Integrated Report 2020

INTEGRATED REPORT 2020 CIM FINANCIAL SERVICES LTD Explanatory Notes 30 SEPTEMBER 2020 2. ACCOUNTING POLICIES (CONT’D) 2.3 Going Concern and COVID-19 outbreak (Cont’d) To mitigate the socio-economic crisis of the pandemic, the Government of Mauritius implemented key measures, as follows, to support individuals, businesses and the local economy: (i) The Wage Assistance Scheme (“WAS”): Funding partially the salary of those employees earning up to Rs50,000 during the lockdown period to assist employers and ensure employees are duly paid. Post lockdown, the Government continued to support sectors impacted by the closure of our borders through the WAS. (ii) The Self-Employed Assistance Scheme (“SEAS”): Self-employed impacted by loss of revenue due to the pandemic have access to a financial support of Rs5,100 monthly. (iii) COVID-19 Solidarity Fund : To assist those affected by the COVID-19, a special fund was set up. (iv) Moratorium scheme : For Micro, Small and Medium Enterprises (“MSMEs”), a moratorium of 6 months on repayments with respect to their existing loans with commercial banks. (v) Support to households: moratorium of 6 months on repayments of household loans from commercial banks to households with combined basic salary not exceeding Rs50,000. (vi) Special Relief : The Bank of Mauritius (“BOM”) introduced a Special Relief fund of Rs5 Billion through commercial banks to meet cash flow and working capital requirements of MSME’s which are being directly impacted by COVID-19 at a lower funding rate. (vii) Key Repo Rate (“KRR”) : The benchmark KRR was reduced by 50 basis points to reach 2.85% in March 2020 and by a further 100 basis points to 1.85% a month later. Such measure aimed to stimulate and support the domestic economic activity. (viii) Foreign currency swap and line of credit: To support import businesses, BOM introduced USD/MUR swaps and made available line of credit in foreign currency to the tune of USD500million with commercial banks. (ix) Mauritius Investment Corporation (“MIC”): A special purpose entity set up by BOM to provide support to domestic systemic economic operators to navigate through this tumultuous period and to ensure that jobs are not lost. In addition to the group internal measures implemented to mitigate the risk of the pandemic on the business, Management has factored in the various Government measures when assessing the impact of COVID-19 on the going concern of Cim Group. (i) Credit Risk Framework review Cim has reviewed its credit risk framework into a more dynamic one to deal with the rapidly evolving situation. The Consumer Finance automated scorecards were adjusted to reflect increase in risk emerging from the post-lockdown uncertain environment (scorecard tightening). Similarly, for the other lending products, a more conservative approach is being adopted by the credit underwriting team for approval of new facilities. (ii) Existing portfolio assessment The business and risk team collaborated to understand the potential impacts to the existing portfolio and identified stressed sectors and clients. Stress testing and scenario based forecasting to project the expected credit losses were conducted to ensure adequate buffers are maintained in terms of capital adequacy as well as funding and liquidity ratios, thus preserving the Group’s financial soundness, against any expected credit losses. The business, together with Risk, Finance and Recovery, has used the output of the analysis to refine near-term lending capacity and strategy in line with the risk appetite as well as to define the collection strategy. (iii) Forecast review With the COVID-19 implications in the background, management has worked out the forecast for the next twelve months with a prudent view on the level of disbursement across all its lending products as well as the provisioning for impairment. The projection factored in the tightening of credit scorecards that focuses on providing new facilities to those who have better repayment capacity and employment stability. The outcome of the forecast indicates that the Group will meet its financial obligations as they fall due and remains reasonably profitable. 73