annual report 2016 - mobilink microfinance bank annual report... · page 17 with over 11 million...

Celebratin

g

Success

Annual Report 2016

Highlights 2016

Innovative Financial Solutions

About Mobilink Bank

Board of Directors

Management Team

Vision, Mission & Values

Our Products

Branch Network

Five Year Journey

Empowering Businesses: The Story of Deen Muhammad

Director’s Report

CEO’s Message

Chief Digital & Financial Services Officer’s Message

Auditor’s Report

Financial Statements

Notes to Financial Statements

01

06

17

21

23

27

29

31

33

39

42

45

47

49

51

56

Contents

Active Borrowers

Avg. Outstanding Loan Size

No. of Depositors

No. of Locations

Number of Employees

No. of Branchless Banking Agents

Earnings Per Share

Return on Assets (ROA)

Return on Equity (ROE)

PAR

1.59

2.4%

20.7%

0.04%

Highlights 2016

91,747

64,677

8,121,382

51

751

69,780

page 1

The Power of Progress

Mobilink

Microfinance Bank“A/A1”Credit RatingBy PACRA

page 2

MobileAccount*786#

page 3

PAY BILLS

SAVINGS &

INSURANCE

100

MOBILE LOAD

100

PAYMENTS

ATM CARD

SEND MONEY

Rs.

page 4

Innovative Financial Solutions Drivers of Growth & Success Our innovative financial solutions include a diversified range of products and services such as Domestic Remittance, International Remittance, G2P Disbursements, Utility Bills Payment, Inter-Bank Fund Transfer (IBFT), Pre & Post-Paid Top-Ups, Real time Fee/Loan/Donation/Insurance/Passport/ Tickets Payments, Digital Account opening through bio-metric verification, Loans Disbursements, CASA/TDR accounts, Bankers Cheques and Running Finance. These services are accessible through both Branch and Branchless Banking Platforms, and can be accessed real time through Branchless Banking, Over-the-Counter, Internet Banking, Mobile Application, CCDMs/ATMs/POS/Other-ADC Channels. Our financial solutions have transformed the microfinance industry in Pakistan. In the last five years we have introduced a diversified portfolio of financial products and spearheaded the launch of a cutting-edge branchless banking service under the brand JazzCash making us a leading player in technology driven microfinance solutions in Pakistan.

page 6

Pakistan’s Largest DigitalBank

First

Microfinance Bank

to Introduce

page 9

CCDMCash & Cheque

Deposit Machine

page 11

Internet Banking

&

Mobile Banking App

page 13

Visa Classic

QURAT-UL-AEIN

Visa Debit Card

page 15

Visa Classic

QURAT-UL-AEIN

page 16

* Coming Soon

With over 11 million mobile wallets, Mobilink Bank has become Pakistan’s largest digital bank in a short span of 4 years. Mobilink Microfinance Bank, formerly Waseela MF Bank, a Global Telecom - VEON Group company, started operations in April 2012 and launched branchless banking operations under the brand name ‘Jazzcash’ in partnership with Pakistan's largest telecom operator ‘Jazz’ in November 2012.

Being a hybrid model, that combines traditional microfinance with mobile / digital banking and agent based banking, the bank now operates with 51 branches, a nationwide network of 70,000 branchless banking agents and a USSD (GSM) based digital channel offering savings, micro-enterprise loans, small housing loans, remittances, collections (of utility bills and loan instalments), mobile wallets, insurance, G2P, B2B & B2P payments, the bank currently plays a leading role in the promotion of financial inclusion. Despite being a young bank, Mobilink Bank has emerged as a front

About Mobilink BankAbout Mobilink Bank

runner in the sector, having achieved financial break-even within four years of commencement of operations, one of the fastest in the industry.

Mobilink Bank & Jazz, under the brand of Jazzcash, envision to become market leaders in digital financial services. Due to rapid increase in the smartphone user base in the country, distinction between traditional and mobile financial services is rapidly diminishing. Therefore, the Bank continues to invest in technology and systems to maintain it’s lead in digitalization of financial services. Mobilink Bank’s strategy is to take banking from the confines of a limited number of brick and mortar structures to customers’ cell phones thereby removing a major barrier in expanding coverage and outreach, significantly increasing access to financial services such as savings, loans, insurance and transactional services.

• 0pened 26 new branches, reaching a total of 30• Ended the year with deposits of Rs. 644 million (573.9% increase from

2012) and 66,279 depositors• GLP closed at Rs. 178 Million• Jazz Cash agents reached a count of 26,578, 2.51 million remittance

transactions and 5.5 million Utility Bill Payments.

2013

• Opened 8 new Booths• Launched Interbank Fund Transfer (IBFT) service in November 2014.• Launched ATM card on May 02, 2014 and installed its first ATM

machine on July 07, 2014.• Closed deposits at Rs. 1.3 Billion with 311,748 depositors • GLP was closed at Rs. 500 Million • Jazz Cash agents reached to 49,586 with 15.8 million remittance

transactions 9.314 million utility bill payments.

2014

• Opened first branch on May 2, 2012• Pilot launch of branchless banking on May 31, 2012• Commercial launch of branchless banking on November 5, 2012 with

brand name Mobicash.• Opened four branches and six service centers • Ended year with Rs. 112 Million deposit with 8,655 depositors• Ended year at GLP of Rs. 6.5 Million• Branchless banking agents reached to 5,030, had 5,885 home

remittance transactions and 62,375 Utility Bill Payments.

2012

page 19

• MMBL launched Banca assurance for its customers• Closed its deposit at Rs. 3.2 Billion with 3.2 Million depositors• GLP was closed at Rs. 1.4 Billion• Jazz Cash agents reached to 58,818 with 28.4 Million remittance

transactions and 2.2 Million Utility Bill Payments.• Launched international remittance services on August 18, 2015. • Launched savings account products for mobile wallet accounts in

August 2015.

2015

• Opened 05 new branches & 8 new booths in 2016 with total number of branches reaching 35 with 16 booths.

• Launched NFC payments for mobile wallets in March 2016• Re-branded from Waseela Microfinance Bank Limited to Mobilink

Microfinance Bank Limited in May 2016.• Launched Internet Banking services In November, 2016, being the first

MFB to offer these services.• Started disbursement of loans straight to mobile wallets in November

2016.• Closed its deposit at Rs. 10.3 Billion with 8.12 Million depositors • GLP was closed at Rs. 5.9 Billion • Jazz Cash agents reached to 69,767 with 36 Million remittance

transactions and 4.5 Million Utility Bill Payments

2016

page 20

Aamir Hafeez IbrahimDirector / Chairman

A highly motivated leader with the proven ability to develop organizations and drive revenues. Mr. Ibrahim possesses vast cross-functional experience that encompasses strategic marketing & sales, stakeholder management and corporate strategy. His track record includes successful leadership roles in Pakistan as well as Thailand, UK, UAE, Switzerland and USA across the telecom and automotive industry.

Niaz BrohiDirector

Presently the Chief Legal Officer at Jazz and having previously worked with the Pakistan Telecom Authority, Mr. Brohi, has over 15 years of experience in the telecom sector specialising in regulatory and corporate affairs, litigation and management, due diligence, mergers and acquisitions, risk assessment and advising the board of directors.

Salim Nooruddin JiwaniDirector

With over 15 years of experience in policy planning, financial management, institutional assessment and transformation of microfinance institutions, Mr. Jiwani believes in poverty reduction and economic empowerment. He has previously served on the Board of Directors of the First Microfinance Bank, Kashf Microfinance Bank and Pakistan Microfinance Network.

Muhammad Usman BajwaDirector

A corporate finance professional with over 10 years of experience in treasury and financial management. Mr. Bajwa is a qualified Chartered Financial Analyst (CFA) with a proven record of managing extensive operations, large teams and various types of financing, debt and capital transactions.

page 21

Board of Directors:

Ghazanfar AzzamDirector

Ghazanfar Azzam is the President and CEO of Mobilink Microfinance Bank Limited. He has vast experience and exceptional achievements to his credit in retail, commercial, consumer, SME and micro-banking segments.In a career spanning over 30 years, Ghazanfar has worked for some of the best banks in Pakistan including HBL, Union Bank, Prime Bank & Bank Alfalah in retail, commercial, consumer, SME Banking and Training & Development.In recognition of his contributions to HR Development in banking industry, he was awarded the prestigious Hubert Humphrey Fellowship by the United States Government for the year 2000-01 under Fulbright Program. He has attended advanced seminars and management development programs at LUMS, World Bank Institute in Washington DC and Harvard Business School.

page 22

Azfar ManzoorDirector

Mr. Azfar is a seasoned professional having 22 years’ experience in the Telecommunication industry. He had done his Electrical engineering from USA & MBA from Lahore University of Management Sciences. He presently is board member of Universal Service Fund and Regional Chair of Massachusetts Institute of Technology. Currently serving as Vice President/ Head of B2B Business Unit & CEO Link.Net Telecom Ltd.

David Leslie Christopher Dobbie Director

A young professional having 14 years’ experience in Legal and corporate affairs. He is an expert in International Transactions with specialties in international cross border transactions and mergers & acquisitions. Mr. Dobbie is a graduate from University of Auckland with in Law & Accounting. He is currently working as Deputy General Counsel in Vimpel Com.

Management Team:

Ghazanfar AzzamPresident / CEO

Ghazanfar Azzam is the President and CEO of Mobilink Microfinance Bank Limited. He has vast experience and exceptional achievements to his credit in retail, commercial, consumer, SME and micro-banking segments.In a career spanning over 30 years, Ghazanfar has worked for some of the best banks in Pakistan including HBL, Union Bank, Prime Bank & Bank Alfalah in retail, commercial, consumer, SME Banking and Training & Development.In recognition of his contributions to HR Development in banking industry, he was awarded the prestigious Hubert Humphrey Fellowship by the United States Government for the year 2000-01 under Fulbright Program. He has attended advanced seminars and management development programs at LUMS, World Bank Institute in Washington DC and Harvard Business School.

Muhammad Asim AnwarChief Operating Officer (COO)

A Seasoned Microfinance Professional with more than 16 years of diversified experience across key business segments including Business Banking, Bank Operations, Branchless Banking, Administration & Procurement. While managing larger workforce across various locations in the country, Asim has been deeply involved in mobilizing the field operations and achieving bank revenue targets through quality portfolios, diversified business products and effective client management.

page 23

Ghazanfar SiddiqueGroup Head IT & Operations

Business and Technology Integration Specialist with 20 years of diversified experience in Banking, Digital Transformation and IT industries having domain exposure of Retail, Branchless Banking, Payment and Card Solutions. Worked as senior management positions in Pakistan, Malaysia and North Africa in Standard Chartered, Jaiz Bank PLC.

Shahzad Nazir KhanHead Risk Management

A Risk Management professional with diverse banking experience with International and Local Financial Institutions. Having extensive exposure to Business Banking as well as Risk Management in segments ranging from Corporate, SMEs to Microfinance, Shahzad has an effective ability to understand, assess and respond to the ever changing business dynamics. Always promoting a team based and constant learning culture at all levels enables Shahzad to keenly drive the evolution of Microfinance to Digital Banking while effectively safeguarding the interest of all stakeholders. Being a Change Management leader, Shahzad believes that effective communication and repeated transmission of MMBL’s core values not only strengthens our organization but also our people at an individual level.

page 24

Management Team:

page 25

Tayseer AliChief Financial Officer (CFO)

Tayseer is a Chartered Accountant from ICAEW and a Fellow Chartered Certified Accountant. He joined the Bank in January 2017 and was previously working for Pak China Investment Co. as CFO. Tayseer has been associated with the financial sector since 2011.

Syed Sajjad QayyumGroup Head Compliance Affairs

and Service Quality

S. Sajjad Q. Ashraf is an experienced banker having worked in different Instutitions in various capacities, including Leadership roles. Sajjad’ s experience covers key banking functions such as Credit, Operations, Business Banking, Compliance, risk management, Strategic Planning/Business Initiatives, and teams building. He is MBA, LLB(Pb.), D.A.I.B.P.

Naj-Mus-Sahar SabzwariHead Internal Audit

Sabzwari has about 20 years of extensive experience in the field of audit encompassing both commercial and microfinance banking environment. He is a Fellow member of Institute of Chartered Accountants of Pakistan (ICAP) with added qualifications of CISA, CISM and CIA. He is reporting to the Board Audit Committee.

Samiha Ali ZahidHead HR and Trainings

Samiha Ali Zahid brings with her 15 years of cross functional experience in OD, Staffing & HRM resulting in creating cohesive and high performing teams that contribute towards business goals. She holds a Masters’ Degree in Public Administration and is a Certified Trainer. She has been recently Certified by Korn Ferry for their product suite "Korn Ferry Leadership Architect".

Samiha has proven experience of collaborating with other Business functions to initiate programs aimed at developing and sustaining a positive employer image crucial to attract and retain talent. Her expertise include development of policy guidelines aiming to bring internal and external equity for employees. For the last 6 years she has addressed and implemented strategic plans for managing people experience, compensation structure, retention and succession plans.

page 26

Mobilink Microfinance Bank aims to provide financial solutions to the economically underprivileged for their economic freedom by using innovative ADC’s and promoting micro businesses through an ethical and passionate team, which strives to deliver beyond expectations.

Missi n

Visi nMobilink Microfinance Bank aims to alleviate poverty and promote financial inclusion by providing innovative solutions.

page 27

CorporateValues

Collaborative Truthful

Entrepreneurial

Customer Obsessed Innovative

page 28

Solution forFinancial Empowerment

Salary Loan LSO loans Ready Cash

Micro Enterprise Loan Karobar Loan Khushhal Kisan Loan Fori Cash Loan

Livestock Loan Agri Passbook Loan Mobi House Tractor Loan

page 29

Our Saving Options

Sahulat CurrentAccount

Bachat Account Mahana MunafaTerm Deposit

Mustaqbil TermDeposit

Assan savingAccount

Assan CurrentAccount

Investment in Prosperity

Banca AssuranceWaseela e Zindagi

Banca TakafulMobi Takaful

page 30

Branches51

BusinessAreas

06

10Central 1

09Central 2

09Central 3

07North

07South

09Central 4

Multan & LayyahFaisalabad & Sargooda

Pannu AqilPeshawar

Rahim Yar KhanSahiwal

Business Areas

Branches Network

page 31

Peshawar

Islamabad

Lahore

Karachi

1 Abbotabad Branch North 2 Islamabad Branch North 3 Peshawar Branch North 4 Haripur Branch North 5 Rawalpindi Branch North 6 Mardan Branch North 7 Swabi Branch North 8 Jhang Branch Central-1 9 Toba Tek Branch Central-1 10 Faisalabad Branch Central-1 11 Gojra Booth Central-1 12 Khushab Branch Central-1 13 Lahore Branch Central-1 14 Sialkot Branch Central-1 15 Sargodha Branch Central-1 16 Bhalwal Booth Central-1 17 Mandi Bahauddin Branch Central-1 18 Sahiwal Branch Central-2 19 Pakpattan Branch Central-2 20 Arif Wala Booth Central-2 21 Chishtian Branch Central-2 22 Hasil Pur Booth Central-2 23 Haroon Abad Booth Central-2 24 Fortabbas Branch Central-2 25 Burewala Branch Central-2 26 Mian Channu Branch Central-2

27 Bhakkar Branch Central-3 28 Layyah Branch Central-3 29 Multan Branch Central-3 30 Daryah Khan Booth Central-3 31 Chowk Azam Booth Central-3 32 Shujabad Booth Central-3 33 Kot Addu Branch Central-3 34 Mankera Booth Central-3 35 Karor Lal Essan Booth Central-3 36 Lodhran Branch Central-4 37 Kehror Pecca Booth Central-4 38 Duniapur Booth Central-4 39 Jalalpur Booth Central-4 40 Liaquatpur Branch Central-4 41 Ahmedpur Booth Central-4 42 Rahimyarkhan Branch Central-4 43 Khanpur Booth Central-4 44 Sadiqabad Booth Central-4 45 Pannu Akil Branch South-1 46 Dherki Branch South-1 47 Ranipur Branch South-1 48 Hala Branch South-1 49 Hyderabad Branch South-1 50 Karachi-PC Branch South-2 51 Karachi-NTO Branch South-2

AreaName

S.No. Business UnitName

Branch /Booth

AreaName

S.No. Business UnitName

Branch /Booth

page 32

Five Year Journey

649

Investm

ents

Gro

ss A

dvances

Deposits

Tota

l A

ssets

Share

hold

ers

Equity

112,1

51

1,1

80,8

97

915,4

11

1,0

46,6

81

2012

409,5

17

178,3

28

Investm

ents

Gro

ss A

dvances

Deposits

Tota

l A

ssets

Share

hold

ers

Equity

645,3

69

1,9

13,3

98

1,1

44,0

45

2013

125,2

72

Investm

ents

Gro

ss A

dvances

Deposits

Share

hold

ers

Equity

1,3

50,3

15

3,1

97,3

11

4,8

90,5

57

1,0

00,3

36

2015

Investm

ents G

ross A

dvances

Deposits Tota

l A

ssets

Share

hold

ers

Equity

2016

1,4

95,0

53

5,9

33,9

62

10,3

06,3

62

14,2

33,8

57

1,2

30,4

93

Financial Position (PKR in 000's)

(34,640)

Revenue Profit/(Loss) Before Tax

Key

Profit/(Loss) After Tax

2012 2013

(35,194)

110,931

(212,779)

(215,960)

157,886

2014

(148,904)

(107,054)

457,313

2015

(193,668)

(37,277)

884,453

2016

334,835

230,758

1,948,586

Financial Performance (PKR in 000's)

326,7

80

Investm

ents

Gro

ss A

dvances

Deposits T

ota

l A

ssets

Tota

l A

ssets

Share

hold

ers

Equity

2,5

40,8

47

1,2

87,9

19

500,4

02

1,0

36,3

30

2014

page 33

Return on Assets 2.4% -1.0% -4.8% -14.0% -3.1%

Ratios2016 2015 2014 2013 2012

Return on Equity 20.7% -3.7% -9.8% -19.7% -3.3%

Earnings/(Loss) Per Share (PKR) 1.59 (0.26) (0.75) (1.90) (0.31)

PAR 0.04% 0.0% 0.0% 0.0% 0.0%

Operating Self Sufficiency 120.7% 82.0% 75.4% 42.6% 76.2%

page 34

Business Units

Key Stats

Branches/Booths

2012

20132014

2015

2016

BranchLeSs banking agents

2012

20132014

2015

2016

Employees

2012

20132014

2015

201610

3641

41

51 -

26,550

49,573

58,568

69,780

346

130

475

620

751

Active Borrowers

2012

20132014

2015

201629

11,402

4,407 27,225

91,747

Depositors

2012

20132014

2015

20166,850

66,693

311,920

3,185,600

8,121,382

page 38

The Story of Deen Muhammad

Deen Muhammad, a 49 year old resident of Hala, Sindh, owns a lumber and coal business. Deen has a large family, with 10 dependents, and prior to having his own business he worked as an unskilled laborer and was barely making ends meet. Acting on the suggestion of a close friend, he set out to establish a business to create other income streams, particularly a small lumber business. He began from selling small pieces of wood from trees in the local market but struggled to generate any significant income.

In 2013, during the initial days of the establishment of Mobilink Bank (at the time known as Waseela Microfinance Bank), Deen came into contact with a relationship officer from the local bank branch and applied for a micro-loan in order to invest in his business. He added upon his existing setup with new wood and coal products and expanded to the Bhit-Shah Bus Terminal, a busy area where wood and coal were the primary sources of power generation. Through

The Local Lumber Business Owner

Empowering BusinessesTransforming Lives

page 39

additional income he also purchased agricultural land and live-stock to generate further income and supplement his household’s dairy and food consumption.

In the future, Deen plans to further expand the distribution of his business and employ the services of his elder son, who already supports him in various ways. The family plans to build upon the success of the business and multiply the income potential through expansion. Deen’s wood and coal business has also helped his community. Previously local households had to travel far to obtain these commodities for everyday use.

Citi-PPAF also acknowledges Deen Muhammad’s efforts and contributions to his community. His story brings great pride and joy to us at Mobilink Microfinance Bank and also won Deen, his relationship officer and the bank awards at the 10th Citi-PPAF Micro Entrepreneurship Awards held at Islamabad.

page 40

ChairmanAamir Hafeez Ibrahim

page 41

For the year ended December 31, 2016

Financial Highlights:

Operational achievements/milestones:

Controls Framework:

Directors’ Report

On behalf of the Board of Directors, I am pleased to present the audited financial statements and Auditors’ Report thereon, for the year ended December 31, 2016.

Performance Highlights:

The bank established itself as a key player in the digital banking and microfinance industry. With a network of 35 branches, 16 booths/service centers and 69,780 branchless banking locations, the bank achieved a growth of 339% in the loan book during the year and 222% growth in deposits from the previous year. Both core banking & branchless banking revenue has increased significantly resulting in Rs. 1,949 million in total revenue in 2016, compared to Rs. 884 million in the previous year. The bank posted a profit after tax of Rupees 231 million during the year.

The bank’s performance against its business plan is on track since its inception. With a mix of collateralized and uncollateralized products for rural & urban markets, the bank managed to secure high quality loan portfolio with only 0.04% of the total portfolio categorized as non-performing, demonstrating the bank’s effective credit policy and internal controls.

During the year 2016, the bank has successfully made a number of technological developments, including internet banking and mobile banking applications, and capitalized on previously established alternate delivery channels to effectively expand on delivery of products and services to secure significant growth in its customer base. The bank established new integrations and partnerships with service providers to enable international remittance & fund transfers and also integrated the payment gateway with 1-Link to enable payments at ATMs. To ensure timely efficient & effective controls new features were implemented in the branchless banking platform to adhere to recent regulatory control requirements.

The Bank’s management, being responsible to establish and maintain an adequate and effective system of internal controls and procedures, evaluated the effectiveness of the bank’s internal control system and reviews significant policies and procedures. To make these functions more effective & independent Board Sub - Committees have been set-up to provide the necessary oversight.

2016 2015

---- Amount in PKR ‘000’ ---- Net Mark-up/Interest Income 985,740 298,597

Provision against NPLs (67,611) (5,170)

Net Mark-up/Interest Income after provisions 918,129 293,427 Non-Mark-up / Non-interest Income 707,516 531,145

Total income 1,625,645 824,572

Administrative Expenses (1,290,810) (1,018,240)

Taxation (104,077) 156,390

Profit/(Loss) after tax 230,758 (37,277)

page 42

Statement of Compliance

Pattern of Shareholding:

The pattern of shareholding of the bank as at December 31, 2016 as required under section 236 of the Companies Ordinance, 1984 is as follows:

Credit Rating

The Pakistan Credit Rating Agency Limited (PCRA) revised the bank’s credit rating for the year 2016 in August 2016 as follows:

The board is pleased to confirm that:

1. The financial statements prepared by the management of the bank present a true and fair view of the state of its

affairs, operational results, cash flows and changes in equity.2. Proper books of accounts of the company have been maintained.3. Appropriate accounting policies have been consistently applied in preparation of financial statements.4. The bank has followed all accounting standards as applicable to Microfinance Banks in Pakistan. 5. As a continuous process, efforts are made to effectively implement the internal control systems. 6. There are no doubts about the bank’s ability to continue as a going concern.7. The board has constituted Audit and Risk Management Committees comprising of non-executive members, which

have defined terms of reference.

No. of shareholders

Held by

From To Total Shares Held

5 1 100 5

1 Global Telecom Holdings S.A.E (Formerly Orascom Telecom Holding S.A.E) Egypt

101 145,175,355 145,175,355

Capital Adequacy

During the year the bank remained compliant with the statutory capital adequacy requirement of keeping the ratio to at least 15% capital of its risk-weighted assets.

New – Aug’16 Previous – Mar’16

Long term A A-

Short term A1 A2

Outlook Stable Stable

Acknowledgements:

Aamir Hafeez IbrahimChairman

On behalf of the Board of Directors, I would like to appreciate the hard work put in by the employees of the bank in taking various initiatives during the year. I, on behalf of the Board, express gratitude to the State Bank of Pakistan for its continued support and guidance. Taking this opportunity, I would also thank, on behalf of the Board & the management, the customers for entrusting confidence in us and assure them that we remain committed to maintaining high service standards and a strong corporate governance and compliance in all our endeavors.

For and on behalf of the Board

became accessible to all mobile subscribers in Pakistan.

Resultantly the Bank achieved aggressive growth in all key indicators. The total asset base stood at PKR 14.2 billion, a growth of 191% from the previous year’s base of PKR 4.89 billion. The bank’s loan and deposit portfolios grew exponentially, closing the year at PKR 5.9 billion ( 339%) and PKR 10.3 billion ( 222%) respectively, with a pre-tax profit of PKR 334.8 million, a swing of 273% from last year’s loss of 193.6 million. The bank’s share of the country’s microfinance banking portfolio grew to 6.6%, from 2.4%, and our credit rating was improved to A/A-1 by PACRA.

Our strategy for the year, deemed ‘Quantum Leap 2016’, built upon our strength of being a digital and versatile institution, yielded outstanding results and I am proud of all we have managed to achieve. We now serve over 91,000 active loan customers, 137,000+ branch banking customers and close to 8 million mobile wallet accounts. During the year Jazzcash gained majority market share in active mobile wallets making it the leading mobile financial service in the country.

We progress into the new year seeking to face greater challenges, aiming higher and geared up to accomplish more. Leveraging on our strengths we will optimize our systems and operating structure towards enhanced efficiency and control to continue to grow effectively while maintaining standards of service delivery. The market we serve offers immense opportunity for growth and our edge of being digital and innovative will be pivotal to expanding on the services and value we offer to the country’s microfinance and digital financial ecosystem.

On behalf of the Board of Directors and the management, I would like to congratulate the team at Mobilink Microfinance Bank Limited (MMBL) on the close of the bank’s most impressive and successful year. In 2016 we took on the challenge to grow and expand on our business, products and services and in doing so we achieved tremendous goals and greatly enhanced our level of service delivery.

As the microfinance industry continues to grow on the premise of financial inclusion, it remains in need of disruptive intervention. The market stands at PKR 137 billion in outstanding micro-loans, 65% catered to by microfinance banks, with a total banked population of less than 18%. The opportunity remains quite vast with demand continuing to increase. Mobile financial services remain at the forefront of inclusion efforts as local and international influence guides efforts to further strengthen delivery channels and penetration of digital services.

In an evolving market, we felt it necessary to reposition ourselves in the arena of digital financial services. This included rebranding ourselves, to Mobilink Microfinance Bank, to better capitalize on the brand strength of our sister company. With our new image we set new goals for the organization and it is my pleasure to acknowledge that the team collectively strived and worked tirelessly to successfully achieve them.

We launched our state of the art internet banking services and mobile applications, expanded on our loan and deposit products, added 13 addition locations to our branch network and our branchless banking service, rebranded to Jazzcash, launched innovative insurance and remittance products, an online payment gateway and the Jazzcash account

CEO’s MESSAGEGhazanfar Azzam

page 45

In line with State Bank’s National Financial Inclusion Strategy, our focus is to take banking services to the masses. Our short term goal is to bring people in the financial net and offer them basic services like domestic transfers, bill payments, top ups and disbursements, and in the long run upgrade these customers to more sophisticated products like micro loans, online payments and debit cards. I would also like to thank State bank for all their guidance and support.

The world is changing at a very fast pace, but this is what makes our jobs and lives more exciting. We saw opportunity in the change; we re-thought and re-shaped our business to become more agile and innovative. Our ambition is to become a digital organization and we want to reshape the digital landscape in Pakistan. We need to continuously work on adapting ways to make things easier for our stakeholders both internally and externally. I would like to wish the best of luck to the Bank’s team for the years to come.

First of all, I would like to congratulate Mobilink Microfinance Bank on the completion of 5 successful years. It has been a phenomenal journey so far. We have secured a leading position in the Mobile Financial services category with more than 2 Million monthly active mobile accounts. On the traditional banking front we made great progress in the last five years. 2016 was a special year. The bank saw over 300% growth in its Gross Loan Portfolio and over 200% in Deposits. We closed the year with Rs.5.93 billion in receivables and Rs.10.3 billion in deposits. This was made possible by the hardwork, dedication and support extended by the bank, not to mention effectively managing the relationship with the State Bank. I deeply value, appreciate and acknowledge the commitment of Mobilink Bank’s employees. It is your passion to do things differently, and your promise and determination to act with integrity and transparency in everything you do, that has made it possible for us to live upto our values, and deliver on the promise made to our stakeholders.

Chief Digital & Financial Services OfficerAniqa Afzal Sandhu

page 47

For the year ended December 31, 2016Auditor’s Report to the Members

We have audited the annexed balance sheet of Mobilink Microfinance Bank Limited – formerly Waseela Microsoft Bank Limited, (the Bank) as at December 31, 2016 and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit.

It is the responsibility of the Bank’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984, Microfinance Institutions Ordinance, 2001, and the directives issued by the State Bank of Pakistan. Our responsibility is to express an opinion on these statements based on our audit.

We conduct our audit in accordance with the audit standards as applicable in Pakistan. These standards require to that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by the management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that:

a) in our opinion, proper books of accounts have been kept by the Bank as required by the Companies Ordinance, 1984;

b) in our opinion –

i) the balance sheet, profit and loss account and statement of comprehensive income together with the notes thereon have been drawn up in conformity with the Companies Ordinance 1984, the Microfinance Institution Ordinance, 2001 and the directives issued by the State Bank of Pakistan, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied;

ii) the expenditure incurred during the year was for the purpose of Bank’s business; and

iii) the business conducted, investments made and the expenditure during the year were in accordance with the objects of the Bank;

page 49

Chartered Accountants

Islamabad: March 24, 2017

Engagement Partner: JehanZeb Amin

c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and give the information required by the Companies Ordinance, 1984, the Microfinance Institutions Ordinance, 2001 and the directives issued by the State Bank of Pakistan, in the manner so required and respectively give a true and fair view of the state of Bank’s affairs as at December 31, 2016 and of the profit, its cash flows and changes in equity for the year then ended; and

d) in our opinion, Zakat deductible at source under the Zakat and Usher Ordinance, 1980 (xviii 0f 1980), was deducted by the Bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance.

MOBILINK MICROFINANCE BANK LIMITED(Formerly Waseela Microfinance Bank Limited)

BALANCE SHEET AS AT DECEMBER 31, 2016

2016 2015ASSETS Note (Rupees) (Rupees)

Cash and Balances with SBP and NBP 6 747,930,012 266,578,027

Balances with other Banks/NBFIs/MFBs 7 4,742,891,348 2,402,370,277

Lending to financial Institutions - -

Investments – net of provisions 8 1,495,053,230 125,271,966

Advances – net of provisions 9 5,858,824,209 1,342,557,145

Operating fixed assets 10 388,447,521 289,234,838

Other assets 11 853,361,423 270,088,401

Deferred tax asset 12 147,349,687 194,455,975

Total Assets 14,233,857,430 4,890,556,629

LIABILITIES

Deposits and other accounts 13 10,306,362,467 3,197,311,437

Borrowings - -

Subordinated debts - -

Other liabilities 14 2,697,001,907 692,909,346

Deferred tax liabilities - -

Total Liabilities 13,003,364,374 3,890,220,783

Net assets 1,230,493,056 1,000,335,846

REPRESENTED BY:

Share Capital 15 1,451,753,600 1,451,753,600

Statutory reserves 5.8 46,151,566 -

Depositor's protection fund 5.8 11,537,892 -

Accumulated losses (278,950,002) (452,018,374)

1,230,493,056 999,735,226

Surplus on revaluation of assets 16 - 600,620

Deferred grants - - Total Capital 1,230,493,056 1,000,335,846

MEMORANDUM / OFF-BALANCE SHEET ITEMS 17

The annexed notes from 1 to 35 form an integral part of these financial statements.


PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED DECEMBER 31, 2016

2016 2015Note (Rupees) (Rupees)

Mark-up/Return/Interest earned 18 1,241,070,085 353,307,829 Mark-up/Return/Interest expensed 19 (255,330,339) (54,710,577)

Net Mark-up/ Interest Income 985,739,746 298,597,252

Provision against non-performing loans and advances (67,610,733) (5,170,193) Provision for diminution in the value of investments - - Bad debts written off directly - -

(67,610,733) (5,170,193) Net Mark-up/ Interest Income after provisions 918,129,013 293,427,059

NON MARK-UP/ NON INTEREST INCOMEFee, Commission and Brokerage Income - net 20 703,855,723 531,144,891 Dividend Income - - Other Income 21 3,660,355 - Total non-markup/non interest Income 707,516,078 531,144,891

1,625,645,091 824,571,950 NON MARK-UP/ NON INTEREST EXPENSESAdministrative expenses 22 (1,287,181,352) (1,018,141,704) Other provisions/write offs - - Other charges 23 (3,629,020) (98,000) Total non-markup/non interest expenses (1,290,810,372) (1,018,239,704)

334,834,719 (193,667,754) Extra ordinary/unusual items - -

PROFIT / (LOSS) BEFORE TAXATION 334,834,719 (193,667,754)

Taxation - Current 24 (56,921,902) - Taxation - Prior years 24 - - Taxation - Deferred 24 (47,154,987) 156,390,336

(104,076,889) 156,390,336

PROFIT / (LOSS) AFTER TAXATION 230,757,830 (37,277,418)

Accumulated loss brought forward (452,018,374) (414,740,956) Loss available for appropriation (221,260,544) (452,018,374)

APPROPRIATIONS:Transfer To:

Statutory reserve (46,151,566) - Capital reserve - - Contribution to depositors protection fund (11,537,892) - Revenue reserve - - Dividend - - Others - -

(57,689,458) -

Accumulated loss carried forward (278,950,002) (452,018,374)

Profit / (Loss) per share (Rupee) 28 1.59 (0.26)



STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED DECEMBER 31, 2016


Profit /(Loss) after taxation 230,757,830 (37,277,418) Other comprehensive income/ (loss) 48,699 -

Comprehensive income/ (loss) transferred to equity 230,806,529 (37,277,418)

Components of comprehensive income not reflected in equity

Surplus / (deficit) on revaluation of investments 8.2 - 1,331,608

Related tax impact - (48,699)

- 1,282,909

230,806,529 (35,994,509)


page 53


CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2016

CASH FLOWS FROM OPERATING ACTIVITIESProfit / (Loss) before taxationLess: Dividend income

Adjustments for non-cash charges

DepreciationAmortizationProvision for gratuityProvision against non-performing advancesProvision for diminution in the value of investments/ other assets(Gain) /loss on sale of fixed assets- netAssets transferred to related party

(Increase)/ decrease in operating assets Lending to financial institutionsAdvancesOther assets (excluding advance taxation)

Increase/ (decrease) in operating liabilities Bills payableBorrowings from financial institutionsDepositsOther liabilities (excluding current taxation)

Gratuity paidPayments against provisions held against off-balance sheet obligationsIncome tax paid

Net cash inflow from operating activitiesCASH FLOWS FROM INVESTING ACTIVITIES

Net investment in available-for-sale securitiesNet investment in held-to-maturity securitiesDividend incomeInvestments in operating fixed assetsSale proceeds of property and equipment disposed–off

Net cash (outflow) / inflow from investing activitiesCASH FLOWS FROM FINANCING ACTIVITIES

Receipts/ payments of Sub-ordinated loanReceipts/ payments of lease obligationsIssue of share capital

Dividend paidNet cash flow from financing activitiesIncrease / (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the yearCash and cash equivalents at end of the year



334,834,719 (193,667,754) - -

334,834,719 (193,667,754)

88,332,296 65,418,020 32,897,932 17,311,184

5,024,139 4,730,073 67,610,733 5,170,193

- - (2,462,889) 87,247

- 12,777

191,402,211 92,729,494

526,236,930 (100,938,260)

- - (4,583,877,797) (849,914,872)

(594,577,185) (77,949,066)

(5,178,454,982) (927,863,938)

28,551,824 33,755,730 - -

7,109,051,030 1,909,392,697 1,972,053,060 444,545,173

9,109,655,914 2,387,693,600

4,457,437,862 1,358,891,402 (1,536,462) (2,150,381)

- - (45,617,739) (15,812,984)

4,410,283,661 1,340,928,037

(1,370,430,583) 202,839,400 - - - -

(221,888,203) (152,646,719) 3,908,181 1,544,000

(1,588,410,605) 51,736,681

- - - - - -

- - - -

2,821,873,056 1,392,664,718

2,668,948,304 1,276,283,586

30 5,490,821,360 2,668,948,304

page 54

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page 55


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016

1 STATUS AND NATURE OF BUSINESS

2 BASIS OF PRESENTATION

3 STATEMENT OF COMPLIANCE

These financial statements have been presented in accordance with the Banking Supervision Department (BSD) Circular No.11 dated December 30, 2003 issued by the State Bank of Pakistan.

These financial statements have been prepared in accordance with the approved accounting standards as applicable inPakistan. Approved accounting standards comprise of International Financial Reporting Standards (IFRSs) issued by theInternational Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984, the requirements ofthe Companies Ordinance, 1984, the Microfinance Institutions Ordinance, 2001, and the regulations/ directives issued by theSECP and the SBP. Wherever the requirements of the Companies Ordinance, 1984, the Microfinance Institutions Ordinance,2001, or regulations/ directives issued by the SECP and SBP differ with the requirements of IFRSs, the requirements of theCompanies Ordinance, 1984, the Microfinance Institutions Ordinance, 2001, or the requirements of the said regulations/directives shall prevail.

The SBP vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard(IAS) 39, "Financial Instruments: Recognition and Measurement" and IAS 40, "Investment Property" till further instructions.Accordingly, the requirements of these standards have not been considered in the preparation of these financialstatements. However, investments have been measured in accordance with the Prudential Regulations (the Regulations) ofthe SBP and presented in accordance with the requirements of SBP BSD Circular No. 11 dated December 30, 2003. Further,the SECP vide its S.R.O No. 411 (I)/ 2008 dated April 28, 2008 has deferred the applicability of International FinancialReporting Standard (IFRS) 7 "Financial Instruments: Disclosures", which is applicable for annual periods beginning on orafter July 01, 2009, till further orders.

Mobilink Microfinance Bank Limited formerly known as Waseela Microfinance Bank Limited (the Bank) was incorporated inPakistan on November 29, 2010 as a public limited company under the Companies Ordinance, 1984. The Bank obtainedlicense for Microfinance from the State Bank of Pakistan (SBP) on September 12, 2011 to operate on a nationwide basis andreceived the certificate of commencement of business from Securities and Exchange Commission of Pakistan (SECP) onFebruary 13, 2012 whereas certificate of commencement of business from SBP was received on April 20, 2012. The Bank has51 business locations / touch points comprising of 35 branches and 16 booths / service centres (2015: 41 business locations/ touch points comprising of 30 branches and 11 booths/ service centres) in operation. The Bank is a subsidiary of GlobalTelecom Holding S.A.E. (the holding company) which owns 99.99% shareholding in the Bank. The Bank's registered andprincipal office is situated at Plot No. 3-A/2, F-8 Markaz, Islamabad, Pakistan. The Bank's principal business is to providemicrofinance banking and related services to the poor and under served segment of the society under the MicrofinanceInstitution Ordinance, 2001. The Bank is also offering Branchless Banking Services through agency agreement with PakistanMobile Communications Limited (PMCL), a related party, under the Branchless Banking license from the SBP.

Further, pursuant to the special resolution passed in the Extraordinary General Meeting of the shareholders held on 2016and approval of SBP and the SECP, the name of the Bank was changed from "Waseela Microfinance Bank Limited" to"Mobilink Microfinance Bank Limited" with effect from April 29, 2016.

page 56

4 BASIS OF MEASURMENT

4.1 Functional and presentation currency

4.2 Significant accounting estimates

a) Impairment of investments

b) Advances

c) Taxation

The Bank takes into account the current income tax law and decisions taken by the taxation authorities. Those amounts areshown as contingent liabilities wherein, the Bank's views differ from the views taken by the taxation authorities at theassessment stage and where the Bank considers that its view on items of material nature is in accordance with law.

These financial statements have been prepared under the historical cost basis except "available for sale" investments whichare measured at fair value.

These financial statements are presented in Pakistan Rupee (PKR), which is the Bank’s functional currency. All financialinformation presented in PKR has been rounded to the nearest of PKR, unless otherwise stated.

The preparation of financial statements in conformity with approved accounting standards, as applicable in Pakistan,requires management to make judgments/ estimates and associated assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These judgments/ estimates and associated assumptionsare based on historical experience and various other factors that are believed to be reasonable under the circumstances,the result of which form the basis of making the estimates about carrying value of assets and liabilities that are not readilyapparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in the period in which the estimates are revised if the revision affects only that period, or in the period of therevision and future periods if the revision affects both current and future periods. Information about significant areas ofestimation, uncertainty and critical judgments in applying accounting policies that have significant effect on the amountsrecognized in the financial statements relates to valuation and impairment of investments, advances, determination ofuseful lives of depreciable assets and intangible assets, provision for income taxes and other provisions which arediscussed in following paragraphs:

Impairment in the value of investments is made after considering objective evidence of impairment. Provision fordiminution in the value of investments is made as per the Regulations issued by SBP.

The Bank reviews its micro credit loan portfolio to assess amount of non-performing advances and provision requiredthere against on regular basis. While assessing this requirement, the Regulations of SBP are taken into consideration.

d) Operating fixed assets/ intangible assets

e) Provisions and contingencies

f) Impairment of financial assets

g) Other provisions

5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5.1 Cash and cash equivalents

5.2 Investment

a) Held for trading

Estimates of residual values and useful lives of operating fixed assets and intangible assets are reassessed annually andany change in estimate is taken into account in the determination of depreciation/ amortization charge and impairmentloss. Changes in estimates are accounted for over the estimated remaining useful life of the assets.

The Bank reviews the status of all the legal cases on a regular basis. Based on the expected outcome and consideration ofopinion of its legal advisor, appropriate provision/ disclosure is made.

A financial asset is considered to be impaired if objective evidence indicates that one or more events would have anegative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between itscarrying amount, and the present value of the estimated future cash flows discounted at the original interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets areassessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in profitand loss account.

Estimates of the amount of provisions recognized are based on current legal and constructive requirements. As actualoutflows can differ from estimates due to changes in laws, regulations, public expectations, prices and conditions, and cantake many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account ofsuch changes.

Cash and cash equivalents comprise cash in hand, balance with SBP/ National Bank of Pakistan (NBP) and other banks/ Non-Banking Financial Institutions (NBFIs)/ Microfinance Banks (MFBs).

All purchases and sale of investments are recognized using settlement date accounting. Settlement date is the date onwhich investments are delivered to or by the Bank. All investments are derecognized when the right to receive economicbenefits from the investments has expired or has been transferred or the Bank has transferred substantially all the risksand rewards of ownership.

Investments of the Bank are classified into the following categories:

These represent securities acquired with the intention to trade by taking advantage of short-term market / interest ratemovements. These securities are disposed off within 90 days from the date of their acquisition. These are marked to marketand surplus / deficit arising on revaluation of ‘held for trading’ investments is taken to profit and loss account inaccordance with the requirements prescribed by SBP.

b) Held to maturity

c) Available-for-sale

5.3 Advances

a) Other assets especially mentioned

b) Substandard

c) Doubtful

d) Loss

Investments which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equityprices are classified as available for sale. Available-for-sale investments are initially recognized at cost and subsequentlymeasured at fair value. Profit on available-for-sale investments is recognized on a time proportion basis taking into account the effective yield on the investments.

The surplus / (deficit) arising on revaluation of available for sale investments is kept in "surplus/(deficit) on revaluation ofassets" through statement of comprehensive income. The surplus/(deficit) arising on these investments is taken to profitand loss account, when actually realized upon disposal of the investment.

Advances are stated net of provision for non-performing advances. The outstanding principal and mark-up of the loansand advances, payments against which are overdue for 30 days or more are classified as non-performing loans (NPLs). Theunrealized interest / profit / mark-up / service charges on NPLs is suspended and credited to interest suspense account.Further the NPLs are divided into following categories:

These are advances in arrears (payments/instalments overdue) for 30 days or more but less than 60 days.



These are advances in arrears (payments/instalments overdue) for 180 days or more.

In addition the Bank maintains a Watch List of all accounts overdue for 5-29 days. However, such accounts are not treatedas non-performing for the purpose of classification/ provisioning.

Premium or discount on acquisition of held to maturity investments is amortized through profit and loss account over theremaining period till maturity.

Investments with fixed maturity, where management has both the intention and the ability to hold to maturity, areclassified as held to maturity. Subsequent to initial recognition at cost, these investments are measured at amortized cost,less provision for impairment in value, if any. Amortized cost is calculated taking into account effective interest ratemethod. Profit on held to maturity investments is recognized on a time proportion basis taking into account the effectiveyield on the investments.

Other assets especially mentioned Nil

Substandard 25% of outstanding principal net of cash collaterals

Doubtful 50% of outstanding principal net of cash collaterals

Loss 100% of outstanding principal net of cash collaterals

In accordance with the Regulations, the Bank maintains specific provision of outstanding principal net of cash collateralsand Gold (ornaments and bullion) realizable without recourse to a Court of Law at the following rates:

page 59

5.4 Operating fixed assets

a) Property and equipment

b) Capital work-in-progress

Non-performing advances are written off one month after the loan is classified as “Loss”. However, the Bank continues itsefforts for recovery of the written off balances.

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Costincludes expenditure that is directly attributable to the acquisition of the asset and the costs of dismantling and removingthe items and restoring on which they are located, if any.

Depreciation is charged on the straight line method at rates specified note 10.2 to the financial statements, so as to writeoff the cost of assets over their estimated useful lives.

Full month's depreciation is charged in the month of addition while no depreciation is charged in the month of deletion.

Subsequent costs are included in the assets carrying amount when it is probable that future economic benefits associatedwith the item will flow to the Bank and the cost of the item can be measured reliably. Carrying amount of the replaced partis derecognized. All other repair and maintenance are charged to income during the year.

Gains or losses on disposal of an item of property and equipment are determined by comparing the proceeds fromdisposal with the carrying amounts. Gains are recognized within "other income" while losses are recognized inadministrative expenses in the profit and loss account.

Capital work-in-progress is stated at cost less impairment losses, if any.

General and specific provisions are charged to the profit and loss account in the period in which they occur.

In addition to above, a general provision is made equivalent to 1.5% (2015: 1%) of the net outstanding balance (advancesnet of specific provisions) in accordance with the requirement of the Regulations.

c) Intangible assets

5.5 Deposits

An intangible asset is recognized if it is probable that the future economic benefits that are attributable to the asset willflow to the Bank and that the cost of such asset can also be measured reliably. These are stated at cost less accumulatedamortization and impairment losses, if any.

Intangible assets comprise of computer software and related applications. Intangible assets are amortized over theirestimated useful lives at rate specified in note 10.3 to the financial statements. Subsequent expenditure is capitalized onlywhen it increases the future economic benefit embodied in the specific asset to which it relates. All other expenditure isrecognized in profit and loss account as incurred.

Deposits are initially recorded at the amount of proceeds received. Mark-up accrued on deposits, if any, is recognizedseparately as part of other liabilities and is charged to the profit and loss account over the period.

page 60

anthe

5.6 Taxation

a) Current

b) Deferred

The Bank takes into account the current income tax law and decisions taken by the taxation authorities. Those amounts areshown as contingent liabilities wherein, the Bank's views differ from the views taken by the taxation authorities at theassessment stage and where the Bank considers that its view on items of material nature is in accordance with law.

Current tax is the tax due on the taxable income for the year, using tax rates enacted or substantively enacted at thereporting date, taking into account tax credits, rebates and tax losses, if any, and any adjustment to tax payable in respectof previous years.

Deferred tax is accounted for on all major taxable temporary differences between the carrying amounts of assets and theirtaxation base. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will beavailable against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probablethat the related tax benefit will be realized. At each balance sheet date, the Bank reassesses the carrying and theunrecognized amount of deferred tax assets.

Deferred tax assets and liabilities are calculated at the rate that are expected to apply to the period when the asset isrealized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted bythe balance sheet date.

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the profit andloss account, except to the extent that it relates to items recognized directly in other comprehensive income or belowequity, its related tax is recognized in other comprehensive income or below equity.

5.7 Staff retirement benefits

a) Provident fund

b) Gratuity

5.8 Reserves

a) Statutory reserve

The Bank participates in a defined contribution provident fund for its eligible employees. Monthly contributions are madeby the Bank and its employees at rate of 10% of basic salary.

The Bank maintains provision of gratuity for all its contractual employees, according to the agreement signed with HRSGOutsourcing (Pvt) Limited, an outsourcing company. Gratuity equivalent to one month's last drawn basic salary for eachcompleted year of service is paid to outgoing employees with at least 1 year of past service rendered.

In compliance with the related regulatory requirements, the Bank is required to maintain statutory reserve to whichappropriation equivalent to 20% of the profit after tax is required to be made till such time the reserve fund equalspaid up capital of the Bank. However, thereafter, the contribution is to be reduced to 5% of the profit after tax.

b) Depositor's protection fund

c) Cash reserve

d) Statutory liquidity requirement

5.9 Provisions

5.10 Foreign currency transactions

A provision is recognized when, and only when, the Bank has a present obligation (legal or constructive) as a result of apast event, it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation, and a reliable estimate can be made of the amount of the obligation.

The financial statements are presented in Pakistani Rupee, which is the Bank's functional currency. Transactions in foreigncurrencies are translated into Pak Rupee at exchange rate on the date of transaction. All monetary assets and liabilities inforeign currencies are translated into Pak Rupee at the rate of exchange approximating those ruling at the balance sheetdate. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at theyear end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit andloss account.

In compliance with the related regulatory requirements, the Bank is required to maintain liquidity equivalent to at least10% of its total demand liabilities and time liabilities with tenor of less than one year in form of liquid assets i.e. cash, gold,unencumbered treasury bills, Pakistan Investment Bonds and Government of Pakistan sukuk bonds. Treasury bills andPakistan Investment Bonds held under depositor protection fund are excluded for the purpose of determining liquidity.

The Bank is required under the Microfinance Institutions Ordinance, 2001, to contribute 5% of annual after tax profit andprofit earned on investments of the fund to be credited to depositors protection fund for the purpose of providingsecurity or guarantee to persons depositing money in the Bank.

In compliance with the related regulatory requirements, the Bank is required to maintain a cash reserve equivalent to notless than 5% of its deposits (including demand deposits and time deposits with tenor of less than 1 year) in a currentaccount opened with the State Bank or its agent.

5.11 Revenue recognition

a) Markup / income on advances

b) Income from investments

Markup / income / return / service charges on advances is recognized on accrual / time proportion basis using effectiveinterest rate method at the Bank's prevailing interest rates for the loan products. Markup/ income on advances is collectedwith loan instalments. Due but unpaid service charges / income are accrued on overdue advances for period up to 30 days.After 30 days, overdue advances are classified as non-performing and recognition of unpaid service charges / incomeceases. Further, accrued markup on non-performing advances are reversed and credited to suspense account.Subsequently, markup recoverable on non-performing advances is recognized on a receipt basis in accordance with therequirements of the Regulations.

Markup / income on investments is recognized on accrual / time proportion basis using the effective interest method.Where debt securities are purchased at premium or discount, those premiums / discounts are amortized through profit andloss account over the remaining period of maturity.

c) Fee, commission and brokerage income

d) Income from inter bank deposits

e) Gain/ loss on sale of operating fixed assets

f) Gain/ loss on sale of investments

5.12 Financial instruments

a) Financial assets

Financial assets are cash and balances with SBP and NBP, balances with other banks/NBFls/MFBs, lending to financialinstitutions, investments, advances and other receivables. Advances are stated at their nominal value as reduced byappropriate provisions against non-performing advances, while other financial assets excluding investments are stated atcost. Investments classified as held for trading and available for sale are valued at year end prices and investmentsclassified as held to maturity are stated at amortized cost.

All financial assets and liabilities are initially measured at cost which is the fair value of the consideration given andreceived respectively. These financial assets and liabilities are subsequently measured at fair value, amortized cost orhistorical cost, as the case may be.

Fee, commission and brokerage income is recognized when the related services are rendered.

Income from inter bank deposits in saving accounts is recognized in the profit and loss account as it accrues using theeffective interest method .

Gain on sale of operating fixed assets are recognized under other income in the profit and loss account.

Loss on sale of operating fixed assets are recognized under administrative expenses in the profit and loss account.

Gains and losses on sale of investments are recognised in the profit and loss account.

Financial assets and liabilities are recognized when the Bank becomes a party to the contractual provisions of theinstrument. These are derecognized when the Bank ceases to be the party to the contractual provisions of the instrument.

b) Financial liabilities

5.13 Off-setting

Financial liabilities are classified according to the substance of the contractual arrangement entered into. Financial liabilities include deposit and other accounts and other liabilities which are stated at their nominal value. Financial charges areaccounted for on accrual basis.

Any gain or loss on the recognition and derecognition of the financial assets and liabilities is included in the net profit andloss for the year in which it arises.

Financial assets and financial liabilities and tax assets and tax liabilities are only off-set and the net amount is reported inthe financial statements when there is a legally enforceable right to set off the recognized amount and the Bank intendseither to settle on net basis or to realize the assets and to settle the liabilities simultaneously. Income and expense items ofsuch assets and liabilities are also off-set and the net amount is reported in the financial statements.

page 63

5.14 Borrowing costs

5.15 Mark-up bearing borrowings

5.16 Grants

5.17 Earnings per share

Mark-up bearing borrowings are recognized initially at cost being the fair value of consideration received, less attributabletransaction costs. Subsequent to initial recognition mark-up bearing borrowings are stated at original cost less subsequentrepayments.

The grant related to an asset is recognized in the balance sheet initially as deferred income when grant is received or thereis reasonable assurance that it will be received and that the Bank will comply with the conditions attached to it. Grants thatcompensate the Bank for expenses incurred are recognized as revenue in the profit and loss account on a systematic basisin the same periods in which the expenses are incurred. Grants that compensate the Bank for the cost of an asset arerecognized in the profit and loss account as other operating income on a systematic basis over the useful life of the asset.

The Bank presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing theprofit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary sharesoutstanding during the year. Diluted EPS, if any is determined by adjusting the profit or loss attributable to ordinaryshareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potentialordinary shares. There were no dilutive potential ordinary shares in issue at December 31, 2016.

Borrowing costs are recognized as an expense in the period in which they are incurred except where such costs relate tothe acquisition, construction or production of a qualifying asset in which case such costs are capitalized as part of the costof that asset. Borrowing cost includes exchange differences arising from foreign currency borrowings to the extent theseare regarded as an adjustment to borrowing costs.

5.18

a)

IFRS 5IFRS 11IAS 1

IAS 16

IAS 19

IAS 27

IAS 38

b)

The management considers that adoption of above amendments and interpretations had no material impact on the Bank'sfinancial statements other than in presentation/disclosure.

Following standard has been issued by the International Accounting Standards Board (IASB), which is yet to be notified by theSecurities and Exchange Commission of Pakistan (SECP) for the purpose of its applicability in Pakistan:

Employee Benefits (Amendments) January 1, 2016

Separate financial statements (Amendments) January 1, 2016

Intangible Assets (Amendments) January 1, 2016

Joint Arrangements (Amendments) January 1, 2016

Presentation of financial statements (Amendments) January 1, 2016

Property, plant and equipment (Amendments) January 1, 2016

Non-current Assets Held for Sale and Discontinued Operations (Amendments) January 1, 2016

Standards, interpretations and amendments to approved accounting standards that are not yet effective

The following amendments and interpretations to published accounting standards were effective during the year and have beenadopted by the Bank:

Effective date (annual periods beginning on or after)

page 64

IFRS 1

IFRS 14 Regulatory Deferral Accounts

c)

IFRS 1

IFRS 2

IFRS 4

IFRS 7

IFRS 12

IFRS 15

IFRS 16

IAS 12

IAS 39

IAS 40 Investment property (Amendments) July 1, 2018

The management anticipates that adoption of above standards and amendments in future periods will have no material impacton the Bank's financial statements other than in presentation/disclosure.

Leases January 1, 2019

Income taxes (Amendments) January 1, 2017

Financial Instruments: Recognition and Measurement (Amendments) January 1, 2018

Financial Instruments (Amendments) January 1, 2018

Disclosure of Interests in Other Entities (Amendments) January 1, 2017

Revenue from Contracts with Customers January 1, 2018

First-time Adoption of International Financial Reporting Standards (Amendments)

January 1, 2018

Share-based payment (Amendments) January 1, 2018

Insurance Contracts January 1, 2018

January 1, 2016

Following standards and amendments to published accounting standards will be effective in future periods and have not beenearly adopted by the Bank.



First-Time Adoption of International Financial Reporting Standards (Amendments)

July 1, 2009

page 65

2016 2015(Rupees) (Rupees)

6. CASH AND BALANCES WITH SBP AND NBP

Cash in hand 249,860,266 95,892,067 Balance with State Bank of Pakistan (SBP) - note 6.1 466,316,546 170,685,960 Balance with National Bank of Pakistan (NBP) 31,753,200 -

747,930,012 266,578,027

6.1

2016 2015

7. BALANCES WITH OTHER BANKS/NBFIs/MFBs

(Rupees) (Rupees)

In Pakistan

- on current accounts - Local currency - - - on saving accounts - Local currency - note 7.1 1,442,891,348 302,370,277 - on term deposits accounts - Local currency - note 7.2 3,300,000,000 2,100,000,000

4,742,891,348 2,402,370,277 - on current accounts - Foreign currency - note 7.3 - -

4,742,891,348 2,402,370,277

7.1

7.2

7.3

2016 2015

8. INVESTMENTS - net of provisions

(Rupees) (Rupees)

Federal Government securities - available for sale

Pakistan Investment Bonds - 124,622,647

Market treasury bill - note 8.1 1,495,053,230 -

- 649,319

1,495,053,230 125,271,966

8.1


8.2 Particulars of surplus / (deficit) on revaluation of available for sale investments:

Balance at the beginning 649,319 (682,289)

Transferred (from) / to revaluation of assets (649,319) 1,331,608

Balance at the end - 649,319

Surplus / (deficit) on revaluation of available for sale investments - note 8.2

These carry markup at 5.85% and 5.90% per annum maturing on January 19, 2017 and February 2, 2017 respectively.

This includes balance held with SBP in a current account to comply with the requirement of maintaining minimum balanceequivalent to 5% (2015: 5%) of the Bank’s demand deposits and time deposits with tenor of less than one year.

These carry markup ranging from 4% to 6.5% (2015: 4% to 7.15%) per annum.

These carry markup ranging from 6% to 6.25% (2015: 6.6% to 7.45%) per annum.

This account is being maintained with United Bank Limited for the purpose of Home Remittance under Pakistan remittanceinitiative as approved by the SBP.

page 66

9. ADVANCES - net of provisions

2015 Loans

outstanding Amount

outstanding Loans

outstanding Amount

outstanding

(Number) (Rupees) (Number) (Rupees)Micro credit -Secured against gold 12,069 955,190,655 8,583 574,490,934

-Unsecured 79,678 4,978,771,502 18,642 775,824,456

91,747 5,933,962,157 27,225 1,350,315,390

Less: Provision held

Specific provision 41 463,325 - -

General provision - note 9.1 79,678 74,674,623 18,642 7,758,245

79,719 75,137,948 18,642 7,758,245

Advances - net of provisions 5,858,824,209 1,342,557,145

9.1

9.2 Particulars of non-performing advances

Amount outstanding

Provisionrequired

Provisionheld

Amount outstanding

Provision required

Provision held

OAEM 556,040 - - - - -

Sub-standard 1,021,737 41,184 41,184 - - -

Doubtful 512,070 188,735 188,735 - - -

Loss 233,406 233,406 233,406 - - -

2,323,253 463,325 463,325 - - -

9.3 Particulars of provision against non-performing advances

Specific General Total Specific General Total

Opening balance 7,758,245 1,791 2,588,052 2,589,843

Charge for the year 67,610,733 - 5,170,193 5,170,193

Amounts written off (231,030) - - -

Reversals - - (1,791) - (1,791)

Closing balance

-694,355

(231,030)

463,325

7,758,24566,916,378

- -

74,674,623 75,137,948 - 7,758,245 7,758,245

-----------------------Rupees------------------------- ---------------------Rupees-----------------------

2016Category of classification

-----------------------Rupees------------------------- -----------------------Rupees-------------------------

2016

2016

2015

2015

page 67

2016 201510. OPERATING FIXED ASSETS

(Rupees) (Rupees)

Capital Work in progress - note 10.1 4,915,860 2,283,480

Property and equipment - note 10.2 271,020,288 195,696,168

Intangible assets - note 10.3 112,511,373 91,255,190

388,447,521 289,234,838

10.1 Capital Work in progress

Civil works 4,915,860 2,283,480

Equipments - -

Advances to suppliers and contractors - -

Others - -

4,915,860 2,283,480

page 68

10.2 Property and equipment

At January 01 Additions Adjustments

/transfersDisposals/ write offs

At December 31

2016

Furniture and fixture 55,736,451 15,252,634 - (2,243,599) 68,745,486

Electrical, office and

computer equipment 216,147,977 122,751,362 - (2,405,644) 336,493,695

Vehicles 23,138,774 14,028,604 - (13,031,895) 24,135,483

Leasehold improvements 68,859,833 13,180,834 (117,120) (24,690) 81,898,857 363,883,035 165,213,434 (117,120) (17,705,828) 511,273,521

2015

Furniture and fixture 42,167,324 13,753,207 - (184,080) 55,736,451

Electrical, office and

computer equipment 150,935,990 65,426,147 (22,878) (191,282) 216,147,977

Vehicles 24,233,222 1,052,936 - (2,147,384) 23,138,774

Leasehold improvements 59,778,113 10,685,253 - (1,603,533) 68,859,833

277,114,649 90,917,543 (22,878) (4,126,279) 363,883,035

10.2.1 The cost of fully depreciated assets still in use is Rs. 87,619,901 (2015: Rs. 35,838,075)

10.2.2 Detail of disposals of operating fixed assets

Particulars of assets

Vehicles

Mercedez Benz

Honda City

Honda Civic

Cost

------------------------------------------- Rupees ---------------------------------------------

Original Accumulated Book Sale cost depreciation value proceeds

9,194,954 9,194,953 1 2,696,189

1,691,457 1,691,456 1 490,799

2,145,484 1,984,573 160,911 630,000

13,031,895 12,870,982 160,913 3,816,988

page 69

Net book value

At January 01

Charge for the year

Adjustments /transfers

Disposals/ write offs

At December 31

At December 31

Rate per annum

%age

18,644,056 12,869,074 - (1,201,320) 30,311,810 38,433,676 20%

97,149,094 52,713,269 - (2,169,202) 147,693,161 188,800,534 10-33%

17,924,711 4,951,904 - (12,870,982) 10,005,633 14,129,850 25%

34,469,006 17,798,049 (5,394) (19,032) 52,242,629 29,656,228 25%168,186,867 88,332,296 (5,394) (16,260,536) 240,253,233 271,020,288

9,835,521 8,885,943 - (77,408) 18,644,056 37,092,395 20%

62,262,866 34,987,139 (10,101) (90,810) 97,149,094 118,998,883 10-33%

13,523,411 5,877,626 - (1,476,326) 17,924,711 5,214,063 25%

19,652,182 15,667,312 (850,488) 34,469,006 34,390,827 25%

105,273,980 65,418,020 (10,101) (2,495,032) 168,186,867 195,696,168

Mode of

disposal

HR Policy Ghazanffar Azaam (CEO)

HR Policy Samiha Ali Zahid (Head HR)

HR Policy Kamran Adeel (Ex - CFO)

Particulars of buyer

Depreciation

------------------------------------------------------ Rupees --------------------------------------------------------

page 70

10.3

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2016

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128,

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702

54,1

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840,

817

37,4

31,5

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32

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,932

-

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2015

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59,4

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-

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91

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69,2

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-

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8,68

6,70

2

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20,3

28

17,3

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page 71

2016 2015

(Rupees) (Rupees)

652,412,703 135,934,872

57,985,540 52,733,421

30,342,832 41,646,995

105,935 9,474,513

9,002,299 4,609,785

74,389,688 1,314,794

29,122,426 24,374,021

853,361,423 270,088,401

41,646,995 25,834,011

45,617,739 15,812,984

(56,921,902) -

30,342,832 41,646,995

- 9,386,353

105,935 88,160

105,935 9,474,513

22,541,384 2,327,473

- 4,015,701

75,470,589 194,412,599

117,904 117,904

2,864,304 1,818,001

56,921,902 -

157,916,083 202,691,678

(10,566,396) (8,187,004)

147,349,687 194,504,674

- (48,699) 147,349,687 194,455,975

11. OTHER ASSETS

Income / Markup accrued

Advances, deposits and prepayments

Advance taxation - net - note 11.1

Receivable from related parties - note 11.2

Inventory/ printed stationary

Receivable against Insurance premium - note 11.3Others

11.1 Advance taxation - net - note 11.1

Opening balance

Tax paid

Provision for taxation

Closing balance

11.2 Receivable from related parties

Pakistan Mobile Communication Limited

Business Communication System (private) Limited

11.3

12. DEFERRED TAX ASSET

Deferred tax asset arising on account of deductible temporary differences on:

Provision against non-performing advances

Precommencement expenditure

Unused tax credit

Deferred tax liability arising on account of taxable temporary differences on:

Operating fixed assets

Surplus on revaluation of available for sale investments

12.1

Unused tax losses

Provision for gratuity

Alternate Corporate Tax

This represents the amount receivable from SBP in respect of insurance premium paid by the Bank for livestock and crop loans under AC&MFD Circular No. 1 of 2013 dated November 1, 2013.

Deferred tax asset has been recognised based on the premise that sufficient taxable profits will be available in future years against which unused tax losses amounting to Rs.251.57 million (2015: Rs. 641.06 million) can be utilised.

page 72

13. DEPOSITS AND OTHER ACCOUNTS

Time Liabilities:

Term deposits

Demand Liabilities:

Savings deposits

Current deposits

Branchless deposits

13.1 Particulars of deposits by ownership

Individual depositors

Institutional depositors

a) Corporations/firms etc.

b) Banks & financial institutions

Retailers

Franchisees

Customer care centers

14. Other Liabilities

Mark-up/ Interest payableAccrued expenses

Payable to related parties - note 14.1

Taxes and levies withheld

Payable to suppliers

Bills collected for settlement through NADRA

Uncollected remittances

Bills payable

Provision for gratuity - note 14.2

Others

14.1 Payable to related parties

PMCL

Global Telecom Holding S.A.E - note 14.1.1

LinkdotNet Telecom Limited

Oracap - GTH

2016 2016 2015 2015

Note (Number) (Rupees) (Number) (Rupees)

1,265 2,344,357,034 217 187,191,132

37,808 2,526,149,947 30,421 955,004,926

98,549 1,317,006,773 17,759 473,886,074

7,983,760 4,118,848,713 3,137,203 1,581,229,305

8,120,117 7,962,005,433 3,185,383 3,010,120,305

8,121,382 10,306,362,467 3,185,600 3,197,311,437

8,050,538 5,686,390,251 3,126,691 2,177,843,422

1,031 1,834,000,242 340 484,441,189

33 1,941,623,675 1 15,462,664

69,330 684,321,037 58,158 432,200,784

429 160,025,166 389 82,935,548

21 2,096 21 4,427,830

8,121,382 10,306,362,467 3,185,600 3,197,311,437


6,128,231

51,829,618

3,937,163

49,448,457

240,304,527

60,975,033

136,305,069

33,755,730

6,060,004

104,165,514 692,909,346

25,537,867 -

1,288,580,091 -

- 1,455,040

2,482,123 2,482,123

1,316,600,081 3,937,163

-16-

53,241,065

85,538,644

1,316,600,081

83,654,788

63,492,751

327,679,666

259,244,032

62,307,554

9,547,681

435,695,645 2,697,001,907

page 73

This represents the amount received from PMCL, associated company under a tripartite arrangement with PMCL and Global Telecom Holding S.A.E., the holding company.

14.1.1

14.2 Provision for gratuity

Opening balance

Charge for the year

Payment during the year

Closing balance

15. SHARE CAPITAL

Authorized Capital

2016 2015

Numbers Numbers

150,000,000 150,000,000 Ordinary shares of Rs. 10 each.

Issued, subscribed and paid-up capital

Ordinary shares145,175,360 145,175,360 Fully paid in cash of Rs. 10 each.

6,060,004 3,480,312

5,024,139 4,730,073

(1,536,462) (2,150,381)

9,547,681 6,060,004

1,500,000,000 1,500,000,000

1,451,753,600 1,451,753,600

15.1

16. SURPLUS ON REVALUATION OF ASSETS

Federal government securities- available for sale investments

17. MEMORANDUM / OFF-BALANCE SHEET ITEMS

17.1 Contingencies

There are no contingencies at the year end (2015: Nil).

17.2 Commitments:

Commitments against contracts

18.

- Advances

- Government securities

- On Deposit accounts/placements with other banks/financial institution

MARK-UP/RETURN/INTEREST EARNED

Global Telecom Holding S.A.E. is the holding company controlling 145,175,355 i.e. 99.99% shares (2015: 99.99%) of the Bank.

Interest / Mark-up on;

-

-

2016(Rupees)

995,539,79971,075,993

174,454,2931,241,070,085

600,620

4,558,902

2015(Rupees)

212,595,891

72,959,033

67,752,905

353,307,829

page 74

19. MARK-UP/RETURN/INTEREST EXPENSED

20. FEE, COMMISSION AND BROKERAGE INCOME - NET

Income from branchless banking - note 20.1

Loan processing fee

20.1 Income from branchlessBranchless banking income - note 20.2

Commission to retailer / franchisee

Commission to related party

20.2

2016

21. OTHER INCOME(Rupees)

Gain on disposal of fixed assets 3,660,355

22. ADMINISTRATIVE EXPENSES

Salaries, allowances etc. 598,678,628 Contribution to defined contribution plan 22,669,055 Provision for gratuity 5,024,139 Training / Capacity building 6,323,141 Depreciation - note 10.2 88,332,296 Amortization - note 10.3 32,897,932 Travel and transportation 18,173,194 Rent, taxes, insurance, electricity, etc. 98,080,633 Loss on sale of fixed assets 1,197,466 Stationary and printing 29,962,201 Communications 11,268,723 Repair and maintenance - General 8,278,815 Repair and maintenance - Vehicle 890,239 Legal and professional charges 1,480,989 Auditors' remuneration - note 22.1 1,025,000

Bank charges 47,070,224 IT equipment and software maintenance 96,118,044 Security 38,580,161 NADRA verification charges 119,723,436 Janitorial services 18,351,251 Office supplies 7,908,347

On deposits

Others

2016(Rupees)

255,330,339

528,811,396 143,635,710

31,408,617703,855,723

3,746,551,522 (2,093,138,008) (1,124,602,118)

528,811,396

2015(Rupees)

54,710,577

482,684,687

30,895,903

17,564,301 531,144,891

2,602,612,130 (1,419,701,987)

(700,225,456)

482,684,687

2015(Rupees)

-

384,024,262 14,573,916

4,730,073 5,728,024

65,418,020 17,311,184

8,095,076 61,779,883

87,247 33,983,511

8,378,497

6,806,912 1,074,652 2,549,485

912,342 17,973,201

107,353,797 26,377,545

209,842,026 15,782,310

2,408,848 Entertainment 10,074,619 5,670,890

G2P Project Cost 6,234,346

4,864,060

Advestisement and publicity 3,307,248 1,321,176

Others 15,531,225 11,094,767 1,287,181,352 1,018,141,704

This represents the income from branchless banking operations (Jazz cash formerly Mobicash) carried out by the Bank together with Pakistan Mobile Communication Limited (PMCL) through agency agreement under SBP Branchless Banking Regulations. As per the agreement, Income from Mobicash (Net of Agents commission) is shared between the Bank and PMCL in the ratio of 30:70 respectively.

page 75

22.1 Auditors' remuneration

Audit fee 675,000 675,000

Fee for audit of provident, pension, gratuity and other funds - -

Special certifications 300,000 175,000

Tax services - -

Out of pocket expenses 50,000 62,342

1,025,000 912,342

2016(Rupees)

23. OTHER CHARGES

Penalties imposed by the State Bank of Pakistan - note 23.1 3,629,020

Others - 3,629,020

23.1

24. TAXATION

For the year

Current 56,921,902

Deferred 43,178,379

For the prior years

Current -

Deferred 3,976,608 104,076,889

24.1 Relationship between tax expense and accounting loss

Profit / (Loss) before taxation 334,834,719Tax at applicable tax rate of 31% percent (2015: 32% percent) 31%

103,798,763 Effect of:

- Deferred tax asset not recognized -

- Prior years

- Permanent differences 1,124,996

- Unused tax credits

- Unused tax losses

- Tax rate changes (395,881)

- Others (450,989) 104,076,889

2015(Rupees)

98,000

-

98,000

-

(155,251,133)

-

(1,139,203)

(156,390,336)

(193,667,754)

32%

(61,973,681)

-

520,654

31,360

(117,904)

(106,360,385)

11,513,413

(3,792)

(156,390,336)

The charge for the year represents the penalties paid to the State Bank of Pakistan in the year 2016 against SBP thematic inspection on portfolio review, Branchless banking, Statutory reserve deficit as at December 31, 2015 and incorrect reporting of data to SBP.

page 76

24.2

24.3

25. NUMBER OF EMPLOYEES

Credit / Sales Staff

Banking / Support Total

Credit / Sales Staff

Banking / Support

Total

Permanent 231 291 522 121 256 377 Contractual / temporary 175 54 229 83 160 243

406 345 751 204 416 620

Change in applicable income tax rate from 32% to 31% is due to change in relevant Income tax laws.

2016 2015

2016 2015

26. NUMBER OF BRANCHES/SERVICE CENTRES

(Number) (Number)

Beginning of the year 41 41Opened during the year

-Branches 5 --Service Centers/Booth 8 --Closed / Merged during the year (3) -

At the end of the year 51 41

This includes 35 branches and 16 booths/service centers (2015: 30 and 11)

27. REMUNERATION OF DIRECTORS AND EXECUTIVES

Managerial remuneration

Rent and house maintenance

Utilities

Relocation allowance

Conveyance allowance

Car allowance

Car maintenance

Contribution to defined contribution plan

Fuel allowance / reimbursements

Sales staff incentive

Training compensation

Bonus, Prizes and rewards

Number of persons

2016 2016

Rupees Rupees Rupees Rupees

14,168,940 13,482,545 69,417,600 51,412,434

270,000 270,000 15,339,503 10,997,123

1,416,900 1,348,260 6,941,772 5,153,259

- - 574,318 280,000

- - 1,072,111 698,654

- - 6,380,000 1,690,000

613,556 452,556 774,134 743,948

1,416,900 1,348,260 6,863,705 4,924,507

340,608 440,000 1,775,072 1,606,777

- - 4,733,972 1,562,476

- - 303,000 135,000

7,298,720 2,420,000 18,184,224 9,435,550

25,525,624 19,761,621 132,359,411 88,639,728

1 1 63 47

President/Chief Executive Executives

The provision of tax is recorded as Alternative Coporate Tax as specified in section 113(C) of the Income Tax Ordinance, 2001 (Ordinance).

2015 2015

page 77

a) Executive means any employee whose basic salary exceeds Rs. 500,000 (2015: Rs. 500,000) per year.b)

c)

28. EARNING / (LOSS) PER SHARE (RUPEE)

Profit / (Loss) after taxation - Rupees

Weighted average ordinary shares - Numbers

Profit / (Loss) per share - Rupee

2016

A 230,757,830 (37,277,418)

B 145,175,360 145,175,360 A/B 1.59 (0.26)

29. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

2016(Rupees) (Rupees)

Transactions with related parties by virtue of common Directorship

Deposit Mobilization Commission Paid 66,426,078 31,149,166 Branchless commission (Net of agents commission) 1,058,176,040 669,076,290

Expenses incurred on behalf of the Bank by PMCL 38,463,396 9,608,723

Payments made for expenses incurred on behalf the Bank to PMCL 7,766,843 7,377,677

Services availed from LinkDotNet Telecom Limited - 8,262,160

Payments made against defined contribution plan 32,669,154 25,541,370

Mark-up/ return/ interest expensed to PMCL 32,768,439 3,899,800

Transaction with key management personnel

Remuneration, allowances and benefits - note 29.1 42,787,864 39,244,619

29.1 Remuneration, allowances and benefits

Managerial remuneration 36,895,542 33,682,198

Rent and house maintenance 2,202,750 2,182,500

Utilities 3,689,572 3,379,921

39,244,619

30. CASH AND CASH EQUIVALENTS

Cash and balances with SBP and NBP - note 6

Balances with other banks/NBFIs/MFBs - note 7

747,930,012 266,578,027

4,742,891,348 2,402,370,277

5,490,821,360 2,668,948,304

The President / Chief Executive Officer and certain other executives are provided with free use of the Bank's owned and maintained cars in accordance with their entitlement as per rules of the Bank.

Amount of Rs.150,000 is reimbursed to Non-Executive Director of the bank on account of attending board meetings as per SBP regulation (2015: Rs. 225,000).

The Bank is a subsidiary of Global Telecom Holding S.A.E. (GTH) which holds 99.99% share capital of the Bank. Therefore, all subsidiaries and associated undertakings of GTH are related parties of the Bank. Other related parties include directors, key management personnel which inlcude CEO and Head of Departments (HOD's), entities under common directorship. Remuneration to directors and executives is disclosed in note 27 to these financial statements. Amounts due from and due to the related party companies are shown in note 11 and 14 to these financial statements. All transactions involving related parties are subject to the approval of the Board of Directors. Significant transactions with the related parties other than those referred to in the foregoing entered into during the year are as follows:

Deposits in savings account include an amount of Rs. 501,287,599 (2015: Rs. 282,746,127) of PMCL, whereas the term deposit receipt include an amount of Rs. 50,000,000 placed at a profit rate of 7.5 % per annum (2015: nil) by PMCL.

Deposits in savings account include an amount of Rs. 501,287,599 (2015: Rs. 282,746,127) of PMCL, whereas the term deposit receipt include an amount of Rs. 50,000,000 placed at a profit rate of 7.5 % per annum (2015: nil) by PMCL.

The Bank has not extended financing or other microfinance services to members of management, directors or parties related to them.

42,787,864

2015

2015

page 78

31. FINANCIAL INSTRUMENTS (based on contractual obligation)

Up to one year One to five yearsOver five

yearsSub total

%31 December 2016Financial assetsCash and balances with SBP and NBP - - - - Balances with other banks/NBFIs/MFBs 4-6.25 4,742,891,348 - - 4,742,891,348 Investments 5.85-5.90 1,495,053,230 - - 1,495,053,230 Advances 18-38.40 5,642,054,414 216,769,795 - 5,858,824,209

Other assets - - - -

11,879,998,992 216,769,795 - 12,096,768,787 Financial liabilitiesDeposits and other accounts 6-12.35 4,126,298,749 744,208,232 - 4,870,506,981

Other liabilities - - - - -

4,126,298,749 744,208,232 - 4,870,506,981

Off balance sheet financial instruments:

Commitments - - - -

31 December 2015

Financial assets

Cash and balances with SBP and NBP - - - -

Balances with other banks/NBFIs/MFBs 4-7.45 2,402,370,277 - - 2,402,370,277

Investments 11.5 125,271,966 - - 125,271,966

Advances 18-38.40 1,342,557,145 - - 1,342,557,145

Other assets - - - -

3,870,199,388 - - 3,870,199,388

Financial liabilities

Deposits and other accounts 6-12.35 1,110,794,558 31,401,500 - 1,142,196,058

Other liabilities - - - - -

1,110,794,558 31,401,500 - 1,142,196,058

Off balance sheet financial instruments:Commitments - - - -

Effective yield/interest rate

Interest/Mark up bearing

----------------------------------- Rupees --------------------------------

page 79

Total

Up to one yearOne to five

yearsOver five

yearsSub total 2015

747,930,012 - - 747,930,012 747,930,012 - - - - 4,742,891,348 - - - - 1,495,053,230 - - - - 5,858,824,209

853,361,423 - - 853,361,423 853,361,423

1,601,291,435 - - 1,601,291,435 13,698,060,222

5,435,855,486 - - 5,435,855,486 10,306,362,467 2,680,656,677 16,345,230 - 2,697,001,907 2,697,001,907

8,116,512,163 16,345,230 - 8,132,857,393 13,003,364,374

- - - - -

266,578,027 - - 266,578,027 266,578,027

- - - - 2,402,370,277

- - - - 125,271,966

- - - - 1,342,557,145

274,657,617 - - 274,657,617 274,657,617

541,235,644 - - 541,235,644 4,411,435,032

2,055,115,379 - - 2,055,115,379 3,197,311,437

697,039,474 439,088 - 697,478,562 697,478,562

2,752,154,853 439,088 - 2,752,593,941 3,894,789,999

4,558,902 - - - 4,558,902

Non interest/mark up bearing

----------------------------------------------- Rupees -------------------------------------------

page 80

32. MATURITIES OF ASSETS AND LIABILITIES

Total Up to one monthOver one month up to six month

Over six month up to one year

Over one year

31 December 2016 (Rupees) (Rupees) (Rupees) (Rupees) (Rupees)

Market rate assets

Cash and Balance with SBP and NBP 747,930,012 747,930,012 - - -

Balances with other Banks/NBFIs/MFBs 4,742,891,348 1,442,891,348 3,300,000,000 - -

Investments 1,495,053,230 1,196,584,659 298,468,571 - -

Advances 5,858,824,209 91,523,088 2,013,956,766 3,536,574,560 216,769,795

Total market rate assets 12,844,698,799 3,478,929,107 5,612,425,337 3,536,574,560 216,769,795

Other non-earning assets

Operating fixed assets 388,447,521 532,461 3,429,138 119,138,745 265,347,177

Other assets 853,361,423 172,591,245 652,412,703 28,357,475 -

Deferred tax asset 147,349,687 - - - 147,349,687

Total non-earning assets 1,389,158,631 173,123,706 655,841,841 147,496,220 412,696,864

Total assets 14,233,857,430 3,652,052,813 6,268,267,178 3,684,070,780 629,466,659

Cost/non cost bearing liabilities

Deposits and other accounts 10,306,362,467 8,071,473,702 614,815,397 875,128,905 744,944,463

Other non-cost bearing liabilities

Other liabilities 2,697,001,907 2,637,236,673 11,405,460 32,014,544 16,345,230

Total Liabilities 13,003,364,374 10,708,710,375 626,220,857 907,143,449 761,289,693

Net assets 1,230,493,056 (7,056,657,562) 5,642,046,321 2,776,927,331 (131,823,034)

Represented by :

Share Capital 1,451,753,600

Statutory reserves 46,151,566

Depositor's protection fund 11,537,892

Accumulated Losses (278,950,002)

Surplus / (deficit) on revaluation of assets

- 1,230,493,056

page 81

On behalf of the Board of Directors, I would like to appreciate the hard work put in by the employees of the bank in taking various initiatives during the year. I, on behalf of the Board, express gratitude to the State Bank of Pakistan for its continued support and guidance. Taking this opportunity, I would also thank, on behalf of the Board & the management, the customers for entrusting confidence in us and assure them that we remain committed to maintaining high service standards and a strong corporate governance and compliance in all our endeavors.

For and on behalf of the Board

32. MATURITIES OF ASSETS AND LIABILITIES

Total Up to onemonth

Over one month up to six month

Over six month up to one year

Over one year

31 December 2015 (Rupees) (Rupees) (Rupees) (Rupees) (Rupees)

Market rate assets

Cash and Balance with SBP and NBP 266,578,027 266,578,027 - - -

Balances with other Banks/NBFIs/MFBs 2,402,370,277 302,370,277 2,100,000,000 - -

Investments 125,271,966 - - 125,271,966 -

Advances 1,342,557,145 27,137,732 369,472,261 945,947,152 -

Total market rate assets 4,136,777,415 596,086,036 2,469,472,261 1,071,219,118 -

Other non-earning assets

Operating fixed assets 289,234,838 - 2,908,535 4,965,122 281,361,181

Other assets 274,657,617 236,214,850 20,527,114 14,592,801 3,322,852

Deferred tax asset 194,455,975 - - - 194,455,975

Total non-earning assets 758,348,430 236,214,850 23,435,649 19,557,923 479,140,008

Total assets 4,895,125,845 832,300,886 2,492,907,910 1,090,777,041 479,140,008

Cost/non cost bearing liabilities

Deposits and other accounts 3,197,311,437 3,014,835,315 51,219,001 68,287,800 62,969,321

Other non-cost bearing liabilities

Other liabilities 697,478,562 694,589,720 825,166 751,058 1,312,618

Total Liabilities 3,894,789,999 3,709,425,035 52,044,167 69,038,858 64,281,939

Net assets 1,000,335,846 (2,877,124,149) 2,440,863,743 1,021,738,183 414,858,069

Represented by :

Share Capital 1,451,753,600

Accumulated losses (452,018,374)

(Deficit) / surplus onrevaluation of assets

600,6201,000,335,846

33. RECLASSIFICATION

Rupees (as previously reported)

Rupees (as reclassified)

Payable to related parties 8,506,379 3,937,163 Receivable from related parties 14,043,729 9,474,513 Fee, Commission and Brokerage income 2,651,072,334 531,144,891 Commission expense (2,119,927,443) -

34. GENERAL

35. DATE OF AUTHORIZATION FOR ISSUE

Figures have been rounded off to the nearest rupee unless otherwise stated.

These financial statements were authorized for issue by the Board of Directors of the Bank in their meeting held on 24th March 2017.

The corresponding figures as at December 31, 2015 have been reclassified for more appropriate presentation. These reclassifications have no effect on previously reported net loss or shareholders' equity. The effect on presentation of the balance sheet as at December 31, 2015 and profit and loss account for the year ended December 31, 2015 is summarized below:

page 82

Branch Names And Contacts

Faisalabad

FaisalabadP-7, Santpura Main Allama Iqbal Road Opposite GC University Faisalabad041-2620622

Toba Tek SinghShop #240-241,Mall GoDown Road,Grain Market,Toba Tek Singh046-2510721

GojraShop no.1 Azeem plaza, Near Sabzi Mandi, Borh Wali Gali, Quaid e azam road, Tehsil Gojra District Toba Tek Singh046-3511461

JhangBuilding No.93, Near Girls College Chowk, Gojra Road, Jhang Saddar047-7650148-9

ShorkotNear Ghani Petrol Pump Lari Ada Jhang Road Shorkot City047-5310178

ChiniotNear NADRA office Faisal Abad Road Chiniot047-6330181

Layyah

BhakkarWard # 12/6 near Nasir hospital Mandi Town Bhakkar0453-514014

Chowk AzamMM Fateh Pur Road, Sial Colony, Chowk Azzam0606-381141

Chowk Sarwar ShaheedOpposit Ghala Mandi Gate No 2 Near ZTBL main Multan Road Chowk Sarwar Shaheed. District Muzafargarh066-2210621

Darya KhanMain Bhakkar Road, Opposite GPO, Darya Khan0453-252314

Koror Lal EssanFateh Pur road opposite ZTBL Karor Lal Essan0606-811555

Kot AdduShop No. 476 Ward No.11 Main GT Road Kot Adu Distt Muzaffar Garh0662-243591

LayyahPlot # 134,Mohallah Qadirahabad,near Moti mosque,Chobarah Road Layyah0606-410141

MankeraShop no. 4 Bhatti markit, Opposite UBL-Jhang road, Mankera045-3410101

Multan

DunyapurShop # 6-9, Faizan E Madina Road, Kazmi Chowk, Dunyapur0608-304342

JalalpurArain Plaza,Opposite Allied Bank Permat Road, Jalalpur Pirwala0614-420197

Kehror PeccaDunya Pur Road, Kehror Pacca0608-340223

LodhranSaad Plaza, Shop # 1-3, Near Choti Nagar, Main Bahalwalpur Road, Lodhran0608-361104

Multan3626 AB, Azmat wasti road, Chowk Sadu Hassam, Multan061-4588868

MuzafargarhJhang Road Chungi # 02, Near wapda office Muzafargarh0662-422472

ShujabadOpposite Munawarah Masjid, Jalalpur Road, Shujaabad061-4397599

Pannu Aqil

DharakiProperty No. 446, Near EFU office , Main Road, Deharki0723644402

HalaDargah Road, Opposite HBL, New Hala, District Matiari223331124

HyderabadPlot # D-1 & D4, Mobilink House, Main Auto Bhan Road, Near Standard Chartered Bank, Latifabad, Hyderabad022-3411038

Karachi-DHA40D, 24th Commercial Street, Phase II Extension, DHA, Karachi021-34328516

Pannu AqilPlot No. 435, Baiji road, Pannu Akil District, Sukkur.071-5692437

RanipurShop No. 1 & 2, Behind Al-Shifa Medical Center, Near Askari Bank, Main National Highway, Ranipur.0243-730372

SadiqabadNishter chowk fanous, cinema road, near KPL road, Sadiqabad0685-705333

LarkanaShaikh Muhallah, survey no. 72 old anaj Mandi, near Haji Dhani Bux oil mill, Bank Square Road Larkana074-4040133

QambarOld bus Stand, Mian Mangan Main Road Qamber074-4211442

Peshawar

AbbotabadGround Floor, Shalimar Motors, Mansehra Road, Abbotabad0992-384488

HaripurShop#7-8,Naeem Khan Market,GT Road,opposite Total Pump,Haripur0995-627725

IslamabadKaghan Road F-8 Markaz Islamabad051-2817101 ext 1225

MardanNaeem Khan Market College Chowk,Mardan.093-7875123

MuzafarabadNeelum Road Near 4 Field Masjid Lower Plate Muzaffarabad05822-449114-5

PeshawarMobilink Contact Center, Near Arbab Road, University Rd, Peshawer.091-5711626

SwabiShop #1, Fazal Dad Khan Market, Mardan Road, Near Meezan Bank, Swabi0938-222325

Rahim Yar Khan

AhmedpurShop # 2/2, Opposite MAPCO Office, Kuchehri Road, Ahmedpur East.062-2271443

ChishtianPlot # 68-D,Gulistan Plaza Gurdwara Road,Main Bazar Chishtian063-2500177

Fort AbbasGrain Market, Along with Meezan bank , Fort Abbas063-2510120

HaroonabadJamia Masjid Road, Near UBL bank, Haroonabad063-2250041

HasilpurMain Bazar, Baldia Road, Near Bank of Punjab, Hasilpur062-2441094

KhanpurShop # 1 & 2, Quaid-e-Millat Road, Khanpur, District Rahim Yar Khan068-5577072

LiaquatpurPlot #7,Ghalla Mandi Road,Liaqatpur0685-693442

Rahim Yar KhanBin Hakim Plaza Shahi Road, Opposite Police Station City A Division, Behind Zam Zam Plaza, Rahim Yar Khan0685-878071

Sahiwal

Arif WalaMain Muhammadi Road, Adjacent NRSP Bank, Arifwala045-7830510

BurewalaAl Ramay industeries, Near Khushhali bank limited, Multan road Burewala067-3770828

LahoreE-17/5-1, Main Walton Road, Islam Nagar, Lahore042-36628256

Mian ChanuBatalvi Plaza, Near Ghallani Plaza, Shaheed Road, Mian Channu.065-2660287

PakpattanEx-Punjab Bank Building, Adjacent Telenor Franchise, College Road, Pakpattan.0457-372172

SahiwalOffice No G-3 Ground Floor,Plot no 515-B,Saeed center,opposite DPO office,Farid Road,Sahiwal040-4222219

BasirpurHaveli road opposite Girls degree college Basirpur.0444-771010

MinchinabadPlot No. 150 Circular Road Minchanabad0632-750244

Sargodha

BhalwalKhewat # 100, Khattoni # 103, Liaquat Shaheed road Bhalwal District Sargodha.048-6643406

Chota SahiwalVinni House, Jhang Sargodha Road, Tehsil Chota Sahiwal, District Sargodha048-6786157

KhushabShop No. 198, block No. 14, Main Bazar Jouharabad, District Khushab.0454-721491

Mandi Baha UddinAli Plaza, Cinema Road, Near Civil Lines Hospital, Mandi Baha Uddin.054-6500942

SargodhaZahoor Plaza, Hussain Chowk, Noori Gate, Sargodha048-3768825

SialkotM.A. Heights, Defence Road, Sublime Chowk, Khewat No 343, Khatoni No 724,Khasra No.24,Opposite WAPDA OFFICE, Sialkot052-3258877

PasrurNarowal By Pas Pasru Road Pasrur Near PSO Petrol Pump052-6442724

www.mobilinkbank.com

Head Office

Mobilink Microfinance Bank, Head Office,

3-A/2, Kaghan Road, F-8 Markaz, Islamabad.

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