Interim Financial Statements

Chhimek Laghubitta Bittiya Sanstha Limited

Unaudited Condensed Statement of Financial Position
As on Quarter ended 31 Ashadh, 2080
Amount (NPR)
Immediate Previous Year
Particulars This Quarter Ending
Ending
Assets
Cash and Cash Equivalent 8,225,036,420.36 3,505,371,295.43
Statutory Balances and due from Nepal Rastra Bank 956,486,670.00 618,114,670.00
Placement with Bank & Financial Institutions - -
Derivative Financial Instruments - -
Other Trading Assets - -
Loan and advances to MFIs & Cooperatives - -
Loans and Advances to Customers 32,003,609,476.96 33,074,020,591.05
Investment Securities 503,638,000.00 481,671,850.07
Current Tax Assets 58,800,326.49 95,227,293.96
Investment Property - -
Property and Equipment 295,672,492.05 276,858,972.25
Goodwill and Intangible Assets 3,442,080.15 2,872,778.72
Deferred Tax Assets 29,635,896.59 29,635,896.59
Other Assets 516,531,503.09 172,120,537.02
Total Assets 42,592,852,865.69 38,255,893,885.09
Liabilities
Due to Bank and Financial Institutions - -
Due to Nepal Rastra Bank - -
Derivative Financial Instruments - -
Deposits from Customers 30,716,613,283.88 27,019,461,555.58
Borrowings 4,553,973,587.13 4,773,126,739.84
Current Tax Liabilities - -
Provisions 37,281,807.71 61,319,376.17
Deferred Tax Liabilities - -
Other Liabilities 529,077,268.69 588,378,001.09
Debt Securities Issued - -
Subordinated Liabilities - -
Total Liabilities 35,836,945,947.41 32,442,285,672.68
Equity
Share Capital 2,835,402,000.00 2,324,100,000.00
Share Premium 40,967,834.00 40,967,834.00
Retained Earnings 1,450,134,543.24 1,206,401,946.17
Reserves 2,429,402,541.04 2,242,138,432.24
Total Equity 6,755,906,918.28 5,813,608,212.41
Total Liabilities and Equity 42,592,852,865.69 38,255,893,885.09
 Chhimek Laghubitta Bittiya Sanstha Limited
Unaudited Condensed Statement of Profit & Loss
For the Quarter ended 31 Ashadh, 2080

Amount (NPR)
Previous Year
Current Year
Particulars Corresponding
This Quarter Upto This Quarter This Quarter Upto This Quarter
Interest Income 1,544,508,249.50 5,822,681,019.14 689,889,510.61 4,968,062,280.25
Interest Expense 808,084,199.80 2,969,200,448.38 310,852,515.53 2,471,968,764.11
Net Interest Income 736,424,049.70 2,853,480,570.76 379,036,995.08 2,496,093,516.14
Fee and Commission Income (37,097,706.72) 239,601,029.28 (9,853,718.52) 266,845,017.48
Fee and Commission Expense 66,006.07 122,621.60 44,436.74 101,052.27
Net Fee and Commission Income (37,163,712.79) 239,478,407.68 (9,898,155.26) 266,743,965.21
Net Interest, Fees and Commission Income 699,260,336.91 3,092,958,978.44 369,138,839.82 2,762,837,481.35
Net Trading Income - - - -
Other Operating Income 777.32 118,577.32 1,932,138.08 2,049,938.08
Total Operating Income 699,261,114.23 3,093,077,555.76 371,070,977.90 2,764,887,419.43
Impairment Charge/(reversal) for Loans and Other Losses 112,603,691.09 340,000,765.34 (10,565,591.90) 216,831,482.35
Net operating income 586,657,423.14 2,753,076,790.42 381,636,569.80 2,548,055,937.08
Operating Expense
Personnel Expenses 224,264,942.57 1,002,722,721.96 132,159,227.92 910,617,007.31
Other Operating Expenses 51,650,435.20 166,136,777.00 29,921,348.08 144,407,689.88
Depreciation & Amortization 13,702,876.89 42,365,604.50 5,744,964.91 34,407,692.52
Operating Profit 297,039,168.48 1,541,851,686.96 213,811,028.89 1,458,623,547.37
Non-Operating Income 5,418,959.94 18,691,550.53 5,120,279.70 18,392,870.29
Non-Operating Expense - - - -

Profit before Income Tax 302,458,128.42 1,560,543,237.49 218,931,308.59 1,477,016,417.66

Income Tax Expense
Current Tax 121,191,471.16 498,617,003.88 156,884,424.53 534,309,957.25
Deferred Tax - - (4,515,613.23) (4,515,613.23)
Profit for the Period 181,266,657.26 1,061,926,233.61 66,562,497.29 947,222,073.64

Statement of Comprehesive Income

Previous Year
Current Year
Particulars Corresponding
This Quarter Upto This Quarter This Quarter Upto This Quarter
Profit or loss for the Period 181,266,657.26 1,061,926,233.61 66,562,497.29 947,222,073.64
Other Comprehensive Income - - - -
a) Items that will not be reclassified to profit or loss - - - -
-Gains/(losses) from investments in equity instruments
measured at fair value - - - -
-Gain/(loss) on revaluation - - - -
-Actuarial gain/loss on defined benefit plans - - - (13,146,814.00)
-Income tax relating to above items - - - 3,944,044.20
Net other compressive income that will not be
reclassified to profit or loss - (9,202,769.80)
b) Items that are or may be reclassified to profit or loss - - - -
-Gains/(losses) on cash flow hedge - - - -
-Exchange gains/(losses) (arising from translating financial
assets of foreign operation) - - - -
-Income tax relating to above items - - - -
Net other compressive income that are or may be
reclassified to profit or loss
c) Share of other comprehensive income of associate
accounted as per equity method - - - -
Other comprehensive income for the period, net of
income tax - - - (9,202,769.80)
Total Comprehensive Income for the period 181,266,657.26 1,061,926,233.61 66,562,497.29 938,019,303.84
Earnings per share
Basic earnings per share 37.45 40.76
Annualized Basic Earnings Per Share 37.45 40.76
Diluted earnings per share 37.45 40.76

Ratios as per NRB Directive

Previous Year
Current Year
Particulars Corresponding
This Quarter Upto This Quarter This Quarter Upto This Quarter
Capital Fund to RWA 17.91% 15.87%
Non-performing loan (NPL) to total loan 1.72% 0.83%
Total Loan Loss Provision to Total NPL 176.27 245.46%
Cost of Funds 9.26% 9.78%
Credit to Deposit and Borrowing Ratio 107.12% 103.43%
Base Rate 12.27% 13.37%
Interest Rate Spread 5.75% 5.14%
 Statement of Distributable Profit or Loss
For the Quarter ended 31 Ashadh, 2080
(As per NRB Regulation)

Previous Year
Current Year
Particulars Corresponding
Upto this Qtr Upto this Qtr
Net Profit or (Loss) as per statement of profit or loss 1,061,926,233.61 947,222,073.64
Appropriations:
a. General Reserve 212,385,246.72 250,568,244.73
b. Foreign exchange fluctuation fund - -
c. Capital redemption reserve - -
d. Corporate social responsibility fund 10,619,262.34 9,472,220.74
e. Employee's training fund 4,208,046.94 -
f. Other 10,619,262.34 40,034,135.74
Profit or (Loss) before regulatory adjustment 824,094,415.28 647,147,472.43
Regulatory Adjustment:
a.Interest receivable (-) / previous accrued interest received (+) 6,705,841.80 (40,869,607.59)
b. Short loan loss provision in accounts (-)/ reversal (+) - -
c. Short provision for possible losses on investment (-)/ reversal (+) - -
d. Short loan loss provision on Non Banking Assets (-)/ reversal (+) - -
e. Deferred tax assets recognised (-)/ reversal (+) - (8,459,657.43)
f. Goodwill recognised (-)/ impairment of Goodwill (+) - -
g. Bargain purchase gain recognised (-)/ reversal (+) - -
h. Actuarial loss recognised (-)/reversal (+) - (9,202,769.80)
i. Other - -
Net Profit for the Quarter end Ashadh 31, 2080 available for distribution 830,800,257.07 588,615,437.61
Opening Retained Earning as on Shrawan 1, 2079 1,206,401,946.17 1,223,997,855.81
Adjustment (+/-) - (57,211,347.26)
Distribution
Bonus share issued 511,302,000.00 494,100,000.00
Cash Dividend Paid 75,765,660.00 54,900,000.00
Total Distributable profit or (loss) as on Quarter end date 1,450,134,543.24 1,206,401,946.17
Annualised Distributable Profit/Loss per share 51.14 51.91

Notes:
1. Above financial statements are prepared in accordance with Nepal Financial Reporting Standards(NFRS) and certain Carve-outs issued by the Institute of
Chartered Accountants of Nepal (ICAN).These figures may vary at the instances of statutory auditors and regulators.

2. The detailed interim financial report has been published in the website (www.chhimekbank.org).
3. Loans and Advances are presented net of impairment charges and includes staff loans.
4. Actuarial Valuation will be done for Employee Benefits.
5. Personnel Expenses also include employee's bonus provision.
6. Previous period figures are regrouped/rearranged/restated wherever necessary for consistent presentation and comparison.
 Disclosure Pursuant to Securities Registration and Issue Regulation 2073
(Rule 26(1), Annexure 14)
Fourth Quarter of Financial Year 2079/80
1 Financial Statement
a) The Nepal Financial Reporting Standard (NFRS) compliant financial statement of the second quarter has been published
along with this report.

b) Key Financial Indicators

Earnings Per Share 37.45 Liquidity Ratio 33.49%
Price Earnings Ratio 22.00 Return on Equity 15.72%
Net Worth Per Share 238.27 Total Assets Value Per Share 1,502.18

2 Management Analysis
a) Quarterly analysis of the microfinance’s incomes and liquidity:
The microfinance has registered NPR 1,061,926,233.61 in net profit and its liquidity ratio stands at 33.49%. Current
liquidity crisis has affected the microfinance.
b) Business Analysis and Business Plan
Having the license to operate all over Nepal, the microfinance is currently providing its services in 69 districts through 197
branches. With the aim of improving access to financial services to the poor and marginalized women members and
developing micro-entrepreneurship, the microfinance is serving 419,819 households and has provided various loans to
234,928 members till the end of this quarter. The microfinance is further planning to timely improve its quality of services
as per the contemporary circumstances and needs & requirements of the members. The microfinance will keep on
continually developing the micro-enterpreneurship on its members through micro-credit services and training facilities.

To ease the collection of deposits and installments from its members, the microfinance has collaborated with various
private digital payment service providers.Further microfinance is planning to enhance the digital services to its members.

3 Details Related to Legal Proceedings

a) No information regarding the lawsuit against the microfinance has been filed during the Quarterly period under review.

b) No information regarding the lawsuit on account of violation of prevailing laws or commission of criminal offences has
been filed against the promoter or director of the microfinance during the quarterly period under review.

c) No information regarding the lawsuit of financial fraud/crime has been filed against the promoters and management team of
the microfinance during the quarterly period under review.

4 Analysis of the Microfinance’s Share Transaction

a) The shares of the microfinance are listed on Nepal Stock Exchange. The microfinance’s share price is determined by the
market’s movement and microfinance’s management is neutral in this regard.
b) The microfinance has complied with all the prevailing norms of SEBON and directives issued by NRB.
c) Details of share transaction during the quarter is as follows:
Maximum Price 1,052.50 Total Days Transacted 62.00
Minimum Price 760.00 Total Shares Transacted 918,840.00
Closing Price 824.10 Total Number of Transaction 14,991.00
Total Amount Transacted 838,327,856.90
(Source: - www.nepalstock.com.np)

5 Problems and Challenges

The recovery and lending process of the microfinance has not taken its pace, as it was before the COVID-19 pandemic.
Current liquidity crisis along with high cost borrowing from the BFIs has increased cost of fund.
Quality of Portfolio has been deteriorated due to the activities of Group, carrying out act against the microfinance sectors.

The microfinance has been continuously involved in providing quality financial services to its members by ensuring the
safety of its employees as well as its members during the times of ongoing pandemic (COVID-19). The total cost of
operations has been increased in recent times due to recruitment, retention of quality human resource and addition of new
branches.
 The challenges faced by the microfinance during this period are listed below:
i) Internal Challenges:
a) Challenges in the timely recovery of loans,
b) Recruitment and retention of quality manpower,
c) Increasing cost of operation,
d) Decrease in employee productivity due to geographical dificulties,
e) Management of increased operational risk with the increase in business volume & number of branches.
f) Difficulty in conducting members field meeting due to the activities of group, carrying out act against Microfinance
sectors.

ii) External Challenges

a) Increment in the interest rate of Deprived Sector and other Borrowings availed by the microfinance,
b) Changes in Regulatory provisions,
c) Challenges in the management of the liquidity,
d) Multiple Borrowings and Duplication of members,
e) Larger numbers of microfinances and Unhealthy Competition among them,
f) Lack of Markets for the productions of the members,
g) Long term impact of Covid-19 pendamic.

iii) Future Strategies to overcome the challenges

a) Optimum and efficient utilization of the available means and resources,
b) Enhancing the Quality of Assets,
c) Analyzing the overall impact of the COVID-19 & Liquidity crisis and formulating & Implementing strategies
accordingly,
d) Incorporating Digital banking in every possible aspects of the services,
e) Expansion of branches to the untapped areas of the country,
f) Enhancing the competitive advantages,
g) Extension of the lending in Productive and Agricultural Sector.

6 Corporate Governance
The microfinance is committed in maintaining the highest level of ethical standards, corporate governance, and compliance.
The board of directors and management strictly comply with all the regulatory norms issued by NRB and various other
regulatory authorities. Further, the microfinance adheres to all the regulatory and legal requirements and the industry best
practices.

7 Declaration by CEO
I, CEO of the microfinance, take responsibility for the truthfulness of the information disclosed in this report to the best of
my knowledge. Further, the information disclosed herein are true and fair and have not knowingly concealed any material
information which may affect the decision of the investor.
 Chhimek Laghubitta Bittiya Sanstha Limited
Statement of Changes in Equity
For the Quarter ended 31 Ashadh, 2080

Amount (NPR.)
Attributable to Equity-Holders of the Institution

Other Reserve
Share Capital

Equalisation

Revaluation
Regulatory

Fair Value
Exchange
Premium

Retained
Earning
General
Reserve

Reserve

Reserve

Reserve

Reserve

Total
Share
Particulars Total Equity

Balance as Shrawan 1st, 2078 1,830,000,000.00 40,967,834.00 1,138,721,069.37 - 118,422,978.40 - - 1,223,997,855.81 719,001,705.91 5,071,111,443.49 5,071,111,443.49
Comprehensive Income for the Year
Profit for the Year 947,222,073.64 947,222,073.64 947,222,073.64
Other Comprehensive Income, Net of Tax - -
Gains/(Losses) from Investment in Equity Instruments measured at Fair Value - -
Gains/(Losses) on Revaluation - -
Actuarial Gains/(Losses) on Defined Benefit Plans - -
Gains/(Losses) on Cash-flow Hedge - -
Exchange Gains/(Losses)(arising from translating Financial Assets of Foreign Operation) - -
Total Comprehensive Income for the year - - - - - - - 947,222,073.64 - 947,222,073.64 947,222,073.64
Transfer to Reserves during the Year 250,568,244.73 58,532,034.82 (358,606,636.02) 40,303,586.67 (9,202,769.80) (9,202,769.80)
Transfer from Reserves during the Year (57,211,347.26) (83,411,187.66) (140,622,534.92) (140,622,534.92)
Transactions with Owners, directly recognized in Equity - -
Share Issued - -
Share Based Payments - -
Dividend to Equity-Holders - -
Bonus Shares Issued 494,100,000.00 (494,100,000.00) - -
Cash Dividend Paid (54,900,000.00) (54,900,000.00) (54,900,000.00)
Other - -
Total Contributions by and Distributions 494,100,000.00 - 250,568,244.73 - 58,532,034.82 - - (964,817,983.28) (43,107,600.99) (204,725,304.72) (204,725,304.72)
Balance at 32 Ashadh, 2079 2,324,100,000.00 40,967,834.00 1,389,289,314.10 - 176,955,013.22 - - 1,206,401,946.17 675,894,104.92 5,813,608,212.41 5,813,608,212.41
Balance as Shrawan 1st, 2079 2,324,100,000.00 40,967,834.00 1,389,289,314.10 - 176,955,013.22 - - 1,206,401,946.17 675,894,104.92 5,813,608,212.41 5,813,608,212.41
Adjustment
Balance as Shrawan 1st, 2079 after adjustment 2,324,100,000.00 40,967,834.00 1,389,289,314.10 - 176,955,013.22 - - 1,206,401,946.17 675,894,104.92 5,813,608,212.41 5,813,608,212.41
Comprehensive Income for the Year
Profit for the Year 1,061,926,233.61 1,061,926,233.61 1,061,926,233.61
Other Comprehensive Income, Net of Tax
Gains/(Losses) from Investment in Equity Instruments measured at Fair Value
Gains/(Losses) on Revaluation
Actuarial Gains/(Losses) on Defined Benefit Plans
Gains/(Losses) on Cash-flow Hedge
Exchange Gains/(Losses)(arising from translating Financial Assets of Foreign Operation)
Total Comprehensive Income for the year - - - - - - - 1,061,926,233.61 - 1,061,926,233.61 1,061,926,233.61
Transfer to Reserves during the Year 212,385,246.72 (6,705,841.80) (231,125,976.54) (15,688,083.13) (41,134,654.74) (41,134,654.74)
Transfer from Reserves during the Year (2,727,213.00) (2,727,213.00) (2,727,213.00)
Transactions with Owners, directly recognized in Equity - -
Share Issued - -
Share Based Payments - -
Dividend to Equity-Holders - -
Bonus Shares Issued 511,302,000.00 (511,302,000.00) - -
Cash Dividend Paid (75,765,660.00) (75,765,660.00) (75,765,660.00)
Other -
Total Contributions by and Distributions 511,302,000.00 - 212,385,246.72 - (9,433,054.80) - - (818,193,636.54) (15,688,083.13) (119,627,527.74) (119,627,527.74)
Balance at Ashadh End, 2080 2,835,402,000.00 40,967,834.00 1,601,674,560.82 - 167,521,958.42 - - 1,450,134,543.24 660,206,021.80 6,755,906,918.28 6,755,906,918.28
 Chhimek Laghubitta Bittiya Sanstha Limited
Condensed Statement of Cash Flows
As on Quarter ended 31 Ashadh, 2080

Amount (NPR)
Corresponding Previous
Particulars Upto This Quarter
Upto this Quarter
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 5,822,681,019.14 4,902,621,319.13
Fees and other income received 239,865,552.85 266,845,017.48
Divided received -
Receipts from other operating activities 101,104,559.19 18,392,870.29
Interest paid (2,969,200,448.38) (2,471,968,764.11)
Commission and fees paid (122,621.60) (101,052.27)
Cash payment to employees (1,002,231,752.96) (745,935,503.89)
Other expense paid (589,187,466.25) (361,239,172.23)
Operating cash flows before changes in operating assets and liabilities 1,602,908,841.99 1,608,614,714.40
(Increase)/Decrease in operating assets 104,432,790.08 (8,278,570,713.63)
Due from Nepal Rastra Bank (338,372,000.00) (23,597,000.00)
Placement with bank and financial institutions - -
Other trading assets - -
Loan and advances to bank and financial institutions - -
Loans and advances to customers 519,907,146.05 (8,120,489,731.76)
Other assets (77,102,355.97) (134,483,981.87)
Increase/(Decrease) in operating liabilities 3,872,725,036.30 3,062,528,917.84
Due to bank and financial institutions - -
Due to Nepal Rastra Bank - -
Deposit from customers 3,697,151,728.30 4,580,085,290.79
Borrowings (219,153,152.71) (1,444,394,669.80)
Other liabilities 394,726,460.71 (73,161,703.15)
Net cash flow from operating activities before tax paid 5,580,066,668.37 (3,607,427,081.40)
Income taxes paid (498,617,003.88) (534,309,957.25)
Net cash flow from operating activities 5,081,449,664.49 (4,141,737,038.65)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities (32,028,000.00) (135,768,663.26)
Receipts from sale of investment securities 5,890,000.00 15,532,841.00
Purchase of property and equipment (60,411,103.97) (53,667,963.89)
Receipt from the sale of property and equipment 520,688.24 4,369,133.30
Purchase of intangible assets (1,858,010.00) (254,250.00)
Receipt from the sale of intangible assets - -
Purchase of investment properties - -
Receipt from the sale of investment properties - -
Interest received - -
Dividend received - -
Net cash used in investing activities (87,886,425.73) (169,788,902.85)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt from issue of debt securities - -
Repayment of debt securities - -
Receipt from issue of subordinated liabilities - -
Repayment of subordinated liabilities - -
Receipt from issue of shares - -
Dividends paid (587,067,660.00) (54,900,000.00)
Interest paid - -
Other receipt/payment 313,169,546.17 (149,825,304.72)
Net cash from financing activities (273,898,113.83) (204,725,304.72)
Net increase (decrease) in cash and cash equivalents 4,719,665,124.93 (4,516,251,246.22)
Beginnning Cash and cash equivalents 3,505,371,295.43 8,021,622,541.65
Effect of exchange rate fluctuations on cash and cash equivalents held - -
Closing Cash and cash equivalents 8,225,036,420.36 3,505,371,295.43
 Chhimek Laghubitta Bittiya Sanstha Limited
Notes to the Interim Financial Statement
For the Quarter ended 31 Ashadh, 2080

1 Reporting Entity
Chhimek Laghubitta Bittiya Sanstha Limited ('the Microfinance') is domiciled and incorporated in Nepal under then Development Bank Act, 2052 on
28th Bhadra, 2058 from Nepal Rastra Bank. The microfinance is operating as a D Class licensed financial institution as per Bank and Financial
Institution Act, 2063. The Microfinance is a limited liability company having its shares listed on Nepal Stock Exchange with trading code “CBBL”
after issuing its shares to the general public on Fiscal Year 2061/62. The microfinance has been promoted by Neighborhood Society Service Center
(NSSC), Himalayan Bank Limited, Bank of Kathmandu Limited, Nabil Bank Limited and several reputed persons. Initially the microfinance was
operating from its Registered Office at Hetauda, which was later transferred to Kathmandu Metropolitan city-31, New Baneshwor, Kathmandu.

2 Basis of Preparation
2.1 Statement of Compliance
The Financial Statements of the entity which comprises components presented above have been prepared in compliance with Nepal Financial
Reporting Standards and Nepal Accounting Standards (hereafter referred as NFRS), laid down by the Institute of Chartered Accountants of Nepal and
in compliance with the requirements of the Companies Act, 2063.
The disclosure made in the condensed interim financial informations have been based on the formats prescribed by Nepal Rastra Bank.
The Interim Financial Statement don’t include all of the information required for a complete set of NFRS financial statements. However selected
explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the microfinance's financial
position and performance since the last published annual financial statements.

2.2 Reporting Period

The Microfinance follows the Nepalese financial year based on the Nepalese calendar:
1. For Statement of Financial Position :- Ashadh 31, 2080
2. For Statement of Profit & Loss :- Shrawan 1, 2079 to Ashadh 31, 2080
3. For Statement of Cash Flows :- Shrawan 1, 2079 to Ashadh 31, 2080

2.3 Functional and Presentation Currency

The Financial Statements of the Microfinance are presented in Nepalese Rupees, which is the currency of the primary economic environment in which
the company operates. There was no change in microfinance’s presentation and functional currency during the year under review.

2.4 New Standards issued but not yet effective

Management has issued its assumptions and understandings for the preparation of financial statements under compliance with NFRS, however, certain
interpretations might vary regarding the recognition, measurement and other related provisions where the standards are not specific and not clear.

3 Use of Estimates and Judgements

The Microfinance, in order to comply with the financial reporting standards has made accounting judgements as having potentially material impact on
the financial statement. Those judgements and their impact on the financial statement have been described herein. The management believes that the
estimates used in the preparation of the financial statement are prudent and reasonable. Actual results may differ from the estimates. Any revision to
the accounting estimate is recognized prospectively in the current and future period.

4 Changes in Accounting Policies

The Microfinance applies its accounting policies consistently from year to year except where deviations have been explicitly mandated by the
applicable accounting standards.

5 Significant Accounting Policies

The principal accounting policies applied by the Bank in the preparation of these financial statements are presented below. These policies have been
consistently applied to all the years presented unless stated otherwise.

5.1 Basis of Measurement

The Financial Statements of Entity have been prepared on the historical cost basis, except for the following material items in the Statement of Financial
Position:
● Financial assets, held for trading are recorded in the statement of financial position at fair value and the changes in the value have been routed
through profit or loss statement,
● Available for sale investments (quoted) are measured at fair value,
● Liabilities for defined benefit obligations and staff loans provided at subsidized interest rates as per Employee Bylaws of the Bank are recognized at
the present value of the defined benefit obligation less the fair value of the plan assets.

5.2 Cash and Cash Equivalents

The cash and cash equivalents include cash in hand, balances with banks and financial institutions, money at call and short notice and highly liquid
financial assets with original maturity of three months or less from the acquisition date that are subject to and insignificant risk of changes in their fair
values and are used by the microfinance in the management of its short-term commitments.
Cash and Cash equivalents includes cash in hands, deposits with BFIs and other short-term investments with original maturities of three months or less.
5.3 Financial Assets and Financial Liabilities
Recognition
The Microfinance recognizes financial assets and financial liabilities on the date it becomes party to the contractual agreement (trade date) and
recognizes changes in fair value of the financial assets or financial liabilities from that date.

Classification and Measurement

5.3.1 Financial Assets
Financial Assets are classified mainly under amortized cost, fair value through profit or loss and fair value through OCI. Financial Liabilities are
classified at amortized cost or fair value through profit or loss.
a. Measured at Amortized Cost
Financial assets that are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are
solely payments of principal and interest, are subsequently measured at amortized cost using the effective interest rate (‘EIR’) method less impairment,
if any. The amortization of EIR and loss arising from impairment, if any is recognized in the Statement of Profit and Loss.
b. Measured at Fair Valur through OCI
Assets are categorized under this category if the business model is to obtain the contractual cash flow from the assets but the contractual cash flow isn’t
solely repayment of principal and interest.
Equity Instrument which are not held for trading and initially recognized as held for trading for which the Microfinance makes an irrevocable election
to carry the changes in fair value of the instrument through OCI are measured at Fair Value through other Comprehensive Income.
c. Measured at Fair Value through Profit & Loss
The Microfinance classifies the financials assets as fair value through profit or loss if they are held for trading or designated at fair value through profit
or loss.
Any other financial asset not classified as either amortized cost or FVOCI, is classified as FVTPL.

5.3.2 Financial Liabilities

a. Measured at Fair Value through Profit & Loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Upon initial recognition, transaction cost i.e. directly attributable to the acquisition are recognized in
Statement of Profit or Loss as incurred. Subsequent changes in fair value are recognized at profit or loss.
b. Measured at Amortized Cost
All financial liabilities other than measured at fair value though profit or loss are classified as subsequently measured at amortized cost using effective
interest method.

Derecognition
The Microfinance derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the
contractual rights to receive the cash flows from the asset.
A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expires.

Determination of Fair Value

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The Microfinance follows three levels of the fair-value-hierarchy as described below:
Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets;
Level 2: Significant inputs to the fair value measurement are directly or indirectly observable or valuations of quoted for similar instrument in active
markets or quoted prices for identical or similar instrument in inactive markets; and
Level 3: Significant inputs to the fair value measurement are unobservable.

Investment in Unquoted Equity Instrument are carried at cost as the market price of such shares could not be ascertained with certainty at the reporting
date.

5.4 Impairment
The Microfinance reviews its individually significant loans and advances at each reporting date to assess whether an impairment loss should be
provided in the Statement of Profit or Loss. The Management’s judgement is extensively used in the estimation of the amount and timing of future cash
flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and hence actual results may differ,
resulting in future changes to the provisions made.
The individual impairment provision applies to financial assets evaluated individually for impairment and is based on Management’s best estimate of
the present value of the future cash flows that are expected to be received. In estimating these cash flows, Management makes judgements about the
number of factors including a borrower’s financial situation and the net realizable value of any underlying collateral. Each impaired asset is assessed on
its merits to estimate the recoverable amount of cash flows. A collective impairment provision is established for:
● groups of homogeneous loans and advances and investment securities which are held-to-maturity, that are not considered individually significant;
and
● groups of assets that are individually significant but that were not found to be individually impaired.
The collective impairment is carried using the statistical modelling such as historical trends of probability of defaults, timings of recoveries, and current
economic and market conditions which may warrant for the loss being greater than the suggested by the historical trends.
For the purpose of collective assessment of impairment, Microfinance has categorized assets into following broad products as follows:
· CGISP Loan
· Collateral Loan
· Discipline Loan
· Normal Loan
· Entrepreneurship Development Loan
 Carveout adopted for assessment of impairment charge
The Microfinance has opted to apply carveout on impairment of loans and receivables. Accordingly, individual and collective impairment loss amount
calculated as per NFRS is compared with the impairment provision required under NRB directive no. 2, higher of the amount derived from these
measures is taken as impairment loss for loans and receivables.

5.5 Property, Plant & Equipment

Recognition and measurement: Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost
includes expenditures directly attributable to the acquisition of the asset.
Depreciation & Amortization: The Microfinance depreciates property, plant and equipment following Written Down Value method applying the
Depreciation rates prescribed by Income Tax Act, 2058. The rates used for depreciation of assets for the current and comparative period of significant
items of property, plant and equipment are as follows:
Type of Asset Depr eciation Rate
Buildings 5%
Computer & Accessories 25%
Vehicles - Two-wheeler 20%
- Four-wheeler 20%
Furniture & Fixtures 25%
Equipment & Others - Equipment 25%
Other Assets 15%
Intangible Assets Rate set, dividing the cost of the property by adjusting in the nearest
half year of the fiscal year

The Microfinance adopts cost model for entire class of Property, Plant and Equipment. It has not measured any Property Plant and Equipment at
revaluation model and at fair value. The items of Property, Plant and Equipment are measured at cost less accumulated depreciation and any
accumulated impairment losses.
Depreciation of newly acquired assets is charged based upon the date of invoice and assets having acquisition cost less than NPR. 1,000 have been
written down as an expense for the period in the Statement of Profit and Loss.

5.6 Goodwill and Intangible Assets

Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired in Business Combination is recognized as goodwill.
Goodwill is measured at cost less any accumulated impairment losses/accumulated amortization. Goodwill is reviewed for impairment annually, or
more frequently, if events or changes in circumstances indicate that the carrying value may be impaired.
Intangible assets are recognized separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can
be measured reliably. These intangible assets are recognized at historical cost less impairment /amortization over their estimated useful life.

5.7 Tax Expenses

Tax expenses comprises of current tax and deferred tax.
5.7.1 Current Tax
Current tax is the income tax expense recognized in the statement of Profit or Loss, except to the extent it relates to items recognized directly in equity
or OCI in which case it is recognized in equity or in other comprehensive income. Current tax is the amounts expected or paid to Inland Revenue
Department in respect of the current year, using the tax rates and tax laws enacted or substantively enacted on the reporting date and any adjustment to
tax payable in respect of prior years.
5.7.2 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the balance sheet and the amounts
attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and
deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary
differences can be utilized.
Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realized or the liabilities settled, based on tax
rates and laws enacted, or substantively enacted, by the balance sheet date. Deferred tax assets and liabilities are offset when they arise in the same tax
reporting group and relate to income taxes levied by the same taxation authority, and when the group has a legal right to offset.

5.8 Deposits from Members

Deposits from members and public depositors are initially recognized at fair value, plus for those financial liabilities not at fair value through profit and
loss. The transaction price is considered as the fair value for measuring the deposits.

5.9 Provisions, Liabilities and Contingent Liabilities

A provision is recognized, if as a result of a past event, the Microfinance has a present legal or constructive obligation that can be estimated reliably,
and it is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognized is the best estimate of the
consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation at
that date. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate and are reversed if there is no probability of
outflow of resources.
During the quarter under review, the microfinance has filed a lawsuit against its three staffs in Janakpur High Court through Government Attorney
Office under Banking Offence and Punishment Act. For the related case of embazzlement, a provision of NPR. 15,415,147.00 has been made.

5.10' Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to Microfinance and the consideration can be reliably
measured. The following specific recognition criteria shall also be met for revenue recognition.
5.10.1 Interest Income
For all financial instruments measured at amortized cost, interest bearing financial assets classified as available-for-sale and financial instruments
designated at fair value through profit or loss, interest income or expense is recorded using the Effective Interest Rate (EIR). EIR is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the
net carrying amount of the financial asset or financial liability. The calculation of effective interest rate includes all charges and fee paid or received
that are integral part of the effective interest only if considered material. Such a charges are not amortized over the life of the loan and advances as the
income so recognized closely approximates the income that would have derived under effective interest method and are recognized directly in
statement of profit and loss.
5.10.2 Fees and Comssion Income
Fees and commissions are generally recognized on an accrual basis when the service has been provided.

5.10.3 Dividend Income

Dividend income received from equity shares is recognized in the books when the right to receive the dividend is established.

5.11 Interest Expenses

Interest expense on all financial liabilities including deposits is recognized in statement of profit or loss using effective interest rate method. The
Microfinance uses ASB carve- outs and treat coupon rate as effective interest rate.

5.12 Employees Benefits

Employee benefits include all forms of consideration given by an entity in exchange for service rendered by employees for the termination of
employment.
Defined Contribution Plan

A defined contribution plan is a post-employment plan under which an entity pays fixed contributions into a separate entity and will have no legal or
constructive obligation to pay a further amount. Obligations for contributions to defined contribution plans are recognised as expense in the profit or
loss as and when they are due. The Microfinance operates a defined contribution plans as provident fund contribution of its employees and defined
benefit plans for the Gratuity and leave payment requirement under its staff rules.

Defined Benefits Plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
Gratuity and Leave Benefits are Defined Benefit Plans. The Entity annually measures the value of the promised retirement benefits for gratuity, which
is a Defined Benefit Plan. Actuarial Valuation of Defined Benefit Plan has been carried out as per the requirement of NAS 19 – Employee Benefits.
Gain or loss arising as a result of changes in assumptions is recognized in other comprehensive income (OCI) in the period in which it arises.

5.13 Leases
The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment
of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance Leases
Agreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets, but not necessarily legal title,
are classified as finance lease.
However, the Microfinance doesn’t hold any finance lease agreements.
Operating Leases
Lease payments under an operating lease has been recognized as an expense on straight line basis over the lease term. Majority of the lease agreement
entered into by the microfinance are within the clause of normal increment which the management assumes are in line with the expected inflationary
cost. The microfinance operates its branches under operating lease agreement. The payments to the lesser are structured to increase in line with the
general inflation rate to compensate for the lessors expected inflationary cost increment.

5.14 Share Capiral and Reserves

5.14.1 Share Capital
Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue available
number of own equity instruments. Incremental costs directly attributable to the issue of new shares are shown in equity as deduction net of taxes from
the proceeds.
Dividends on ordinary shares classified as equity are recognized in equity in the period in which they are declared.
The shares issue expenses which can be avoided for the issue was charged in the year of issue directly through equity and disclosed in the statement of
changes in equity. Tax impact is also disclosed.

5.14.2 Statutory General Reserves

20% of the net profit as stated in Bank and financial Institution Act, 2073 and 50% of additional amount of Cash Dividend and Bonus Shares if
declared and distributed in excess of 20% as provisioned in Circular GHA/1/078/79 of NRB Dated 2078/04/11 is set aside to the general reserve.

5.14.3 Corporate Social Responsibility Fund

1% of net profit is set aside in the fund as per the NRB Directives for the purpose of corporate social responsibility.

5.14.4 Employee Training Fund

The fund is created for the purpose of employee training. As per the directives to microfinance by NRB, the microfinance needs to spend at least 3% of
last fiscal year’s total personnel expenses for the development and trainings of the employees. Further if the microfinance couldn’t spend up to the limit
of 3%, the shortfall amount shall be transferred to the Employee Training Fund and shall be used for employee trainings in subsequent years.
5.14.5 Investment Adjustment Fund
It is a reserve created on investment in equity instrument if the equity doesn’t get listed in Security Market within 2 years as per the directives issued
by NRB.

5.14.6 Regulatory Reserve

The amount that is allocated from profit or retained earnings of the microfinance to this reserve as per the directives of NRB for the purpose of
implementation of NFRS and which shall not be regarded as free for distribution of dividend shall be presented under this reserve. The regulatory
reserve of the microfinance includes the reserve net of tax and employee bonus created relating to accrued interest receivable as on Ashadh end 2078
not recovered. Reserve on deferred tax assets, non-banking assets, reduction in fair value of investment in equity below cost price, actuarial loss etc.

5.14.7 Actuarial Gain/Loss Reserve

The amount that is allocated from profit or retained earnings of the microfinance both positive or negative to this reserve as per the directives of NRB
for the purpose of implementation of NFRS and which shall not be regarded as free reserve for distribution of dividend are recorded in this reserve. The
reserve includes actuarial gain/(loss) net of tax on defined benefit plan.

5.14.8 Client protection fund

Client protection fund is created at 1% of net profit. In addition to this, 25% of dividend in excess of 20% is also allocated to this fund as per NRB
Directives.

5.15 Earnings per Share (EPS) including diluted EPS

Microfinance presents basic and diluted Earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit and loss
attributable to ordinary equity holders of the microfiannce by the weighted average number of ordinary shares outstanding during the period. Diluted
EPS is determined by adjusting both the profit and loss attributable to the ordinary equity holders and the weighted average number of ordinary shares
outstanding, for the effects of all dilutive potential ordinary shares.

5.16 Segment Reporting

The Microfinance's operating segments are organized and managed separately through the respective department/business managers according to the
nature of products and services provided with each segment representing a strategic business unit. These business units are reviewed by Chief
Executive Officer of the Microfinance.
The Microfinance has identified seven segments namely: Province 1, Madhesh Pradesh, Bagmati Province, Gandaki Province, Lumbini Province,
Karnali Province and Far West Province as the seven operating segment and the segment report is set out in Notes 6.
Segment report include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The income, expenses,
assets & liabilities that cannot be allocated to aforesaid segment or those related to head office are unallocated and are included in Bagmati Province.
The unallocated items generally comprise of head office assets, head office expenses, and tax assets and liabilities. The geographical segment has been
identified on the basis of the location of the branches in 7 different provinces of the country.

5.17 Investment in Associates

For the purpose of consolidation, NAS 28 - Investments in Associates is applied. Associates are entities in which the Microfinance has significant
influence, but not control, over the operating and financial policies. The Microfinance has investment in nature of Associates i.e., it holds more than
20%, but less than 50%, of their voting shares.
The microfinance's investments in associates are initially recorded at cost and increased (or decreased) each year by the entity’s share of the post-
acquisition profit/(loss). The entity ceases to recognize its share of the losses of equity accounted associates when its share of the net assets and
amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make good its share of the losses.
As per the directives (4)8/077 issued to microfinances by NRB, the microfinance has to dispose all the investment within 2 years of investment. As the
Microfinance has planned to subsequently dispose the investment in the said entities which are normally to be considered as the associate the
Microfinance has not followed the above-mentioned method and such investment are presented as Share Investment in the Statement of Financial
position and dividend income if any is shown in Statement of Profit or Loss.
6 Segment Information
A. Information about reportable segments
Segment Reporting is the reporting of the operating segment of the entity. A segment is reportable if: it has at least 10% of the revenues, or 10% of the profit or
loss, or 10% of the combined assets of the entity.
Segment can be categorized either on the basis of geographical segment or business segment. The microfinance has categorized its segment on the basis of
provinces i.e., geographical segment. Segment assets, segment liabilities, total revenue, total expenses and operating profit are disclosed. Branches of the
microfinance are classified under the regional operating structure for monitoring and supervision. The disclosure has been prepared in accordance with the
requirements of NFRS.
Amount ('000)
Segment
Particulars Revenues from Intersegment Profit/Loss Before
External Customers Revenues Tax Segment Assets Segment Liabilities
Corresponding
Koshi Province Previous Qtr. 738,968.90 6,257.08 167,865.18 5,212,327.59 3,623,799.92
Current Qtr. 888,044.41 11,637.94 267,282.51 5,070,315.68 3,970,521.92
Corresponding
Madhesh Province Previous Qtr. 1,482,531.51 5,977.67 503,415.50 9,385,224.32 6,784,472.08
Current Qtr. 1,632,220.86 5,355.94 688,612.24 9,138,023.69 7,317,294.26
Corresponding
Bagmati Province Previous Qtr. 630,620.13 45,123.94 197,653.61 4,064,591.44 3,920,948.23
Current Qtr. 771,353.18 78,700.30 253,227.53 3,937,495.18 4,538,415.01
Corresponding
Gandaki Province Previous Qtr. 479,749.68 51,758.21 147,670.70 3,073,544.79 3,180,205.85
Current Qtr. 589,135.22 58,066.41 212,620.15 3,066,587.87 3,620,817.50
Corresponding
Lumbini Province Previous Qtr. 1,042,830.99 68,267.45 345,295.86 7,229,513.14 6,734,339.83
Current Qtr. 1,295,273.31 82,633.90 493,060.88 7,101,918.94 7,682,570.08
Corresponding
Karnali Province Previous Qtr. 260,190.33 12,401.75 68,703.79 1,768,414.33 1,386,754.79
Current Qtr. 318,950.04 14,332.43 89,488.23 1,827,318.49 1,583,230.21
Corresponding
Sudur-Paschim
Previous Qtr. 347,039.39 9,611.69 65,555.01 2,602,728.98 1,957,012.89
Province
Current Qtr. 466,589.91 12,814.13 113,378.25 2,899,227.63 2,358,908.30
Corresponding
Total Previous Qtr. 4,981,930.93 199,397.79 1,496,159.65 33,336,344.59 27,587,533.59
Current Qtr. 5,961,566.93 263,541.06 2,117,669.80 33,040,887.47 31,071,757.27
a) Revenue from external customer includes the total interest revenue and non-interest revenue.
b) Intersegment revenue includes revenue from transactions with other operating segments of the microfinance.
c) Segment Assets and Liabilities includes the assets and liabilities identifiable to a particular segment.
d) The result reported include the items directly attributable to a segment.

B. Reconciliaition of Reportable segment profit or Loss Amount ('000)

Corresponding
Particulars Current Qtr.
Previous Qtr.
Total profit before tax for reportable segments 1,695,557.43 2,117,669.80
Profit before tax for other segments 144,969.70 (120,191.81)
Elimination of inter-segment profit (199,397.79) (263,541.06)
Elimination of discontinued operation - -
Unallocated amounts: - -
– Other corporate expenses (Employee Bonus Provision) (164,112.94) (173,393.69)
Profit before tax 1,477,016.42 1,560,543.24

7 Related Party Disclosure

The microfinance has carried out transactions in ordinary course of business on an arm's length basis at commercial rates with the parties as per Nepal
Accounting Standard (NAS 24- Related Party Disclosure), except for the transactions that are key managerial personnel have availed under schemes uniformly
applicable to all the staffs at concessionery rates.
Parents and unlimate controlling parties
The microfinance doesn’t have an identifiable parents of its own.

Transactions with Key Managerial Personnel

As per NAS-24 Related Party Disclosure, key managerial personnel are defined as those person having authority and responsibility for planning, directing and
controlling the activities of the entity.
Board of Directors and Chief Executive Officer of the microfinance are considered as key managerial personnel of the microfinance.
 Compensation of Key Managerial Personnels
Compensation of Board of Directors
Particulars Amount (NPR)
Meeting Fees Paid 786,000.00
Telephone/Newspaper/Transportation/Daily Allowance etc. 1,004,979.00
Taining Expense 3,175,396.68
Total 4,966,375.68

Compensation of Chief Executive Officer

Particulars Amount (NPR)
Short Term Employee Benefits 2,880,000.00
Employee Bonus 838,708.95
Festival Allowance 240,000.00
Total 3,958,708.95
In addition to above, the Microfinance also provide other facilities like telephone, Medical Insurance, Accidental Insurance, Travelling Allowance as per the
approved employee facilities of the Microfinance to the Chief Executive Officer.

8 Dividend Paid
The microfinance has declared 22% Stock Dividend and 3.26% Cash Dividend out of profits of F/Y 2078-79 during current period.

9 Issue, Purchase, and Repayment of debt and equity Securities

None.

10 Events after interim Period

There are no material events after the reporting date affecting financial status of the Microfinance.

11 Effect of changes in the composition of the entity during the interim period including merger & Acquisition
No such events occurred.