Annual Report 2019

Explanatory Notes 30 SEPTEMBER 2019 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.1 Financial risk factors (cont’d) (d) Credit risk (Cont’d) Maximum exposure to credit risk The maximum exposure to credit risk at the reporting date equals the carrying amount of the respective financial assets and is as follows: GROUP COMPANY Sep-19 Sep-18 Sep-19 Sep-18 MUR m MUR m MUR m MUR m Bank balances and cash 444.5 526.1 12.6 107.9 Deposits with banks 507.0 1,026.0 - 524.5 Net investment in leases and other credit agreements 8,769.1 7,637.7 - - Loans and advances 3,708.7 2,865.6 2,991.9 1,105.5 Investments in financial assets 8.1 1,597.7 - 1,597.7 Other assets 376.6 605.5 200.4 373.0 13,814.0 14,258.6 3,204.9 3,708.6 The Group held collaterals on finance lease which include heavy equipments, vehicles and other equipments. The fair value of collaterals of impaired lease facilities is estimated at MUR 95.1m (2018: MUR 159m). The Group may recover amounts not settled by the debtors from the customers for factoring facilities with recourse while the non-recourse factoring facilities are insured. Other credit agreements and loans with exposure of MUR 7,407m (2018: MUR6,641m) are mitigated by insurance covers which are directly linked to the facilities and entered at the same time of the credit origination. Other credit agreements also contain the right for the Group to recover the collateral which the Company estimated not to be significant at recovery. Other credit agreements also contain the exposure in respect of credit cards is not backed by collaterals. (e) Liquidity risk Liquidity risk is the risk that the Groupwill encounter difficulty inmeeting obligations associatedwith financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Group might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Group on acceptable terms. To limit this risk, management has arranged for diversified funding sources including deposits from customers and keeping committed credit facilities with banks. The Group also maintains a certain level of cash and deposits with banks to cater for its liquidity needs. CIM FINANCIAL SERVICES LTD / ANNUAL REPORT 2019 104