TECHNOLOGY-DRIVEN
FINANCES
ANNUAL REPORT
2021
Content
Financial
Statements
стр. 46
Company Overview
стр. 4
6
Company in Brief
10
Chairman’s Statement
11
Chief Executive’s Review
Strategic Report
стр. 12
14
Market Overview
19
Operational Overview
23
Financial Overview
24
Strategy and Development Plans
24
Risk Management
29
Sustainability
Corporate Governance
стр. 30
32
Board of Directors
34
Key Management
36
Directors’ Report
39
Remuneration Report
41
Corporate Governance Report
44
Section 172 Statement
45
Directors’ Responsibility Statement
Corporate
Information
& Glossary
стр. 88
1
2
3
4
5
1
2
3
4
5
11
CHIEF EXECUTIVE’S
REVIEW
6
COMPANY
IN BRIEF
10
CHAIRMAN’S
STATEMENT
COMPANY
OVERVIEW
1
Company
in Brief
Our Mission
We are focused on
developing our business
which generates
solutions to problems
experienced by
“unbankable” individuals.
We provide access to
financial services and an
Internet-based world
(“online”) to people
who are not eligible for
mainstream financial
services.
Our Vision
The combined effect of tighter financial regulations and
growing technology-driven complexity has forced an
increasing number of people into a sector where it is very
hard to access financial services, the “No service zone.”
“Unbanked” or “unbankable” individuals are neglected by
the mainstream banking system and have no access to any
financial service or support.
We see an opportunity to make a transparent, solid, healthy
and profitable business by creating conditions for these
people to improve their status and progressively mingle with
the world of financial services.
Our Guiding Principles
As at 31 December 2021,
Zaim directly operated
26 stores
Any and all services we provide, now and in
the future, are conceived with the highest
standards of transparency, efficiency and
compliance, with the utmost respect for
our customers.
Our employees are our most valuable
resource and we focus on creating a
comfortable working environment.
Company in Brief
Zaim Credit Systems Plc (ZCS) is the UK holding company of Zaim
Express LLC (“Zaim”), a Russian-based fintech company providing
small-sized short-term loans to customers.
Zaim currently provides loans with an average size of 8,530 Russian
rubles (RUB) (about £1011) with a maximum amount of RUB30,000
(about £354) for an average period of 27.5 days.
As at 31 December 2021, Zaim directly operated 26 stores. These stores
are generally nearby to densely populated residential communities in
urban areas, as well as in locations near the transport infrastructure
of Moscow and the Moscow Region.
Since establishment, Zaim has developed a bespoke fully integrated
business platform and operating tools to increase efficiency, driven by
automation and a constantly improving credit scoring system.
Zaim’s platform allows for remote transfer of money to the client’s
own card (can be newly issued by Zaim) or other receiving facilities
(bank accounts or any other system allowed in the market by Russian
authorities) within minutes of the online application.
Among other products, Zaim has created a pre-paid Mastercard
product branded with the Zaim logo, to which Zaim can credit loan
amounts directly to customers who can then spend them online or
via POS terminals. It is also possible for customers to withdraw funds
at ATMs. This card was conceived and implemented to be the most
convenient and cheapest instrument on the market, and it is aimed at
removing the entrance barrier to the online world.
Since mid-2020, Zaim’s directors and management developed and
implemented an online-focused business strategy, dramatically
increasing volumes of loans issued online and reducing the number of
physical stores. Online operations now represent the largest portion
of the Group’s business (93% as of December 2021) and is continuing
to grow.
1 Here and further in the Strategic Report the exchange rate used for the purpose of currency translation from Russian Ruble to British Pound is the official rate of the Central Bank of
Russia as of 12 May 2022, unless stated otherwise
Zaim has been operating in the
microcredit market in Russia since
2011. Today, Zaim occupies one
of the leading positions in the
Russian microcredit market rapidly
developing its online and mobile
platforms.
In Q2 2021 Zaim has launched its branded mobile application allowing
the customers to easily receive and repay loans using their mobile
phones. It has become an important sales channel – as of December
2021 Zaim provided over 9% of the loans via the mobile app, which is
more than it provided via its retail stores.
The total loans outstanding had a carrying value of £2.8 million as at
the end of the year (£1.3 million as at 31 December 2020).
As at 31 December 2021, the total number of employees of the Group
was 152.
6
АNNUAL REPORT 2021
Any and all clients, now and in the
future, are supported and helped to
improve their financial status and
access to the online world.
A solid, transparent and profitable busi-
ness is the result and consequence of
the full and complete implementation
of the above.
1 Loans to customers after expected credit loss allowance.
2 Average for 2021
Zaim in Numbers
26
directly managed
outlets
> 2,635
million rubles a year
(approximately £31 million)
Providing loans
in the amount of
488,712
active
customers
£2.8
million loan book1 as
at 31 December 2021
>1.53
million loans
provided
>63%
of loans are to
recurring customers2
8
АNNUAL REPORT 2021
9
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Zaim Today
State-of-the-art IT platform
allowing for credit risk management
COMPANY’S
STRENGTH
Successful IPO
on the London Stock
Exchange
Best corporate
governance practices
Scalable online
business model
Strong management
team
Cash generation
potential
11 years providing
services
Zaim’s
History
In Q2 2021 Zaim launched
its branded mobile
application allowing its
customers to receive and
repay the loans using their
mobile phones.
Zaim was established on
14 March 2011, as a limited
liability company under
the laws of the Russian
Federation.
On 29 August 2011, Zaim
was authorised to conduct
microfinance activities in
the Russian Federation and
included in the State Registry
of Microfinance Organisations
maintained initially by the
Russian Ministry of Finance
and later by the Central Bank
of Russia (“CBR”).
In 2016, Zaim obtained
its current status as a
microcredit company
(“MCC”) which allows it to
engage in microfinance
activity in the territory of
the Russian Federation.
On 20 February 2017, Zaim’s
shareholders approved the
change of the Company’s
name from LLC MO Zaim-
Express
to LLC Zaim-Express.
On 4 November 2019, ZCS,
Zaim’s holding company,
made a successful initial
public offering (IPO) of
its ordinary shares on the
London Stock Exchange
raising gross cash
proceeds of £2.6m.
In 2020 Zaim developed
and implemented an
online-focused business
strategy, providing higher
scalability of its business
and reducing its operating
costs.
The total number of ordinary shares in issue as at the
date of this report and 31 December 2021 was
461,975,000
69.27%
1.06%
29.67%
Zaim Holding SA
Simon J. Retter
Other shareholders
Share Capital
Zaim has issued a total of 43,650,000
warrants and options to Directors and Management
team
Digital and online services are becoming increasingly important in
our everyday life. The trend of moving traditional activities online has
been around for a number of years and it was further accelerated
by the COVID-19 pandemic and quarantine measures taken by the
authorities of most countries in 2020 and 2021. Now a significant
part of our lives – including shopping, education, entertainment, and
dining – has moved online.
Being able to access so many services through an “app” on your
phone has revolutionised consumer markets around the world,
dramatically increasing the ease, speed and range of transactions.
Hundreds of millions of people are benefiting. However, those who
are left behind, who do not have online banking facilities, are going to
end up excluded from the new age, and their sense of exclusion and
actual exclusion may end up worse than before. One example of how
this works is freelancers or people with irregular income: they are
vulnerable and underserved by traditional financial services provid-
ers. Loans available to such individuals are often subject to credit or
income scoring that penalises those who have variable incomes.
Seeing this large group of people being excluded from the modern
online world, we have set ourselves the mission to tackle problems
experienced by “unbankable” individuals and to provide them with
access. For example, Zaim has created the Zaim MasterCard, an
inclusivity tool that can be easily issued and delivered to those who
lack the “key” to the modern online world.
In the middle of 2020, Zaim directors and management implemented
an online-focused strategy allowing customers to receive and repay
their loans online without physically attending our branches. By
December 2021, 93% of our loans were issued online, compared to
only 13% in January 2020. This move increased our addressable market
beyond the Moscow region to include the rest of Russia and it allowed
“unbankable” individuals to receive their money in a few minutes
without leaving their homes. This strategy not only became a perfect
solution for the COVID-19 quarantine period, but also allowed Zaim
rapidly to scale up its business without significant increase in its cost
base, thereby driving profitable growth.
Another important product development and additional step for finan-
cial inclusion was the launch of our Zaim-branded mobile application
in Q2 2021. This “app” allows people to receive and repay loans within
minutes using only mobile phones. This fintech service means we can
help people efficiently resolve their temporary financial difficulties
without the need for collateral or guarantors and with funds usually
delivered within a few minutes.
Chairman’s
Statement
1 According to the Bank for International Settlements
Malcolm Groat
Chairman
17 May 2022
It is very hard talking about business in such unprecedented and difficult
times. The Russian “special military operation” in Ukraine launched on
24 February 2022 and subsequent sanctions imposed by US, UK and EU
against Russia changed our lives and economic reality in an unprecedent-
ed way. Our thoughts and prayers are for the peaceful resolution of the
conflict.
Zaim’s business is currently under no direct influence of sanctions, though
long-term consequences of the recent geopolitical events for the Russian
and global economy are still unclear. We remain firmly committed to ad-
hering to all our duties to our stakeholders and customers. The Company’s
management believes it is taking all necessary measures to maintain a
sustainable position and further develop the Company’s business in the
current circumstances.
Over the past 11 years, Zaim has developed a bespoke IT system that
allows it to receive and repay loans remotely with an automated scoring
process taking less than 10 minutes to approve or reject new applicants.
Our investment in our proprietary platform and process delivered impres-
sive results.
In the second quarter of 2021 Zaim had successfully launched its branded
mobile application for both Android and iOS devices. It allows customers
to receive and repay the loans in a minute using no more than their
mobile phones. The launch of the mobile application became an important
milestone in the path of increasing the Fintech content in our business
model. In an ever increasingly digital world this expansion of our online
offering will bring more people access to the financial products that many
of us take for granted.
Mobile app became an important sales channel responsible for issuing
9.2% of the loans in December 2021, which was higher than 6.7% of the
loans issued via the stores network. It reinforced customer loyalty and
created the opportunity to widen the knowledge of our clients, under-
stand their needs, attitudes and source information and data that will
drive Zaim in the creation of next generation services. It also became a
significant platform for cross-selling of additional products, promotions
and discounts.
Our online-focused business strategy bear fruit driving impressive busi-
ness performance with six consecutive quarters of very strong profitable
growth. This strategy allows for lower fixed costs and faster growth that
makes us confident in the long-term development of our business.
As a result of above mentioned business developments we have
significantly outperformed a very fast-growing market: in 2021 Russian
microfinance market grew by 31.6% year-on-year1, at the higher rate than
in pre-COVID 2019, whilst the amount of loans issued by Zaim Express
increased by more than 2.5 times2 to £26.1m.
Performance of our online business was the main driver for this growth:
loans issued online skyrocketed to £23.1m, which is 4.9 times higher than
in 2020. In this respect, we also dramatically outperformed the Russian
market where total portfolio of the microloans issued online doubled
in 2021 compared to 2020. At the same time Zaim loans issued offline
1 According to the Central Bank of Russia’s publication “Microfinance market trends in 2021”, growth of the portfolio of microloans in 2021 was 31.6% compared to 2020
2 Loans issued by Zaim Express in 2021 increased by 153% vs. 2020
Siro Donato Cicconi
CEO
17 May 2022
Chief Executive’s
Review
Due to the successful implementation of its online-focused growth
strategy Zaim achieved impressive results in 2021. Zaim’s loans issued
grew by 153% to £26.1 million, and net profit improved from a loss of
£615,000 in 2020 to a profit of £683,000 in 2021.
The market in Russia still has a great potential. Russian household
debt in September 2021 was only 22% of the Russian GDP compared
to 88% in the UK and 79% in the USA1. Total loans outstanding in the
Russian market grew by over 31% to 328 billion rubles (c. £3.87 billion)
as at 31 December 2021. Online lending in Russia had doubled reaching
108.6 billion (c. £1.28 billion) rubles as at 31 December 2021.
Let me now turn to recent events in Ukraine and their impact on Zaim.
Firstly, we recognize with horror the devastating impact on Ukrainians
of the “special military operation”. The conflict has already brought
difficulties for many Russians and we expect those difficulties to
mount. International sanctions are targeting Russian-owned assets,
wealthy people close to Vladimir Putin, and Russian banks. Zaim is
majority-owned by EU citizens, is unconnected with the Russian gov-
ernment, and is not working with Russian banks. The business of Zaim
Express operates solely within Russia and therefore is not affected by
international restrictions on using the SWIFT international payment
system.
Zaim Express continues to serve its clients in the normal course of
business with as yet no significant deviation in business performance.
It is not possible to foresee how events will unfold and the Company
is closely monitoring the situation and considering various scenarios.
For the time and whilst the Board establishes the position regarding
the transfer of funds in and out of Russia, the Board has decided to
fund the Company and Zaim Express from its respective existing cash
resources; in this regard, the Company retains a balance of approxi-
mately £100,000 to meet its ongoing financial liabilities.
In order to diversify and further develop its business, Zaim is currently
accelerating work to expand into nearby European countries and is
actively undertaking an assessment of jurisdictions in which to deploy
its technology.
Zaim’s management team has faced and overcome a significant
number of challenges during the last eleven years, emerging stronger.
I hope we have gained enough experience to weather this storm as
well.
With this I would like cordially to thank our management, employees,
and consultants, and my fellow board members, for their hard work
and dedication in delivering these excellent results and for transform-
ing the Company into a rapidly growing and profitable business.
We remain committed to strengthening our position as a leading
fintech company and will strive to keep delivering a fast and flawless
solution to all of our customers.
decreased by 47% to £2.9m due to closure of stores and transition to
online-focused business model. We have decreased the number of offline
stores from 30 as of 31 December 2020 to 26 as of 31 December 2021.
Interest income grew by 96% to £9.5m due to the higher amount of loans
issued. As Zaim issued 89% of loans via the internet in 2021 vs 47% in 2020,
rental costs have decreased by 67% to £220,000 and staff costs have de-
creased by 17% to £1.3m, at the same time advertising and marketing costs
increased by 263% to £979,000. Given 153% growth of the amount of loans
issued, the unit costs for issuing loans have decreased. The company plans
to further optimize the network operation, including abandoning unprofit-
able sites, strengthening the Internet and mobile channels for attracting
customers.
As a result of dramatic growth in loans issued on the back of decreasing
unit costs Zaim business turned to profitability from a loss of £615,000 in
2020 to a profit of £683,000 in 2021.
The business continues to be cash-generative, which we are carefully re-
investing in order to serve a wider base of clients with our online business.
We continued our investments in growth, being careful to maintain cash
generation and profitability.
In the first quarter of 2022 the effective demand remained strong and the
business volumes continued to grow. Strong fluctuation of exchange rate
of Ruble vs GBP and other currencies did not affect our business perfor-
mance. It is important to remark that such initial fluctuation seems to be,
at the moment, more than recovered as the current prevailing Ruble to GBP
exchange rate is higher than those observed pre-crisis. Given the opera-
tions are wholly focussed on Russia at present, the ongoing performance
should not be influenced by foreign exchange rates.
The Directors and the management of Zaim have a successful track record
of turning crises into opportunities by reacting swiftly and decisively. The
last example of such pivot was the implementation of online-focused
business strategy and creating strong platform for the profitable growth
amidst the COVID-19 pandemics. As a result, our team had evolved Zaim
from a traditional microfinance organisation into a rapidly developing and
profitable fintech company.
I am confident that the vast experience and dedication of the Board and
management team coupled with our low fixed cost highly scalable business
model will help us to run the business in a challenging economic environ-
ment in the interests of all our stakeholders providing best in class fast and
flawless digital services.
I would like to cordially thank our investors, employees and clients for
their support and dedication. We remain committed to adding value and
generating profitability for all of our stakeholders.
Dear Shareholders,
Dear fellow Stakeholders,
10
АNNUAL REPORT 2021
11
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
1
2
3
4
5
24
STRATEGY
AND DEVELOPMENT
PLANS
24
RISK
MANAGEMENT
14
MARKET
OVERVIEW
23
FINANCIAL
OVERVIEW
29
SUSTAINABILITY
STRATEGIC
REPORT
2
19
OPERATIONAL
OVERVIEW
0
200
400
100
300
500
2018
300
2017
256
2016
195
2019
415
1H 2021
270
Russian microfinance market (loans issued), RUB bn
Source: Expert RA
2020
417
0
200
400
100
300
2018
164
2017
113
2016
88
2019
212
2021
328
Russian microloans portfolio at the end of the year, RUB bn
Source: Central Bank of the Russian Federation
2020
249
0
2000
4000
1000
3000
5000
2016
2 588
2015
3 688
2014
4 200
2017
2 271
2018
2002
2019
1 774
2021
1 267
Number of microcredit licenses in issue
2020
1 385
Market Overview
The Market for Microfinance in Russia
Microfinance involves providing individuals who do not have access
to the banking system with small credits or loans to help them cover
their expenses. These microfinance activities in Russia started in the
1990s in the post-Soviet era and until 2010, the provision of consumer
loans was largely unregulated.
The Microfinance Business Law adopted in 2010 created a new
special category of financial organisations — microcredit companies
(MCCs or MFIs). Microcredit companies were permitted to provide
loans subject to strict regulations on a regular basis. Although some
banks structured their consumer lending arms as MCCs, due in part
to the financial crisis in Russia in 2014 and 2015, the banking sector
largely neglected small businesses and the less well-off sections
of society.
Following the introduction of the Microfinance Business Law and the
disengagement of the core banking sector from the microfinance
sector, the microfinance market grew rapidly from 21 million Russian
rubles (approximately £426,0001) of loans provided in 2012 to 417 billion
Russian rubles (approximately £4.5 billion2) of loans provided in 20203
and 270 billion rubes (approximately £2.6 billion4) of loans provided in
the first half of 20215.
1 At the average exchange rate for 2012
2 At the average exchange rate for 2020
3 Expert RA: Results of 2020 and forecast for 2021 for the MFI market: pandemic imprint
4 At the average exchange rate for the first half of 2021
5 Expert RA: Microfinance: results of the first half of 2021
0
20
40
10
30
50
2018
45
2017
28
2016
25
2019
29
2021
32
Annual growth of Russian microloans portfolio, %
Source: Central Bank of the Russian Federation
2020
17
Rapid market growth is clear evidence of a strong need for financial
services among lower-income segments of the population combined
with the technological capability to provide said services in a simple
way with convenient conditions.
Dynamics of microloans portfolio is even more impressive. Histor-
ically, the Russian microfinance market has been growing by over
25% per annum with the online segment growing close to 100%
year-on-year. In 2021 microfinance portfolio grew by 31.6% a year,
which exceeding dynamics in 2019, when the portfolio grew by 29.5%.
Even in 2020, seriously affected by COVID-19 microfinance portfolio
grew by 17.4%.
Tightening Microfinance Market Regulations Reducing
Competition
Since 2014, the Central Bank of the Russian Federation (CBR) has been
implementing reforms to the microfinance sector to ensure consumer
protection, increase levels of transparency and quality of services in
the sector. This has led to the introduction of KYC procedures, AML
and other compliances in line with the best world practices, minimum
capital requirements, economic ratios for microfinance institutions,
requirements in relation to accounting and risk management
procedures, maximum interest rates and charges, limitation on the
total amount of liability in consumer loan products, etc. As a result of
this, smaller players withdrew from the market.
According to the CBR statistics, the number of MFIs decreased
from 4,200 as at 31 December 2014 to 1,267 as at 31 December 2021,
representing a reduction of 70%. Additional restrictions on consumer
loans came into effect on 1 July 2019, reducing the daily interest rate
to 1% and limiting the maximum recovery amount, representing the
sum of interest, penalties and other charges and commissions, to
200% of the principal amount of the loan (“Maximum Recovery Rate”).
The Maximum Recovery Rate was further reduced to 150% of the
principal amount of the loan from 1 January 2020, resulting in a further
reduction in the number of MCCs and MFIs operating in the sector.
0
400
800
200
600
1000
2014
834
2013
923
2012
956
2015
733
2016
623
2019
402
2020
366
2017
561
2021
335
Number of bank licenses in issue
2018
440
Source: Central Bank of the Russian Federation
Reduced Offer of Financial Services from the Banking
Sector
As at 1 January 2021, there
were 335 banks operating in
Russia, whereas on 1 January
2013, Russia had a total of
956 banks in operation.
Over the past nine years, the
Central Bank of the Russian
Federation revoked 621 bank-
ing licenses.
Reductions in the number of bank licenses and teller desks widened
the “unbankable” segment of the population. Many low-income
households therefore do not have access to credit from traditional
commercial credit institutions since they do not have enough
collateral.
This, combined with weak social security protections in Russia
hastened by the onset of the financial crisis, has driven those on low
or unstable incomes to seek alternative sources of finance. This trend
is expected to be amplified further by the economic turmoil caused
by Russian “special military operation” in Ukraine and subsequent
sanctions from the US, UK and EU.
14
АNNUAL REPORT 2021
15
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
1 According to the Bank for International Settlements
MFI Market Structure by Product
The majority of MFIs issue small short-term loans (mostly up to 30,000 rubles). At the same time, 77% of loans issued in 2021 were in the range of
rates of 0.8–1% per day (in 2020 — 72%). At the same time, due to the high turnover of such loans, the share of the PDL segment in the MFI market
portfolio has fluctuated insignificantly over the past two years and amounted to 22–25%.
Overdue Debt, Debt Burden of Borrowers
The share of non-performing loans 90+ at the end of 2021 was 29.5% (+0.6 percentage points for the year). The stable value of the indicator is
partially supported by the sale of debt: the volume of assignment in 2021 averaged about 3% of the market portfolio quarterly (at the level of
2020).
Russian Microfinance Market Potential
As a result of the abovementioned factors, Russia has a far shallower
financial services penetration, especially online, than virtually all other
European countries and many developed countries.
y
Only 18% of Russian adults have credit cards, and they are
primarily used for cash withdrawal.
y
Russian households’ debt in 3Q 2021 was only 22% of the GDP
compared to 87.7% in the UK and 78.5% in the US1.
At the same time, we see a significant reduction in competition in the
microfinance market. The CBR actions on the microfinance market
have caused a dramatic increase in complexity which has resulted in
the reduction of the number of players in the sector. Given the specific
features of the industry (small transaction size and very short terms
which result in the need to process thousands of microtransactions
every day), all the players have faced increases to operational costs
and/or IT system CAPEX which have “eaten up” profits of small and
inadequately organised players.
These factors show that the Russian microfinance market is still at its initial stage
and is expected to grow, potentially to multiples of its current size.
During 2021, about 220 MFIs sold debt, that is, about 18% of the total number of organizations on the market:
y
the bulk of the debt is sold by a relatively small number of MFIs belonging to the categories of large and medium (about 30 companies);
y
60% of the amount of debt sold is accounted for by microfinance companies (mainly a few large players).
16
АNNUAL REPORT 2021
17
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
28,8
27,6
31,2
30
32,4
Share of overdue loans with NPL 90+ in the MFIO portfolio, %
31.12.2019
28.0%
30.09.2020
30.7%
30.06.2021
28.6%
31.03.2020
28.7%
31.12.2020
28.9%
30.09.2021
29.5%
31.06.2020
32.0%
31.03.2021
28.6%
31.12.2021
29.5%
25
0
75
125
50
100
Dynamics of main parameters of the online microloans market (billion rubles)
31.03.2020
48.2
30.09.2020
48.8
31.03.2021
69.2
62.3
30.09.2021
94.6
83.8
30.06.2020
47.7
31.12.2020
55.1
49.7
30.06.2021
82.7
82.7
31.12.2021
108.5
98.7
37.1
38.7
30.3
Volume of online microloans issued per quarter
Online portfolio
Market Digitalisation
Active digitalization of the MFI market continued in 2021: the portfolio and the volume of online microloans issued doubled over the year. In 2021,
more than 70% of all microloan agreements were concluded remotely.
During 2021, more than 230 companies issued loans online, but the core of this segment is 24 MFIs, which account for about 80% of the online
market portfolio.
Microfinance Market Dynamics in 2021
In 2021, the MFI market returned to pre-pandemic dynamics. During the year, the implementation of pent-up demand for microloans was ob-
served:
y
the portfolio growth rate in 2021 was slightly higher than in 2019: an average of 7–8% per quarter, 31.6% per year (in 2019 — 29.5%);
y
the share of loans issued to SMEs in the total market portfolio at the end of the year was 19%. The volume of loans issued in 2021 decreased
slightly compared to the values of 2020 (50 billion versus 52 billion Rubles, respectively). The capacity of the segment is determined by the
volume of allocated financing from the state, while the demand of small businesses for financing from MFIs in 2021 remained quite high.
3
0
9
6
12
Volume of assigned claims (main debt), billion rubles
Q1 2020
4.1
Q2 2021
9.0
Q4 2019
10.2
Q1 2021
4.5
Q3 2019
5.6
Q4 2020
5.0
Q2 2019
5.1
Q3 2020
7.2
Q2 2020
8.1
Q3 2021
7.3
Q4 2021
10.0
Changing the Financing Structure of MFIs
In 2021, there was a significant change in the structure of financing
of MFIs: the share of funds raised from individuals decreased by 6
p.p., to 16%, from legal entities that are not credit institutions — by
14 p.p., to 39%. At the same time, the portfolio of funds raised from
banks increased significantly: the share of bank financing in the total
structure of funds raised reached 45%, while the portfolio of funds
raised from banks increased by 2.5 times in absolute terms since
the beginning of 2021. The number of MFIs that attract financing
from banks has remained stable since the beginning of 2020 (40
institutions). Of these, most companies are not affiliated with credit
institutions. However, it should be noted that about 80% of debt on
attracted funds falls on two large organizations affiliated with banks.
0
60
30
90
19
24
57
31.03.2020
25
20
54
31.03.2021
22
24
54
30.09.2020
40
19
41
30.09.2021
22
25
53
30.06.2020
36
20
44
30.06.2021
25
22
53
31.12.2020
45
16
39
31.12.2021
In general, the ratio of the volume of funds raised for the quarter to
the volume of loans issued for the quarter in 2021 was in the range
from 14 to 21%, that is, the MFO market is more focused on working
with its own funds.
Operational Overview
Zaim’s Business
Zaim’s core service is providing microloans to Russian consumers.
Zaim predominantly provides its loans online to the customer’s
own bank account, but also provides them in cash and to its Zaim
Express branded bank cards. Loans are provided up to a maximum
amount of RUB30,000 (equivalent to £354) or in the case of online
loans – RUB15,000 (equivalent to £177), with a maximum duration of
30 days. The standard interest rates on these loans is 1% per day with
a maximum recovery capped by regulators at 150% of the principle
advanced. The maximum interest rate and maximum recovery rate
is set by market regulator – the Central Bank of Russia – for all the
participants of the microfinance market.
18
АNNUAL REPORT 2021
19
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
The structure of the portfolio of attracted funds in the context of funding sources, %
Credit institutions
Individuals
Legal entities
(except for credit institutions)
0
30
15
45
38
8
31.12.2018
29
10
31.12.2020
32
9
31.06.2019
25
15
31.12.2021
Number of MFIs attracting bank loansof funding sources, %
Microcredit companies
Microfinance companies
The level of overdue debt is also affected by the debt burden of
borrowers:
y
the share of contracts with debt loan indicator of more than
80% in the structure of the consumer portfolio (principal and
interest) is 47% (for loans up to 10 thousand rubles, MFIs have
the right not to calculate debt loan indicator).
At the same time, the structure of the portfolio of companies in the
context of debt burden indicator differs depending on the business
model of the company and the attitude to risk: a number of MFIs op-
erate on the market, in which the share of contracts with debt burden
indicator of more than 80% is less than 10% of the total number.
21%
8%
8%
7%
5%
4%
47%
less than 30%
30%-40%
40%-50%
50%-60%
60%-70%
70%-80%
more than 80%
The share of contracts with respective debt load indicator, %
MAXIMUM ALLOWED
Loan amount
Loan duration
Daily rate
Online
Mobile application
Directly opeated stores
26
stores
1%
30
days
30,000 RUB
(£354)
1%
27.5
days
8,530 RUB
(£101)
Operated in the entire country
Operated in the entire country
ENTIRE COUNTRY
AVERAGE
MOSCOW AND
THE MOSCOW REGION
Through 3 Distribution Channels
1 Single Product
Simple Business Model
Part way through 2020 Zaim changed its strategic focus towards an
online-centred business model. The Company put significant effort
into development of its online activities which now represent the core
of the business and is experiencing rapid growth. As a direct result of
this it closed its less efficient outlets reducing the number from 92
on 1 January 2020 to 31 as at 31 December 2020 and then to 26 as at 31
December 2021. The share of loans issued online increased from 9% in
December 2019 to 93% in December 2021.
The Zaim Express MasterCard functions in much the same way as a
debit card issued by a traditional bank, except that the consumer is
limited to using the funds loaded onto the bank card and Zaim does
not provide any overdraft facilities.
Zaim’s loans have historically been distributed by the Group’s
existing outlets which predominantly targeted relatively small,
densely populated residential communities; all such outlets
being within walking distance of transport infrastructure and
approximately 10 to 30 sq. m in size. The clients of these outlets
typically live very locally. The growth of the outlets was limited by
their geographical reach which is typically less than two miles from
the consumer’s residence.
With the rapid growth of the loans issued online, Zaim’s client base is
able to target customers across all Russia. The accessibility of loans
increased even further with the launch of mobile application in the
second quarter of 2021. Now every customer can receive or repay loan
on the go without having to visit Zaim web-site.
Zaim’s customers take out loans on average 3.7 loans and
approximately 63% of Zaim’s customers in 2021 were repeat
customers, reflecting Company’s rapid online expansion.
Balashikha
Zheleznodorozhny
Reutov
Lyubertsy
Moscow
Ramenskoye
Lytkarino
Domodedovo
Vidnoye
Butovo
Shrerbinka
Odintsovo
Krasnogorsk
Ruza
Mozhaysk
Istra
Podolsk
Klimovsk
Naro-Fominsk
Obninsk
Chekhov
Serpukhov
Voskresensk
Kolomna
Ozery
Stupino
Kashira
Lukhovitsy
Zaraysk
Serebryanye Prudy
Yegoryevsk
Noginsk
Pavlovsky Posad
Electrostal
Orekhovo Zuevo
Shatura
Shchelkovo
Mytishchi
Khimki
Solnechnogorsk
Lobnya
Klin
Redkino
Volokolamsk
Shakhovskaya
Lotoshino
Dmitrov
Pushkino
Ivanteevka
Sergiev Posad
Taldom
Dubna
Company Infrastructure
A key component of the Zaim’s business offering is its bespoke IT
platform that manages and executes client acquisition, scoring
assessment and financing authorization in less than 5 minutes. All
back-office functions are fully automated and managed by this
integrated IT system, which includes:
y
automatically generating important customer communications,
including notifying customers of key repayment dates;
y
call centre personnel provided with instructions to contact
customers regarding overdue payments on a pre-assigned date
in order to assist with debt collection, some of which being
automated; and
y
in the event that loans are not repaid and are considered bad
debts or where a consumer is otherwise declared bankrupt, such
claims will be submitted to the relevant Court or state agency
(as applicable) for adjudication.
The current level of automation allows Zaim to efficiently process
large volumes of micro-transactions. The Group’s IT system is set
up to receive data from the Group’s preferred credit agency and
independent referencing agencies (including Equifax). These data
sources, when combined with Zaim’s own scoring algorithm, assess
the credit worthiness of borrowers.
Zaim’s scoring algorithm is a mathematical multi-parameter
regression model that forecasts the likelihood of default of the client
based on information about the client at the moment of approval of
the loan application, application data, existing data base information,
the Bureau of credit history and other third-party sources. Zaim
undertakes a regular review of the model’s parameters to determine
whether any finetuning is required.
This system has been successful in reducing the number of non-
performing loans which have decreased the weighted average default
rate from 22% in February 2017 to between 10 % and 18 % during 2020.
In 2021 the rate fluctuated between 20% and 25% due to aggressive
expansion and rapid growth. The rate naturally increases with a higher
proportion of new customers that usually carry higher risk of default
than repeated customers and so comparisons between periods
are not always reliable indicators. Growth of default rate has been
driven by the Company’s growth rate, which is being controlled and
monitored by the management and is in line with the business plan.
Zaim customers may repay loans in-store, via its call centres, through
its website, internet banking and the mobile application. The Company
has developed a number of convenient alternative methods of making
repayment.
20
АNNUAL REPORT 2021
21
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Geographic Footprint
Weighted average default rate
10
0
20
15
25
11.61%
20.00%
10.28%
24.56%
16.00%
20.88%
16.26%
21.32%
14.00%
23.47%
16.00%
20.77%
13.17%
22.18%
11.50%
24.82%
17.00%
20.45%
13.74%
23.25%
15.00%
23.57%
19.00%
23.95%
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Zaim’s customers may also repay their outstanding loans by using
QIWI’s e-wallet, which is one of the most popular e-wallets in Russia.
Customers may load cash onto their QIWI wallet at various locations
including POS terminals, ATMs and dedicated QIWI kiosks. Consumers
may also use QIWI’s dedicated kiosks to repay their loan with Zaim
and to undertake a wide variety of transactions including repayment
of bills to utility companies, mobile phone providers and other online
purchases. QIWI operates approximately 100,000 kiosks throughout
Russia and has a customer base of 27 million customers, who pay
more than 148 billion Russian Roubles each month. Zaim is also able to
use QIWI “Contact” Payment System which enables Zaim to provide an
online application to obtain a cash loan in any region of Russia.
22
АNNUAL REPORT 2021
23
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Zaim Master Card
In 2015 Zaim entered into an agreement with MasterCard Circuit to
have its own branded and operated MasterCard.
After a long and intensive negotiation with MasterCard and related
Due Diligence, in 2017 Zaim has its own card “made to measure” to
serve its clients’ microfinancing needs. This card has been specified
and customized by Zaim management in order to have the operational
tools coherent with microfinance market and clients. It is simple,
friendly and with no hidden costs or fees on transactions.
The card can be used by the low-income segment of the population to
access various digital and online services, thus becoming the key tool
to increase inclusivity. From the possibility to rent a movie on-stream
to buy food on-line, the absence of a card would severely impact the
lifestyle of people and their ability to participate in the society.
The card is currently a “vector” for Zaim services but it could also
become a vector to any third-party services as well in the future. It
is an especially important product for elderly people or people with
disabilities, who can receive and repay loans to the card without leav-
ing their homes. From its launch, Zaim has released 65,764 branded
MasterCards.
Zaim’s Business Model
Zaim has worked on developing its own unique business model based
on its bespoke IT system and directly managed network of stores.
Zaim’s 11-year presence in the microfinance loan market has enabled
it to develop highly effective credit scorecards. Zaim is able to use the
data on its scorecards, loan performance analysis and underwriting
decisions, giving it a significant competitive advantage over new
entrants to the market. As a result, the Group is well positioned to
participate substantively in the further growth potential of the non-
standard lending market. Sufficient investment has already been
made in Zaim’s systems so that they are able to cope with a much
larger volume of business with only a small increase in operational
expenditure, positioning the Group well for future growth.
In 2020, Zaim accelerated the change in its business model to remote
lending via the internet, which resulted in a significant decrease in
fixed leases and staff costs and a decrease to the share of lending
costs within total expenses. The Group streamlined its physical store
network with the closure of many of its existing stores. As a result,
volumes of the loans issued online increased by 77 times from £0.3m
in 2019 to £23.1m in 2021. In December 2021, online lending represented
93% of total loans issued vs. only 9% in December 2019.
In the second quarter of 2021 Zaim launched its branded mobile
application, further strengthening its competitive advantage, creating
new important sales channel and the perfect tool for collecting big
data and understanding customers behaviour.
Compliance is important to the Group’s business and culture and
is implemented through its customer service processes and its
underwriting and collection procedures. The Group seeks to treat all
of its customers fairly and offers customers in financial difficulty a
number of payment options tailored to their individual circumstances.
For example, Zaim’s policies include never selling on unrecovered
debts to third parties who might seek to collect defaulted loans.
Zaim reviews all of its customer facing employees at least weekly
and operates ongoing refresher training to ensure that the ethical
behaviour and principles of treating customers fairly are embedded in
its culture.
Financial Overview
2021
2020
Change
£'000
£'000
%
Loans issued during the period
26,084
10,290
153
Interest income
9,544
4,857
96
Staff costs
1,567
1,810
(13)
Operating expenses
2,623
2,116
24
Net profit/(loss)
683
(615)
n/a
Adjusted EBIT1 for the period
1,001
(125)
n/a
31 December 2021
31 December 2020
Change
£'000
£'000
%
Gross outstanding loans to customers
36,469
28,298
29
Total outstanding loans measured at amortised cost
2,825
1,269
123
Cash and cash equivalents
1,474
641
130
In 2021, the Group continued an important business transformation,
shifting from a predominantly store-based business to an online-
based business model. In doing so, the Group put significant efforts
into the development of its online and mobile platforms and closed
its less efficient sales offices reducing their number from 91 as at 31
December 2019, to 26 as at 31 December 2021.
The amount of loans issued increased in 2021 by an impressive 153%
to £26.1 million compared to £10.3 million in 2020 due to the growth
in loans issued online and launch of the mobile app as a new sales
channel.
In 2021, interest income increased by 96% compared to 2020 due to the
sharp increase in the amount of loans issued partially offset by the
shorter average terms of these loans (61.5 days in 2021 vs. 67 days in
2020).
Due to the staff reduction caused by the transition from store-centred
to online-centred business model by 33% from the average of 212
people in 2020 to the average of 142 in 2021, staff cost decreased by
13% to £1,567k.
Operating expenses increased by 24% from £2,116k to £2,624k, driven
largely by a 3.6-fold increase in advertising and marketing expenses
partially offset by 67% decrease in rental expenses both related to the
transition to online- and mobile-centred business model. Given the
outstripping growth of the loans issued, per-unit costs significantly
improved.
The net financial result generated by the Company increase from
a loss of £615k in 2020 to a profit of £683k in 2021 reflecting the
transition to an online- and mobile-centred business model with
greater flexibility of the business and improving unit cost of the loans
issued.
Adjusted EBIT improved from a negative £125k in 2020 to a positive
£1,001k in 2021.
Loans to customers increased by 29% to £36.5 million compared to
£28.3 million as of 31 December 2020 reflecting the growth in the loans
issued via online and mobile platforms.
Total loans to customers measured at amortized cost increased by
123% from £1,269k to £2,825k reflecting the improved quality of the
loan book.
Cash and cash equivalents increased by 130% from £641k on 31
December 2021 to £1,474k on 31 December 2020 given the improvement
of the cash flow and overall profitability of the business.
With the successful transition from an offline-focused to an online-
and mobile-focused business model Zaim achieved a significant
milestone and returned to profitability, dramatically reducing its cost
base and increasing scalability. It is now well positioned to grow its
business and meet the macroeconomic challenges caused by the
geopolitical tensions in 2022.
1 Adjusted EBIT is calculated by taking profit/ (loss) for the year adding back accrued interest and non-cash share-based payment charges and one-off restructuring costs which are
non-recurring
Zaim manages its risk exposures in respect of financial risks (credit,
market, currency, liquidity and interest rate), operational and legal
risks, as well as epidemic risk and geopolitical risk. The primary
objectives of the financial risk management function are to establish
risk limits, and then ensure that exposure to risk stays within these
limits. The assessment of exposure to risks also serves as a basis for
optimal distribution of risk-adjusted capital, transaction pricing and
business performance assessment. The operational and legal risk
management functions are intended to ensure proper functioning of
internal policies and procedures to minimise operational and legal
risks. The epidemic risk is mitigated by timely implementation of
health and safety policies and switching to online-centred business
model allowing to provide services remotely without physical contact
with the customers. Geopolitical risk is mitigated by the close
monitoring of the situation and potential expansion of the business
into other European countries.
Credit Risk
The Company is exposed to the credit risk of its customers as the
Company makes unsecured personal loans to a segment of the
population that has difficulty obtaining credit from mainstream
financial institutions. The Group uses internally developed models for
assessing credit risk and credit worthiness.
Credit risk is the risk of financial loss to Zaim if a counterparty to a
financial instrument fails to meet its contractual obligations within
the specified period. Zaim has policies and procedures for the
management of credit risk exposures (both for recognised financial
assets and unrecognised contractual commitments), including
requirements for the establishment and monitoring of loan portfolio
concentration limits.
The credit policy establishes:
y
procedures for review and approval of loan applications;
y
methodology for assessment of the borrowers’ solvency;
y
credit documentation requirements;
y
procedures for the ongoing monitoring of loans and other credit
exposures.
Zaim continuously monitors the performance of individual loans
and regularly reassesses the creditworthiness of its customers.
The review is based on the most recent delinquency statistics. Zaim
applies the expected credit loss model for the purpose of provisioning
for financial debt instruments, the key principle of which is timely
reflection of deterioration or improvement in the credit quality of
debt financial instruments based on current and forward-looking
information.
The amount of expected credit losses recognised as a credit loss
allowance depends on the extent of credit quality deterioration since
the initial recognition of a debt financial instrument.
Credit Risk Classification System.
Each level of credit risk is assigned a certain degree of solvency,
using a single scoring system:
y
minimum credit risk – high credit quality with low expected
credit risk, debt is not past due;
y
low credit risk – sufficient credit quality with average credit risk,
debt is prolonged and not past due;
y
moderate credit risk – average credit quality with satisfactory
credit risk, the debt is from 1 to 30 days past due;
y
high credit risk – low credit quality with unsatisfactory credit
risk, high probability of default, the debt is from 31 to 60 days
past due;
y
default – assets that meet the definition of default, the debt is
more than 60 days past due.
Expected credit losses on financial assets that are not impaired
are usually measured on the basis of default risk over one or two
different time periods, depending on whether there has been
a significant increase in the borrower’s credit risk since initial
recognition.
Zaim-Express performs a collective assessment of loans to
individuals. This approach provides for aggregation of the portfolio
into homogeneous segments based on specific information about
borrowers, such as delinquent loans, historic data on prior period
losses and forward-looking macroeconomic information.
Collective assessment principles: for assessing risk stages and
estimating ECL on a collective basis, Zaim-Express combines its loans
into segments based on shared credit risk characteristics, so that
exposure within a grouping had a homogeneous pattern.
Zaim carries out an affordability assessment on the borrower before
a loan can be paid out. As a separate exercise, using the knowledge
and data from its 11-year presence in the loan market, each potential
loan undergoes a creditworthiness assessment based on the
applicants’ credit history. No formal collateral or guarantees are held
against the borrower.
Zaim manages credit risk by actively managing the blend of risk in
its portfolio to achieve desired impairment rates in the long term.
Zaim aims to achieve the desired risk in the portfolio by managing its
scorecards and the maximum amount borrowers are able to borrow
depending on their circumstance and credit history. Factors Zaim
considers in monitoring the overall impairment rates include the total
value of the loan, the home owner status of the guarantor, whether
loans are new or repeat loans and whether these are pilot lending
loans. Using the data and expected loss curves for the different
scorecards, the business can vary its origination levels to target an
expected loss rate, impairment level and manage balance sheet risk.
In assessing the level of impairment, the business makes a provision
for a percentage of loans that are currently up to date. As part of
its procedures, the Directors expect that at any time there will be
an element of loans that are currently up to date but where the
customer may have an unreported difficulty in repaying the loan and
therefore Zaim’s practice is to make a provision for the estimated
effect. In addition, should a customer enter into a repayment plan,
Zaim does not reschedule the terms for its internal reporting. Instead
the business calculates the arrears level with reference to the
original terms.
24
АNNUAL REPORT 2021
25
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Strategy and Development Plans
The Group’s strategy includes a focus on the development of the
Group’s online and mobile platforms along with the maintenance of
its core stores to enable lending to higher quality customers (with
comparably low historic defaults). This online-focused business model
allows for growth in the lending book and the number of loans made
without the capital and operational expenditure of a purely store-
based model. In addition, the Group continues to refine its lending and
credit ratings’ criteria based on experience to reduce default rates
and thereby improve operating margins. These factors enabled the
Group to dramatically increase revenue and turn profitable in the 2021.
The Group’s main strategy is therefore to develop and improve its
online and mobile offering and to grow the number of customers
obtaining loans the new sales channels. This strategy was successfully
executed and the growth of online business (almost 5-fold in 2021 vs.
2020) exceeded management expectations. In December 2021 93%
of loans were issued online while in December 2019 only 9% of the
loans were issued via the online platform. Moreover, in December
2021 9% of loans were issued via our brand-new sales channel being
mobile application. The group is taking steps to expand in to different
jurisdictions to mitigate any potential geographical risk and is actively
assessing potential locations to launch its products outside of Russia.
Risk Management
Market
risk
Interest
rate risk
Legal
risk
Foreign
currency
exchange
risk
Liquidity
risk
Geopolitical
risk
Epidemic
risk
Operatonal
risk
Credit
risk
Market Risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
prices. Market risk comprises currency risk, interest rate risk and
other price risks. Market risk arises from open positions in interest
rate, currency and equity financial instruments which are exposed
to general and specific market movements and changes in the level
of volatility of market prices. The Group’s exposure is primarily to the
risk of changes in interest rates.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising
the return on risk.
Currency Risk
Currency risk is the risk that the fair value or the future cash flows
of a financial instrument will fluctuate because of changes in foreign
currency exchange rates. Zaim accepts the risk of the effect of
foreign currency exchange rate fluctuations on its financial position
and cash flows. Currency risk arises when the existing or prospective
assets in foreign currencies are greater or lower than the existing or
prospective liabilities in the same currencies.
The main operating subsidiary of the Group, Zaim Express LLC,
operates in Russian Roubles, with the majority of transactions with
customers and suppliers occurring domestically within the Russian
Federation. The Group has its parent company and head office
activities operating in the United Kingdom and raises finance from
shareholders in Pounds Sterling. The Group is therefore exposed to
foreign exchange risks relating to the both £ and RUB.
Exchange rate exposures are managed within approved policy
parameters. Zaim-Express’s management controls the exposure to
currency risk on a regular basis.
Please see Note 20 to the Financial Statements for further information on currency risk.
Interest Rate Risk
The Company historically relied on debt finance to fund its loan book.
Such indebtedness may expose the Company to risks associated with
movements in prevailing interest rates.
Changes in the level of interest rates can affect, among other things:
y
the cost and availability of debt financing and hence the
Company’s ability to achieve attractive rates of return on its
assets;
y
the debt financing capability of the Zaim business.
This exposure may be reduced by introducing a combination of fixed
and floating interest rates or through the use of hedging transactions
(such as derivative transactions, including swaps or caps). Interest
rate hedging transactions will only be undertaken for the purpose
of efficient portfolio management, and will not be carried out for
speculative purposes.
Please see Note 20 to the Financial Statements for further information on interest rate risk.
Liquidity Risk
Liquidity risk arises when the maturity of assets and liabilities does
not match. Zaim does not accumulate cash resources to cover all
liabilities mentioned above, as based on the existing practice it is
possible to forecast with a sufficient degree of certainty the required
level of cash funds necessary to meet the above obligations.
The directors have responsibility for liquidity risk management.
The directors monitor rolling forecasts of the Company’s liquidity
requirements to ensure it has sufficient cash to meet operational
needs while maintaining sufficient headroom on its banking facilities
at all times.
To manage its liquidity, Zaim is required to analyse the level of liquid
assets needed to settle the liabilities when they fall due, provide
access to various sources of financing, draw up plans to solve the
problems with financing and exercise control over compliance of the
liquidity ratios with the statutory laws and regulations.
Liquidity risk is managed by the Group’s central finance department
through daily monitoring of expected cash flows, ensuring sufficient
funds are drawn against the Group’s finance facilities to meet
obligations as they fall due. The Group’s forecasts and projections,
which cover a period of more than 12 months, take into account
expected originations, collections, and payments and allow the Group
to plan for future liquidity needs.
The CBR sets and monitors liquidity requirements for microfinance
institutions. The Company calculates its liquidity ratio in accordance
with CBR instruction No. 5114-U dated 02 April 2019 “On establishing
economic norms for a microcredit company that attracts funds from
individuals, including individual entrepreneurs who are founders
(participants, shareholders) and/or legal entities in the form of loans”.
As at 31 December 2021 and 31 December 2020 the minimum liquidity
ratio was 70%. The Company provides the division of the Central Bank
of Russia that is supervising its activities with information on the
mandatory liquidity ratio in accordance with the established format
on a quarterly basis as of the first day of each month.
If the liquidity ratio values approach the limit set by the CBR,
this information is communicated to the company’s member.
The Company complied with the liquidity adequacy ratio as at 31
December 2021 181.8% (unaudited) and as at 31 December 2020, 153.74%
(unaudited).
Please see Note 20 to the Financial Statements for further information on liquidity risk.
Operational Risk
The Group is exposed to operational risk which is the risk of losses
resulting from inadequate management and control procedures,
fraud, poor business decisions, system errors relating to employee
mistakes and abuse by employees of their positions, technical
failures, settlement errors, natural disasters and misuse of the
Group’s property.
The Group has established internal control systems intended to
comply with the CBR’s requirements regarding operational risk.
The Board adopts general risk management policy, assesses the
efficiency of risk management, approves the Group’s management
structure, adopts measures designed to ensure continuous business
activities of the Group including measures designed for extraordinary
and emergency situations and supervises other executive bodies
in respect of operational risk management. Management generally
oversees the implementation of risk management processes at the
Group including relevant internal policies. It also adopts internal
regulations on the Group’s risk management, determines limits for
monitoring operational risks and allocates duties among various
bodies responsible for operational risk management.
Legal Risk
Zaim operates in a highly regulated financial services industry and
existing laws and regulations could be amended at any time. The
manner in which laws and regulations are enforced or interpreted
could change and new laws or regulations could be adopted.
Any breach of applicable regulations could expose the Group to
potential liability and other sanctions, including the exclusion of
Zaim from the Registry and revocation of its MCC status, thus
depriving it of the opportunity to carry on its business. Furthermore,
any changes in regulation and laws could reduce the potential
returns the Group earns on its lending operations.
Zaim was included within the registry of microfinance institutions
when its status as an MCC was obtained; this inclusion means
that the Group is subject to ongoing monitoring and compliance
reporting requirements. If Zaim’s MCC status is withdrawn or
suspended this is likely to have a materially adverse effect on the
Group’s business, financial condition, results of operations and
prospects.
On 4 March 2022, the Russian parliament approved the first reading
of the bill providing for lowering of maximum microloans interest
rate from 1% to 0.8% per day, meaning the reduction of maximum
value of the total cost of the loan from 365% to 292% per annum and
a decrease in maximum amount of total payments under the loan
agreement from 150% to 130% of the amount of the loan.
The Group mitigates legal risk by constantly monitoring applicable
legislation and ensuring that all legal requirements are met.
Epidemic Risk
In 2020 the coronavirus (COVID-19) outbreak emerged with
governments across the world taking actions and measures to
contain the spread of infection, which had an impact on the business
of the Group.
The Russian authorities took a number of steps aimed at containing
the spread of Covid-19, including travel restrictions with other
countries, social distancing initiatives and announcing holidays in
Russia from 30 March 2020 to 11 May 2020, with a number of further
restrictions in Moscow and the Moscow region that were significantly
relaxed mid-June 2020.
In 2021 the recovery in Russian economic activity is becoming more
sustainable. However, the sharp decline in economic activity caused
by the coronavirus pandemic was accompanied by a rupture of
production and supply chains, the formation of a deep imbalance in
supply and demand, and a softening of financial conditions as part of
anti-crisis government programs. This resulted in worldwide general
rise of inflation. By mid-2021, there was a trend towards accelerating
consumer inflation. As a result, in October 2021 the CBR decided to
raise the key rate by 75 basis points to 7.50% per annum.
In March 2022, the Russian authorities lifted most of the coronavirus
restrictions. However, there is a risk that the Russian authorities may
impose additional restrictions, including in response to new virus
strains.
Zaim’s team is well prepared to continue their work while at the same
time ensuring the safety of employees and clients as a top priority.
Starting from March 2020 Zaim proactively implemented strict health
and safety policies specifically tailored to Covid-19, including working
from home for the entire head office staff, taking all necessary
disinfection measures in the stores such as using hand sanitizers,
medical masks and more frequent cleaning of the customer area.
As part of its strategy Zaim has developed a convenient online
platform, allowing customers to receive and repay the loan via the
internet or by phone in less than 10 minutes without leaving their
homes. This is an especially important option in the era of social
distancing. Zaim can also deliver its Zaim MasterCard debit card to
its clients and provide the loans to these cards while continuing to
observe these Covid-19 prevention measures. In the second quarter
of 2021 Zaim launched its branded mobile application, making online
lending and repayments much easier.
Although there is a risk that further anti-pandemic measures in
response to Covid-19 or other infections can be implemented,
currently the Group’s business model is much less dependent on
physical stores with over 93% of loans issued and repaid online. This
protects the Company from potential risks of the pandemic and any
anti-pandemic measures.
26
АNNUAL REPORT 2021
27
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
The World economy is rapidly moving toward digitalization. The
consumption of online services and products is becoming part of
customers’ basic needs. At the same time, a larger and larger segment
of population cannot access the “minimum lifestyle level” in order to be
able to consume these services. The key to enter this online world is
the availability of a bank card or online and mobile banking platform.
Given potential decline in disposable income in Russia caused by
geopolitical tensions, we expect significant segments of population
being unable to use these basic services.
A combination of financial burdens with technology has become the
real “Digital Divide”.
Non-availability of bankcards, mobile and online banking services
remains the main barrier for lower income segments of the population
to join the world and participate in its future evolutions. This could
become the new segregation wall.
From the possibility to rent a movie on-stream or to buy food online,
the non-availability of financial services will severely impact the
lifestyle of people and their ability to participate in society.
Sustainability
Zaim online and mobile platforms are conceived to provide easy
access and solve the divide. This makes Zaim fintech products key
tools of inclusivity. These products have been conceived in coherence
with the microfinance clients’ needs: simple, transparent, and with no
hidden costs or fees on transactions.
Lending to heavily neglected people gives them awareness that “they
can have a further chance”.
Providing people with advanced and modern fintech solutions allows
them to use services that were previously impossible or extremely
complicated to access, which dramatically improves their lifestyle.
This Strategic Report statement was approved by the Board of
Directors on 17 May 2022 and is signed on its behalf by:
Simon Retter
Finance Director & Company Secretary
17 May 2022
Geopolitical Risk
The Company is operating in the Russian Federation and is
consequently exposed to the economic and political effects of the
policies adopted by the Russian government. Russia’s “special military
operation” in Ukraine has further increased the economic uncertainty
and were followed by the imposition of several rounds of sanctions
against Russia from the US, EU and UK.
Since 24 February 2022, when the military operation begun, there has
been an increase in geopolitical tensions, which created significant
risks for the Russian economy and led to significant fluctuations in
exchange rates and a decrease in the value of the Russian assets in
financial markets.
Because of the increased volatility in the financial sector, the Central
Bank of Russia introduced a number of support measures, including
the increase of the key interest rate from 9.5% to 20% per annum on
28 February 2022 in order to support financial and price stability and
protect the savings of citizens from depreciation. On 8 April 2022, the
CBR cut the key rate from 20% to 17%.
Zaim’s Board and management believe that “special military
operation” and subsequent sanctions so far have no direct impact on
Zaim business. Zaim is a holding company incorporated in England
and Wales, majority owned by European shareholder and has no
relationships with any Russian banks. The business of Zaim Express
operates solely within Russia and therefore is not affected by
international restrictions on using the SWIFT international payment
system.
Zaim Express continues to serve its clients in the normal course of
business with as yet no significant deviation in business performance.
However, is too early to access the full long-term impact of sanctions
imposed against Russia both on the economy of the country as a whole
and on its individual industries. As a result, there is no possibility to
make a calculated assessment of the financial impact of these events
on the Company’s activities with a sufficient degree of reliability. The
Company is closely monitoring the development of the situation in order to
make an alternative assessment of its strategic and operational intentions
and plans in case of any indicators of a negative impact on its activities.
In order to mitigate the above-mentioned risks, diversify and furtherly
develop its business, Zaim is currently accelerating its work to expand into
other European countries and is actively undertaking an assessment of
jurisdictions in which to deploy its technology.
1
2
3
4
5
44
SECTION
STATEMENT
41
CORPORATE
GOVERNANCE
REPORT
32
BOARD
OF DIRECTORS
36
DIRECTORS’
REPORT
39
REMUNERATION
REPORT
45
DIRECTORS’
RESPONSIBILITY
STATEMENT
CORPORATE
GOVERNANCE
3
34
KEY
MANAGEMENT
Board of Directors
The Board of Directors of Zaim Credit Systems Plc consists of five
members, including two independent directors. The Directors are
responsible for carrying out the Company’s objectives, implementing
its business strategy and conducting its overall supervision.
The Board provides leadership within a framework of prudent and
effective controls. The Board establishes the corporate governance
values of the Company and have overall responsibility for setting the
Company’s strategic aims, defining the business plan and strategy,
and managing the financial and operational resources
of the Company.
Paul James Auger
Non-Executive Director
With a career of over 30 years in finance and lending, Mr Auger has been a director of an Essex-based and FCA-regulated microlender TFS
Loans Limited (“TFS”) for over 10 years. Established by Paul in 2009, TFS is focused on the guarantor loans market and currently offers guaran-
teed loans under £15,000 to retail consumers. Established in 2009, TFS was initially authorised by the Office of Fair Trading until responsibility
was transferred to the FCA in April 2014 when it was given interim authorisation until full authorisation was granted by the FCA
at the end of 2016.
Simon James Retter
Finance Director
Company Secretary
Simon started his career at Deloitte & Touche LLP (now known as Deloitte LLP), where he qualified as a Chartered Accountant specialising in
corporate finance transactions. He has been instrumental in setting up several private and listed companies. Simon has undertaken numerous
IPOs and reverse takeovers and has a wealth of public market experience and has served a director of Zaim Credit Systems plc
since its inception.
Siro Donato Cicconi
Chief Executive Officer
Siro is an experienced Italian executive director that has worked for and advised numerous businesses in Italy many of which were in turn-
around or distressed situations. In the late 1990s, Siro advised on fundraisings for strategic R&D projects of many organisations (including
Alfa Gomma Group and Benelli Motors SpA), which involved managing relations with European, Italian and local financial administrations. He
also assisted several other industrial groups in raising finance for their acquisition plans. From 2005 until 2010, he provided corporate finance
advice to several businesses. Between 2011 and 2013, he was appointed Managing Director of IMT SpA, a large Italian manufacturer of drilling
equipment, to turn around that business. After finishing this role, he became the Managing Director of EER to fund Zaim and managed the
rationalisation of Zaim’s operations and returned it to profitability.
Vladimir Golovko
Chief Operating Officer
Vladimir was previously the COO of Zaim Express LLC from inception in 2011 prior to becoming CEO of this Company. At the same time, he
serves as the Chief Operating Officer of Zaim Credit Systems. Prior to joining Zaim, he was General Manager of the Pyaterochka retail chain (a
franchise network) (2004–2011) and had previously been Communications Director (1999–2011). Vladimir also previously worked for Uniland (the
largest wholesale company in Russia at the time) as a Sales and Marketing Manager; Uniland now operates as the supermarket chain, DIXY.
Vladimir graduated from the Volgograd branch of Moscow State University of Commerce in 1997 with a degree in Management.
32
АNNUAL REPORT 2021
33
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Malcolm Groat
Non-Executive Chairman
Mr Groat is a Chartered Accountant and MBA graduate. Following an early career with PwC in London, he held CFO, COO and CEO roles in
international businesses, including with the construction engineering firm that is now Arcadis. Since 2005, Mr Groat has held non-executive
board positions, mainly with growth ventures listed on the AIM and the main market, but also with larger bodies such as the UK’s former Milk
Marketing Board, Corps Security and Baronsmead Second Venture Trust PLC. At present, Mr Groat serves as Chairman with two AIM companies,
TomCo Energy and Harland & Wolff. He is also a director of Singapore-based GS Technologies, a fintech blockchain venture.
Vladimir Golovko
Chief Executive Officer
Vladimir was previously the COO of Zaim from its inception in 2011 prior to becoming the CEO. At the same time, he serves as the Chief Op-
erating Officer of Zaim Credit Systems. Prior to joining Zaim, he was General Manager of the Pyaterochka retail chain (a franchise network)
(2004–2011) and had previously been Communications Director (1999–2011). Vladimir also previously worked for Uniland (the largest wholesale
company in Russia at the time) as a Sales and Marketing Manager; Uniland now operates as a supermarket chain, DIXY. Vladimir graduated
from the Volgograd branch of Moscow State University of Commerce in 1997 with a degree in Management.
Kristina Tayurskaya
Head of Marketing
Prior to joining Zaim Express LLC in 2020, Mrs Tayurskaya worked as Head of Marketing for a number of Russian microfinance companies start-
ing from 2015. Mrs Tayurskaya is graduated from Banking school of the Central Bank of the Russian Federation, Khabarovsk in 2005
with a degree in finance; Academy of Economics and Law, Khabarovsk in 2008 with a degree in finance.
Andrey Katyshkov
Chief Financial Officer
Mr Katyshkov joined Zaim at the beginning of 2018 as CFO and had previously worked for Basic Element, one of the biggest investment funds
in Russia, working in corporate finance. Mr Katyshkov worked with GIP Group in 2011–2012 as an Investment Specialist within its investment
department. Prior to this, Mr Katyshkov worked as an Investment Analyst with an investment fund, Ost West Group, in 2002–2006. Mr Katysh-
kov graduated from Moscow State University of Economics, Statistics and Information Systems in 2003 with a degree in Finance, followed by
postgraduate studies at Moscow Financial Industrial Academy which he completed in 2006.
Alexander Akhmetov
Head of Legal Department
Mr Akhmetov joined Zaim in 2011 first as legal counsel and, starting from 2014, as Head of the Legal Department. Prior to joining Zaim Express
LLC, Mr Akhmetov worked for a law firm called Yurconri before practicing at the Arbitration Court of the Moscow Region. Mr Akhmetov grad-
uated from Moscow Engineering Physics Institute in 2007 with a degree in Accounting and subsequently graduated from Moscow State Law
Academy in 2011 with a degree in Law.
Evgeniy Komsyukov
Sales Director
Prior to joining Zaim Express LLC in 2020, Mr Komsyukov worked as a CEO and Deputy CEO for a number of Russian microfinance and retail
companies starting from 2014. Mr Komsyukov is graduated from Russian Presidential Academy of National Economy and Public Administration,
Moscow in 2009 with a degree in corporate law; Plekhanov Russian University of Economics, Moscow in 2012 with a degree
in financial management.
Vildan Vegerio
Head of Network Management
Prior to his appointment as Head of Network Management of Zaim in 2016, Mr Vegerio had worked with the Company as a Senior Customer
Relationship Specialist from 2011. Mr Vegerio graduated from the International Slavic Institute with a degree in Economics in 2011.
Key Management
34
АNNUAL REPORT 2021
35
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Directors’ Report
The Directors present their Annual Report on the affairs of Zaim Credit Systems
Plc together with the audited Financial Statements for the year ended
31 December 2021.
Principal Activities
The principal activity of the Group and Company is providing custom-
ers with small-size short-term loans.
Financial Review
Financial review of the Group is presented in the “Financial Overview”
section of the current Annual Report.
Going Concern
The Directors have prepared cash flow forecasts for the 12 months
from the date of signing of these Financial Statements. There exists
uncertainty as to the future impact of the COVID-19 pandemic as well
as the potential impact on the Group from any sanctions that might
be imposed as a result of the EU, USA and UK regarding the “special
military operation” currently underway in Ukraine. Both of these have
been considered as part of the Group’s adoption of the going concern
basis. The Board considers the pandemic has not materially and/or
adversely affected the prospects of the business as of the date of
this report, although any future impact, should further waves of the
pandemic occur and further measures be implemented, remains hard
to quantify.
Whilst it is the current view of the Directors that the sanctions in
place within Russia do not materially impact the Group, it is a very fast
moving situation with sanctions changing rapidly and therefore there
remains a risk to the business predominantly around the access of
banks not linked to the Russian state and businesses not linked to
the state operating in Russia maintaining access to the international
banking system and specifically SWIFT as well as any capital controls
within Russia as a result of the potentially deteriorating economic
situation driven by the sanctions. Both access to SWIFT and potential
and current capital controls could restrict the ability of Zaim Express
to remit dividends and management fees to the parent company
Zaim Credit Systems plc, therefore creating a material risk to the
ability of the Company to continue as a going concern. The Group
has minimised this risk by reducing expenditure to allow time for the
situation to normalise, however should these set of circumstances
continue for an extended period of time then the group would have
to find alternative sources of finance to fund the ongoing expenditure
within the parent company.
The Directors formed a judgement at the time of approving the
Financial Statements that although the operating subsidiary is
operating profitably and generating free cash there exists a material
uncertainty regarding the Company’s ability to operate as a going
concern. The Directors have plans to mitigate such risk including
obtaining alternative sources of capital and have a reasonable
expectation that these plans would be successful and therefore
continue to adopt the going concern basis in preparing the Financial
Statements. Further details of the Directors’ conclusions regarding
going concern are detailed in Note 3 to the Financial Statements.
Dividends
The Directors do not recommend payment of a dividend (2020: £Nil).
The Directors recognise the importance of dividends to investors
and as soon as Zaim’s business is at a mature stage of development,
the Directors will review the desirability of paying dividends. Income
generated by the Company in the near term is likely to be re-invested
by the Company to implement its strategy. As a holding company, the
Company will be dependent upon dividends being declared and paid
by its subsidiary. The Board does not anticipate declaring dividends in
the short term, but it may recommend dividends at some future date,
depending upon, inter alia, the Zaim Business demonstrating sustain-
able profits and the financial position of the Company. The Board can
neither give assurances that it will pay dividends in the future nor, if
dividends are paid, what the amount of such dividends will be.
Health and Safety
Health and safety of our employees is of paramount importance
to Zaim. During the COVID-19 outbreak, Zaim has been proactively
implementing strict health and safety policies specifically tailored to
COVID-19, including working from home for the entire head office staff
and taking all necessary disinfection measures in our stores such as
using hand sanitizers, medical masks and more frequent cleaning of
the customer zone. Clients could enter the shop in compliance with
the social distancing instructions or one at a time. Subsequently,
COVID-19-related restrictions were eased. On 15 March 2022 Moscow
authorities and on 16 March Moscow Region authorities abolished the
mandatory wearing of medical masks in public spaces, except for
railroad transport. Zaim continues following all the recommendations
of local health authorities and the World Health Organisation.
Social, Community and
Human Right Issues and
Policies
The Company does not have formal social, community and human
rights policies.
Environmental Matters
The Company’s activities do not have a negative impact on the envi-
ronment as it is a financial services company and it does not own or
operate heavy machinery or air- or water-polluting equipment. The
Company does not have formal policies on this matter.
Employees
As of 31 December 2021, the Group had 152 employees. Our employees
are our most valuable resource and we focus on creating a
comfortable working environment for them. Zaim sets high standards
for customer service and conducts regular training for its employees.
We see innovation as a tool to ensure customer loyalty and increase
the motivation of our employees. We invest in human capital through
continuous staff training, development of a personnel reserve system
and the career growth of our employees. Responsibility, honesty, and
openness are core values of our Company.
The Company has the following internal policies:
y
On recruitment, evaluation and management of employees;
y
On hiring and allocating employees;
y
On education, adaptation and evaluation of employees;
y
On motivation and remuneration of employees.
Gender Diversity
Although the Board of Directors consists only of male members, the
Company increased female representation in the senior management
from 0 to 4 individuals. Company supports diversity in the Board-
room and the Financial Reporting Council aims to encourage gender
diversity.
The following table sets out a breakdown by gender as of 31 Decem-
ber 2021:
Male
Female
Board of Directors
5
-
Senior management1
9
4
Other employees
38
96
Substantial Shareholdings
The Directors are aware of the following substantial interests or hold-
ings of 3% or more of the Company’s ordinary called-up share capital
as of 31 December 2021.
Shareholder
Number of shares
Percentage
Zaim SA2
320,000,000
69.27%
Zaim had also issued a total of 43,650,000 warrants and options to
Directors and Management team as of 31 December 2021.
There was no change in the interests set out above between 31 De-
cember 2021 and 17 May 2022.
Share Capital
Changes in the share capital of the Company, including the disclosure
of earnings per share, are set out in Note 11 to the Financial State-
ments.
Voting Rights
All the issued shares have equal voting rights.
Directors and Their Interests
The names of the Directors of the Company at the date of this report are shown in the “Board of Directors” section of this report.
The Directors who served during the year together with their directly beneficial interests in the shares of the Company as of 31 December 2021
are as follows:
Director
Date of appointment
2021
2021
2020
2020
Shares
Option
Shares
Options
Malcolm Groat
4.11.2019
-
2,150,000
-
2,150,000
Paul James Auger
4.11.2019
-
2,000,000
-
2,000,000
Siro Donato Cicconi
22.07.2019
320,000,000
10,750,000
320,000,000
10,750,000
Simon James Retter3
15.06.2018
4,900,000
6,450,000
3,600,000
6,450,000
Vladimir Golovko
25.10.2019
-
8,600,000
-
8,600,000
None of the Directors exercised any share options during the year.
Relationship Agreement
The Board confirms that on 29 October 2019, Siro Cicconi, Zaim SA
and the Company entered into a relationship agreement to ensure
that the Company is able to carry on its business independently of
Siro Cicconi and Zaim SA and that all transactions and relationships
with Siro Cicconi and Zaim SA shall be on an arms’ length and normal
commercial basis. Where either of the Founder Shareholder Parties
hold or in aggregate hold 20% or more of the total voting rights in the
Company, Zaim SA has the right to appoint a representative director.
In addition, where either of the Founder Shareholder Parties hold or in
aggregate hold 15% or more of the total voting rights in the Company,
they have the right to appoint a Board observer.
The Company complied with the Relationship Agreement during the
period under review. So far as the Company is aware, the agreement
was complied with during the period under review by the controlling
shareholder or any of its associates; and the procurement obligation
was complied with during the period under review by a controlling
shareholder.
Directors’ Statement as to
the Disclosure of Informa-
tion to the Auditor
The Directors who held office at the date of approval of this Directors’
Report confirm that, so far as they are individually aware, there is no
relevant audit information of which the Company’s auditor is unaware
and the Directors have taken all the steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of the information.
1 One of the Board members of Zaim Credit Systems, Vladimir Golovko serves at the same time as the CEO of Zaim Express. He is counted as a member of Board of Directors and discount-
ed as a member of senior management for the purpose of this table.
2 Siro Cicconi, the Director of the Company is the ultimate beneficial owner of Zaim SA, which he wholly owns through his life interest in Excelsior Foundation which wholly owns Zaim SA.
3 On 9 February 2021, Stonedale Management & Investments Ltd, a company controlled by Simon Retter, Finance Director of the Company, purchased 1,300,000 ordinary Zaim shares of £0.01
each at a price of 4.4 p per share. Following this transaction, Mr Retter has a beneficial interest in 4,900,000 ordinary shares, representing 1.06% of the Company’s issued share capital.
36
АNNUAL REPORT 2021
37
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Matters Covered in the
Business Review
The business review and review of KPIs are included in the “Operation-
al Overview” section of the Strategic Report.
Events after the Reporting
Date
The events after the reporting date are set out in Note 28 to the
Financial Statements.
Future Developments
Since February 2022, there has been an increase in geopolitical
tensions, which created significant risks for the Russian economy and
led to considerable fluctuations in exchange rates and a decrease in
the value of the Russian assets in financial markets. “Special military
operation” in Ukraine launched by Russia on 24 February 2022 and
subsequent sanctions imposed by UK, US & EU on Russia so far have
no direct impact on Zaim business.
Taking into account the information available at the moment, the
possible long-term impact of these events both on the economy of
the Russian Federation as a whole and on its individual industries is
not readily predictable. As a result, there is no possibility of estimating
the financial impact of these events on the Company’s activities with
a sufficient degree of reliability in the short term. The Company is
closely monitoring the development of the situation in order to make
an alternative assessment of its strategic and operational intentions
and plans in the event of any indicators of a negative impact on its
activities.
Information on Exposure
to Risks
Principal risks and uncertainties are discussed in the Risk Manage-
ment section of this report as well as in Note 20 to the Financial
Statements.
Financial Instruments
The financial risk management policies and objectives are set out in
detail in Note 20 to the Financial Statements.
Greenhouse Gas Emissions
The Group has as yet minimal greenhouse gas emissions to report
from the operations of the Group and does not have responsibility for
any other emission-producing sources under the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2014.
Corporate Governance
Please refer to the Corporate Governance Report section of this
document.
Amendment of the
Company’s Articles
of Association
The Directors do not have any specific procedures in place regarding
any potential changes to the Company’s Articles of Association, but
should this need arise, it will be presented to shareholders at a gener-
al meeting in line with the company law.
Appointment and
Replacement of Directors
Subject to the Articles of Association and the Companies Act, the
Company may by ordinary resolution appoint a person who is willing
to act as a Director and the Board shall have power at any time to
appoint any person who is willing to act as a Director, in both cases
either to fill a vacancy or as an addition to the existing Board.
At the first annual general meeting, all the Directors shall retire
from office and may offer themselves for reappointment by the
Shareholders by ordinary resolution.
At every subsequent annual general meeting, any Director who (i)
has been appointed by the Directors since the last annual general
meeting or (ii) was not appointed or reappointed at one of the
preceding two annual general meetings must retire from office and
may offer themselves for reappointment by the Shareholders by
ordinary resolution.
Powers of the Company’s
Directors
The Directors do not have any specific procedures in place regarding
any potential changes to the opportunity for the Company to buy back
its own shares, but should this need arise, they will be presented to
the shareholders at a general meeting in line with company law.
Directors and Officers
Insurance
The Group has not provided Directors and Officers insurance for both
the current and prior periods.
Annual General Meeting
The Notice of the Annual General Meeting of the Company will be
distributed to shareholders together with the Annual Report. Full
details of the business to be considered at that meeting can be found
in the Notice.
Independent Auditor
The auditor, Shipleys LLP, will be proposed for reappointment in
accordance with section 485 of the Companies Act 2006.
Shipleys LLP has signified its willingness to continue in office as
Auditor.
By Order of the Board,
Simon Retter
Company Secretary
17 May 2022
Remuneration Report
The Board of Directors of Zaim Credit Systems Plc formed the
Remuneration Committee that was constituted at a full meeting of
the Board held on 29 October 2019 in accordance with the Articles of
Association of the Company.
The Committee determines and agrees with the Board the
framework or broad policy for the remuneration of the Company’s
Chairperson and the Executive Directors, including pension rights
and compensation payments. The remuneration of Non-executive
Directors shall be a matter for the Board or the shareholders
(within the limits set in the Articles of Association). No Director or
Senior Manager shall be involved in any decisions as to their own
remuneration. The Committee recommends and monitors the level
and structure of remuneration for senior management.
The Group’s policy is to maintain levels of remuneration so as to
attract, motivate and retain Directors and Senior Managers of the
highest calibre who can contribute their experience to deliver
industry-leading performance with the Group’s operations.
Below are the summary service contracts and appointment letters of
the Directors:
Non-Executive Chairman —
Malcolm Groat
Malcolm Groat is paid an annual salary of £25,000 which shall escalate
to £35,000 if Zaim reaches EBITDA of £200,000 per calendar month.
Chief Executive Officer —
Siro Cicconi
Siro Cicconi is paid an annual salary of £100,000 which shall escalate
to £200,000 per annum if Zaim reaches EBITDA of £200,000 per calen-
dar month and shall further escalate to £350,000 per annum if Zaim
reaches EBITDA of £350,000 per calendar month.
Chief Operating Officer —
Vladimir Golovko
Vladimir Golovko is paid an annual salary of £10,000 by the Company.
Under the terms of an agreement dated 21 December 2017, Vladimir
Golovko is also employed by Zaim for a monthly salary of 700,000
Russian Roubles (approximately £6,9072) in January – March 2021 and
701,470 Russian Roubles (approximately £6,9222) from April 2021 plus
an annual bonus determined by the shareholders with reference
to the key performance indicators. A discretionary quarterly bonus
is typically paid in the amount of the monthly salary (depending on
performance).
Finance Director —
Simon Retter
Simon Retter is paid an annual salary of £60,000 which shall escalate
to £120,000 per annum if Zaim reaches EBITDA of £200,000 per calen-
dar month and shall further escalate to £150,000 per annum if Zaim
reaches EBITDA of £350,000 per calendar month.
Non-executive Director —
Paul Auger
Paul Auger is paid an annual salary of £20,000 which shall escalate to
£27,000 per annum if Zaim reaches EBITDA of £200,000 per calendar
month.
Below is the summary of remuneration for each Director for 2021:
Salary
Other fees/
bonuses
Benefits
Pension
contributions
Share-based
payment charge
Total
£
£
£
£
£
£
Malcolm Groat
25,000
4,000
-
-
-
29,000
Siro Donato Cicconi
100,000
35,000
-
-
-
135,000
Vladimir Golovko
141,038
3,500
-
-
10,177
154,715
Simon James Retter
60,000
21,000
-
-
-
81,000
Paul James Auger
20,000
4,000
-
-
9,506
33,506
Total
346,038
67,500
-
-
19,683
433,221
The social insurance contributions, paid by the Company for the year 2021 on remuneration, was £17,388. Due to the potential issues related to
the remittance of dividends and management fees noted in the going concern section of the financial statements, the Directors propose to not
pay the year end accrued bonuses until such a time as the Company has sufficient free cash to remove any risk associated with its ability to
continue as a going concern.
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АNNUAL REPORT 2021
39
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
1 At the weighted average exchange rate of 2021
2 At the weighted average exchange rate of 2021
Below is the summary of remuneration for each Director for 2020:
Salary
Other fees/
bonuses
Benefits
Pension
contributions
Share-based
payment charge
Total
£
£
£
£
£
£
Malcolm Groat
25,000
-
-
-
-
25,000
Siro Donato Cicconi
100,000
35,000
-
-
-
135,000
Vladimir Golovko
124,361
3,500
-
-
32,616
160,477
Simon James Retter
60,000
21,000
-
-
-
81,000
Paul James Auger
20,000
-
-
-
1,788
21,788
Total
329,361
59,500
-
-
34,404
423,265
The social insurance contributions, paid by the Company for the year 2020 on remuneration, was £17,388.
Shares and options held by the Directors are as follows:
Shares held
Share options
Shares held
Share options
2021
2021
2020
2020
Malcolm Groat
-
2,150,000
-
2,150,000
Siro Donato Cicconi
320,000,000
10,750,000
320,000,000
10,750,000
Vladimir Golovko
-
8,600,000
-
8,600,000
Simon James Retter1
4,900,000
6,450,000
3,600,000
6,450,000
Paul James Auger
-
2,000,000
-
2,000,000
The only discretionary pay received by the Directors was linked
to a performance-related bonus; all other terms of the Director’s
remunerations are fixed as per contracts set out above and are
directly linked to the EBITDA generated by Zaim on a monthly basis.
As of the end of 2021, none of these milestones had been reached.
There is no LTIP in place other than the unapproved options scheme
and none of the Directors received any benefits in kind or pension
contributions.
The Company issued certain Directors with options exercisable at the
issue price of 2.5 p at the date of the IPO and subsequent options
to one Non-Executive Director at 2.7 p during 2020. The share-based
payment charge was calculated using the Black Scholes method and
included in the tables above.
Approved on behalf of the Board,
Malcolm Groat
Non-Executive Chairman
17 May 2022
Corporate Governance Report
Corporate Governance
Practices
The Board recognises the importance of sound corporate governance
commensurate with the size of the Company and the interests of
Shareholders. As the Company is listed in the Standard segment of
the Official List of the LSE, it is not required to comply with the UK
Corporate Governance Code, which is applicable to all companies
whose securities are admitted to trading in the premium segment
of the Official List. The UK Corporate Governance Code can be
found at https://www.frc.org.uk/directors/corporate-governance-
and-stewardship. Nevertheless, the Directors are committed to
maintaining high standards of corporate governance and propose,
so far as is practicable given the Company’s size and nature, to
voluntarily adopt and comply with the QCA Code. However, at present,
due to the size of the Company, the Directors acknowledge that
adherence to certain provisions of the QCA Code may be delayed until
such time as the Directors are able to fully adopt them.
The Role of the Board
The Company holds timely Board meetings as issues arise which
require the attention of the Board. The Board is responsible for
the management of the Company, setting the strategic direction
of the Company and establishing the policies of the Company. It is
the Directors’ responsibility to oversee the financial position of the
Company and monitor the business and affairs of the Company
on behalf of the Shareholders, to whom they are accountable. The
primary duty of the Directors is to act in the best interests of the
Company at all times. The Board also addresses issues related to
internal control and the Company’s approach to risk management.
The Directors established an Audit Committee and a Remuneration
Committee. The Board do not consider it appropriate to establish a
Nomination Committee at this stage of the Company’s development,
and decisions usually undertaken by those committees will be taken
by the Board as a whole.
Audit Committee
The Audit Committee assists the Board in discharging its
responsibilities with regard to financial reporting, external and
internal controls, including reviewing and monitoring the integrity
of the Group’s annual and interim financial statements, reviewing
and monitoring the extent of the non-audit work undertaken by
the Group’s external auditors, advising on the appointment of such
external auditors, overseeing the Group’s relationship with its external
auditors, reviewing the effectiveness of the external audit process
and reviewing the effectiveness of the Group’s internal control
and review function. The ultimate responsibility for reviewing and
approving the annual report and accounts and the half-yearly reports
remains with the Board. The Audit Committee will meet not less than
twice a year. The Audit Committee is chaired by Malcolm Groat, and
its other member is Paul Auger. The Directors consider that Simon
Retter has recent and relevant financial experience. In 2021, the Audit
Committee met on 28 April 2021 and 28 September 2021.
Remuneration Committee
The Group established a Remuneration Committee, which
comprises Malcolm Groat as Chairman and Paul Auger, to review
the performance of the Executive Directors and set the scale and
structure of their remuneration and the basis of their service
agreements with due regard to the interests of Shareholders.
In determining the remuneration of Executive Directors, the
Remuneration Committee seeks to enable the Group to attract and
retain executives of the highest calibre. The Remuneration Committee
also make recommendations to the Board concerning the allocation
of any share awards. No Director is permitted to participate in
discussions or decisions concerning their own remuneration. In 2021,
the Remuneration Committee met on 18 January 2021.
Market Abuse Regulation
The Board adopted a share dealing code that complies with
the requirements of the Market Abuse Regulation. The Board is
responsible for taking all proper and reasonable steps to ensure
compliance with the MAR by the Directors and persons discharging
managerial responsibilities. The FCA is the competent authority for
the MAR and has powers to intervene as competent authority and will
be responsible for the investigation and enforcement of breaches of
MAR.
Board Meetings
The core activities of the Board are carried out during scheduled
meetings of the Board. These meetings are timed to link to key
events in the Group’s corporate calendar and regular reviews of the
business are conducted. Additional meetings and conference calls
are arranged to consider matters which require decisions outside the
scheduled meetings.
In 2021, the Board met on 6 occasions:
Attendance at meetings:
Malcolm Groat
Siro Donato Cicconi
Simon James Retter
Paul James Auger
Vladimir Golovko
Non-Executive
Chairman
Director
and CEO
Finance
Director
Non-Executive
Director
Chief Operating
Officer
5 February 2021
x
x
x
x
x
1 April 2021
x
x
x
x
x
24 May 2021
x
x
x
x
x
15 June 2021
x
x
x
x
x
20 July 2021
x
x
x
x
x
28 September 2021
x
x
x
x
x
40
АNNUAL REPORT 2021
41
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
1 On 9 February 2021, Stonedale Management & Investments Ltd, a company controlled by Simon Retter, Finance Director of the Group, purchased 1,300,000 ordinary ZCS shares and at the date of
this report was beneficially interested in 4,900,000 shares.
Outside the scheduled meetings of the Board, the Directors maintain
frequent contact with each other to discuss any concerns they may
have relating to the Group or their areas of responsibility and to keep
them fully briefed on the Company’s operations.
Matters Reserved
Specifically for the Board
The Board has a formal schedule of matters reserved that can
only be decided by the Board. The key matters reserved are the
consideration and approval of the following:
y
The Group’s overall strategy;
y
Financial Statements and dividend policy;
y
Management structure including succession planning,
appointments and remuneration; material acquisitions and
disposal, material contracts, major capital expenditure projects
and budgets;
y
Capital structure, debt and equity financing and other matters;
y
Risk management and internal controls;
y
The Group’s corporate governance and compliance
arrangements; and
y
Corporate policies.
Effectiveness
y
For the period under review, the Board comprised a Chief
Executive Officer, a non-executive Chairman and three other
Directors, including one independent non-executive Director. See
biographical details in the “Board of Directors” subsection of the
“Corporate Governance” section of this report.
y
The Directors are of the view that the Board and its Committees
consist of Directors with an appropriate combination of skills,
experience, independence and diverse backgrounds to enable
them to carry out their duties and responsibilities effectively.
Independence
The Board considers each of the non-executive Directors to be inde-
pendent in character and judgement.
Appointments
The Board is responsible for reviewing the structure, size and compo-
sition of the Board and making recommendations to the Board with
regard to any required changes.
Commitments
All the Directors have disclosed any significant commitments to the
Board and confirmed that they have sufficient time to perform their
duties.
Induction
All new Directors received an induction as soon as practical upon
joining the Board.
Conflicts of Interest
A Director has a duty to avoid a situation in which he or she has, or
can have, a direct or indirect interest that conflicts, or may possibly
conflict with the interests of the Group and the Company. The Board
has satisfied itself that there is no compromise to the independence
of those Directors who have appointments on the Boards of, or
relationships with, companies outside the Company. The Board
requires Directors to declare all appointments and other situations
which could result in a possible conflict of interest.
Board Performance and
Evaluation
The Company has a policy of appraising Board performance annually.
Having reviewed various approaches to Board appraisal, the
Company has concluded that for a Company of its current scale an
internal process of regular videoconference meetings is the most
appropriate, in which all Board members can discuss any issues
as and when they arise in relation to the Board or any individual
member’s performance.
Remuneration Policy
In determining the remuneration policy, the Committee takes
into account all factors which it deems necessary including
relevant legal and regulatory requirements and the provisions and
recommendations of relevant guidance. The objective of such a policy
shall be to attract, retain and motivate the executive management of
the Company without paying more than necessary. The remuneration
policy bears in mind the Company’s appetite for risk and is aligned
to the Company’s long-term strategic goals. A significant proportion
of remuneration is structured so as to link rewards to corporate and
individual performance and is designed to promote the long-term
success of the Company.
When setting the remuneration policy for the Directors of the
Company, the Committee reviews and has regard to the pay and
employment conditions across the Company or the Group, especially
when determining salary increases.
All Remuneration Committee members demonstrate independent
judgement and discretion when determining and approving
remuneration outcomes.
Investing in the Company’s
Workforce
Remuneration system of the Company includes:
1.
Guaranteed salary, which is the fixed monetary remuneration of
an employee.
This amount does not depend on financial situation of the
organisation, personal characteristics of the employee and other
factors. It includes:
y
basic salary for the time actually worked;
y
compensations for overnight and overtime work;
y
allowances.
2.
Variable part of the salary linked to professional achievements
of the employee:
y
bonus for overachievement of the plan;
y
payment for participation in the training of young
professionals.
Diversity
Although the Board consists of only male Directors, the Board sup-
ports diversity in the Boardroom and the Financial Reporting Council
aims to encourage such diversity.
Accountability
The Board is committed to providing shareholders with a clear assess-
ment of the Group’s position and prospects. This is achieved through
this report and other periodic financial and trading statements as
required.
External Audit
No significant issues were identified during the external audit process
undertaken by the external auditors. The Audit Committee reviews the
audit process each year and, in addition, analyses the performance and
feedback from the external auditors as part of the reporting process.
The Audit Committee assesses the external auditor’s independence,
length of service and provision of non-audit services as part of the
review of the suitability of the external auditors to continue to hold
office for the following year and therefore seek reappointment at the
next AGM. A tender was not submitted for reappointment of the audit
this year as the current external auditors held office for less than the
statutory number of years prior to a retender process.
The external auditor of the Group is independent and objective as they
do not provide any material non-audit services.
Internal Controls
The Board of Directors reviews the effectiveness of the Group’s and
Company’s system of internal controls in line with the requirements of
the Code. The internal control system is designed to manage the risk
of failure to achieve business objectives. This covers internal financial
and operational controls, compliances and risk management.
The Company has necessary procedures in place for the year under
review and up to the date of approval of the Annual Report and
Financial Statements. The Directors acknowledge their responsibility
for the Group’s and Company’s system of internal controls and for
reviewing its effectiveness. The Board confirms the need for an
ongoing process for identification, evaluation and management of
significant risks faced by the Group. The Directors carry out a risk
assessment before signing up to any commitments.
The Audit Committee regularly reviews and reports to the Board on the
effectiveness of the system of internal control. Given the size of the
Group and the Company and the relative simplicity of the systems, the
Board considers that there is no current requirement for an internal
audit function. The procedures that have been established to provide
internal financial control are considered appropriate for a Group and
Company of its size and include controls over expenditure, regular
reconciliations and management accounts.
The Directors are responsible for taking such steps as are reasonably
available to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Nomination
Currently, due to the size of the Group, there is no Nomination
Committee.
Shareholder Relations
Open and transparent communication with shareholders is given
high priority and there is regular dialogue with institutional investors,
as well as general presentations made at the time of release of the
annual and interim results. All the Directors are kept aware of changes
in major shareholders in the Company and are available for conference
calls or meetings with shareholders who have specific interests or
concerns. The Group issues its results promptly to individual share-
holders and also publishes them on the Company’s website: www.
zaimcreditsystemsplc.comhttp://www.pembridgeresources.com/.
Regular updates to record news in relation to the Group are included
on the Company’s website.
The Directors are available to meet with institutional shareholders
to discuss any issues and gain an understanding of the Company’s
business, its strategies and governance. Meetings are also held with
corporate governance representatives of institutional investors when
requested.
Our AGMs give the Board the opportunity to engage with investors on
the running of the Company and to receive feedback. ZCS plans to
conduct its AGM following the publication of this annual report.
The Board also considers the views and interests of other key
stakeholders, including clients, employees, regulators and society as a
whole in its discussions.
Annual General Meeting
At every annual general meeting, individual shareholders are given
the opportunity to put forward questions to the Chairman and to the
other members of the Board of Directors that may be present. Notice
of the annual general meeting is sent to shareholders at least 21
clear days before the annual general meeting. Details of proxy votes
for and against each resolution together with the votes withheld are
announced by way of regulatory information service and are published
on the Company’s website as soon as practical after the annual
general meeting.
42
АNNUAL REPORT 2021
43
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Section 172 Statement
The Directors of the Company, as those of all UK companies, must act in
accordance with a set of general duties. These duties are detailed in section 172 of
the UK Companies Act 2006 which is summarized as follows:
“A director of a company must act in the way he considers, in good
faith, would be most likely to promote the success of the company for
the benefit of its stakeholders as a whole, and in doing so have regard
(amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with
suppliers, customers and others;
(d) the impact of the company’s operations on the community and the
environment;
(e) the desirability of the company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly as between stakeholders of the Company”.
As part of their induction, all Directors are briefed on their duties and
they can access professional advice on these, either from the Company
Secretary or, if they judge it necessary, from an independent adviser.
The Directors fulfil their duties partly through a governance framework
that delegates day-to-day decision-making to employees of the
Company and details of this can be found in our Corporate Governance
Report on pages from 41 to 43.
The following paragraphs summarise how the Directors fulfil their
duties:
Risk Management
We provide financial services to our clients, often in competitive
and highly regulated environment. As we grow and develop financial
technologies, our risk environment also become more complex.
It is therefore vital that we effectively identify, evaluate, manage
and mitigate the risks we face, and that we continue to evolve our
approach to risk management.
For details of our principal risks and uncertainties and how we manage
our risk environment, please see pages 24 to 28.
Our People
Our Company is committed to being a responsible business. Our
behavior is aligned with the expectations of our people, clients,
investors, communities and society as a whole. Client-facing
employees are at the heart of our services. For our business to
succeed we need to manage our people’s performance and develop
talent while ensuring we operate as efficiently as possible. For that
we have developed regular training programs for our employees. We
must also ensure we share common values that inform and guide our
behavior so we achieve our goals in the right way.
For further details on our people, please see pages 32 to 35.
Shareholders
The Board is committed to openly engaging with our shareholders,
as we recognize the importance of continuing effective dialogue. It
is important to us that shareholders understand our strategy and
objectives, so these must be explained clearly, feedback heard and any
issues or questions raised properly considered. Our board members,
especially Siro Donato Cicconi, hold a series of shareholders meetings
several times a year on the back of financial and operational reporting.
For further details on how we engage with our shareholders please see
page 43.
Community and
Environment
The Company’s approach is to use our strengths to create positive
change for the people and communities with which we interact. We
are providing financial inclusion solutions for people overlooked by
traditional banking sector. We want to leverage our expertise and
enable colleagues to support the communities around us.
For further details on how we interact with communities and the
environment, please see page 36.
Directors’ Responsibilities
Statement
For the year ended 31 December 2021
The Directors are responsible for preparing the Strategic Report,
the Annual Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law, the Directors elected
to prepare the Group's and Company's Financial Statements in
accordance with UK-adopted International Accounting Standards.
Under company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of the profit
or loss of the Group and the Company for that period. The Directors
are also required to prepare Financial Statements in accordance with
the rules of the London Stock Exchange.
In preparing these Financial Statements, the Directors are required to:
y
Select suitable accounting policies and then apply them
consistently;
y
Make judgments and accounting estimates that are reasonable
and prudent;
y
State whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
y
Prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors’ Responsibility
Statement
We confirm that to the best of our knowledge:
y
The Financial Statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation
taken as a whole;
y
The Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole together with a description of the principal
risks and uncertainties that they face; and
y
The Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
This Responsibility Statement was approved by the Board of Directors
on 17 May 2022 and is signed on its behalf by:
Simon Retter
Company Secretary
17 May 2022
44
АNNUAL REPORT 2021
45
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
1
2
3
4
5
FINANCIAL
STATEMENTS
4
CONTENTS
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Notes to the Consolidated financial statements
1.Principal Activities of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2. Operating Environment of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
3. Basis of Presentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4. Summary of Significant Accounting Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
5. Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6. Loans to Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7. Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8. Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9. Loans Received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10. Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11. Charter and Additional Capital. Earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12. Share-based payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13. Interest Income and Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
14 Gains less Losses from Dealing in Foreign Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
15. Allowance for Expected Credit Losses / Impairment of Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
16. Other Operating Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
17. Staff Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
18. Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
19. Income Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
20. Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
21. Capital management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
22. Contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
23. Fair Value of Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
24. Reconciliation of Classes of Financial Instruments with Measurement Categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
25. Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
26. Business combination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
27. Auditor’s remuneration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
28. Events after the Reporting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Independent Auditor’s Report
to the Shareholders of Zaim
Credit Systems plc
We have audited the financial statements of Zaim Credit Systems plc
(the “parent company”) and its subsidiaries (the “group”) for the year
ended 31 December 2021 which comprise the Consolidated Statement
of Profit or Loss and Other Comprehensive Income, Consolidated and
Company Statement of Financial Position, Consolidated and Company
Statement of Changes in Equity, Consolidated and Company State-
ment of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework that
has been applied in the preparation of the group financial statements
is applicable law and UK-adopted International Accounting Standards.
The financial reporting framework that has been applied in the prepa-
ration of the parent company financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion:
y
the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31
December 2021 and of the group’s profit for the year then ended;
y
the group and the parent company financial statements have
been properly prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006; and
y
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006; and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Basis for Opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are
independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material Uncertainty Relating to Going Concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made
in note 3 to the financial statements concerning the Company
and Group’s ability to continue as a going concern. The conditions
described in note 3 in respect of the Russian “special military
operation” in Ukraine indicate the existence of material uncertainties
which may cast doubt about the Company and Group’s ability to
continue as a going concern. The financial statements do not include
the adjustments that would result if the Company and Group was
unable to continue as a going concern.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
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ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance on our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Risk
Our response to the risk
Our response and observation
Going concern
There is a risk that the group may
not be considered a going concern
as a result of the impact of COVID-19
(Coronavirus) and the Russian invasion
of Ukraine.
We read the Directors’ assessment of the risks and impacts of
COVID-19 and the Russian invasion of Ukraine on the business. We
compared this assessment to our own understanding of the risks,
and the nature of the group’s operations, products and customer
base. We then conducted a review of going concern in respect of
these two factors which included reviewing forecasts and current
trading performance, and carrying out stress testing. The work
undertaken considered a period of at least twelve months from the
date of approving these financial statements.
The disclosures in the financial
statements adequately reflect
the Directors’ conclusions around
the material uncertainties in
respect of the Russian invasion of
Ukraine.
Recoverability of loans to customers
Given the extended credit terms
that were provided to customers,
judgement is required to establish
how much of the loan receivables
balance is recoverable. There is a
risk that management’s judgements
and estimates over recoverability
are inappropriate, when considering
the specific balances and the
requirements of IFRS 9.
We understood the group’s process for estimating the expected
credit loss provision under IFRS 9. Loans to customers were tested
on a sample basis which included considering the recoverability of
the balances post year end. Overdue balances were discussed with
management and we assessed whether the accounting provision
appropriately reflects the facts and circumstances.
We did not identify any evidence
of material misstatement related
to carrying value of receivables.
Management continue to apply an
appropriate expected credit loss
provision.
Risk of fraud in revenue recognition
There is a risk that revenue is
materially understated due to fraud.
We reviewed the group’s revenue recognition policies and how they
are applied. Revenue was then tested on a sample basis to confirm
that transactions have been appropriately recorded in line with
IFRS 15.
Revenue was recognised in
accordance with the group’s
accounting policy and we
concluded that no evidence of
fraud or other understatement
was identified.
Risk that management is able to
override controls
Journals can be posted that
significantly alter the financial
statements.
We examined journals posted around the year end, specifically
focusing on areas which are more easily manipulated.
We identified no evidence of
management override in respect
of inappropriate manual journals
recorded in any section of the
financial statements.
Our Application of Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be charged or
influenced. We use materiality both in planning and in the scope of our
audit work and in evaluating the results of our work.
We determine materiality for the group and the parent company to be
£113,779 and this financial benchmark, which has been used throughout
the audit, was determined by way of a standard formula being applied
to key financial results and balances presented in the financial
statements, being the key performance indicators of turnover and
profit before tax. Where considered relevant the materiality is
adjusted to suit the specific risk profile of the group.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
Performance materiality for both the group and the parent company
was set at 75% of the above materiality levels, which equates to
£85,334. We agreed with the audit committee that we would report
to the committee all individual audit differences identified during
the course of our audit in excess of £5,689. We also agreed to report
differences below these thresholds that, in our view, warranted
reporting on qualitative grounds.
An Overview of the Scope of Our Audit
Our group audit was scoped by obtaining an understanding of the
group and its environment, including the group’s system of internal
control, and assessing the risks of material misstatement in the
financial statements at the group level.
Whilst Zaim Credit Systems plc is a company registered in England &
Wales and its head office is located in the UK, the group’s principal
operations are located in Russia. In approaching the audit, we
considered how the group is organised and managed. We assessed
the activities of the group as being the issuance of microfinance loans
to Russian individuals.
Our group audit scope focused on the group’s principal operating
subsidiary, being Zaim Express LLC, which was subject to a full scope
audit together with the parent company. Shipleys LLP performed
the audit of the parent company and BDO Unicon Aktsionernoe
Obshchevstvo performed the audit of the Russian component.
The group audit team was actively involved in the direction of the
audit and specific audit procedures performed by the component
auditor along with the consideration of findings and determination
of conclusions drawn. As part of our audit strategy, we issued group
audit engagement instructions and discussed the instructions with
the component auditor. A senior member of the group audit team
met with the component auditor and local management performed
a review of the component audit files and we discussed the audit
findings with the component auditor.
Other Information
The other information comprises the information included in the
annual report other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information
contained within the annual report. Our opinion on the financial
statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to read
the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or
our knowledge obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact.
In this context, matters that we are specifically required to report to
you as uncorrected material misstatements of the other information
include where we conclude that:
y
Fair, balanced and understandable – the statement given
by the directors that they consider the annual report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the groups’ position and performance,
business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
y
Audit committee reporting - the section describing the work of
the audit committee does not appropriately address matters
communicated by us to the audit committee; or
We have nothing to report in respect of these matters.
Opinions on Other Matters Prescribed by the
Companies Act 2006
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements
Matters on Which We are Required to Report by
Exception
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
y
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
y
the parent company financial statements and the part of
the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
y
certain disclosures of directors’ remuneration specified by law
are not made; or
y
we have not received all the information and explanations we
require for our audit.
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51
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set
out on page 40, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that in-
cludes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these financial statements.
Explanation as to What Extent the Audit was Considered Capable of Detecting Irregularities, Including Fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregular-
ities, including fraud. Our approach was as follows:
y
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the group and determined the
most significant are those that relate to the reporting framework
(UK-adopted International Accounting Standards, the Companies
Act 2006) and the relevant tax compliance regulations in the
jurisdictions in which the group operates.
y
We understood how Zaim Credit Systems plc is complying
with those frameworks by making enquiries on management,
the Company Secretary, and those responsible for legal and
compliance procedures. We corroborated our enquiries
through our review of board minutes, papers provided to the
Audit Committee, discussion with the Audit Committee and any
correspondence received from regulatory bodies.
y
We assessed the susceptibility of the group’s financial
statements to material misstatement, including how fraud
might occur by enquiring with management and the Audit
Committee during the planning and execution phase of our audit.
We considered the programs and controls that the group has
established to address risks identified, or that otherwise prevent,
deter and detect fraud and how senior management monitors
those programs and controls. Where the risk was considered
to be higher, we performed audit procedures to address each
identified fraud risk including revenue recognition as discussed
above. These procedures included testing manual journals and
were designed to provide reasonable assurance that the financial
statements were free from fraud or error.
y
Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations
identified in the paragraphs above. Our procedures involved
journal entry testing, with a focus on manual journals and
journals indicating large or unusual transactions based on
our understanding of the business; enquiries of the Company
Secretary and management; and focused testing, as referred to
in the key audit matters section above.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with
laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other Matters Which We are Required to Address
We were initially appointed by the board on 23 October 2019 to audit
the financial statements for the period ending 31 December 2018. Our
total uninterrupted period of engagement is 4 years, covering the
periods ending 31 December 2018 to 31 December 2021.
The non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of Our Report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
BENJAMIN BIDNELL
For and on behalf of SHIPLEYS LLP, Chartered Accountants and Statutory Auditor
10 Orange Street, Haymarket, London, WC2H 7DQ
17 May 2022
Zaim Credit Systems Group
Consolidated Statement of Financial Position as at 31 December 2021
(in British pounds sterling)
Company Registered number 11418575
Note
2021
2020
Assets
Cash and cash equivalents
5
1,473,909
640,871
Loans to customers
6
2,824,717
1,269,313
Property and equipment
20,319
5,677
Right-of- use assets under lease agreements
7
539,709
297,925
Intangible assets
28,795
_
Other assets
8
455,579
251,297
Total assets
5,343,028
2,465,083
Liabilities
Loans received
9
1,304,680
735,646
Lease liabilities
7
533,683
347,216
Other liabilities
10
1,284,312
823,830
Total liabilities
3,122,675
1,906,692
Equity
Charter capital
11
4,619,750
4,369,750
Shares to be issued Reserve
26
800,000
800,000
Additional capital
11,25
6,755,628
6,078,128
Foreign currency translation reserve
11
4,411,989
4,390,225
Merger reserve
11, 26
22,964,800
22,964,800
Share options reserve
11
248,146
218,099
Accumulated deficit
11
(37,579,961)
(38,262,611)
Total equity
2,220,353
558,391
Total liabilities and equity
5,343,028
2,465,083
Siro Donato Cicconi, Chief Executive Officer
Simon James Retter, Finance Director
17 May 2022
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53
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Zaim Credit Systems plc
Company Statement of Financial Position as at 31 December 2021
(in British pounds sterling)
Company Registered number 11418575
Note
2021
2020
Assets
Cash and cash equivalents
5
211,833
161,163
Other assets
8
130,076
126,477
Investment in Subsidiary
1
10,438,409
10,096,089
Total assets
10,780,319
10,383,729
Liabilities
Other liabilities
10
197,086
186,739
Total liabilities
197,086
186,739
Equity
Charter capital
11
4,619,750
4,369,750
Shares to be issued Reserve
26
800,000
800,000
Additional capital
11
6,755,628
6,078,128
Share options reserve
12
248,146
218,099
Accumulated deficit
(1,840,292)
(1,268,987)
Total equity
10,583,232
10,196,990
Total liabilities and equity
10,780,319
10,383,729
The above Company Statement of Financial Position should be read in
conjunction with the accompanying notes, the loss for the period was
£571,305 (2020: £576,000). As permitted by section 408 of the Companies Act
2006, the statement of comprehensive income of the Parent Company is not
presented as part of these Financial Statements.
The Financial Statements were authorised for issue by the Board of
Directors on 17 May 2022 and were signed on its behalf
Simon James Retter, Finance Director
Siro Donato Cicconi, Chief Executive Officer
Zaim Credit Systems Group
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2021
(in British pounds sterling)
Note
2021
2020
Interest income
13
9,544,013
4,857,496
Interest expenses
(154,674)
(12,835)
Interest expense – lease liabilities
13
(15,228)
(92,442)
Net interest income
9,374,112
4,752,218
Allowance for ECL/impairment of loans to customers
6,8,15
(6,534,146)
(1,790,718)
Net interest income after allowance for ECL/impairment of loans to
customers
2,839,966
2,961,501
Gains less losses from dealing in foreign currency
14
20,943
(189,127)
Other operating income
16
2,160,735
590,502
Operating income
5,021,644
3,362,875
Staff costs
17
(1,567,055)
(1,810,443)
Charge for share based options
12
(30,047)
(51,216)
Operating expenses
18
(2,623,045)
(2,115,735)
Profit/(loss) before income tax
801,497
(614,519)
Income tax expense
19
(118,847)
-
Net profit/(loss)
682,650
(614,519)
Net other comprehensive income that may be reclassified to profit or loss
Foreign exchange differences arising on translation into presentation
currency
21,764
(67,563)
Total comprehensive expense
704,415
(682,083)
Earnings per share
Basic profit/(loss) for the year attributable to
ordinary equity holders of the parent
11
0.18p
0.14p
Diluted profit/(loss) for the year attributable to
ordinary equity holders of the parent
0.14p
0.16p
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ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Zaim Credit Systems Group
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2021
(in British pounds sterling)
Charter
capital
Shares to
be issued
Reserve
Additional
capital
Foreign
currency
translation
reserve (FCTR)
Merger
reserve
Share
options
reserve
Accumulated
deficit
Total
equity
Balance at 31 December 2019
4,369,750
-
6,078,128
4,457,788
23,764,800
166,883
(37,648,092)
1,189,258
Comprehensive loss for 2020
-
-
-
(67,563)
-
-
(614,519)
(682,083)
Contingent consideration
-
800,000
-
-
(800,000)
-
-
-
Share-based payments
-
-
-
-
-
51,216
-
51,216
Balance at 31 December 2020
4,369,750
800,000
6,078,128
4,390,225
22,964,800
218,099
(38,262,611)
558,391
Issue of odinary shares
250,000
-
677,500
-
-
-
-
927,500
Comprehensive Income for 2021
-
-
-
21,764
-
-
682,650
704,415
Share-based payments
-
-
-
-
-
30,047
-
30,047
Balance at 31 December 2021
4,619,750
800,000
6,755,628
4,411,989
22,964,800
248,146
(37,579,961)
2,220,353
Zaim Credit Systems plc
Company Statement of Changes in Equity for the Year Ended 31 December 2021
(in British pounds sterling)
Charter capital
Shares to
be issued
Reserve
Additional
capital
Accumulated
deficit
Share options
reserve
Total
equity
Balance at 31 December 2019
4,369,750
-
6,078,128
(692,987)
166,883
9,921,774
Comprehensive loss for 2020
-
-
-
(576,000)
-
(576,000)
Contingent consideration
-
800,000
-
-
-
800,000
Share-based payments
-
-
-
-
51,216
51,216
Balance at 31 December 2020
4,369,750
800,000
6,078,128
(1,268,987)
218,099
10,196,990
Issue during the year
250,000
-
677,500
-
-
927,500
Comprehensive loss for 2021
-
-
-
(571,305)
-
(571,305)
Share-based payments
-
-
-
-
30,047
30,047
Balance at 31 December 2021
4,619,750
800,000
6,755,628
(1,840,292)
248,146
10,583,232
Zaim Credit Systems Group
Consolidated Statement of Cash Flows for the year ended 31 December 2021
(in British pounds sterling)
2021
2020
Cash flows from operating activities
Interest received
7,578,606
4,219,635
Interest paid
(340,811)
(105,273)
Gains less losses from dealing in foreign currency
(11,886)
(7,460)
Other operating income
2,233,026
559,981
Staff costs
(1,582,249)
(1,854,393)
Operating expenses
(2,263,521)
(1,226,365)
Income tax paid
(55,613)
-
Cash flows from/(used in) operating activities before changes in operating assets and liabilities
5,557,552
1,586,125
Net increase/(decrease) in operating assets
Loans to customers
(6,083,920)
(1,848,483)
Other assets
112,564
(109,063)
Net decrease in operating liabilities
Other liabilities
95,690
57,357
Net cash flows from operating activities
(318,114)
(314,064)
Cash flows from investing activities
Other loans issued
(254,702)
-
Purchases of property and equipment and intangible assets
(46,762)
-
Net cash flows from investing activities
(301,463)
-
Cash flows from financing activities
Repayment of lease liabilities
(261,555)
(536,120)
Loans received
1,578,786
259,266
Repayment of loans received
(789,393)
(259,266)
Issue of ordinary shares (including share premium)
1,000,000
-
Share issue costs
(72,500)
-
Net cash flows from financing activities
1,455,337
(536,120)
Effect of exchange rate changes on cash and cash equivalents
(2,722)
(91,696)
Net change in cash and cash equivalents
833,038
(941,880)
Cash and cash equivalents at the beginning of the year
640,871
1,582,751
Cash and cash equivalents at the end of the year (Note 5)
1,473,909
640,871
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Zaim Credit Systems plc
Company Statement of Cash Flows for the year ended 31 December 2021
(in British pounds sterling)
2021
2020
Cash flows from operating activities
Loss for the period
(571,305)
(576,000)
Correction for non-cash transaction (charge for share options granted)
30,047
51,216
Cash flows from/(used in) operating activities before changes in operating assets and liabilities
(541,258)
(524,784)
Adjustments for
Increase in trade and other receivables, VAT
(3,599)
(58,355)
Increase in trade and other payables
10,347
24,073
Cash generated from operations
(534,510)
(559,066)
Net cash flows used in operating activities
(534,510)
(559,066)
Cash flows from investing activities
Investment in Subsidiary
(342,320)
(590,426)
Net cash flows from investing activities
(342,320)
(590,426)
Cash flows from financing activities
Issue of ordinary shares (including share premium)
1,000,000
-
Share issue costs
(72,500)
-
Net cash flows from financing activities
927,500
-
Net change in cash and cash equivalents
50,670
(1,149,492)
Cash and cash equivalents at the beginning of the year
161,163
1,310,655
Cash and cash equivalents at the end of the year (Note 5)
211,833
161,163
1. Principal Activities of the Group
The principal activity of Zaim Credit Systems plc (“the Company”)
and its subsidiary Zaim-Express, LLC (together “the Group”) is
the issuance of microloans to individuals (retail customers).
The Company was incorporated as Agana Holdings Plc and
registered in England and Wales on 15 June 2018 as a public limited
company with company registration number 11418575 and LEI,
213800Z4MI9KSZA2VW72 and on 22 July 2019 the Company changed its
name to Zaim Credit Systems Plc.
On 18 September 2019 the Company acquired the entire issued share
capital of Zaim-Express LLC. The Company is now the holding company
of a Russian based financial services company Zaim-Express LLC
(Subsidiary), so the main function of the Company is to provide holding
company services and undertake management of their listed activities
on the stock exchange. These business combinations in 2019 was
stated in consolidated financial statements as reverse acquisitions
under IFRS 3.
The organisational structure of the Group:
The share votes of the Company
The name of Subsidiary
Country of registration
31.12.2021
31.12.2020
Zaim-Express LLC
Russia
100%
100%
The Subsidiary’s principal activity is the issuance of microloans
through its network of branches in Russian cities (mainly – in Moscow
and the Moscow region, and St. Petersburg). The Subsidiary was
entered in the state register of microfinance organisations on 29
August 2011, registration number 2110177000440. The Subsidiary’s assets
and liabilities are located in the Russian Federation. The average
number of Subsidiary’s employees is as follows:
The average number of Subsidiary’s employees, by groups
2021
2020
Central office
54
47
Call center
14
22
Other specialists
70
143
Total average number of employees
138
212
The average number of parent Company’s employees (directors) is as follows:
The average number of parent Company’s employees
2021
2020
Directors
5
5
As at 31 December 2021, the main shareholder of the Company is Zaim Holdings SA (with a 69.27% equity holding; 31 December 2020 - with a 73.23%
equity holding). The ultimate controlling party of the Group is an individual - Mr. Siro Donato Cicconi (Director).
2. Operating Environment of the Group
General
The economy of the Russian Federation continues to demonstrate
certain characteristics of an emerging market. They include, in
particular, inconvertibility of the Russian rouble in most countries
outside of Russia and relatively high inflation. The current Russian tax,
currency and customs legislation is subject to various interpretations
and frequent changes. The country’s economy depends on oil and gas
prices. Russia continues to develop the legal, tax and administrative
infrastructure to meet the market economy requirements. The
economic reforms implemented by the government are aimed at
modernisation of the Russian economy, development of high-tech
production, improvement of labour productivity and competitiveness
of the Russian products on the global market.
After a difficult 2020, when the issuance of microloans decreased
significantly against the background of coronavirus restrictions and
quarantine measures, the market began to show recovery dynamics.
According to the Central Bank, the total portfolio grew by 7% in the
second quarter of 2021, which already corresponds to the average
growth rate of the pre-pandemic 2019.
Market digitalisation and the growing popularity of the online segment
of microloans has become an important trend. According to the
Central Bank’s estimates, over the past year, the share of credit
agreements concluded remotely increased in the quarter in the total
number of contracts to 71%. The number of companies that now use
online lending channels has also grown significantly.
As for the overdue debt on microloans, the situation as a whole can be
called stable. The rate of arrears with long delays in payments reached
to 27.8% in the second quarter of 2021. This is significantly lower than it
was in mid-2020 and close to the results of the pre-pandemic 2019.
During the quarantine period, the Group changed its business
model to one of remote lending via the Internet. All operations
necessary for the performance of this activity were carried out
by the employees remotely, which allowed the Group to maintain
regularity and continuity of business processes. Based on the analysis
conducted, the Group’s management believes that the expected
recession will not have any significant negative impact on the Group’s
financial performance in the short term. The management of the
Group believes it is taking all the necessary measures to support
the sustainability and further development of the Group’s business
operations in these circumstances.
As at 31 December 2021, the CBR’s key rate was 8.50% (31 December
2020: 4.25%).
The future economic development of the Russian Federation is largely
dependent upon the effectiveness of economic measures, financial
mechanisms and monetary policies adopted by the Government,
together with tax, regulatory, and political developments.
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Inflation
The Russian economy experiences relatively high levels of inflation. The inflation indices for the last five years are given in the table below:
The year ended
Inflation for the period
31 December 2021
8.39%
31 December 2020
4.9%
31 December 2019
3.0%
31 December 2018
4.3%
31 December 2017
2.1%
Foreign exchange transactions
Foreign currencies, especially the US Dollar, Euro, and British pound sterling play a significant role in determining economic parameters of many
economic transactions carried out in Russia. The table below shows the CBR exchange rates of RUB relative to USD and EUR:
Date
USD
EUR
GBP
31 December 2021
74.2926
84.0695
100.0573
31 December 2020
73.8757
90.6824
100.0425
31 December 2019
61.9057
69.3406
81.146
31 December 2018
69.4706
79.4605
88.2832
31 December 2017
57.6002
68.8668
77.6739
Management takes all necessary measures to ensure the
sustainability of the Group’s operations. However, the future
impact of the current economic situation is difficult to predict and
management’s current expectations and estimates may differ from
actual results.
For the purpose of estimating expected credit losses, the Group uses
forward-looking information, including projections of macroeconomic
variables. The Group takes these forecasts into account when
providing its best estimate of outcomes. However, as with any
economic forecast, the projections and likelihoods of their occurrence
are subject to a high degree of inherent uncertainty and therefore the
actual outcomes may be significantly different from those projected.
Note 6 provides additional information on how the Group incorporates
forward-looking information in its expected credit loss models.
Functional and presentation currency
The functional currency is the currency that mainly influences sales
prices for goods and services (this will often be the currency in which
sales prices for goods and services are denominated and settled) and
which mainly influences labour, material and other costs of providing
goods or services (this will often be the currency in which such costs
are denominated and settled). The Group’s functional currency is the
Russian rouble.
The presentation currency is the currency in which financial
statements are presented.
The consolidated financial statements are presented in British pounds
sterling. The reasons why the functional currency differs from the
presentation currency are the consolidation of Subsidiary’s financial
statements with the parent Company accounts which have been
presented in GBP and investors’ interests.
3. Basis of Presentation
General principles
The consolidated financial statements of the Group are prepared in
accordance with UK-adopted International Accounting Standards.
The Group maintains its records in compliance with the applicable
legislation of the United Kingdom. These financial statements have
been prepared on the basis of those accounting records and adjusted
as necessary in order to comply, in all material respects, with UK-
adopted International Accounting Standards.
On 1 January 2021, IFRS as adopted by the European Union at that
date was brought into UK law and became UK-adopted International
Accounting Standards, with future changes being subject to
endorsement by the UK Endorsement Board. The Company transitioned
to UK-adopted International Accounting Standards in its consolidated
financial statements on 1 January 2021. This change constitutes a change
in accounting framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of the
change in framework
Going concern
These consolidated financial statements reflect the Group
management’s current assessment of the impact of the Russian
business environment on the operations and the financial position of
the Group. The future economic direction of the Russian Federation is
largely dependent upon the effectiveness of measures undertaken by
the RF Government and other factors, including regulatory and political
developments which are beyond the Group’s control. The Group’s
management cannot predict what impact these factors will have
on the Group’s financial position in future. As a result, adjustments
related to this risk have not been included in the accompanying
financial statements.
As at 31 December 2021, the Group has an accumulated deficit of
GBP 37,579,961 (2020: GBP 38,262,611), and incurred a net profit of GBP
682,650 during the year ended 31 December 2021 (2020: net loss GBP
614,519).
The Group’s business activities together with the factors likely to
affect its future development, performance and position are set out
in the Chairman’s Statement on page [10] and Chief Executive Review
on page [11]. In addition, Note 3 to the Financial Statements includes
the Group’s objectives, policies and processes for managing its capital;
its financial risk management objectives; details of its financial
instruments and its exposure to credit and liquidity risk.
The Financial Statements have been prepared on a going concern
basis. The Directors have prepared cash flow forecasts for the 12
months from the date of signing of these Financial Statements. There
exists uncertainty as to the future impact of the COVID-19 pandemic
as well as the potential impact on the Group from any sanctions
that might be imposed as a result of the EU, USA and UK regarding
the “special military operation” currently underway in Ukraine. Both
of these have been considered as part of the Group’s adoption of
the going concern basis. The Board considers the pandemic has not
materially and/or adversely affected the prospects of the business as
of the date of this report, although any future impact, should further
waves of the pandemic occur and further measures be implemented,
remains hard to quantify.
Whilst it is the current view of the Directors that the sanctions in
place within Russia do not materially impact the Group, it is a very fast
moving situation with sanctions changing rapidly and therefore there
remains a risk to the business predominantly around the access of
banks not linked to the Russian state and businesses not linked to
the state operating in Russia maintaining access to the international
banking system and specifically SWIFT as well as any capital controls
within Russia as a result of the potentially deteriorating economic
situation driven by the sanctions. Both access to SWIFT and potential
and current capital controls could restrict the ability of Subsidiary
to remit dividends and management fees to the parent Company,
therefore creating a material risk to the ability of the Company to
continue as a going concern. The Group has minimised this risk by
reducing expenditure to allow time for the situation to normalise,
however should these set of circumstances continue for an extended
period of time then the group would have to find alternative sources
of finance to fund the ongoing expenditure within the parent Company.
The Directors formed a judgement at the time of approving the
Consolidated Financial Statements that although the operating
Subsidiary is operating profitably and generating free cash there
exists a material uncertainty regarding the Company’s ability to
operate as a going concern. The Directors have plans to mitigate
such risk including obtaining alternative sources of capital and have
a reasonable expectation that these plans would be successful and
therefore continue to adopt the going concern basis in preparing the
Consolidated Financial Statements.
The CBR sets the minimum mandatory liquidity ratio at over 70%. The
Subsidiary meets the mandatory liquidity ratio: as of 31 December 2021,
181.89% (not audited) and 31 December 2020, 153.74% (not audited).
As a result of considerations noted above, the Directors have a
reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing these Consolidated Financial Statements.
Basis of consolidation and business acquisitions
On 18 September 2019 Company acquired the entire issued share
capital of Zaim-Express (LLC) by way of a share for share exchange.
The transaction was treated as a reverse acquisition and was
accounted for using the merger accounting method as the entities
were under common control before and after the acquisition.
A Subsidiary is an entity controlled by the Group. Control is achieved
when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The Group considers all relevant facts and circumstances in assessing
whether it has power over an investee, including:
y
the contractual arrangement with the other vote holders of the
investee;
y
rights arising from other contractual arrangements.
y
the Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income, and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.
Other than for the acquisition of the Subsidiary as noted above,
the Group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets transferred,
the liabilities incurred, and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values as at the acquisition date. Acquisition-related costs are
expensed as incurred unless they result from the issuance of shares,
in which case they are offset against the premium on those shares
within equity.
If an acquisition is achieved in stages, the acquisition date carrying
the value of the acquirer’s previously held equity interest in the
acquiree is remeasured to its fair value at the acquisition date
through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be
an asset or a liability is recognised in accordance with IFRS9 either
in profit or loss or as a change in other comprehensive income. The
unwinding of the discount on contingent consideration liabilities
is recognised as a finance charge within profit or loss. Contingent
consideration that is classified as equity is not remeasured, and its
subsequent settlement is accounted for within equity.
The excess of the consideration transferred and the fair value as at
the acquisition date of any previous equity interest in the acquiree
over the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair value of
the net assets of the subsidiary acquired in the case of a bargain
purchase, the difference is recognised directly in profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost less impairment.
Subsidiaries and Acquisitions
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
recognised where an investor is expected, or has rights, to variable
returns from its investment with the investee, and has the ability to
affect these returns through its power over the investee. Based on
the circumstances of the acquisition an assessment will be made
as to whether the acquisition represents an acquisition of an asset
or the acquisition of business. In the event of a business acquisition,
the assets, liabilities and contingent liabilities of a subsidiary are
measured at their fair value at the date of acquisition. Any excess of
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the cost of the acquisition over the fair values of the identifiable net
assets acquired is recognised as a “fair value” adjustment.
If the cost of the acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly
in profit or loss. In the event of an asset acquisition, assets and
liabilities are assigned a carrying amount based on relative fair value.
The results of subsidiaries acquired or disposed of during the year
are included in the statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies into line with those
used by the Group.
Contingent consideration as a result of business acquisitions is
included in the cost at its acquisition date assessed value and, in
the case of contingent consideration classified as a financial liability,
remeasured subsequently through profit and loss.
Critical Accounting Estimates and Judgments in
Applying Accounting Policies
The Group makes estimates and assumptions that affect the amounts
recognised in the financial statements and the carrying amounts of
assets and liabilities in the next financial year. Judgements that have
the most significant effect on the amounts recognised in the financial
statements and estimates that can cause a significant adjustment to
the carrying amount of assets and liabilities in the next financial year
include:
Fair value of financial instruments
Information on the fair value of financial instruments measured on the
basis of assumptions that use observable market prices is disclosed
in Note 23.
ECL measurement
Calculation and measurement of ECLs is an area of significant
judgement and involves methodology, models and data inputs. The
methodology used by the Group for assessment of expected credit
losses is disclosed in Note 6. The following components of ECL
calculation have a major impact on the allowance for ECLs: default
definition, significant increase in credit risk (SICR), probability of
default (PD), exposure at default (EAD), loss given default (LGD), macro-
models and scenario analysis for impaired loans. The Group regularly
reviews and validates models and inputs to the models to reduce any
differences between expected credit loss estimates and actual credit
loss experience.
Significant increase in credit risk (SICR)
In order to determine whether there has been a significant increase
in credit risk, the Group compares the risk of a default occurring
over the expected life of a financial instrument at the reporting
date with the risk of default at the date of initial recognition. IFRS
9 requires an assessment of relative increases in credit risk rather
than the identification of a specific level of credit risk at the reporting
date. In this assessment, the Group considers a range of indicators,
including behavioural indicators based on historical information as
well as reasonable and supportable forward-looking information
available without undue cost and effort. The most significant
judgments include identifying behavioural indicators of increases in
credit risk prior to default and incorporating appropriate forward-
looking information into the assessment, either at an individual
instrument, or on a portfolio level.
Due to the coronavirus pandemic, the Group updated the prospective
information used in the models intended for the assessment of
expected credit losses and reassessed the Probability of default
during the 12 months for adequate reflection of the uncertainties
caused by the decrease in market prices and the spread of the
COVID-19 pandemic, taking into account:
y
GDP drop and decline in income of individuals due to restricted
economic activity;
y
state support measures;
y
real wage level;
y
real disposable income of the population.
Determining business model and applying SPPI test
In determining the appropriate measurement category for debt
financial instruments, the Group applies two approaches: a business
model assessment for managing the assets and the SPPI test based
on contractual cash flow characteristics on initial recognition to
determine whether they are solely payments of principal and interest.
The business model assessment is performed at a certain level
of aggregation and the Group will need to apply judgement to
determine the level at which the business model condition is
applied.
The assessment of the SPPI criterion performed on initial recognition
of financial assets involves the use of significant estimates in
quantitative testing and requires considerable judgement in
determining whether quantitative testing is required, what scenarios
are reasonably possible and should be considered, and in interpreting
the outcomes of quantitative testing (i.e. determining what represents
a significant difference in cash flows).
Substantial modification of financial assets
When the contractual terms of financial assets are modified (e.g.
renegotiated), the Group assesses whether the modification is
substantial and should result in derecognition of the original asset
and recognition of a new asset at fair value. This assessment is based
primarily on qualitative factors described in the relevant accounting
policy and requires significant judgment.
Recognition of a deferred tax asset
The recognised deferred tax asset represents the amount of income
tax that can be offset against future income taxes and is recognised
in the statement of financial position. A deferred tax asset is
recognized only to the extent that realisation of the related tax benefit
is probable. The future taxable profits and the amount of tax benefits
that are probable in the future are based on medium-term forecasts
prepared by management.
Changes in accounting policies
For accounting periods beginning on or after 1 January 2021, the
following amendments to the standards have entered into force:
y
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest
Rate Benchmark Reform – Phase 2;
y
Amendments to IFRS 16 Leases - Covid-19-Related Rent
Concessions beyond 30 June 2021.
These amendments to the standards did not have a significant impact
on the financial statements.
The IASB has issued a number of standards and amendments to
standards that will be effective in future reporting periods and are not
early adopted by the Company. The most significant of them are the
following:
y
Amendments to IFRS 16 Leases - COVID-19-Related Rent
Concessions (effective for annual periods beginning on or after 1
June 2020);
y
IBOR Reform and its Effects on Financial Reporting – Phase 2
(effective 1 January 2021);
y
Annual improvements to IFRSs – 2018-2020 Cycle (effective 1
January 2022);
y
Amendments to IAS 16 Property, Plant and Equipment - Proceeds
before Intended Use (effective 1 January 2022);
y
Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets - Onerous Contracts – Cost of Fulfilling a
Contract (effective 1 January 2022);
y
IFRS 17 Insurance Contracts (effective 1 January 2023);
y
Amendments to IAS 1 Presentation of Financial Statements and
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors - Classification of Liabilities as Current or Non-Current
(effective 1 January 2023).
Unless otherwise described above, the new standards and
interpretations are not expected to significantly impact the Group’s
financial statements.
4. Summary of Significant Accounting Policies
Fair value measurement
The fair value is the price that would be received when selling an
asset, or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date
under current market conditions (i.e. an exit price) regardless of
whether that price is directly observable or estimated using another
valuation technique.
All assets and liabilities for which a fair value is recognised or
disclosed are categorised within the fair value hierarchy, described
as below, based on the lowest level input that is significant to the fair
value measurement as a whole:
y
Level 1 — quoted market prices in an active market (that are
unadjusted) for identical assets or liabilities;
y
Level 2 — valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable;
y
Level 3 — valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable.
For assets and liabilities that are remeasured in the financial
statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between the Levels in the hierarchy
by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of
each reporting period.
For the purpose of fair value disclosures, the Group has determined
classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the
fair value hierarchy as explained below (Note 23).
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, current accounts
and deposits with banks with original maturity of three months or
less. Cash and cash equivalents are stated at amortised cost in the
statement of financial position.
Financial instruments
Key measurement terms
Depending on their classification, financial instruments are carried at
fair value or amortised cost, as described below.
Fair value is the price that would be received when selling an asset,
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value measurement
assumes that the transaction to sell the asset or transfer the liability
takes place in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market for the
asset or liability. Fair value is the current bid price for financial assets
or current ask price for financial liabilities.
Amortised cost is the amount at which the financial asset or financial
liability is measured at initial recognition minus principal repayments,
plus or minus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the maturity
amount, and for financial assets, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised cost
of a financial asset, before adjusting for any expected credit loss
allowance.
The effective interest method is a method of calculating the amortised
cost of a financial asset or a financial liability and of allocating or
recognising the interest income or interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts over the expected life of
the financial asset or financial liability to the gross carrying amount of
the financial asset or to the amortised cost of a financial liability. When
calculating the effective interest rate, the Group shall estimate cash
flows considering all contractual terms of the financial instrument but
shall not consider future credit losses. The calculation includes all fees
and points paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs, and
all other premiums or discounts. There is a presumption that the cash
flows and the expected life of a group of similar financial instruments
can be estimated reliably. However, in those rare cases when it is not
possible to estimate reliably the cash flows or the expected life of a
financial instrument, the Group shall use the contractual cash flows
over the full contractual term of the financial instrument.
Initial recognition of financial instruments
The Group recognises financial assets and financial liabilities in
its statement of financial position when it becomes a party to the
contractual obligations of the respective financial instrument. The
regular way the purchase and sale of the financial assets and liabilities
is recognised is by using settlement date accounting.
Classification and measurement of financial
instruments
The Group classifies financial assets into the following categories:
y
financial assets at fair value through profit or loss;
y
financial assets at fair value through other comprehensive
income;
y
financial assets measured at amortised cost.
Classification and subsequent measurement of debt financial assets
depends on:
1.
the business model used by the Group to manage the asset; and
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2.
characteristics of cash flows on the asset.
The business model is determined for a group of assets (on a portfolio
basis) based on all relevant evidence of activities that the Group
intends to undertake to achieve the objectives set out for the portfolio
available as at the measurement date.
Loans to customers meeting the SPPI criterion are held for the
purpose of collecting contractual cash flows and are carried at
amortised cost.
Reclassifications
Financial assets are not reclassified after initial recognition unless the
Group has changed its business model for managing financial assets.
Financial liabilities are not reclassified after initial recognition.
Derecognition
A financial asset is derecognised where:
y
the rights to receive cash flows from the asset have expired;
y
the Group has transferred its rights to receive cash flows from
the asset, or retained the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party;
y
the Group either has transferred substantially all the risks and
rewards of the asset or has neither transferred nor retained
substantially all the risks and rewards of the asset but has
transferred control of the asset. If the transferee has no
practical ability to sell the asset in its entirety to an unrelated
third party without needing to impose additional restrictions on
the transfer, the entity has retained control.
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires.
Loans to customers and other loans issued
Based on cash flow characteristics, the Group classifies loans and
advances to customers and other loans issued into the measurement
category:
1.
at amortised cost: loans held to collect contractual cash flows,
if these cash flows are SPPI and are not classified at fair value
through profit or loss, are measured at amortised cost;
Loans to customers are recorded when cash is advanced to
borrowers. Impairment of loans at amortised cost or at FVOCI is
assessed using a forward-looking ECL model. The Group does not
acquire loans from third parties.
Impairment of financial assets: ECL allowance
The Group assesses, on a forward-looking basis, the ECL for debt
instruments measured at amortised cost and FVOCI and for the
exposures arising from credit related commitments and financial
guarantee contracts. The Group measures ECL and recognises credit
loss allowances at each reporting date. The measurement of ECL
reflects:
i.
an unbiased and probability weighted amount that is determined
by evaluating a range of possible outcomes;
ii.
time value of money, and;
iii.
all reasonable and supportable information that is available
without undue cost and effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
Debt instruments measured at amortised cost are presented in the
statement of financial position net of the ECL allowance.
The Group applies a three-stage model for impairment, based on
changes in credit quality since initial recognition, in accordance with
IFRS 9.
1.
A financial instrument that is not credit-impaired on initial
recognition is classified into Stage 1. Financial assets in Stage 1
have their ECL measured at an amount equal to the portion of
lifetime ECL that results from default events possible within the
next 12 months (12m ECL).
2.
If the Group identifies a significant increase in credit risk (SICR)
since initial recognition, the asset is transferred to Stage 2 and
its ECL is measured based on a lifetime basis (lifetime ECL).
Refer to Note 3 for a description of how the Group determines
when a SICR has occurred.
3.
If the Group determines that a financial asset is credit-impaired,
the asset is transferred to Stage 3 and its ECL is measured as
a lifetime ECL. Assets that are more than 60 days past due are
considered to be defaulted.
For financial assets that are purchased or originated credit-impaired
(POCI assets), the ECL is always measured as a lifetime ECL.
Note 6 provides information about inputs, assumptions and estimation
techniques used in measuring ECL, including an explanation of how the
Group incorporates forward-looking information in the ECL models.
Modification of financial assets
Sometimes the Group reviews or otherwise modifies the contractual
terms of financial assets. The Group estimates that the modification
of contractual cash flows is significant taking into account, among
other factors: the existence of new contractual terms that indicate a
significant change in interest rates, which have a significant effect on
the credit risk associated with the asset, a significant extension of the
loan term in cases where the borrower is in financial difficulty.
If the modified terms significantly differ so that the rights to
cash flows from the original asset are deemed expired, the Group
derecognizes the original financial asset and recognizes the new asset
at fair value. The date of renegotiation is considered to be the date
of initial recognition for impairment calculation purposes, including
determination of whether credit risk has increased significantly. The
Group also evaluates the compliance of the new loan with the criterion
of making payments solely against principal and interest. In situations
where the renegotiation was caused by the debtor’s financial
difficulties and inability to make the originally agreed payments, the
Group assesses whether the modified loan is considered impaired on
initial recognition. The difference in the carrying amount is recognised
in profit or loss.
If the conditions of the modified asset do not differ significantly, the
modification does not result in derecognition. The Group restates its
gross carrying amount based on revised cash flows by discounting
the modified cash flows at the original effective interest rate (or
credit-adjusted effective interest rate for purchased or originated
credit-impaired financial assets) and recognises a gain or loss on
modification in profit or loss.
Loans received
Loans received include loans received from the participant and are
carried at amortised cost.
Property and equipment
Property and equipment are stated at cost, less accumulated
depreciation and impairment allowance.
At the end of the reporting period the Group assesses whether there
is any indication of impairment of property and equipment. If such
an indication exists, the Group estimates the recoverable amount,
which is determined as the higher of an asset’s fair value less costs
to sell or its value in use. Where the carrying amount of property
and equipment is greater than their estimated recoverable amount,
it is written down to their recoverable amount and the difference is
charged as impairment loss to the statement of profit or loss and
other comprehensive income.
Gains and losses on disposal of property and equipment are
determined by reference to their carrying amount and recorded
as operating expenses in the statement of profit or loss and other
comprehensive income.
Repairs and maintenance are charged to the statement of profit or
loss and other comprehensive income when the expense is incurred.
Depreciation
Depreciation of an asset begins when it is available for use.
Depreciation is charged on a straight-line basis over the following
useful lives of the assets:
y
Equipment – 2-7 years.
Lease
The Group classifies its lease agreements as finance or operating
leases.
The right-of-use asset and the lease liability are recognized by the
lessee at the lease commencement date.
The original cost of the right-of-use asset includes the following:
y
the amount of the initial measurement of the lease liability;
y
lease payments at or before the lease commencement date less
any;
y
lease incentives received;
y
any initial direct costs incurred by the Group; and
y
an estimate of costs to be incurred by the lessee in dismantling,
removing, restoring the site or restoring the underlying asset to
the condition required by terms of the lease, unless those costs
are incurred to produce inventories.
The right-of-use asset shall be amortised on a straight-line basis over
the shorter of the asset’s useful life and the lease term.
At the lease commencement date, the Group measures the lease
liability at the present value of the lease payments that have not
yet been made at that date. Lease payments shall be discounted
using the interest rate implicit in the lease if that rate can be easily
determined. If such rate cannot be easily determined, the Group uses
the incremental borrowing rate at the lease commencement date.
If finance lease agreements provide for lease extension options, the
Group plans to use these options for 3 years.
At the lease commencement date, lease payments that are included
in the measurement of the lease liability consist of the following
payments for the right to use the underlying asset during the lease
term that have not yet been made at the lease commencement date:
y
fixed payments (including in-substance fixed payments) less any
lease incentives receivable;
y
variable lease payments that depend on an index or rate,
initially measured using an index or a rate as at the lease
commencement date;
y
the amounts expected to be payable by the lessee under the
residual value guarantees;
y
the exercise price of a purchase option that the lessee is
reasonably certain to exercise; and
y
payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the lease.
After initial recognition, the right-of-use assets related to property,
plant and equipment shall be measured by the Group using the
historical cost model less accumulated depreciation and accumulated
impairment losses.
A right-of-use asset shall be assessed for impairment at the end of
each reporting year in accordance with IAS 36 Impairment of Assets.
After initial recognition, the lease liability shall be increased by the
amount of accrued interest and decreased by the amount of lease
payments paid.
The carrying amount of the lease liability shall be remeasured, if
there is a change in future lease payments resulting from changes in
an index or a rate, there is a change in the amounts expected to be
payable under a residual value guarantee, or, as appropriate, there is a
change in the assessment of whether it is reasonably certain that the
purchase option or the lease extension option will be exercised, or that
the lease termination option will not be exercised. The lease liability
shall be remeasured to reflect changes in lease payments.
When determining the lease term, the following periods shall be
considered, as well as the Group’s management’s assessment of the
probability that lease extension options and lease termination options
will be exercised:
y
the non-cancellable period of lease not subject to early
termination;
y
periods covered by an extension option if exercise of that option
by the lessee is reasonably certain;
y
periods covered by a termination option if the lessee is
reasonably certain not to exercise that option.
As at the reporting date, right-of-use assets are disclosed in the
“Right-of-use assets” line item of the statement of financial position.
Lease liabilities are disclosed in the “Lease liabilities” line item of
the statement of financial position. Finance costs are disclosed in
the “Interest expense - lease liabilities” line item of the statement
of profit or loss and other comprehensive income to provide a fixed
periodic interest rate on the remaining lease liability for each period.
Depreciation of right-of-use assets is disclosed in the “Operating
expenses” line item in the statement of profit or loss and other
comprehensive income. The cash outflow on the lease interest repaid
is disclosed in the “Cash from operating activities” section of the
statement of cash flows, and the amount of cash paid to repay the
principal is disclosed in the “Cash from financing activities” section of
the statement of cash flows.
Operating lease - the Group as lessee
A lease is classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to ownership.
The underlying asset is classified as a low-value asset based on
professional judgement.
Payments for short-term leases and low-value asset leases are
recognised as expenses on a straight-line basis over the lease term
and included into operating expenses in the statement of profit or
loss and other comprehensive income. A short-term lease has a lease
term of 12 months or less. Low-value assets represent leased property
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with the value not exceeding the value limit determined by the Group’s
accounting policy.
Lease payments under short-term leases or leases where the
underlying asset is of low value are recognized as an expense over the
lease term.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, and it is probable
that an outflow of resources embodying future economic benefits
will be required to settle the obligation, and a reliable estimate of the
amount of the obligation can be made.
Taxation
The income tax charge/recovery comprises current tax and deferred
tax and is recorded in the statement of profit or loss and other
comprehensive income. Income tax expense is recorded in the
financial statements in accordance with the applicable legislation
of the Russian Federation. Current tax is calculated on the basis of
the estimated taxable profit for the year, using the tax rates enacted
during the reporting period.
Current tax is the amount expected to be paid to or recovered from
the taxation authorities in respect of taxable profits or losses for
the current or prior periods. Tax amounts are based on estimates if
financial statements are authorised prior to filing relevant tax returns.
Deferred income tax is provided using the balance sheet liability
method for tax losses carried forward and temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts for financial statement purposes.
Income and expense recognition
Interest income and expenses are recorded in the statement of profit
or loss and other comprehensive income for all debt instruments on
an accrual basis using the effective interest method. The effective
interest method is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash
payments or receipts over the expected life of the financial instrument
to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group estimates cash
flows considering all contractual terms of the financial instrument
but does not consider future credit losses. The calculation includes all
commissions and fees paid or received by the parties to the contract
that are an integral part of the effective interest rate, transaction
costs, and all other premiums or discounts.
When loans become doubtful of collection, they are written down
to their recoverable amounts and interest income is thereafter
recognised based on the rate of interest that was used to discount
the future cash flows for the purpose of measuring the recoverable
amount.
Employee benefits and social insurance
contributions
The Group pays social insurance contributions predominantly in the
Russian Federation. Social insurance contributions are recorded on an
accrual basis and comprise contributions to the Russian Federation
state pension, social insurance, and obligatory medical insurance
funds in respect of the Group’s employees. The Group does not have
pension arrangements separate from the state pension system of
the Russian Federation. Wages, salaries, contributions to the Russian
Federation state pension and social insurance funds, paid annual
leaves and paid sick leaves, bonuses and non-monetary benefits are
accrued as the Group’s employees render the related service.
Foreign currency
(a) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Gains and losses on purchase and sale of foreign currency are
determined as a difference between the selling price and the carrying
amount at the date of the transaction.
(b) Group companies
The results and financial position of all the Group’s entities that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
1.
assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of the
statement of financial position;
2.
each component of profit or loss is translated at average
exchange rates during the accounting period (unless this average
is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions);
and
3.
all resulting exchange differences are recognised in other
comprehensive income.
5. Cash and Cash Equivalents
Group
2021
2020
Cash on hand
25,429
30,811
Accounts with other banks
1,448,480
610,060
Total cash and cash equivalents
1,473,909
640,871
Company
2021
2020
Accounts with other banks
211,833
161,163
Total cash and cash equivalents
211,833
161,163
As at 31 December 2021, the Group has 2 counterparties (2020: 2
counterparties) with balances exceeding 10% of total cash and cash
equivalents in the amount of GBP 1,175,168 (2020: GBP 524,431).
The table below presents the credit quality analysis of cash and cash
equivalents based on credit risk levels as at 31 December 2021.
Group
Accounts with other banks
Total
Minimum credit risk
1,448,480
1,448,480
Total cash and cash equivalents, less cash on hand
1,448,480
1,448,480
Company
Accounts with other banks
Total
Minimum credit risk
211,833
211,833
Total cash and cash equivalents, less cash on hand
211,833
211,833
The table below presents the credit quality analysis of cash and cash equivalents based on credit risk levels as at 31 December 2020.
Group
Accounts with other RF banks
Total
Minimum credit risk
610,060
610,060
Total cash and cash equivalents, less cash on hand
610,060
610,060
Company
Accounts with other RF banks
Total
Minimum credit risk
161,163
161,163
Total cash and cash equivalents, less cash on hand
161,163
161,163
For the purpose of assessing expected credit losses, cash and cash
equivalent balances are included in Stage 1. The expected credit
losses on these balances represent insignificant amounts, therefore,
the Group does not create an ECL allowance for cash and cash
equivalents.
Below is the credit quality analysis of cash and cash equivalents
as at 31 December 2021 in accordance with ratings of international
agencies:
Group
Fitch A+
Fitch BB+
S&P BBB-
No rating assigned
Total
Accounts with other banks
107,883
103,950
39,353
1,197,294
1,448,480
Total
107,883
103,950
39,353
1,197,294
1,448,480
Company
Fitch A+
Fitch BB+
S&P BBB-
No rating assigned
Total
Accounts with other banks
107,883
103,950
-
-
211,833
Total
107,883
103,950
-
-
211,833
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Below is the credit quality analysis of cash and cash equivalents as at 31 December 2020 in accordance with ratings from international agencies:
Group
Fitch A+
Fitch BB
S&P from BB- to BB+
No rating assigned
Total
Accounts with other banks
54,936
-
-
555,124
610,060
Total
54,936
-
-
555,124
610,060
Company
Fitch A+
Fitch BB
S&P from BB- to BB+
No rating assigned
Total
Accounts with other banks
54,936
-
-
106,227
161,163
Total
54,936
-
-
106,227
161,163
6. Loans to Customers
Group
2021
2020
Loans to customers
36,469,024
28,298,290
Less: ECL allowance
(33,644,307)
(27,028,977)
Total loans to customers at amortised cost
2,824,717
1,269,313
Company
2021
2020
Loans to customers
-
-
Less: ECL allowance
-
-
Total loans to customers at amortised cost
-
-
Below is analysis of movements in the ECL allowance during 2021 (by type of loans specified in the first table of the Note):
Group
Stage 1
Stage 2
Stage 3
Total
ECL allowance as at 1 January 2021
201,494
589,300
26,238,183
27,028,977
Assets recognised for the period
5,559,270
-
-
5,559,270
Assets derecognised or collected
(3,885,890)
(179,317)
(998,466)
(5,063,672)
Transfers to Stage 2
(323,372)
323,372
-
-
Transfers to Stage 3
(1,153,409)
(402,417)
1,555,826
-
Net loss on ECL allowance charge/(reversal)
15,908
673,753
5,350,048
6,039,709
Effect of exchange rate differences
2,702
5,253
72,068
80,024
ECL allowance as at 31 December 2021
416,703
1,009,944
32,217,660
33,644,307
Analysis of movements in the ECL allowance during 2020 is as follows:
Group
Stage 1
Stage 2
Stage 3
Total
ECL allowance as at 1 January 2020
128,028
288,985
30,874,790
31,291,804
Assets recognised for the period
697,907
-
-
697,907
Assets derecognised or collected
(47,273)
(33,654)
(629,075)
(710,002)
Transfers to Stage 2
(189,937)
189,937
-
-
Transfers to Stage 3
(355,164)
(187,618)
542,782
-
Net loss on ECL allowance charge/(reversal)
-
414,887
1,377,954
1,792,841
Effect of exchange rate differences
(32,067)
(83,237)
(5,928,268)
(6,043,572)
ECL allowance as at 31 December 2020
201,494
589,300
26,238,183
27,028,977
The ECL allowance for loans and advances to customers recognised during the period is impacted by various factors. The table below describes
the main changes:
y
transfers between Stages 1 and 2 and Stage 3 due to significant
increases (or decreases) in credit exposure or impairment during
the period and subsequent increases (or decreases) in the
estimated ECL level: for 12 months or over the entire period;
y
accrual of additional allowances for new financial instruments
recognised during the period, as well as reduction in the
allowance as a result of derecognition of financial instruments
during the period;
y
impact on ECL estimation due to changes in model assumptions,
including changes in the probability of default, EAD and LGD
during the period resulting from regular updating of the model
inputs.
Following is the credit quality analysis of loans to customers as at 31 December 2021:
Group
Stage 1
Stage 2
Stage 3
Total
Loans to customers
Minimum credit risk
2,424,558
-
-
2,424,558
Low credit risk
-
134,596
-
134,596
Moderate credit risk
-
994,691
-
994,691
High credit risk
-
697,520
-
697,520
Defaulted assets
-
-
32,217,660
32,217,660
Total loans to customers before allowance
2,424,558
1,826,807
32,217,660
36,469,024
ECL allowance
(416,703)
(1,009,944)
(32,217,660)
(33,644,307)
Total loans to customers after ECL allowance
2,007,855
816,863
-
2,824,717
Following is the credit quality analysis of loans to customers as at 31 December 2020:
Group
Stage 1
Stage 2
Stage 3
Total
Loans to customers
Minimum credit risk
1,222,507
-
-
1,222,507
Low credit risk
-
177,117
-
177,117
Moderate credit risk
-
388,723
-
388,723
High credit risk
-
271,760
-
271,760
Defaulted assets
-
-
26,238,183
26,238,183
Total loans to customers before allowance
1,222,507
837,600
26,238,183
28,298,290
ECL allowance
(201,494)
(589,300)
(26,238,183)
(27,028,977)
Total loans to customers after ECL allowance
1,021,012
248,300
-
1,269,313
The ECL allowance for loans to customers recognized during
the period is impacted by different factors. Information on the
assessment of expected credit losses is disclosed in Note 3.
The Group uses the following approach to measurement of expected
credit losses:
1.
portfolio-based measurement: internal ratings are assigned
individually, but the same credit risk parameters (e.g. PD, LGD)
are applied to similar credit risk ratings and homogeneous credit
portfolio segments in the process of ELC estimation.
This approach provides for aggregation of the portfolio into
homogeneous segments on the basis of specific information on
borrowers, such as delinquent loans, historic data on prior period
losses and forward-looking macroeconomic information.
The amounts of loans recognised as “past due” represent the entire
balance of such loans rather than the overdue amounts of individual
payments.
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7. Lease
The Group has agreements for lease of premises.
The Group did not apply a simplified approach to recognise lease
modifications allowed due to the COVID-19 pandemic.
The carrying amount of right-of-use assets and its movements during
the period are presented below:
Group
Real Estate
Total
As at 1 January 2021
297,925
297,925
Depreciation charge
(220,267)
(220,267)
Modifications and remeasurement
474,131
474,131
Derecognition
(15,105)
(15,105)
Effect of translation into presentation currency
3,026
3,026
As at 31 December 2021
539,709
539,709
Group
Real Estate
Total
As at 1 January 2020
2,549,233
2,549,233
Depreciation charge
(661,165)
(661,165)
Modifications and remeasurement
(248,309)
(248,309)
Derecognition
(1,003,208)
(1,003,208)
Effect of translation into presentation currency
(338,626)
(338,626)
As at 31 December 2020
297,925
297,925
The carrying amounts of lease liabilities and their movements during the period are set out below:
Group
Lease liabilities
Real Estate
Total
As at 1 January 2021
347,216
347,216
Interest expense on lease liabilities
15,228
15,228
Lease payments
(276,786)
(276,786)
Modifications and remeasurement
462,305
462,305
Derecognition
(16,596)
(16,596)
Effect of translation into presentation currency
2,316
2,316
As at 31 December 2021
533,683
533,683
Group
Lease liabilities
Real Estate
Total
As at 1 January 2020
2,555,648
2,555,648
Interest expense on lease liabilities
92,442
92,442
Lease payments
(628,563)
(628,563)
Modifications and remeasurement
(248,309)
(248,309)
Derecognition
(1,080,605)
(1,080,605)
Effect of translation into presentation currency
(343,397)
(343,397)
As at 31 December 2020
347,216
347,216
The Group exercises options to extend signed lease agreements for
at least 3 years given the ongoing profitability of the loan outlet (in
the ordinary course of business). During the current period, the Group
exercised lease termination options. There were no early termination
penalties under these agreements.
8. Other Assets
Group
2021
2020
Other financial assets
Other loans issued to parent company
275,565
45,745
Settlements for rendered services
129,859
26,448
Total other financial assets
405,424
72,193
Group
2021
2020
Other non-financial assets
Lease prepayments
24,062
23,062
Settlements with suppliers
29,614
35,211
Taxes other than income tax
5,400
110,980
Other receivables
12,049
32,001
Less: impairment allowance
(20,971)
(22,149)
Total other non-financial assets
50,154
179,104
Total other assets
455,579
251,297
Company
2021
2020
Other financial assets
Other loans issued to related parties
130,076
45,745
Less: impairment allowance
-
-
Total other financial assets
130,076
45,745
Company
2021
2020
Other non-financial assets
Taxes other than income tax
-
80,732
Less: impairment allowance
-
-
Total other non-financial assets
-
80,732
Total other assets
130,076
126,477
Analysis of movements in the impairment allowance for non-financial assets during 2021 is presented below:
Group
Non-financial assets
Total
Impairment allowance for other assets as at 1 January 2021
22,149
22,149
Impairment allowance charge during 2021
(1,160)
(1,160)
Effect of translation into presentation currency
(18)
(18)
Impairment allowance for other assets as at 31 December 2021
20,971
20,971
Analysis of movements in the impairment allowance for non-financial assets during 2020 is presented below:
Group
Non-financial assets
Total
Impairment allowance for other assets as at 1 January 2020
15,932
15,932
Impairment allowance charge during 2020
9,972
9,972
Effect of translation into presentation currency
(3,754)
(3,754)
Impairment allowance for other assets as at 31 December 2020
22,149
22,149
The Group has no collateral for impaired assets recognised within other assets.
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9. Loans Received
Group
2021
2020
Bank loans
803,772
-
Loan from related party
500,908
735,646
Total loans received
1,304,680
735,646
Company
2021
2020
Bank loan
-
-
Loan from related party
-
-
Total loans received
-
-
On December 31, 2020, the Group entered into an agreement changing
the terms of the loan - starting from January 2021, interest is accrued
on the specified debt at a rate of 13.42% per annum and the maturity
of the specified debt is prolonged until 31.12.2023.
In 2021, the Group attracted short-term funds in rubles - under loan
agreements with JSC NOKSSBANK at a rate of 15% per annum.
The following is a reconciliation between the movements in loans
received and issued and cash flows generated from financing
activities.
Loans attracted
As at 31 December 2019
742,603
Changes in financial flows
Loan received
259,266
Repayment of loans
(259,266)
Loan offset
(55,417)
Interest accrued
12,835
Interest paid
(12,835)
Foreign exchange differences
199,489
Effect of translation into presentation currency
(151,029)
As at 31 December 2020
735,646
Changes in financial flows
Loan received
1,578,786
Repayment of loans
(789,393)
Interest accrued
154,674
Interest paid
(325,578)
Foreign exchange differences
(56,570)
Effect of translation into presentation currency
7,116
As at 31 December 2021
1,304,680
10. Other Liabilities
Group
2021
2020
Other financial liabilities
Payables
437,712
326,692
Other settlements with customers on loan’s agreements
376,693
200,019
Other
10,245
7,195
Other non-financial liabilities
Taxes other than income tax
87,724
26,412
Income tax
63,237
-
Provision for unused vacations
122,447
104,353
Payables to employees and payroll related taxes
186,253
159,159
Total other liabilities
1,284,312
823,830
Company
2021
2020
Other financial liabilities
Payables
112,057
119,057
Other
27
27
Other non-financial liabilities
Payables to employees and payroll related taxes
85,002
67,655
Total other liabilities
197,086
186,739
11. Charter and Additional Capital, Other Reserves.
Earnings per Share
As at 31 December 2018, the Charter capital states the amount of
Share capital of the Subsidiary - the authorised capital represents the
contribution made by the sole participant of the Subsidiary.
During 2019 the reverse acquisition was stated in the consolidated
financial statements, as a result, the Charter capital as at 31
December 2019 states the Share capital of the legal parent Company,
totalling £4,369,750. All the shares issued have equal voting rights.
Below is a reconciliation of the movement in the legal parent Company
Share capital during 2019:
Group and Company Issued and fully paid
31 Dec 2018
Number
Amount, £
Ordinary shares of £0,01 each
6,000,000
60,000
6,000,000
60,000
For the year 2019 (Ordinary shares issue of £0.01 each):
Group and Company
Number
Amount, £
Consideration shares (acquisition of Subsidiary)
320,000,000
3,200,000
IPO
104,000,000
1,040,000
Fee shares
6,975,000
69,750
430,975,000
4,309,750
Group and Company
Issued and fully paid
31 Dec 2019
Number
Amount, £
Ordinary shares of £0.01 each
436,975,000
4,369,750
436,975,000
4,369,750
There are no changes in the structure and amount of the share capital
during 2020.
During the first half of 2021, Group has completed an equity fundraise
of £1,000,000 (gross) through the issue of 25,000,000 ordinary shares
at a price of 4.0 pence per ordinary share.
The Fundraise has been undertaken by way of a placing of new
ordinary shares of £0.01 par value in the share capital of the Group.
The Fundraise is to provide additional capital for expansion of the loan
portfolio and the development of new products.
Charter capital
Group
Issued and fully paid
Number
Amount, £
As at 31 Dec., 2020
Ordinary shares of £0.01 each
436,975,000
4,369,750
Issue of ordinary shares in 1H 2021
25,000,000
250,000
As at 31 December, 2021
461,975,000
4,619,750
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ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Additional Capital
As at 31 December 2018 the amount of Additional capital stated in the
agreement on in-kind contribution (debt on the loan) of the Subsidiary
was - £29,122,880.
Amounts of Additional capital as at 31 December 2018 were restated
as at the date of the agreement on in-kind contribution (debt on the
loan).
Group
Date of exchange rate for translation to
presentation currency
Amount in RUB
Exchange rate
Amount in GBP
29.12.2018
2,561,820,344
87.9659
29,122,880
Total additional capital at
31 December, 2018
29,122,880
As a result of the reverse acquisition, which was stated in the
consolidated financial statements in 2019, the Additional capital as at
31 December 2019 of the legal parent Company was £6,078,128.
Below there is reconciliation of movement in Additional capital (share
premium) of legal parent Company during 2019:
For the year 2019:
Group and Company
As at 1 January 2019
Amount, £
-
Premium arising on issue of ordinary shares
6,406,699
Issue costs
(328,570)
As at 31 December 2019
6,078,128
There are no changes in the structure and amount of additional
capital during 2020.
During the first half of 2021, Group has completed an equity fundraise
of £1,000,000 (gross) through the issue of 25,000,000 ordinary shares
at a price of 4.0 pence per ordinary share.
The Fundraise has been undertaken by way of a placing of new
ordinary shares of £0.01 par value in the share capital of the Group.
Group
Amount, £
As at 1 January 2021
6,078,128
Premium arising on issue of ordinary shares in 1H 2021
750,000
Issue costs
(72,500)
As at 31 December 2021
6,755,628
Other Reserves
Group
Shares to
be issued
Reserve
Merger
reserve
Share
option
reserve
Translation
reserve
As at 31 December 2019
-
23,764,800
166,883
4,457,788
Contingent consideration
800,000
-
-
-
Merger reserve
-
(800,000)
-
-
Share based payments
-
-
51,216
-
Translation differences
-
-
-
(67,563)
As at 31 December 2020
800,000
22,964,800
218,099
4,390,225
Merger reserve
-
-
-
-
Share based payments
-
-
30,047
-
Translation differences
-
-
-
21,764
As at 31 December 2021
800,000
22,964,800
248,146
4,411,989
The merger reserve as at 31 December 2019 arose on consolidation
as a result of merger accounting for the acquisition of the entire
issued share capital of the Subsidiary during 2019 and represents
the difference between the value of the share capital issued for the
acquisition of the Subsidiary and investments made in the Subsidiary
and that of the acquired share capital of the Subsidiary.
Share options reserve - this reserve represents cumulative share-
based payment expense for the Group’s share option schemes. See
Note 12 Share-based payments.
Shares to be issued Reserve - this reserve represents shares to be
issued in respect of contingent consideration, see note 26 Business
Combination for further details.
Currency translation differences relate to the translation of the
Subsidiary that have a functional currency different from the
presentation currency (refer Note 2). Movements in the translation
reserve are linked to the changes in the value of the Russian Ruble
against the Pound Sterling: the business of the Group is located in
Russian Federation, and the Subsidiary’s functional currency is the
Russian Ruble, which had substantial volatility against Sterling during
the year.
Accumulated deficit represents retained earnings.
Earnings per share. The basic earnings per share of 0.18p (2020 loss
per share: 0.14p) is calculated by dividing the profit/(loss) attributable
to owners of the parent by the weighted average number of ordinary
shares in issue during the year.
Group
2021
2020
Profit attributable to owners of the parent
Weighted average number of ordinary shares in issue
450,125,685
436,975,000
The diluted earnings per share for the years ended 31 December
2021 are 0.16p. The diluted earnings per share is calculated by diving
the profit attributable to owners of the parent by weighted average
number of ordinary shares in issue outstanding for the effects of all
dilutive potential ordinary shares.
The basic and diluted loss per share for the years ended 31 December
2020 are the same as the year 2020 result was a loss, the options and
warrants outstanding would be anti-dilutive. Therefore, the dilutive
loss per share for the year 2020 is considered the same as the basic
loss per shares.
Group
2021
2020
Profit attributable to owners of the parent
Weighted average number of ordinary shares in issue outstanding for the effects
of all dilutive potential ordinary shares
493,775,685
436,975,000
12. Share-based Payments
In October 2019, a total of 32,250,000 options were issued to certain
directors, senior management and other advisers in recognition of the
work undertaken for Zaim prior to the IPO. In addition the Company
issued a total of 13,600,000 warrants to advisers in relation to the
funds raised at the time of the IPO. All the options were issued with
an exercise price of 2.5 pence per share and expire after 5 years from
the date of issue. 17,200,000 of the options vest immediately and have
no employment related conditions, the remaining 15,050,000 vest over
1-2 years from the date of issue and, should the individual end their
employment, the options either expire immediately or are valid for a
further 6 months (depending on the circumstances of the departure
of the individual). All the warrants have a contractual term of 3 years
from the date of issue, have no performance related terms attached
and have a strike price of 2.5 pence per share.
In addition to the options noted above as set out in the prospectus
at the time of the IPO the Directors have the discretion to issue a
further 10,750,000 options to key employees and consultants of the
Group as an incentivising tool to retain key individuals. As at the date
of this report these have not been issued and have therefore not
been included in the calculations. Neither the Company nor the Group
has any legal or constructive obligation to settle or repurchase the
options in cash.
Movements on number of share options and their related exercise
price are as follows:
On 24 September 2020, 2,000,000 options were issued to Paul Auger a
non-executive director of the company at a price of 2.7p. The options
vest equally over one year from the date of grant and express after 5
years.
On 26 November 2020, 1,000,000 options were issued to an employee
of the Group at a price of 2.7p. The options vest equally over 2 years
from the date of the grant and express after 5 years.
74
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75
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Group
Number of options& warrants
2020
Weighted exercise price
2020, £
Outstanding at 1 January 2020
40,650,000
2.50
Granted
3,000,000
-
Forfeited
-
-
Outstanding at 31 December 2020
43,650,000
2.50
Exercisable at 31 December 2020
34,200,000
2.50
There was no issue of new options in 2021.
Group
Number of options& warrants
2021
Weighted exercise price
2021, £
Outstanding at 1 January 2021
43,650,000
2.50
Granted
-
-
Forfeited
-
-
Outstanding at 31 December 2021
43,650,000
2.50
Exercisable at 31 December 2021
42,150,000
2.50
The options & warrants outstanding at 31 December 2021 had a
weighted average remaining contractual life of 2.8 years.
The fair value of the share options and warrants was determined
using the Black-Scholes valuation model.
The parameters used are detailed below.
For the year 2020:
Group and Company
2020
Options
Date of Grant
24 Oct 2020
Weighted average share price
2.575 pence
Weighted average exercise price
2.70 pence
Weighted average fair value at the measurement date
0.72 pence
Expiry date
24 Oct 2025
Options granted
3,000,000
Volatility
30%
Dividend yield
Nil
Option life
5 years
Annual risk-free interest rate
2.83%
13. Interest Income and Expense
Group
2021
2020
Interest income
Loans to customers
9,528,856
4,857,496
Other loans issued to related parties
15,157
-
Total interest income
9,544,013
4,857,496
Interest expense
Loans received
(154,674)
(12,836)
Lease liabilities
(15,228)
(92,442)
Total interest expense
(169,902)
(105,277)
Net interest income
9,374,112
4,752,218
14. Gains less Losses from Dealing in Foreign Currency
Group
2021
2020
Gain/(loss) on revaluation of financial assets and liabilities
23,961
(181,466)
Realised gain/(loss) from foreign exchange transactions
(3,019)
(7,661)
Total gains less losses from dealing in foreign currency
20,943
(189,127)
15. Allowance for Expected Credit Losses /
Impairment of Other Assets
Group
Note
2021
2020
Loans to customers
6
6,535,306
1,780,746
Other assets
8
(1,160)
9,972
Total allowance for expected credit losses / impairment of other assets
6,534,146
1,790,718
16. Other Operating Income
Group
2021
2020
Agent's fee
1,124,626
253,889
Information services
898,296
51,867
Fines received under loan agreements
96,472
158,322
Effect of revaluation as a result of use of lease options
13,735
-
Financial result from derecognition of lease assets and liabilities
4,964
126,091
Other income
22,642
333
Total other operating income
2,160,735
590,502
17. Staff Costs
Group
2021
2020
Salary
1,249,155
1,429,920
Payroll related taxes
317,899
380,523
Total staff costs
1,567,055
1,810,443
18. Operating Expenses
Group
2021
2020
Advertising and marketing
978,716
269,304
Consulting services
321,754
209,828
Depreciation of right-of-use assets
220,267
661,165
State duty
202,523
283,523
Communication
170,990
98,172
Banking services
153,485
87,558
Postal services
125,043
91,328
Investor Relations
91,642
181,456
Writing off VAT
70,583
-
Rental expenses
28,493
66,434
Material expenses
21,683
33,920
Security
9,555
22,023
Other expenses
228,311
111,025
Total operating expenses
2,623,045
2,115,735
76
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77
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
19. Income Tax
In 2021, the Group received taxable profit (as at 31 December 2020, the
Company has no current income tax expenses). The current income tax
rate applicable to the majority of the Group’s profit is 20% (2020: 20%).
A reconciliation between the theoretical and the actual taxation
charge is provided below.
Group
2021
2020
IFRS loss before taxation
801,497
(614,519)
Theoretical tax charge at the applicable statutory rate
(160,299)
122,904
Non-deductible expenses and other differences
31,189
29,521
Unrecognised deferred tax asset
10,263
(152,425)
Income tax expense for the year
(118,847)
-
The Company has a potential deferred tax asset of £337,744 (2020:
£153,847) as a result of trade losses to be offset against future profits,
should they arise.
Differences between IFRS and statutory taxation regulations of the
Russian Federation give rise to certain temporary differences between
the carrying amount of certain assets and liabilities for financial
statement purposes and for the Group’s income tax purposes.
2020
Effect of
exchange rate
differences
Change recognised
in profit and loss
2021
Tax effect of deductible temporary differences
Loans to customers
51,714
(394)
(30,089)
21,230
Other assets
8,390
14
1,173
9,577
Intangible assets
15,287
(9)
(537)
14,740
Lease liabilities
69,443
463
36,830
106,737
Other liabilities
-
-
-
-
Tax loss
3,330,002
(2,208)
38,844
3,366,638
Deferred tax assets
3,474, 836
(2,135)
46,220
3,518,921
Tax effect of taxable temporary differences
Other liabilities
(9,942)
(113)
(8,906)
(18,961)
Property and equipment
(700)
2
175
(523)
Right-of-use assets under lease agreements
(59,585)
(605)
(47,752)
(107,942)
Gross deferred tax liabilities
(70,227)
(716)
(56,483)
(127,426)
Total net deferred tax asset
3,404,608
(2,851)
(10,263)
3,391,495
Unrecognised tax assets
(3,404,608)
2,851
10,263
(3,391,495)
Recognised tax liabilities
-
-
-
-
2019
Effect of
exchange rate
differences
Change recognised
in profit and loss
2020
Tax effect of deductible temporary differences
Loans to customers
91,779
(15,500)
(24,565)
51,714
Other assets
24,891
(3,749)
(12,752)
8,390
Intangible assets
-
(1,234)
16,521
15,287
Lease liabilities
511,130
(68,680)
(373,007)
69,443
Other liabilities
9,716
(1,199)
(8,517)
-
Tax loss
3,882,681
(734,761)
182,082
3,330, 002
Deferred tax assets
4,520,197
(825,123)
(220,238)
3,474, 836
Tax effect of taxable temporary differences
Other liabilities
-
803
(10,745)
(9,942)
Property and equipment
(1,857)
287
871
(700)
Right-of-use assets under lease agreements
(509,846)
67,725
382,536
(59,585)
Gross deferred tax liabilities
(511,703)
68,815
372,663
(70,227)
Total net deferred tax asset
4,008,494
(756,310)
152,425
3,404,608
Unrecognised tax assets
(4,008,494)
756,310
(152,425)
(3,404,608)
Recognised tax liabilities
-
-
-
-
20. Risk Management
The risk management function within the Group is carried out in
respect of financial risks (credit, market, currency, liquidity and
interest rate), operational, and legal risks. The primary objectives of
the financial risk management function are to establish risk limits
and then ensure that exposure to risks stays within these limits. The
assessment of exposure to risks also serves as a basis for optimal
distribution of risk-adjusted capital, transaction pricing and business
performance assessment. The operational and legal risk management
functions are intended to ensure proper functioning of internal
policies and procedures to minimise operational and legal risks.
Credit Risk
The Group assumes a credit risk, namely the risk that a counterparty
will fail to meet its debt obligations within the specified period. The
Group has developed policies and procedures for the management
of credit exposures (both for recognised financial assets and
unrecognised contractual commitments), including requirements for
establishment and monitoring of the loan portfolio concentration
limits.
The credit policy establishes:
y
procedures for review and approval of loan applications;
y
methodology for assessment of the borrowers’ solvency;
y
credit documentation requirements;
y
procedures for the ongoing monitoring of loans and other credit
exposures.
The Group continuously monitors the status of individual loans and
regularly reassesses the creditworthiness of its customers. The review
is based on the most recent loan delinquency statistics.
The Group applies the expected credit loss model for the purpose of
provisioning for financial debt instruments, the key principle of which
is timely reflection of deterioration or improvement in the credit
quality of debt financial instruments based on current and forward-
looking information.
The amount of the ECL recognised as a credit loss allowance depends
on the extent of credit quality deterioration since initial recognition of
a debt financial instrument.
Credit risk classification system. Each level of credit risk is assigned
a certain degree of solvency, using a single scoring system:
y
minimum credit risk – high credit quality with low expected
credit risk, debt is not past due;
y
low credit risk – sufficient credit quality with average credit risk,
debt is prolonged and not past due;
y
moderate credit risk – average credit quality with satisfactory
credit risk, the debt is from 1 to 30 days past due;
y
high credit risk – low credit quality with unsatisfactory credit
risk, high probability of default, the debt is from 31 to 60 days
past due;
y
default – assets that meet the definition of default, the debt is
more than 60 days past due.
Expected credit losses on financial assets that are not impaired are
usually measured on the basis of default risk over one or two different
time periods, depending on whether there has been a significant
increase in the borrower’s credit risk since initial recognition.
The Group performs collective assessment of loans to individuals.
This approach provides for the aggregation of the portfolio into
homogeneous segments based on specific information about
borrowers, such as delinquent loans, historic data on prior period
losses and forward-looking macroeconomic information.
Collective assessment principles: for assessing risk stages and
estimating ECL on a collective basis, the Group combines its loans
into segments based on shared credit risk characteristics, so that
exposure within a grouping has a homogeneous pattern.
Market Risk
The Group assumes a market risk. Market risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market risk comprises currency
risk, interest rate risk and other price risks. Market risk arises
from open positions in interest rates, currency and equity financial
instruments which are exposed to general and specific market
movements and changes in the volatility levels of market prices.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising
the return on risk.
Currency Risk
Currency risk is the risk that the fair value or the future cash flows
of a financial instrument will fluctuate because of changes in foreign
currency exchange rates.
The Group accepts the risk of effect of foreign currency exchange
rate fluctuations on its financial position and cash flows. Currency risk
arises when the existing or prospective assets in foreign currencies
are greater or lower than the existing or prospective liabilities in the
same currencies. The Group’s management controls the exposure to
currency risk on a regular basis.
The table below provides the analysis of the Group’s currency risk as
at 31 December 2021.
Group
RUB
GBP
EUR
Total
Assets
Cash and cash equivalents
1,116,787
185,961
171,161
1,473,909
Loans to customers
2,824,717
-
-
2,824,717
Property and equipment
20,319
-
-
20,319
Right-of-use assets under lease agreements
539,709
-
-
539,709
Intangible assets
28,795
-
-
28,795
Other assets
180,013
-
275,565
455,579
78
АNNUAL REPORT 2021
79
ZAIM CREDIT SYSTEMS: TECHNOLOGY-DRIVEN FINANCES
Total assets
4,710,341
185,961
446,726
5,343,028
Liabilities
Loans received
803,772
-
500,908
1,304,680
Lease liabilities
533,683
-
-
533,683
Other liabilities
1,087,226
197,086
-
1,284,312
Total liabilities
2,424,681
197,086
500,908
3,122,675
Net balance sheet position
2,285,661
(11,125)
(54,182)
2,220,354
The table below provides the analysis of the Group’s currency risk as at 31 December 2020.
Group
RUB
GBP
EUR
Total
Assets
Cash and cash equivalents
479,708
161,095
68
640,871
Loans to customers
1,269,313
-
-
1,269,313
Property and equipment
5,676
-
-
5,676
Right-of-use assets under lease agreements
297,925
-
-
297,925
Other assets
124,821
126,477
-
251,298
Total assets
2,177,443
287,571
68
2,465,083
Liabilities
Loans received
-
-
735,646
735,646
Lease liabilities
347,216
-
-
347,216
Other liabilities
637,091
186,739
-
823,830
Total liabilities
984,307
186,739
735,646
1,906,692
Net balance sheet position
1,193,136
100,832
(735,578)
558,391
The table below presents a change in the financial result and equity due to possible fluctuations of exchange rates used at the end of the
reporting period if all other conditions remain unchanged. Reasonable exchange rate changes for each currency were projected on the basis of
historical information on maximum daily exchange rate fluctuations in December 2021.
31 December 2021
Group
Effect on profit or loss before taxation
Effect on equity
EUR appreciation by 20%
(98,910)
(79,128)
EUR depreciation by 20%
98,910
79,128
The table below presents a change in the financial result and equity due to possible fluctuations of exchange rates used at the end of the
reporting period if all other conditions remain unchanged. Reasonable exchange rate changes for each currency were projected on the basis of
historical information on maximum daily exchange rate fluctuations in December 2020.
31 December 2020
Group
Effect on profit or loss before taxation
Effect on equity
EUR appreciation by 20%
(147,129)
(117,703)
EUR depreciation by 20%
147,129
117,703
Liquidity Risk
Liquidity risk arises when the maturity of assets and liabilities do
not match. The Group does not accumulate cash resources to meet
all liabilities mentioned above, as based on the existing practice it is
possible to forecast with a sufficient degree of certainty the required
level of cash funds necessary to meet the above obligations.
To manage its liquidity, the Group is required to analyse the level of
liquid assets needed to settle the liabilities when they mature, provide
access to various sources of financing, draw up plans to solve the
problems with financing, and exercise control over the compliance of
the liquidity ratios with the statutory laws and regulations.
The CBR sets and monitors liquidity requirements for microfinance
organisations. The Group calculates the liquidity ratio in accordance
with Instruction No. 5114-U of the Central Bank of the Russian
Federation “On establishment of economic standards for a microloan
company attracting loan funds from individuals, including individual
entrepreneurs who are founders (participants, shareholders), and
(or) legal entities” dated 2 April 2019. As at 31 December 2021 and
31 December 2020, the minimum liquidity ratio was 70%. The Group
provides the territorial CBR division that supervises its activities with
information on mandatory liquidity ratios in accordance with the set
format on a quarterly basis as at the first day of each month. Also,
if the liquidity ratio values approach the limit set by the CBR, this
information is communicated to the Group’s management. The Group
complies with the liquidity ratio as at 31 December 2021 (unaudited)
and as at 31 December 2020 (unaudited).
The table below shows the maturity profile of financial liabilities as at
31 December 2021:
On demand and
less than 1 month
From 1 to 3
months
From 3 months
to 6 months
From 6 months
to 1 year
From
1 to 3 years
Total
Liabilities
Loans received
4,230
71,720
71,720
443,268
786,593
1,377,531
Lease liabilities
-
71,417
67,169
112,690
383,375
634,650
Other liabilities
824,650
-
-
-
-
824,650
Total potential future
payments under financial
liabilities
828,880
143,136
138,889
555,957
1,169,968
2,836,831
The table below shows the maturity profile of financial liabilities as at 31 December 2020:
On demand and
less than
1 month
From 1 to 3
months
From
3 months to
6 months
From
6 months
to 1 year
From
1 to 3 years
Total
Liabilities
Loans received
-
51,582
77,373
154,745
618,982
902,682
Lease liabilities
-
83,486
86,451
161,569
31,707
363,213
Other liabilities
533,909
-
-
-
-
533,909
Total potential future payments under
financial liabilities
533,909
135,068
163,824
316,314
650,689
1,799,804
The Group does not use the above undiscounted amounts in the maturity analysis to monitor the liquidity profile. Instead, the Group monitors the
expected maturity limits that are shown in the table below as at 31 December 2021:
On
demand
and less
than 1
month
From 1 to 3
months
From 3 to
6 months
From 6
months to 1
year
More than 1
year
Overdue
No stated
maturity
Total
Assets
Cash and cash equivalents
1,473,909
-
-
-
-
-
-
1,473,909
Loans to customers
2,592,265
-
-
-
-
232,452
-
2,824,717
Property and equipment
-
-
-
-
-
-
20,319
20,319
Right-of-use assets under
lease agreements
-
-
-
-
-
-
539,709
539,709
Intangible assets
-
-
-
-
-
-
28,795
28,795
Other assets
309,643
79
750
1,656
134,434
-
9,017
455,579
Total assets
4,375,817
79
750
1,656
134,434
232,452
597,840
5,343,028
Liabilities
Loans received
137,183
40,954
42,208
388,383
695,953
-
-
1,304,680
Lease liabilities
-
63,615
57,402
82,026
330,640
-
-
533,683
Other liabilities
1,161,864
-
-
-
-
-
122,447
1,284,312
Total liabilities
1,299,047
104,568
99,610
470,409
1,026,592
-
122,447
3,122,675
Net liquidity gap as
at 31 December 2021
3,076,770
(104,489)
(98,860)
(468,754)
(892,158)
232,452
475,393
2,220,354
Cumulative liquidity gap
as at 31 December 2021
3,076,770
2,972,281
2,873,421
2,404,667
1,512,509,
1,744,961
2,220,354
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The table below present the maturity profile of assets and liabilities as at 31 December 2020:
On demand
and less than 1
month
From 1 to 3
months
From 3 to
6 months
From 6 months
to 1 year
More than
1 year
Overdue
No stated
maturity
Total
Assets
Cash and cash equivalents
640,871
-
-
-
-
-
-
640,871
Loans to customers
1,168,937
-
-
-
-
100,376
-
1,269,313
Property and equipment
-
-
-
-
-
-
5,676
5,676
Right-of-use assets under
lease agreements
-
-
-
-
-
-
297,925
297,925
Other assets
156,712
29
415
862
162
-
93,118
251,297
Total assets
1,966,520
29
415
862
162
100,376
396,720
2,465,084
Liabilities
Loans received
-
27,345
54,270
113,642
540,389
-
-
735,646
Lease liabilities
-
77,397
81,779
157,129
30,911
-
-
347,216
Other liabilities
719,477
-
-
-
-
-
104,353
823,830
Total liabilities
719,477
104,742
136,049
270,771
571,300
-
104,353
1,906,692
Net liquidity gap as
at 31 December 2020
1,247,043
(104,713)
(135,634)
(269,909)
(571,138)
100,376
292,367
558,391
Cumulative liquidity gap
as at 31 December 2020
1,247,043
1,142,329
1,006,695
736,787
165,648
266,024
558,391
Interest Rate Risk
The Group assumes the risk associated with the effects of fluctuations
in market interest rates on its financial position and cash flows.
Interest margins may increase as a result of such changes but may
also decrease or create losses in the event of unexpected movements
in interest rates.
The Group is exposed to interest rate risk primarily as a result of its
lending activities at fixed interest rates, in amounts and for periods
which differ from those of fixed interest rate borrowings (loans to
customers as at 31 December 2021: 2,824,717 and as at 31 December
2020: 1,269,313 British pounds sterling and other loans issued as at
31 December 2021: 275,565 and as at 31 December 2020: 45,745 British
pounds sterling). In practice, interest rates for loans to customers
are usually set for short periods. In addition, interest rates recorded
in both asset and liability contracts are often revised by mutual
agreement in accordance with current market conditions. In 2021 the
maximum daily interest rate for loans to customers was limited to 1%
per day (in 2020 – to 1% per day).
Also, the Group’s lease liabilities are exposed to interest rate risk
(as at 31 December 2021: 533,683 and as at 31 December 2020: 347,216
British pounds sterling) and loans received are exposed to interest
rate risk (as at 31 December 2021:1,304,680 British pounds sterling and
as at 31 December 2020 there are no such liabilities).
Other assets and liabilities are not exposed to interest rate risk.
21. Capital Management
The Group’s objectives when managing capital are to comply with the
capital requirements set by the Central Bank of Russia, as the main
area of business of the Group is in the Russian Federation, and to
ensure the Group’s ability to continue as a going concern and maintain
a capital base at the level necessary to achieve the capital adequacy
ratio of 5% in accordance with the CBR requirements.
The Group provides the territorial division of the CBR supervising its
operations with information on the mandatory capital adequacy ratio
in accordance with the established format quarterly as at the first day
of each month.
The statutory requirements for own funds (equity) as at 31 December
2021 are set at two million roubles (as at 31 December 2020 are set
at one million roubles). The Group is in compliance with the above
requirements.
22. Contingencies
Litigations. In the ordinary course of business, the Group is subject to
legal actions and complaints. Management believes that the ultimate
liability, if any, arising from such actions or complaints will not have
a material adverse effect on the Group’s financial condition or the
results of its future operations.
Tax legislation. As the main business of Group is in Russia, Russian tax
legislation is subject to varying interpretations, and changes, which
can occur frequently. Management’s interpretation of such legislation
as applied to the transactions and activities of the Group’s companies
may be challenged by the relevant regional or federal authorities.
Current trends in the Russian Federation suggest that the tax
authorities are taking a more assertive position in their interpretation
of the legislation and assessments. As a result, tax authorities may
challenge transactions and accounting methods for which they have
not previously challenged. As a result, significant additional taxes,
penalties, and fines may be assessed.
As at 31 December 2021, management believes that its interpretation
of the relevant legislation is appropriate and the Group’s tax, currency
and customs positions will be sustained by the regulatory authorities.
Management believes that the Group has accrued all relevant taxes.
Operating lease commitments. In the course of its business, the
Group enters into a number of lease agreements. These agreements
are not irrevocable. As at 31 December 2021 and at 31 December 2020
the Group has no Operating lease commitments.
23. Fair Value of Financial Instruments
A quoted market price in an active market is the best evidence of
fair value. As no readily available market exists for the major part
of the Group’s financial instruments, their fair value is based on
current economic conditions and the specific risks attributable to
the instrument. The estimates presented below are not necessarily
indicative of the amounts the Group could realise in a market
exchange from the sale of its full holdings of a particular instrument.
Below is the estimated fair value of the Group’s financial instruments
as at 31 December 2021 and 31 December 2020:
2021
2020
Group
Carrying value
Fair value
Carrying value
Fair value
Financial assets
Cash
1,473,909
1,473,909
640,871
640,871
Loans to customers
2,824,717
2,824,717
1,269,313
1,269,313
Other assets (loans issued to parent company)
275,565
275,565
45,745
45,745
Financial liabilities
Loans received
1,304,680
1,304,680
735,646
735,646
Other liabilities
824,650
824,650
533,907
533,907
The Group uses the following methods and assumptions to estimate
the fair value of these financial instruments:
Cash and cash equivalents. The estimated fair value of cash and cash
equivalents does not differ from their carrying amounts due to the
nature of these financial instruments.
Loans to customers and loans issued to parent company. Loans
to customers and loans issued to parent company are reported
net of impairment allowance. The estimated fair value of loans to
customers and other loans issued represents the discounted amount
of estimated future cash flows expected to be received. To determine
fair value, expected cash flows are discounted at current market rates
(the interest rate on loans to customers in 2021 was 1% (2020 – 1%), the
interest rate on the loans issued to parent company was 8.7% and 3%
in 2021 (3% in 2020).
Loans received. The fair value of other fixed interest-bearing
borrowed funds is based on discounted cash flows using interest
rates for instruments with similar maturity and in similar currency.
The lending rates are equal to the market rates.
To present information on the fair value hierarchy of financial
instruments as required by IFRS 13 Fair Value Measurement, the
management of the Group assigns the above financial assets and
liabilities as at 31 December 2021 and 31 December 2020, excluding
cash and cash equivalents (Level 1 = GBP 1,473,909 at 31 December
2021 and GBP 640,871 at 31 December 2020) to Level 3 of the fair value
hierarchy of inputs.
24. Reconciliation of Classes of Financial Instruments
with Measurement Categories
In accordance with IFRS 9 “Financial Instruments”, the Group classifies
its financial assets and liabilities into the following categories: (a)
financial assets at fair value through profit or loss; (b) financial assets
at fair value through other comprehensive income; and (c) financial
assets at amortised cost.
At the same time, in accordance with the requirements of IFRS 7
“Financial Instruments: Disclosures”, the Group discloses various
classes of financial instruments.
As at 31 December 2021 and 31 December 2020, all financial assets and
liabilities of the Group are classified as financial assets and liabilities
measured at amortised cost.
25. Related Party Transactions
For the purposes of these consolidated financial statements, parties
are considered to be related if one party has the ability to control
or exercise significant influence over the other party in making
financial or operational decisions as defined by IAS 24 Related Party
Disclosures. In considering each possible related party relationship,
attention is directed to the economic substance of the relationship,
not merely the legal form.
In the normal course of business, the Group enters into transactions
with its sole participant and directors. These transactions include
settlements, payment of remuneration to employees, and loan
draw downs. According to the Group’s policy, the terms of related
party transactions are equivalent to those prevailing in arm’s length
transactions.
The outstanding balances at the year end and liability transactions
with related parties for 2021 are as follows:
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Transactions with ultimate beneficiary
2021
2020
Loan to beneficiary
-
(55,559)
Loan offset
-
55,559
Transactions with parent company
Other loan issued
As at 31 December 2019
-
Changes in financial flows
Loan issuance
45,411
Accrued interest
334
As at 31 December 2020
45,745
Changes in financial flows
Loan issuance
254,702
Loan repayment
(25,194)
Accrued interest
15,157
Exchange rate differences
(16,691)
Impact of conversion into reporting currency
1,847
As at 31 December 2021
275,565
Loans received
As at 31 December 2019
742,603
Changes in financial flows
Offset of loan claims
(55,417)
Exchange rate differences
199,489
Impact of conversion into reporting currency
(151,029)
As at 31 December 2020
735,646
Changes in financial flows
Accrued interest
84,225
Interest paid
(259,305)
Exchange rate differences
(56,570)
Impact of conversion into reporting currency
(3,087)
As at 31 December 2021
500,908
No interest was accrued on loan received in 2020. As at 31 December
2020 and at 31 December 2019, the balance on loans received repre-
sents the obligation to pay interest on the loan, which was forgiven
in 2018. On December 31, 2020, the Group entered into an agreement
changing the terms of the loan - starting from January 2021, interest
is accrued on the specified debt at a rate of 13.42% per annum and the
maturity of the specified debt is prolonged until 31 December, 2023.
For the year ended 31 December 2020, the total remuneration of key
management personnel of the Subsidiary was GBP 304,677, includ-
ing insurance premiums of GBP 47,392 (2020: GBP 274,281, including
insurance premiums of GBP 44,106). The Group does not provide key
management personnel with post-employment and employment ter-
mination benefits. The remuneration of the Board of Directors of the
Group for the year 2021 was as follows:
Below is the summary of remuneration for each Director for 2021:
Salary, £, for the year
2021
Bonus for the year
2021
Shares held
Stock options
Malcolm Groat
25,000
4,000
0
2,150,000
Siro Donato Cicconi
100,000
35,000
320,000,000
10,750,000
Vladimir Golovko
141,038
3,500
0
8,600,000
Simon James Retter
60,000
21,000
4,900,000
6,450,000
Paul James Auger
20,000
4,000
0
2,000,000
The social insurance contributions, paid by the Company for the year
2021 on remuneration, was £17,388 (2020 - £17,388).
Out of pocket expenses totalling £78,055 were incurred by Siro Donato
Cicconi in 2019 and as at 31 December 2021 £48,055 remained payable
(as at 31 December 2020: £48,055).
26. Business Combination
On 19 September 2019 Zaim Credit Systems plc (Parent Company)
became the legal parent of Zaim Express LLC (Subsidiary) by way of
reverse acquisition. The cost of the acquisition is deemed to have
been incurred by Zaim Express LLC, the legal subsidiary, in the form
of equity instruments issued to the owners of the legal parent.
This acquisition has been accounted for as a reverse acquisition as
described in Note 3, Basis of Preparation.
The fair value of the shares in Zaim Express LLC have been determined
from the admission price of the Zaim Credit Systems plc shares on
re-admission to trading on the LSE for 2.5 pence per share. The value
of the consideration shares was £8,000,000. The fair value of the
notional number of equity instruments that the legal subsidiary would
have had to have issued to the legal parent to give the owners of the
legal parent the same percentage ownership in the combined entity
is 1.84 per cent of the market value of the shares after issues, being
£150,000. The difference between the notional consideration paid by
Zaim Credit Systems plc for Zaim Express LLC and the Zaim Credit
Systems plc net assets acquired of £nil has been charged to the
Consolidated Statement of Comprehensive Income as a deemed cost
of the listing amounting to £150,000 with a corresponding entry to the
reverse acquisition reserve.
Details of net assets acquired and the deemed cost of the listing were
as follows:
£
Consideration effectively received
150,000
Less net asset required:
Cash and cash equivalents
52,055
Debtors and prepayments
11,982
Current liabilities
(64,037)
Total net asset required:
Deemed cost of listing
150,000
The terms of the share purchase agreement between the
Company and Zaim Express LLC were as follows: there are certain
circumstances under which deferred contingent consideration might
become payable. Should the Company record a monthly EBITDA figure
in accordance with IFRS of £200k per month for a continuous period
of four months and there be no reasonable expectation that this
should fall below this level for a further period of six months then a
further 16,000,000 new ordinary shares in the Company shall become
payable. Additional consideration of 16,000,000 shares over and above
that already mentioned shall become payable should the Company
record a monthly EBITDA figure of £350k per calendar month with the
same continuous period clause as noted above. At the IPO price per
share these deferred contingent considerations would have a value
of £400k each for a combined value of £800k. It has been considered
by the Directors at this time that, in light of the Covid-19 pandemic
it remains difficult to predict if and when this might occur. This
combined with the current low probability of these milestones being
met in the current environment, meant that no fair value has been
calculated for such deferred considerations.
Under the terms of the share purchase agreement between the Com
pany and Zaim Express LLC (Subsidiary) there are certain circumstances
under which deferred contingent consideration might become payable.
Should the Company record a monthly EBITDA figure in accordance
with IFRS of £200k per month for a continuous period of four months
and there be no reasonable expectation that this should fall below
this level for a further period of six months then a further 16,000,000
new ordinary shares in the Company shall become payable. Addition
al consideration of 16,000,000 over and above that already mentioned
shall become payable should the Company record a monthly EBITDA
figure of £350k per calendar month with the same continuous period
clause as noted above. At the IPO price per share these deferred
contingent considerations would have a value of £400k each for a
combined £800k in value. It has been considered by the Directors that
given the improvement in outlook for the business that this additional
consideration is likely to become payable in the near future and
therefore a reserve of shares to be issued has been recognised and
associated increase in carrying value of the investment in Zaim Express
LLC (Subsidiary) as a result of this consideration.
27. Auditor’s Remuneration
Audit
31.12.21
£
31.12.20
£
Fees payable to the company’s auditor for the audit of the annual parent company and consolidated accounts
40,000
40,000
Fees payable to the company’s auditor for other services provided to the company and its subsidiaries:
The audit of the company’s subsidiaries under legislative requirements
Total audit
40,000
40,000
28. Events after the Reporting Period
Since February 2022, there has been an increase in geopolitical
tensions, which created significant risks for the Russian economy
and led to significant fluctuations in exchange rates and a decrease
in the value of the Russian assets in financial markets. Taking into
account the information available at the moment, the possible
impact of these events both on the economy of the Russian
Federation as a whole and on its individual industries is not readily
predictable. As a result, there is no possibility of estimating the
financial impact of these events on the Company’s activities with
a sufficient degree of reliability in the short term. The Company is
closely monitoring the development of the situation to make an
alternative assessment of its strategic and operational intentions
and plans in the event of any indicators of a negative impact on its
activities.
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1
2
3
4
5
CORPORATE
INFORMATION
& GLOSSARY
5
Corporate Information
ISIN
GB00BK5T9G03
SEDOL
BK5T9G0
TIDM
ZAIM
Registered Office:
10 Orange Street
London
United Kingdom
WC2H 7DQ
Principal Place of Business / Operating address:
Room No.1-12, Structure 7
Trekhgorny Lane
Moscow
Russia
123022
Financial Adviser:
Beaumont Cornish Limited
Building 3
566 Chiswick High Road.
London W4 5YA
Company’s Auditors:
Shipleys LLP
10 Orange Street
Haymarket
London
WC2H 7DQ
Registrar:
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Legal advisers to the Company as to English law:
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Legal advisers to the Company as to Russian law:
Ingvarr Advisory and Trust LLC
Rochdelskaya Street, 20
Moscow
Russia
123022
Legal advisers to the Company as to Luxembourg
Law:
Bonn & Schmitt Avocats
148, Avenue de la Faïencerie
L-1511 Luxembourg
Glossary
ATM – an automated teller machine is an electronic telecommunications device that enables customers of financial institutions to perform finan-
cial transactions, such as cash withdrawals, deposits, funds transfers, or account information inquiries, at any time and without the need for direct
interaction with bank staff
CBR – Central Bank of Russian Federation
“Default” means within the guidelines of the Company any loan with no payments to cover either principal or interest amount for over 90 days
after the maturity date
“Default Rate” means the share of loans with no payments for over 90 days after the maturity day in the amount funded for the same period
“Delinquencies” means within the guidelines of the Company any borrower who is late in the repayment of their loan
ECL – expected credit loss
IFRS – International Financial Reporting Standards as adopted by the European Union
“Independent Non-Executive Director” means the non-executive directors of the Board from time to time considered by the Board to be independ-
ent for the purposes of the UK Corporate Governance Code
MAR – the Market Abuse Regulation (EU) No. 596 (2014) of the European Parliament and of the Council;
MCC – microcredit company
MCO – microcredit organization
“Microfinance Law” – Federal Law No. 151-FZ of July 2, 2010 on Microfinance Activity and Microfinance Organizations, effective January 2011;
MFC – microfinance company
MFI – a microfinance institution
POS Terminal – a point of sale terminal (POS terminal) is an electronic device used to process card payments at retail locations
QIWI – QIWI plc including its banking subsidiary, Qiwi Bank JSC
88
АNNUAL REPORT 2021