of our work ethic.

InclusivenessWe are committed to engaging, supporting and recognising the value of all members of society, regardless of race, religion, gender, nationality, ethnicity, age, physical or mental ability, socioeconomic status and geography.

EffectivenessWe value efficiency and excellence in all our work, constantly challenging ourselves to perform better, to meet and exceed programme targets, and to improve and deepen the impact of our interventions.

Vision, Mission and Values


Chairperson’s Statement

It gives me great pleasure to present the

statements for the year ended 31 December 2011.

The year concluded saw Sri Lanka engaging in large-scale reconstruction and development projects following the end

Tigers of Tamil Eela, including increasing electricity access and rebuilding its road and rail network. Sri Lanka now seeks to reduce poverty by using a combination of state directed policies and private investment promotion to spur growth in disadvantaged areas, develop small and medium enterprises, and promote increased agriculture. In a country with a population of over 21 million, the unemployment rate is relatively low, standing at 4.3 per cent as of 2011, the lowest yet for the country. Continued employment generation was due to reconstruction, infrastructure development and expansion of economic activities.

In 2011, BRAC Sri Lanka began its agricultural development programme to provide farmers living below the poverty

With the support of our development partner Etimos, 471 farmers in this programme have received orientation and input support for the cultivation of cocoa plants which they can sell to Etimos’ cocoa factory, based in Sri Lanka, at a fair wage.

BRAC Annual Report 2011 3

BRAC continues to provide relief in areas suffering from environmental disasters. With the support from Stromme Foundation and food donations from its

eastern Sri Lanka in February 2011 with dried and cooked foods while they focused on rebuilding their livelihoods. At the request of the government of Sri Lanka, BRAC has also provided public

and sports and wet weather materials for school children in southern Sri Lanka.

In 2011, BRAC directed its efforts to scaling up its services, opening

western, central, north central and eastern provinces of Sri Lanka. We have organised 112,329 members, all women, into 6,131 village organisations. Over 74,000 members (including 36,022 new members) are actively borrowing and more than USD 74.2 million has been disbursed to date. We provided holistic capacity development training to 177 members of staff.

While our work in Sri Lanka started with disaster relief and rehabilitation following the Indian Ocean tsunami of 2004, by 2007 our focus had turned to longer term efforts in revitalising affected enterprises

With the end to three decades of armed

aims to build livelihoods to help turn the peace dividends into a practical reality.

Through our extensive global experience

development works best when it goes beyond providing loans. In Sri Lanka,

acts as a capacity-building platform. A combination of local knowledge and rigorous training means that our staff are best placed to support the poorest,

entrepreneurial endeavours. BRAC’s local staff are women, employed from within the branch areas in which they work, ensuring a truly contextual understanding of the challenges faced locally. The combination of all our efforts results in enhanced livelihoods of women across the country, in turn ensuring

third Millennium Development Goals, eradicating extreme poverty and hunger and the empowerment of women. In the coming year, BRAC hopes to continue its expansion to reach more of the most vulnerable women in rural Sri Lanka.

I take this opportunity to commend our team in Sri Lanka who have worked with enduring commitment and loyalty to engage every opportunity that has come our way. The quality of our performance is attributed to this remarkably competent team, their knowledge, skills and professionalism. I extend my sincere thanks to the members of the governing body, whose leadership and foresight has steered the company to success. I thank the government and our development partners in Sri Lanka for their continued support as we strive to create greater value in our services to contribute towards the progress and prosperity of Sri Lanka.


approach to support livelihoods. Over the course of the last four decades, we have grown to become one of the

their lives.

BRAC Programmes

Microfinance

devastating impact of the 2004 Tsunami eased, it is estimated that 1.8 million people in Sri Lanka remain below the poverty line . Economic activity is concentrated in the prosperous western provinces, with huge income differentials in the eastern and inland

support its clients as they grow.

Filling service gaps for the poor

Women attend a BRAC Village Organizations weekly collection meeting in Madapathana neighbourhood of Galle district. Sri Lanka.

As depicted in the diagram, we address

women by providing them with targeted

that the poor are able to help themselves when organised effectively. With this in mind, BRAC conducts comprehensive door-to-door surveys, consulting traditional and government leaders to select poor, uneducated but economically active women. To date, BRAC has mobilised over 112,000 such women into village organisations (VOs), each consisting of 20 to 40 members, across 15 districts out of 25 of Sri Lanka. These groups, led by

network and support the women to be effective conduits for their own social change.

BRAC Annual Report 2011 5Microfinance

Our approach:

Serving women borrowers

At the core of our intervention is the collateral-free micro-loan, exclusively provided to women participating in the VOs. Understanding the limits

economically active women, typically

processing, agriculture and small

responsible for identifying clients and forming VOs from among the women in their target areas.

Poor, economically active women aged 18 to 60

organisations

Priority to female-headed households and widows with children

their own elected leader. These groups meet weekly in their VOs to receive support and discuss their business challenges and successes. In these meetings, women make loan repayments and receive further disbursements under

Household monthly income

less then or up to LKR 15000.

Participation in six weekly group meetings prior to start of disbursements

Loan range of LKR10,000-100,000 LKR (USD 80-800)

Repayment in equal weekly instalments

provided to family on borrower’s death

programme reliably serves millions each year - a rarity anywhere. Recent improvements in products and delivery mechanisms further allow BRAC to

services to the poor in the years to come.

Gregory C. ChenRegional Representative for South AsiaConsultative Group to Assist the Poor (CGAP)


Achievements of 2011

In 2011, BRAC Sri Lanka began its agricultural development programme. Partnering with Etimos Lanka, BRAC provides farmers living below the

support. The programme has disbursed LKR 55 million to 2643 farmers in selected rural areas of Trincomalee and Kurunagala districts. The farmers continue to be supported through VOs and monthly farmers meetings with an emphasis on improving the production of the agricultural sector.

With Etimos’ support, we gave orientation on cocoa cultivation to 471 farmers and distributed cocoa plants to 311 farmers. Farmers will have the opportunity to sell the cocoa they produce to Etimos’ cocoa factory, based in Sri Lanka, at a fair wage.

Relief: BRAC continues to provide relief in areas suffering from environmental disasters. Supported by Stromme Foundation and food donations from its

Lanka (Batticaloa, Trincomalee, Ampara, Anuradapura) in February 2011 with dried and cooked foods to support them while they focused on rebuilding their livelihoods.

At the request of the government of Sri Lanka, BRAC has also provided public

sports and wet weather materials for 550 school children in southern Sri Lanka.

The combination of all our efforts results in enhanced livelihoods of women across the country, in turn ensuring progress towards

Development Goals, eradicating extreme poverty and hunger and the empowerment of women.

Capacity development programme for BRAC staff:BRAC’s local staff are women, employed from within the branch areas in which they work, ensuring a truly contextual understanding of the challenges faced locally. Staff across all 15 districts participate in an intensive capacity development programme, comprising

enterprise development, followed up with periodic refresher sessions.

The year in numbers

A combination of local knowledge and rigorous training means that our staff are best placed to support the poorest,

entrepreneurial endeavours. In 2011, BRAC directed its efforts to scaling up its

districts in western, central, north central and eastern provinces of Sri Lanka. We have organised 112,329 members (100% women) into 6,131 village organisations. Over 74,000 members (including 36,022 new members) are actively borrowing and more than USD 74.6 million (USD 23.2 million in 2011) has been disbursed to date. We provided with holistic capacity development training to 177 members of staff.

Initiated in Bangladesh, BRAC is

countries including Afghanistan, Liberia, Pakistan, Sierra Leone, South Sudan, Sri Lanka, Tanzania, Uganda and Haiti. While our work in Sri Lanka started with disaster relief and rehabilitation following the Indian Ocean tsunami of 2004, by 2007 our focus had turned to longer term efforts in revitalising affected enterprises and

in 2009, BRAC’s work in Sri Lanka aims to build livelihoods to help turn the peace dividends into a practical reality.

Through our extensive global experience

development works best when it goes beyond providing loans. In Sri Lanka,

acts as a capacity-building platform. Clients are encouraged to save and learn from each other, before being given careful support to select, develop and manage their own small businesses effectively.

to act as highly effective vehicles for development within their communities.

Future plans

growth, our team is currently developing a micro-leasing service to begin in 2012. In partnership with leasing specialists, BRAC hopes to provide its borrowers with the opportunity to lease otherwise prohibitively expensive agricultural machinery and vehicles, increasing the pace and scale of production and allowing them to truly alter their future.

In the coming year, BRAC hopes to continue its expansion to reach more of the most vulnerable women in rural Sri Lanka.

Microfinance


C A S E S T U D Y

Pathmawathi in her restaurant, which she opened with loans from BRAC. Today, her business is booming as she makes plans for expansion.

Pathmawathi is a borrower from BRAC’s Sooriyawewa branch. She was deserted by her husband within weeks of her daughter being born. To make ends meet, she used to walk with her baby from door to door through her local streets, persuading people to buy her home-made string hopper noodles.

Knowing of Pathmawathi’s predicament and of her dream and potential to become a restaurateur, a friend encouraged her to talk to BRAC. In July 2011, Pathmawathi

rupees.

Within six months of receiving the loan and participating in her village organisation, Pathmawathi has made a complete life turnaround. She has been able to save enough to set up her own one-room restaurant, in which she now operates a buffet style restaurant serving breakfast, lunch and dinner as well as snacks on the side. Today, her small restaurant business is expanding to meet increasing demand.

Pathmawathi’s income has skyrocketed from LKR 250 rupees to 3,000 per day. Pathmawathi re-invests all the excess after living costs back into her business, and is determined to add a bakery in 2012 and start a small hotel in 2013.

“BRAC gave me an opportunity to invest in my business and my family. Now I am independent and happy and I have faith that I can go

Microfinance


Governance

Sir Fazle Hasan AbedFounder and Chairperson, BRAC

Sir Fazle is recognised by Ashoka as one of the

founding member of its prestigious Global Academy for Social Entrepreneurship. He was also appointed Knight Commander of the Most Distinguished Order of St. Michael and St. George (KCMG) by the British crown in 2010 in recognition of his services to reducing poverty in Bangladesh and internationally. He has received numerous national and international awards for his achievements in leading BRAC, including WISE Prize – the world’s first major international prize for education by Qatar Foundation (2011), the David Rockefeller Bridging Leadership Award (2008), the Conrad N. Hilton Humanitarian Prize (2008) – the world’s largest humanitarian prize, the Inaugural Clinton Global Citizen Award (2007), the Henry R. Kravis Prize in Leadership (2007)

Dr. Mahabub HossainExecutive Director, BRAC and BRAC International(Ex-officio)

A renowned agriculturaleconomist, Dr. Hossainis former head of SocialSciences Division ofthe International RiceResearch Institute(IRRI), Philippines andformer director Generalof the BangladeshInstitute of DevelopmentStudies (BIDS). Hewas awarded thefirst Gold Medalfrom the BangladeshAgricultural EconomistAssociation in 1985,in recognition ofoutstanding contributionto understandingthe operation ofrural economy inBangladesh.

Muhammad A. (Rumee) AliManaging Director, BRAC (Ex-officio)

Mr. Rumee is the vice chairmanof BangladeshAssociation of Banksand a member ofthe Global SteeringCommittee ofthe ‘PerformanceBased Grants Initiative’of the InternationalFinance Corporationand the TechnicalAdvisory Committee ofBangladesh InvestmentClimate Fund. Heserved as the deputygovernor of BangladeshBank, and countryhead and generalmanager of GrindlaysBangladesh. He wasappointed the CEO ofthe Standard CharteredGroup in Bangladesh,heading both StandardChartered Bank andStandard CharteredGrindlays Bank. He alsoserved as a member ofthe Governing Body ofPKSF.

Tanwir RahmanDirector, Finance, BRAC and BRAC International

Previously, Mr. Rahman was the Divisional Controller for HBG (Hollandsche Beton Groep) Royal BAM, Assistant Controller for Mitchell engineering, Senior Project Accounting Manager for Bovis Lend Lease. Before joining BRAC he worked as Controller for Allied Container System.

S.N. KairyCFO, BRAC Group

Mr. Kairy joined the Accounts Section of BRAC in April 1982. He is responsible for ensuring the effective Procurement and Asset Management of BRAC Group. Currently, Mr. Kairy is serving on the board of BRAC Bank Limited as a Director nominated by BRAC. He is also the Chair of the Board Audit Committee of BRAC Bank Limited.

Faruque AhmedSenior DirectorBRAC International

Prior to joining BRAC, Mr. Ahmed worked for the World Bank. He is a member of the working group of Bangladesh Health Watch, a civil society initiative, vice chair of Bangladesh Country Coordination Mechanism for Global Funds for AID Tuberculosis and Malaria (GFATM) and a member of World Bank Civil Society Consultative Group on Health, Nutrition and Population. He also represented civil society on the GAVI Alliance Board.


Management

Ms. Indu has been working with BRAC since December 1996. In her 15 years of working with BRAC, she has worked as a programme organiser before being appointed the country representative for Sri Lanka. Aside from her work in the microfinance and ultra-poor programmes, she also has experience as a management consultant of sustainable livelihood programme for the extreme poor in India and Yemen. She was born in Chittagong, Bangladesh in 1963 and holds a BA (Hons) and Master degrees in Bangla Literature from Chittagong University, Bangladesh, and a Bachelor degree in Education from Open University, Bangladesh. She also has a post graduate diploma on International Rural Planning and Development (Major in Microfinance and Women Empowerment) from University of Guelph, Canada.

Sagarika InduCountry Representative, BRAC Sri Lanka

Development Partners

Lalitha SenarathneHonorary director of BRAC Lanka (Guarantee) Ltd

Ms. Senarathne is a lawyer, who actively practiced law in Sri Lanka . from 1986 to 2000as a junior to Mr. Nimal Senanayake, PC, then president of the Bar Association of Sri Lanka, and to the late Honourable Lakshman Kadirgamar, PC, minister of Foreign Affairs. From 2000 onwards, she has been practicing as a specialist in Conflict of the Laws and International Trade. She is also working as a consultant to the Sri Lanka Medical Council, and legal consultant (through the WHO) to the government of East Timor in the matter of draft legislation for the establishment of a Medical Council. She is the member of the Bar Association of Sri Lanka, and SAARC Law. She is the former vice president of the Sri Lanka Federation of University Women and the former chairperson of the National YWCA Constitution Committee.She was the Hon. Executive Director of

Hon. Executive Director of the Coastal Fisheries & Industries Trust.

Gretion E PereraDirector, BRAC Lanka (Guarantee) Limited

Mr. Perera is an attorney-at-law, and notary public, with a career spanning 26 years, primarily in civil law practice, civil courts, notarial work and corporate work. In 1981, he obtained his (LL.B) from University of Colombo, Sri Lanka, and three years later, he passed the attorneys-at-law final examination from Sri Lanka Law College with first class honours. From the beginning, he has worked in the unofficial bar as a practicing lawyer and gained wide experience in the field of law. As of 26July 2011, he has been serving as the Sri Lankan director of BRAC Lanka (Guarantee) Limited, the company which controls micro finance activities of BRAC in Sri Lanka.

Sadara Wedage Padma Subashini Regional Manager - Southern, Microfinance

Juli Diana RagelRegional Manager - Eastern Region, Microfinance

Abeysingha Gunawardana NadeekaRegional Manager - Central & North Central Region, Microfinance

Chief Accountant - Microfinance


BRAC across the world


Functional education

Life skills development education for adults that helps to build solidarity, create a savings mentality and prepare people for new income generation

Para-professionals

Pioneering models for vaccinators, community health workers and ‘barefoot lawyers’ that provide incentive based jobs for those ready to serve their own communities

Harnessing the Past: Our innovations in the last four decades

Homemade oral rehydration solution campaign

A groundbreaking campaign in which 13 million households in Bangladesh learned how to make oral saline at home – a lesson that continues to save millions of lives from diarrhoea

Incentive salary system

A result oriented incentive package that measures effectiveness of and compensates our community workers and volunteers accordingly

Education for dropouts and non entrants

Our own primary schools that help disadvantaged children make successful transitions to formal schools

Enterprises for value chainsupport

An integrated network of our development programmes, enterprises and investments that result in a unique synergy that supports our holistic approach for alleviating poverty

Directly observed treatment (DOT) for TB control

An effective treatment method for tuberculosis, a result of our incentive based salary system for community health workers, ensuring patients’ daily intake of medicine for six months or more

Credit ++ approach

An integrated set of services for the landless poor, marginal farmers and small entrepreneurs working together to strengthen the supply chain of the enterprises in which our microfinance borrowers invest

Village organisations (VOs)

The most effective medium for catalysing change in disadvantaged communities


Pre primary schools

Our own pre primary schools where we prepare underprivileged children to enter mainstream primary schools

Birthing huts

Safe and culturally accepted childbirth places with appropriate services for mothers in urban slums

Hybrid maize

A pioneer venture to commercialise corn harvesting, which plays a key role in making farmers shift from traditional single cropping to multiple cropping to maximise land usage during idle seasons

Popular theatre

A traditional platform became an effective communication medium to advocate for social changes in rural communities, particularly to the illiterate

Unique management model

A unique management model that focuses on internal control without suffocating creativity, runs our large scale interventions cost effectively, and enables us to constantly learn from the communities we serve across the world

We transformed over 2,000 rural poor into entrepreneurs with an innovative livelihood opportunity: providing fee based ‘door to door’ artificial insemination and education services for livestock farmers

M-health services

A mobile based platform that community health workers use to collect data and provide a range of real time automated services such as storing patient records, categorising and assessing medical risks, prioritisingmedical responses and monitoring referrals

Empowerment and livelihood for adolescents

A range of initiatives to empower adolescents including skills training, social development and micro-loans for their future businesses.

Adolescent clubs

Safe spaces where peer driven intervention for adolescents enhance their personal growth and social skills

Sharecroppers scheme

A phenomenal initiative to offer soft loans for tenant farmers (sharecroppers) with a specially tailored recovery plan

Challenging the frontiers of poverty reduction

A unique model focusing on extremely deprived women to improve their economic and social situations, allowing ultra poor households to graduate from extreme poverty and enter mainstream development programmes



Notes


Notes

2011 2010 2011 2010

Notes

LKR LKR USD USD

Service charge on loans 4 3,618,790 4,024,328 32,022 36,542Interest expenses 5 (132,939) (113,329) (1,176) (1,029)Net income from service charge 3,485,851 3,910,999 30,846 35,513

Membership fees and other charges 6 54,100 - 479 -Grant income 15.1 13,262 - 117 -Total operating income 67,362 - 596 -

3,553,213 3,910,999 31,442 35,513

Impairment losses on loans and advances to customers 7 56,582 42,426 501 385 Operating income after impairment charges 3,496,631 3,868,573 30,941 35,127

Other operating expenses 8 418,532 28,500 3,703 259 418,532 28,500 3,703 259

Income tax expense 9(a) 369,372 768,015 3,268 6,974

BRAC SRI LANKAStatement Of Comprehensive Income

BRAC SRI LANKA

2011 2010 2011 2010

Notes

LKR LKR USD USD

ASSETS

Cash in hand and at Bank 10 - 494,703 - 4,492Loans and advances to customers 11 11,972,809 12,179,772 105,945 110,594Other assets 13 - 16,992,680 - 154,296Total assets 11,972,809 29,667,155 105,945 269,382

LIABILITIES AND CAPITAL FUND

Loan security fund 12 2,318,020 2,217,247 20,512 20,133 Other liabilities 14 1,739,453 5,393,006 15,392 48,969 Tax payable 369,372 768,015 3,268 6,974 4,426,845 8,378,268 39,172 76,076

Capital fundDonor funds 15 - 16,451,650 - 149,383 BRAC contribution 16 1,765,179 1,765,179 15,620 16,028 Retained earnings 5,780,785 3,072,058 51,153 27,895 Total capital fund 7,545,964 21,288,887 66,773 193,306

Country Head of AccountantBRAC Sri Lanka

Director Director

Retained BRAC Total Capital Total Capital

Earnings Fund Fund

LKR LKR LKR USD

At 1 January 2010 - 1,765,179 1,765,179 16,028

At 1 January 2011 3,072,058 1,765,179 4,837,237 42,804

BRAC SRI LANKA

2011 2010 2011 2010

Notes

LKR LKR USD USD

10,846 4,002,061 96 36,339 Loan disbursements (20,100,000) (18,545,000) (177,860) (168,392)Loan collection 20,261,693 16,423,433 179,177 149,128

161,693 (2,121,567) 1,317 (19,264)

- - - -

Loan security fund 100,773 706,073 892 6,411 Tax paid (768,015) (4,714,846) (6,796) (42,812)

(667,242) (4,008,773) (5,904) (36,400)

Net (decrease)/increase in cash in hand and at Bank (494,703) (2,128,279) (4,492) (19,325) 494,703 2,622,982 4,492 23,817

BRAC SRI LANKA

BRAC SRI LANKANOTES TO THE FINANCIAL STATEMENTS

1.00 THE REPORTING ENTITY

Services and Welfare (Reg. No. 94806).BRAC Sri Lanka is engaged in implementing and operating rehabilitation and livelihood development activities.

2.00 BASIS OF PREPARATION

2.01 Statement of Compliance

requirements of the Sri Lankan’s Voluntary Service Act No 1980.

2.02 Basis of Measurement

statements.

2.04 Use of Estimation and Judgments

estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and disclosure of contingent

about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results ultimately may differ from these estimates.

3.00 SIGNIFICANT ACCOUNTING POLICIES

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to

3.02 Depreciation

the expected useful lives of the assets concerned, and intangible assets on a straight line basis. Land is not depreciated.

considered to be appropriate in accounting estimate is recorded through the statement of comprehensive income.

reporting period.

Transactions in foreign currencies are translated to Sri Lankan Rupee at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sri Lankan Rupee at the foreign exchange

foreign currency translated at the exchange rate at the end of the period.

exchange rate ruling at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair

3.04 Loans and Advances to the Customers

market prices at origination date and subsequently measured at the original effective interest rate at reporting date. All loans and advances are

3.05 Impairment

i) Financial Assets

in groups that share similar credit characteristics.

ii) Non Financial Assets

3.06 Other Assets

3.07 Cash and Cash Equivalents

received.

Current income tax is the expected tax payable on taxable income for the year, using tax rates enacted at the balance sheet date. Management

3.10 Revenue Recognition

i) Service Charge on Loans

iv) Other Income Other income comprises interest from short term deposits, gains less losses related to trading assets and liabilities, and includes gains from

institution.

3.11 Donor Grants

Account for the period.

income.

agreements.

3.12 Grant Income

approximate their fair values due to their short term maturity.

3.16 Comparatives

2011 2010 2011 2010

LKR LKR USD USD

4.00 SERVICE CHARGE ON LOANS

3,618,790 4,024,328 32,022 36,542

5.00 INTEREST EXPENSES

Interest on VO Members Savings 132,939 113,329 1,176 1,029 Total 132,939 113,329 1,176 1,029

6.00 MEMBERSHIP FEES AND OTHER CHARGES

Membership fee 54,100 - 479 - Total 54,100 - 479 -

7.00 IMPAIRMENT LOSSES ON LOANS AND ADVANCES

Provision on Impairment losses 56,582 42,426 501 385 Total 56,582 42,426 501 385

8.00 OTHER OPERATING EXPENSES

Maintenance and general expenses 388,292 - 3,436 - Audit fee 30,240 28,500 268 259 Total 418,532 28,500 3,703 259

9.00 TAXATION

Corporation tax –charge for the year 369,372 768,015 3,268 6,974

Balance b/f 768,015 4,714,846 6,796 42,812 Charge for the period 369,372 768,015 3,268 6,974 Paid during the year (768,015) (4,714,846) (6,796) (42,812)Tax payable 369,372 768,015 3,268 6,974

9.01

Tax charge for the year 369,372 768,015 3,268 6,974

2011 2010 2011 2010

LKR LKR USD USD

10.00 CASH AND BANK Cash in hand - - - - Cash at bank - 494,703 - 4,492

- 494,703 - 4,492

11.00 LOANS AND ADVANCES TO CUSTOMERS Group loans 12,266,343 12,428,036 108,542 112,849 Interest receivable 11,609 297 103 3 Impairment loss on loan advance (305,143) (248,561) (2,700) (2,257)

11,972,809 12,179,772 105,945 110,594

as the carrying values. All advances to customers are unsecured.

11.01

At 1 January 12,428,036 10,269,861 109,973 93,252 Loans disbursed 20,100,000 18,545,000 177,860 168,392

Gross advances to customers 12,266,343 12,428,036 108,542 112,849

Interest receivable 11,609 297 103 3 Impairment loss on loans advance (Note -11.02) (305,143) (248,561) (2,700) (2,257)Net advances to customers 11,972,809 12,179,772 105,945 110,594

11.02

At 1 January 248,561 206,135 2,199 1,851 Charge for the year 56,582 42,426 501 406

305,143 248,561 2,700 2,257

11.03 Annalysis of impairment of loans Principal Provision ProvisionOutstanding rate required

Local LocalFor general Provision

143,465 62,685

12,266,343 305,143

2011 2010 2011 2010

LKR LKR USD USD

12.00 LOAN SECURITY FUND Opening balance 2,217,247 1,511,174 19,620 13,722 Received during the year 2,010,000 927,250 17,786 8,420

Closing balance 2,318,020 2,217,247 20,512 20,133

13.00 Other Assets Related party receivables - 16,992,680 - 154,296

- 16,992,680 - 154,296

14.00 OTHER LIABILITIES Accrual for expenses 1,738,563 4,822,171 15,384 43,786 VO members saving deposits 890 570,835 8 5,183 Total 1,739,453 5,393,006 15,392 48,969

15.00 DONOR FUNDS Donor funds investment in loans to group members - 16,438,388 - 149263 Donor funds received in advance (15.10) - 13,262 - 119Total - 16,451,650 - 149,383

15.10 Donor funds received in advance Opening balance 13,262 13,262 117 119 Transferred to statement of income and expenses (13,262) - (117) -

16.00 BRAC CONTRIBUTION

17.00 SUBSEQUENT EVENTS

18.00 CASHFLOW FROM OPERATING ACTIVITIES

2011 2010 2011 2010

LKR LKR USD USD

3,078,099 3,840,073 27,237 34,869 Loan loss provision 56,582 42,426 501 385

Decrease/(increase) of Other Assets 16,992,680 - 150,364 - Decrease/(increase) of Interest Receivable (11,312) - (100) - Increase/(decrease) of Current Liabilities (3,653,553) 119,562 (32,329) (3,798)

Net cash from operations 10,846 4,002,061 96 36,339

19.00 CONTINGENT LIABILITIES

BRAC LANKA (GUARANTEE) LIMITEDStatement Of Comprehensive Income

2011 2010 2011 2010

Notes

LKR LKR USD USD

Service charge on loans 4 373,121,918 377,367,954 3,301,672 3,388,334 Interest expense 5 (45,988,258) (36,890,570) (406,940) (329,733)Net income from service charge 327,133,660 340,477,384 2,894,732 3,058,601

Membership fees and other charges 6 8,415,743 8,815,985 74,469 78,798 Other income 7 9,733,518 28,275,964 86,130 252,734 Grant income 21.1 131,028 131,028 1,159 1,190 18,280,289 37,222,977 161,758 332,722

Total operating income 345,413,949 377,700,361 3,056,490 3,391,322 Impairment losses on loans and advances to customers 8 10,881,417 10,669,012 96,287 95,361 Operating income after impairment charges 334,532,532 367,031,349 2,960,203 3,295,961

Staff costs 9 154,028,904 133,370,680 1,362,967 1,192,119 Other operating expenses 10 100,754,040 125,592,339 891,550 1,122,563 Depreciation 16 8,674,888 5,954,701 76,762 54,070 263,457,832 264,917,720 2,331,279 2,368,752

Income tax expense 11(a) (22,921,633) (21,501,399) (202,828) (195,237)

Other comprehensive income - - - -Total comprehensive income 44,283,522 80,612,230 391,855 731,973

BRAC LANKA (GUARANTEE) LIMITED

2011 2010 2011 2010

Notes

LKR LKR USD USD

ASSETS Cash in hand and at Bank 12 25,579,312 175,942,975 226,346 1,597,594 Short term deposits 13 - 50,000,000 - 454,009 Loans and advances to customers 14 1,261,358,262 986,872,622 11,161,475 8,960,979 Other assets 15 3,964,069 10,543,667 35,077 95,738 Property, plant and equipment 16 47,130,532 46,657,379 417,048 423,657 Total assets 1,338,032,175 1,270,016,643 11,839,946 11,531,977

LIABILITIES AND CAPITAL FUND

Loan security fund 17 254,085,289 68,328,588 2,248,343 620,436 Related party payables 18 198,907,388 167,478,290 1,760,087 1,520,733

19 294,448,787 292,248,213 2,605,511 2,653,666 Other liabilities 20 24,741,626 221,558,768 218,933 2,011,793 Tax payable 22,795,207 21,501,399 201,710 195,237

Capital fund Donor funds 21 4,864,349 4,995,377 43,044 45,359 BRAC contribution 22 460,599,963 460,599,963 4,075,745 4,182,330 Retained earnings 77,589,566 33,306,045 686,574 302,425 Total capital fund 543,053,878 498,901,385 4,805,362 4,530,113

Country Head of AccountsBRAC Lanka (Guarantee) Limited

Director Director

Retained BRAC Total Total

LKR LKR LKR USD

At 1 January 2010 (47,306,187) 460,599,963 413,293,776 3,752,781

At 1 January 2011 33,306,045 460,599,963 493,906,008 4,370,463



2011 2010 2011 2010

Notes

LKR LKR USD USD

(74,309,919) 78,718,534 (698,266) 706,947 Loan disbursements (2,537,819,000) (1,855,782,000) (22,456,588) (16,666,206)Loan collection 2,254,714,876 1,638,551,521 19,951,463 14,715,326

Term loans 2,200,574 34,390,018 19,472 308,846 Loan security fund 185,756,701 68,328,589 1,643,719 613,638 Deferred income (131,028) (131,028) (1,159) (1,177)Tax paid (21,627,825) (7,103,122) (191,380) (63,791)

Cash in hand and at bank at beginning of the year 175,942,975 280,417,569 1,597,594 2,535,848

BRAC LANKA (GUARANTEE) LIMITEDNotes To The Financial Statements

1.00 THE REPORTING ENTITY

Activities to assist in poverty alleviation.

2.00 BASIS OF PREPARATION

2.01 Statement of Compliance

requirements of the Sri Lankan’s Companies Act No. 07 of 2007.

2.02 Basis of Measurement

2.04 Use of Estimation and Judgments

estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and disclosure of contingent assets

of assets and liabilities that are not readily apparent from other sources. Actual results ultimately may differ from these estimates.

3.00 SIGNIFICANT ACCOUNTING POLICIES

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to

3.02 Depreciation

cost over the expected useful lives of the assets concerned, and intangible assets on a straight line basis. Depreciation is not provided for Land.

be appropriate in accounting estimate is recorded through the statement of comprehensive income.

period.

Transactions in foreign currencies are translated to Sri Lankan Rupee at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sri Lankan Rupee at the foreign exchange rate applicable

at the exchange rate at the end of the period.

at the foreign exchange rate ruling at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at

3.04 Loans and Advances to the Customers

a)

3.05 Impairment

i) Financial Assets

in groups that share similar credit characteristics.

ii) Non Financial Assets

amount.

3.06 Other Assets

3.07 Cash in Hand and at Bank

received.

Current income tax is the expected tax payable on taxable income for the year, using tax rates enacted at the balance sheet date. Management

3.10 Revenue Recognition

i) Service Charge on Loans

iv) Other Income Other income comprises interest from short term deposits, gains less losses related to trading assets and liabilities, and includes gains from

3.11 Donor Grants

Account for the period.

income.

agreements.

3.12 Grant Income

approximate their fair values due to their short term maturity.

3.16 Comparatives

2011 2010 2011 2010

LKR LKR USD USD

4.00 SERVICE CHARGE ON LOANS

373,121,918 377,367,954 3,301,672 3,388,334

5.00 INTEREST EXPENSE

Lender 1. SMAGL 13,993,916 10,719,660 123,829 95,814 2. People’s Bank 126,717 704,359 1,121 6,296 3. Etimos 19,269,806 13,174,604 170,514 117,757 4. Deutsche Bank - 164,397 - 1,469 5. Interest on VO Members Savings 12,597,819 12,127,550 111,475 108,398 Total 45,988,258 36,890,570 406,940 329,733

6.00 MEMBERSHIP FEES AND OTHER CHARGES Membership fee 8,415,743 8,815,985 74,469 78,798 Total 8,415,743 8,815,985 74,469 78,798

7.00 Other Income

Other income 7,017,706 22,835,425 62,098 204,106 Total 9,733,518 28,275,964 86,130 252,734

The exchange gains arise from translation of foreign currency transactions and revaluations of foreign currency denominated assets and liabilities

8.00 IMPAIRMENT LOSSES ON LOANS AND ADVANCES Provision on Impairment losses 10,881,417 10,669,012 96,287 95,361 Total 10,881,417 10,669,012 96,287 95,361

9.00 STAFF COSTS

Total 154,028,904 133,370,680 1,362,967 1,192,119

2011 2010 2011 2010

LKR LKR USD USD

10.00 OTHER OPERATING EXPENSES

Staff training and development 1,931,676 3,064,981 17,093 27,395 Travel and transportation 14,592,791 20,137,962 129,128 179,996 Maintenance and general expenses 29,722,209 16,725,128 263,005 149,492

Occupancy expenses (10.10) 20,086,968 15,592,783 177,745 139,371

Audit fees 403,200 369,600 3,568 3,304 Program supplies 184,160 425,050 1,630 3,799

HO logistics and management expenses 23,162,086 49,605,026 204,956 443,377 Total 100,754,040 125,592,339 891,550 1,122,563

Rent 14,663,560 10,997,198 129,755 98,295

Total 20,086,968 15,592,783 177,745 139,371

11.00 TAXATION

Corporation tax –charge for the year 22,921,633 21,501,399 202,828 195,237

Balance b/f 21,501,399 7,103,122 190,261 64,498 Charge for the period 22,921,633 21,501,399 202,828 195,237 Paid during the year (21,627,825) (7,103,122) (191,380) (64,498)

11.01

Tax effect of non deductible expense and non taxable income 3,020,717 772,332 26,730 7,013

2011 2010 2011 2010

LKR LKR USD USD

12.00 CASH IN HAND AND AT BANK

Cash in hand 205,996 2,221,782 1,823 20,174 Cash at Bank

Standard Chartered Bank 15,644,728 133,774,655 138,437 1,214,698 Hatton National Bank PLC 886,058 6,995,737 7,841 63,523 Commercial Bank of Ceylon PLC 276,955 6,219,451 2,451 56,474 Peoples Bank 7,971,287 18,389,325 70,536 166,978 Bank of Ceylon 505,631 3,612,027 4,474 32,798 Seylan Bank PLC 55,888 3,837,541 495 34,846 Sampath Bank PLC 32,769 892,457 290 8,104

25,373,316 173,721,193 224,523 1,577,419

13.00 FIXED DEPOSITS AT AMORTISED COST

Total - 50,000,000 - 454,009

Within 3 months - 50,000,000 - 454,009 Total - 50,000,000 - 454,009

14.00 LOANS AND ADVANCES TO CUSTOMERS Group loans 1,296,508,615 1,024,317,480 11,472,512 9,300,985

Interest receivable 2,705,131 442,198 23,937 4,015 Impairment loss on loan advance (37,855,484) (26,974,067) (334,975) (244,929)

1,261,358,262 986,872,622 11,161,475 8,960,979

as the carrying values. All advances to customers are unsecured.

14.01

At 1 January 1,013,404,491 807,087,001 8,967,388 7,328,494 Loans disbursed 2,537,819,000 1,855,782,000 22,456,588 16,850,831

Gross advances to customers 1,296,508,615 1,024,317,480 11,472,512 9,300,985

Interest receivable 2,705,131 442,198 23,937 4,015 Impairment loss on loans advance (Note -14.02) (37,855,484) (26,974,067) (334,975) (244,929)Net advances to customers 1,261,358,262 986,872,622 11,161,475 8,960,979

2011 2010 2011 2010

LKR LKR USD USD

14.02

At 1 January 26,974,067 16,647,303 238,687 151,160 Charge for the year 10,881,417 21,582,001 96,287 195,968

At 31 December 37,855,484 26,974,067 334,975 244,929

14.03 Analysis of Impairment of loans Principal Provision Provision

Outstanding rate required Local Local

For general provision (4.40)

20,202,708 12,329,366 1,296,508,615 37,855,484

15.00 OTHER ASSETS Advance to third party 3,941,619 3,144,718 34,878 28,555 Related party receivables - 5,946,455 - 53,995 Advances to staff 22,450 - 199 -

Total 3,964,069 10,543,667 35,077 95,738

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2011 2010 2011 2010

LKR LKR USD USD

17.00 LOAN SECURITY FUND

Opening balance 68,328,588 - 604,624 -Received during the year 253,781,900 92,789,100 2,245,659 842,542

Closing balance 254,085,289 68,328,588 2,248,343 620,436

risk.

18.00 RELATED PARTY PAYABLE

Payable to Stitching BRAC International 23,162,086 - 204,956 -Payable to BRAC Bangladesh 175,745,302 167,478,290 1,555,131 1,520,733

198,907,388 167,478,290 1,760,087 1,520,733

BRAC Lanka (Guarantee) Limited, HO logistics and other fees payable.

19.00 BORROWINGS SMAGL 185,312,483 105,029,168 1,639,788 953,684

Etimos 108,865,143 182,554,292 963,323 1,657,625 Peoples Bank 271,161 4,039,905 2,399 36,683 Total 294,448,787 292,248,213 2,605,511 2,653,666

Opening balance 292,248,213 257,858,196 2,653,666 2,341,398 Obtained during the year 19 . B 150,000,000 171,837,539 1,327,316 1,560,315 Less - Loan Repayment during the year 19 . C (147,799,426) (137,447,522) (1,375,471) (1,248,048)

294,448,787 292,248,213 2,605,511 2,653,666

19.1 - 99,712,691 - 905,409 19.2 - 8,000,000 - 72,641 19.3 - 8,500,000 - 77,182 19.4 - 25,000,000 - 227,004 19.5 - 30,000,000 - 272,405 19.6 - 624,848 - 5,674 19.7 20,000,000 - 176,975 -19.8 20,000,000 - 176,975 -19.9 30,000,000 - 265,463 -

19.10 30,000,000 - 265,463 -19.11 20,000,000 - 176,975 -19.12 30,000,000 - 265,463 -

150,000,000 171,837,539 1,327,316 1,560,315

People’s Bank Sri Lanka 73,689,149 8,333,316 684,111 75,668

147,799,426 137,447,522 1,375,471 1,248,048

method.

2011 2010 2011 2010

LKR LKR USD USD

20.00 OTHER LIABILITIES

Accrual for expenses 13,376,410 13,494,182 118,365 122,530 VO Members Saving Deposits (20.10) 10,992,443 208,064,586 97,270 1,889,263 Interest Payable 372,773 - 3,299 -Total 24,741,626 221,558,768 218,933 2,011,793

Opening balance 208,064,586 179,591,326 1,889,263 1,630,721

208,064,586 242,664,832 1,889,263 2,203,440

10,992,443 208,064,586 97,270 1,889,263

21.00 DONOR FUNDS

Total 4,864,349 4,995,377 43,044 45,359

Opening balance 4,995,377 5,126,405 44,203 46,549 Transferred from donor funds received in advance - - - -Depreciation charged during the year (131,028) (131,028) (1,159) (1,190)

22.00 BRAC CONTRIBUTION

23.00 EVENTS AFTER THE BALANCE SHEET DATE

24.00 CASHFLOW FROM OPERATING ACTIVITIES 2011 2010 2011 2010

LKR LKR USD USD

71,074,700 102,113,629 628,924 917,051

Depreciation 8,674,888 5,954,701 76,762 53,477

Loan loss provision 10,881,417 21,582,001 96,287 193,821

capital

Decrease/(increase) of other assets 6,579,598 (105,317) 58,221 (946)Increase/(decrease) of related parties payable 31,429,098 68,793,759 278,109 617,816 Increase/(decrease) of other liabilities (196,817,142) (144,456,213) (1,782,304) (1,297,317)(Increase)/decrease interest receivable (2,262,933) 24,835,974 (20,024) 223,044

(161,071,379) (50,931,797) (1,465,998) (457,403)Net cash from operations (74,309,919) 78,718,534 (698,266) 706,947

25.00 CONTINGENT LIABILITIES

Photo Credit:

Rest of the Photos : BRAC/Shehzad Noorani

BRAC in Sri Lanka

197/1, Templers Road, Mount Lavinia, Sri Lanka.Tel: +94-11-4853063Fax: +94-11-2727503

BRAC International

Teleportboulevard 1401043 EJ AmsterdamNetherlands

BRAC

BRAC Centre75 MohakhaliDhaka 1212Bangladesh

T : +88 02 9881265F : +88 02 8823542E : [email protected] : www.brac.net

www.brac.net