CIM FINANCE. INTEGRATED REPORT 2022 | 139 EXPLANATORY NOTES 30 SEPTEMBER 2022 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.1 Financial risk factors (Cont’d) (d) Credit risk (Cont’d) Impairment assessment (Cont’d) Ifmodifications are substantial either quantitatively or qualitatively, the loan is derecognised as explained under write offs. 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 characteristic of the facilities which are described below. TheGroupconsiders thecustomer type for groupingof theportfoliowhicharegroupedunderCorporatecustomersor individuals. For individual lendingswhich include retail leasing, credit facilities, hirepurchaseandother credit agreements, andcardcustomers, 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 147.9m (2021: MUR 195.2m). 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 12,136m (2021: MUR 10,484m) are mitigated by insurance covers which are directly linked to the facilities and entered at the same time of the credit origination.Other credit agreementsalsocontain the right for theGroup torecover thecollateralwhich theGroupestimatednot to besignificant at recovery.Other credit agreementsalsocontain theexposure in respect of credit cards isnot backedbycollaterals. (e) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty inmeeting obligations associated with financial liabilities that are settledby delivering cashor another financial asset. Liquidity risk arises becauseof thepossibility that theGroupmight beunable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal andstress circumstances. Suchscenarios couldoccurwhen fundingneeded for illiquidasset positions isnot available to theGroup 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 alsomaintains a certain level of cash and deposits with banks to cater for its liquidity needs.
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