130 C I M F I N A N C I A L S E R V I C E S L T D 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.1 Financial risk factors (Cont’d) (d) Credit risk (Cont’d) Impairment assessment (Cont’d) Grouping financial assets measured on a collective basis The Group calculates ECL on a collective basis for all assets classified under stage 1 and stage 2. The Group combines these exposures into smaller homogeneous portfolios, based on a combination of internal and external characteristics of the facilities which are described below. The Group considers the customer type for grouping of the portfolio which are grouped under Corporate customers or individuals. For individual lendings which include retail leasing, credit facilities, hire purchase and other credit agreements, and card customers, the groupings are as follows: • Product type • Age band • Salary band For corporate lendings which include factoring, corporate leasing, and corporate loans, the grouping are as follows: • Product type • Industry sector 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 195.2m (2020: MUR 337.7m). 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 10,484m (2020: MUR 8,453m) 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 Group 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 Group will encounter difficulty in meeting obligations associated with 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 corporate bonds 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. Explanatory Notes 30 SEPTEMBER 2021 E x p l a n a t o r y N o t e s
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