Coopbank Annual Report English

ANNUAL REPORT
2021/22
THE FIRST EVER

UNCOLLATERALIZED
DIGITAL LENDING
CONSTANTLY CREATING
UNIQUE VALUES TO CLIENTS!
PERFORMANCE DASHBOARD
FY 2021/22
ASSET DEPOSIT ACCOUNTS TOTAL CAPITAL
114.61 Billion 100 Billion

8.99M Accounts ETB 11. 31 Billion
41% 18% 59%
LOANS & ADVANCES EMPLOYEES GROSS PROFIT BEFORE TAX

( in millions of ETB)
2,843.25
ETB 84.26 Billion 6,547 1,696.06

55% 27% 1,422.61
COOPAY E-BIRR MERCHANTS 767.01

COOPAY E-BIRR SUBSCRIBERS 669.82
MERCHANT
46,827 3.52 M 2017/18 2018/19 2019/20 2020/21 2021/22
159% 102%
DEPOSITS
( in billions of ETB)
96.77
71.12
Debit Card EARNING 45.51 593

Users PER SHARE 36.17
Branches
25.81
401,772 34%
2017/18 2018/19 2019/20 2020/21 2021/22
1 Statement of the Board Chairperson
IN THIS REPORT 3 Reflections from the President
5 Board of Directors
6 Executive Management
7 Deposits
8 International Trade
9 Loans and Advances
10 Profit
11 Deposit Accounts
12 Market Expansion
13 Our People
14 Other Strategic Achievements
15 Technologies and Digital Banking
16 Our Brand and CSR
19 Interest Free Banking Report
20 SAC Members Comment on IFB
21 IFB Deposits
22 IFB Deposit Accounts
23 IFB Financing
24 IFB Profit
25 IFB Market Expansion
26 Audit Report
01 Annual Report 2021/22
Statement of the Board Chairperson

Distinguished shareholders and stakeholders;
On behalf of the board of directors, I am pleased to make and a dramatic pickup in global inflation spill into a
a remark and share the results of our operations for the region already wearied by an ongoing series of
fiscal year that ended June 30, 2022. During the year, shocks. Rising food and energy prices are striking at
despite the numerous external challenges and the region’s most vulnerable, and macroeconomic
difficulties, we were able to deliver values to our imbalances are approaching levels not seen in
stakeholders by demonstrating our resolve, resilience, decades (IMF, October 2022).
and adaptability.
The macroeconomy has also been experiencing
The world economy is expected to experience its challenges of state of the global economy and the
sharpest decline following an initial rebound from global spillover effect of the Russia-Ukraine war, internal
recession in more than 80 years. Global growth is instabilities and conflicts. The Ethiopian economy was
projected to slow from 5.7 percent in 2021 to 2.9 percent thus forecasted to have grown by 6 to 7 percent in
in 2022 (World Bank Group, Global Economic Prospects, 2021/22. Although it can be categorized as one of the
June 22). The report further highlights the major reasons challenging years, there were areas in the economic
for this decline including Russia – Ukraine war that factors having shown fabulous outcomes. The country
created a significant disruption in trade, food supply and was able to secure more than USD 4.12 billion from
fuel prices. Especially for energy importing economies, it export of goods and services, up by about 14 percent
has tightened their financial conditions and constrained YoY. The deposit in the economy has also grown to
policy spaces, according to the IMF. reach a staggering ETB 1.7 trillion. With the country
trying to digitize the economy, it is reported that
For Sub-Saharan African (SSA) region, though the about ETB 450 billion in electronic purchases
economy has grown by 4.7 percent in 2021, it is expected transacted during the fiscal year.
to slow in 2022 to 3.6 percent, as a worldwide slowdown
02
...Statement of the Board Chairperson
It is with these milieus that we have yet achieved

astounding success on every front. The bank has been
able to stand strong and expand its capabilities by
responding to the everchanging regulations and market
“It is with these
conditions.
milieus that we have
The bank's balance sheet increased by 40.94 percent in
the fiscal year 2021/22 to reach ETB 114.61 billion. yet achieved
Liabilities show the biggest growth from this, at 39
percent. This brings the bank's liability to ETB 103.29 astounding success
billion and its overall capital to an astounding ETB 11.31
billion. on every front.”
During this fiscal year, the bank was able to collect
additional deposits totaling ETB 25.65 billion. When
compared to the previous year similar period, this is an The Board of Directors in operation is newly elected one
increase of 36 percentage points. Accordingly, the that had taken over in April 2022. The governance work
bank's total deposit sum reached ETB 96.77 billion by of the bank during FY 2021/22 had thus been carried out
the end of June 2022. Out of this total, Coopbank in part by the outgone Board of Directors, and in part by
Alhuda, the bank's segment that caters to the newly joined Board of Directors. During the 9
shariah-compliant clients, reached a deposit position of months of its last office term, the outgone BODs
ETB 16.21 billion, maintaining its position as the leading conducted 12 meetings (11 regular and 1 extraordinary).
private bank in the segment. The newly joined BODs on the other hand conducted 4
regular meetings in the remaining period of the
With additional injection of ETB 3.08 billion, paid-up reporting period.
capital of the bank reached ETB 7.73 billion by the close
of the reporting period. The bank concluded the During the FY, the BODs made its utmost effort to
financial year with ETB 2.84 billion in profit before tax, a discharge its governance roles (i.e. decision and
record achievement that exhibited a 67.63 percent rise oversight roles). To this effect, it had deliberated and
compared to the preceding year. The sustainable gave direction on strategic and policy matters. Moreover,
performance of the bank in the past year, and in this the Board of Directors conducted effectiveness
fiscal year in particular has enabled amplified results for self-assessment twice in the fiscal year with the aim to
shareholders. Accordingly, Earnings per share (EPS) enhance its effectiveness in discharging the governance
indicate a 34 percentage point, attributed to the role entrusted to it.
significant growth of the bank’s capital.
Looking ahead, I believe the remarkable efforts the bank
The implementation of the second year of the bank’s has made so far to assure sustainability will be able to
growth strategy enabled the bank to seize the bear fruit. As market volatility is predicted to rise and our
opportunities in the market that can be harnessed with environment to remain demanding, the bank should
a great zeal and team effort. As a strategy led develop technological capabilities, strategic readiness
organization, we have also managed to go further deep and competent human capital that keeps pace with the
in to the society and increased our branch footprint. The latest developments in order to remain competitive.
bank opened 124 new branches on the fiscal year that
concluded on June 30, 2022. This brings the bank's total Finally, I would like to take this opportunity to thank our
number of branches to 593. stakeholders, particularly the bank's shareholders, for
their ongoing support and trust on behalf of all my
In terms of governance, the Board's function was as fellow board members. I would also like to commend the
significant as ever in 2020–21. As a newly elected board National Bank of Ethiopia and all of our partners for their
of directors, we concentrated on finding ways to build invaluable guide and cooperation. We appreciate the
on the achievements of the preceding boards to make bank's leadership and every employee for their ongoing
sure the bank implemented governance and risk commitment; and I sincerely believe that the board of
frameworks to effectively manage the challenging directors, senior management, and employees will push
environment. The bank's board of directors remained the bank to a higher level of achievement in the coming
dedicated throughout the fiscal year to enhancing the years.
bank's governance practices through greater Thank you,
transparency, accountability, and responsibility.
Fikru Deksisa (PhD)
Chairperson, Board of Directors
03
By strategically
targeting various
customer segments,
REFLECTIONS FROM
we have been able to
consistently hold the
THE PRESIDENT
leading position in
customer base
among private
banks.
REFLECTIONS FROM
THE PRESIDENT
Dear valued shareholders;

Led by a strategy crafted to seize opportunities in the market, the bank has set forth balanced measures
that guarantee the bank’s sustainability on all fronts. On top of that, in light of the enormous potential and
wide acceptance of our brand within the community, again in this fiscal year, we set forth ambitious
targets and registered phenomenal growth.
The fiscal year 2021/22 was a year where we hit a major milestone in terms of Asset formation. Our asset
surpassed the ETB 100 billion milestone to reach ETB 114.61 billion at the end of June 30, 2022. Liabilities
take a major share of this being ETB 103.29 billion and total capital reaching ETB 11.31 billion.
Annual Report 2021/22 04
...REFLECTIONS FROM THE PRESIDENT
This year again, the bank was able to mobilize ETB 25.65 The work we have done to improve the capacity of our
billion in deposits, which shows an increase of 36 human capital is the other significant strategic impera-
percent from the position of last year’s same period. tive. A number of development programs have been
put into place this year, and thorough gap analyses
Despite the hurdles in collection of foreign currencies, have been done to identify competency gaps so that
the bank was able to obtain USD 438.28 million, a 27.4 they can be continually addressed. In addition, the
percent increment from the last year. From the bank's overall workforce expanded by 26.5 percent
proceeds, about 69 percent of it came from the export during the course of the fiscal year, reaching 6,547
revenues. employees.
During the year, the bank made fresh loan disburse- We were also able to reiterate during the fiscal year
ments of ETB 37.6 billion which expanded our loan book that our efforts to assist our community in times of
to ETB 84.26 billion, up by 54.6 percent from the preced- need are part of the bank's identity. The bank and its
ing year. International trade accounts for the largest employees together donated ETB 70 million dispersed
portion of this portfolio, followed by DTS, and manufac- in kind to the drought victims when drought condi-
turing. Incredible progress has been made in financing tions worsened as a result of disparities in rain fall in
Coopbank Alhuda customers. The bank is leading the different zones of the Oromia region. In addition, the
market with a financing of ETB 13.51 billion in this arena. bank gave the Somali regional government ETB 8
While significantly increasing our loans and advances, million to fight the natural disasters as a result of the
we have also improved the quality of our assets, bring- drought's worsening conditions.
ing the NPL ratio down to 2.03 percent, a drop of 9
percentage points from the year before. Considering the bank’s DNA and foundation, we were
more able than ever to collaborate with different
The bank had yet another outstanding accomplishment, stakeholders in the agricultural sector. Introducing
generating ETB 12.05 billion in income for the fiscal year Commoditized Collateral Financing (CCF), the bank
that concluded on June 30, 2022. Our income from was able to improve farmers' access to financing by
interest was the major one with around 67 percent of it; allowing them to utilize agricultural products as
the remaining came from fees, commissions, and other collateral, which will be valuable to farmers who sell
sources. On the other hand, the bank incurred a total their produce at a loss to meet their immediate
expense totaling ETB 9.21 billion in interest expense, financial needs. In addition, the bank has made
salaries and benefits as well as operating expenses tremendous progress in supporting cooperatives and
during the fiscal year. Therefore, the profit before tax is a individual farmers.
staggering ETB 2.84 billion, an increase of 67.63 percent
from the balance of ETB 1.7 billion last year. Finally, I take this opportunity to express my sincere
gratitude to our esteemed customers who have
By strategically targeting various customer segments, extended their engagement with Coopbank on behalf
we have been able to consistently hold the leading of myself and the entire team. I owe the Board of
position in customer base among private banks. We Directors a debt of gratitude for their unwavering
have put unrelenting effort into becoming competitive commitment, strong leadership, guidance, and
in the field of digital banking as the future of banking is support. My heartfelt regards and appreciation also
shifting to the digital realm. As a result, we were able to goes to our valued shareholders for their continuous
add 1.56 million new users to our Coopay Ebirr digital support and to our employees for their tenacity,
banking ecosystem throughout the fiscal year, bringing devotion, and unwavering commitment in the Bank's
the total number of users to 3.52 million. Additionally, vision. My appreciation also goes to the National Bank
the bank was able to raise the number of its agents and of Ethiopia, for its guidance, continued support and
merchants to 7,351 and 46,827, respectively, through cooperation.
consistent efforts. Thank you,
This year, on the digital front, we were able to introduce

Michu, a digital lending platform powered by Kifiya’s Deribie Asfaw
Qena, with no requirement for collateral targeting President
micro, small and medium enterprises. The product is the
first of its kind in the country, and we are setting the bar
for more technologically advanced and financially
accessible products that will challenge the current
status quo and fundamentally alter our industry.
05 BOARD OF DIRECTORS
Fikru Deksisa (PhD) Fekadu Dugasa Amb Shiferaw Jarso

Chairperson, Board of Directors Deputy Chairperson Board Director
Eshetu Wakene Girma Delessa Tadele Abdi

Board Director Board Director Board Director
Wegayehu Tsige Kebede Ejeta Muktar Adem

Board Director Board Director Board Director
Terefe Senbaba Debelo Jebesa Teshome Argeta

Board Director Board Director Company Secretariat
Executive Management Annual Report 2021/22 06
Deribie Asfaw Aman Semir Ahmed Hassen

President VP, Technologies and Digital Banking VP, Corporate Banking
Gadissa Mamo Godana Kabato Desalegn Tadesse

VP, Banking Operations VP, Interest Free Banking VP, Retail and MSMEs Banking
Gutema Dibaba Giragn Garo Liko Tolesa

VP, Cooperative and Agricultural VP, Finance and Facilities VP, Human Capital and
Projects Management
Banking Management
Tadele Tilahun Muluneh Aboye Tafesse Fana

VP, Strategy and Marketing Chief Risk & Compliance Chief Internal Auditor
Deposits
Deposit Growth Trends
Deposit is fundamentally a vital financial (in billions of ETB)
component that serves as one the key factors 96.77
to banking business. As the deposit volume in
the country’s financial sector is registering a
robust growth over the past recent years, we 71.12
were also able to harness from the opportuni-
ty. Considering the impact it could have on
45.51
the sustainable growth of the bank, we were
able to mobilize a reasonable amount of 36.10
resources by employing a wide range of
strategic initiatives that involves reaching out
to the unbanked community by broadening 25.77
the access points and bolstering relationship

with our existing customers by introducing
products that add value to their businesses 0
2017/18 2018/19 2019/20 2020/21 2021/22
and lives, and recruiting the new ones.
We have made significant progress in incre-

mental deposit mobilization with ETB 25.65
billion during fiscal year 2021/22. By the end
of June 30th, 2022, the bank's aggregate
deposit was at ETB 96.77 billion signifying a
36 percent increase over the previous year's
deposit.
Classification wise, saving accounts generat-

ed more than 58.57 percent of the deposit
position, followed by demand and fixed time, “Save for beautiful life” PLS Program Winners
which contributed 33.88 percent and 7.54
percent, respectively.
2nd
Deposit Performance by Type

(in millions of ETB)
2nd
2019/20 2020/21 2021/22 1 st 1 Suzuki Dzire Automobile,
2021 model
1 Two bedrooms apartment
in the capital city
Demand 13,285.58 23,789.97 32,791.88 4th 5th
3rd
Saving 28,506.82 42,576.49 56,678.31
3,718.52 4,751.95 7,298.93

Fixed Time 2 Three wheel drive vehicle
30 32 Inch smart television
65 Smart phones
Total 45,510.92 71,118.77 96,769.12 “Save for beautiful life” PLS Prizes
International Trade
International trade is and has always been a The vast majority, 73.4 percent, of foreign curren-
major area of emphasis for the bank, as it cy payments were made to facilitate import LC,
defines the amount of the bank's incoming followed by CAD (8 percent), and the remaining
foreign currency. The fiscal year had a significant 17.6 percent was allocated to facilitate outgoing
impact on international companies due to the TT and other operational purposes.
ongoing Russia-Ukraine war, the post-COVID-19
pandemic epidemic, and other challenges. This suggests that in order to capture a fair share
Despite unexpected difficulties, the country's of the market, we should further solidify our ties
export industry improved, which in turn helped with important stakeholders who have the poten-
the bank's foreign currency inflow. Our overall tial and consistency to fuel international trade
foreign currency earnings for the fiscal year and generate foreign exchange earnings. We
were USD 438.28 million, an increase of USD 94 should also implement new, practical initiatives
million from the previous fiscal year. Exports to strategically increase the bank's foreign
contributed 68.85 percent of total foreign exchange earnings. 1%
exchange inflows, followed by SWIFT which held
25.9 percent of the forex generated.
The bank has used the foreign currency earned 69%

to successfully conduct various international
business transactions. 3.8%
1.4%
Trend of Foreign Currency Mobilized 26%

(in millions of USD)
438.28
363.34
344.06 Export SWIFT Remittance Purchase
310.4 Share of Foreign Currency Earnings by Sources
279.26
2017/18 2018/19 2019/20 2020/21 2021/22

Loans and Advances

The bank has injected new loans and funds into
the economy to help the business community
meet their financial goals, thereby fueling
macroeconomic activities. As a result, additional
loans totaling ETB 37.61 billion were disbursed
during the reporting period to empower a Xiangbo Textile manufacturing PLC
variety of economic sectors. On June 30, 2022,

our total loan book stood at ETB 84.26 billion,
representing a 55 percent growth rate.
The majority of the loan portfolio, 32.43 percent

of our total loans and advances, was used to
facilitate international trade. Subsequently,
domestic trade and services accounts for 25.87
percent, followed by manufacturing which
account for 19.58 percent of our loan portfolio.
On the other hand, the bank has done a decent

job in loan collections with an aggregate collec-
tion of ETB 19.16 billion exhibiting a growth of
29 percent from the preceding budget year. Kerchanshe Coffee
With regards to an emphasis given to asset

quality management, our NPL ratio was main-
tained at 2.03 percent as of June 30, 2022, which
was better than our previous year ratio of 2.22
percent as well as the regulatory authorities'
threshold of 5.0 percent. The decrease in the
NPL ratio indicates the efforts we make to assure
an increase in the quality of our asset.
Loans and Advances Trend Waliso Road Project

84.26
54.5
Outstanding Loans and Advances
International Trade
27.33
34.21
DTS
21.80
24.36 Manufacturing
16.50
15.55 Others
13.32
Building and Construction
2019/20 2020/21 2021/22
5.3
2017/18 2018/19
Key Ratios
ROA 2.09%
ROE 22.22%
Profit EPS
NPL
34.24%
2.03%
As regards to the financial yield, we were able to
achieve a year-on-year growth with the goal of
securing an astounding profitability for our share- Other operating expenses which basically
holders. Our shareholder’s returns increase as includes loss on forex dealings, rent and
income from banking operations increases and other administrative expenses has seen a
expenses carefully controlled despite an aggres- substantial rise of 44% to reach ETB 3.34
sive business expansions followed. billion. Personnel expenses (salaries and
benefits book) has also shown major
We have earned a total operating income of ETB enlargement due to huge onboarding of
12.05 billion during the fiscal year under review, employees for newly opened 124 branches
which was ETB 4.03 billion (50.25 percent) more and strengthening of existing ones. Interest
than the previous fiscal year, owing primarily to an expenses has increased by 33% from the
increase in the bank's loan portfolio. Continuing prior year attributed to fair growth of the
the trend over the years, interest income customers’ deposits.
remained an important source driving the bank’s
earnings. It held 67 percent of the total revenue The net of income and expenses resulted in
generated during the year with ETB 8.08 billion, a gross profit before tax of ETB 2.84 billion
up by 49.4 percent from the preceding fiscal year’s at the end of June 30th, 2022, portraying a
ETB 5.41 billion. Income from other operating 67.63 percent increase from the previous
incomes which basically includes gain on forex fiscal year’s 1.7 billion. Earnings per share
transactions and income from Murabaha financ- (EPS) was 34 percent for the fiscal year
ings held 20 percent of the revenue generated in ending June 30, 2022.
the year. Income trend by category
(in billions of ETB)
2019/20 2020/21 2021/22
On account of expenses incurred, the total operat- 12.05
ing expenses of the bank stood at ETB 9.21 billion,

8.0 8.02
which is higher by ETB 2.88 billion (45.59 percent) 8.0 8.0
from the past fiscal year. Of the total expenses, 6.0

5.74
6.0
5.41
6.0
interest expense accounts for 29.3 percent while 4.0

4.16
4.0 4.0
8.08
personnel expense accounts for 25.19 percent, 2.36

2.0 1.61
and the remaining 45 percent goes to general and 0.76 0.82
2.0 1.17 1.45 2.0
other operating expenses.

Interest Fees and Commission Other Operating Total Income
Income Income Income
Gross profit before tax
Expense trend by category

(in billions of ETB)
2.84
2019/20 2020/21 2021/22

1.7
9.21
8.0 8.0 8.0
1.4 6.33
6.0 6.0 6.0
4.32
4.0 4.19
4.0 4.0
2.68 2.70
2.03 2.32
2.0 1.54
1.09
1.68 2.0 1.62 2.0
Interest Salaries Operating

2020 2021 2022 Expense and benefits Expense
Total Expense
Deposit Accounts
Driven by the mission of rooting our
foundation in the communities, expand- Given the strategic importance and the bank’s
ing customer base remains one of major mission to reach the unbanked masses, custom-
strategic directions we consistently er base expansion remains one of our strategic
discharge. Moreover, the inadequate priorities, which we pursue through enabling
level of financial inclusion in the country, digital initiatives, customer recruitment strate-
coupled with the national financial gies, and the introduction of new products and
inclusion strategy, which is aimed at services backed by various incentives.
promoting banking services to a consid-
erable portion of the population that are
marginalized from financial services,
drives us to take various initiatives to go
beyond the horizon and expand custom-
er base.
During the fiscal year, we have managed

to recruit more than 1.35 million addi-
tional customers, exhibiting an expan-
sion by 17.5 percent. As a result, the total
deposit accounts reached 8.99 million
8.99
Proudly Serving
by the end of June 2022. We maintained
the leading position in total deposit
customers among private banks.
Million
As regards to the deposit account
category, 74.51 percent (6.70 million) is
conventional type and the remaining
25.49 percent (2.29 million) goes to
Interest Free Banking category.
Customers
New Accounts Opening for our

Hardworking Farmers
12
593
Branches
124
New Branches
77%
Outlying areas
Market Expansion
In terms of location, about 77 percent (456)
The expansion of digital platforms is believed of our branches are in outlying areas, while
to define the future of banking. Any organiza- 137 (23 percent) are city-centered branches
tion, particularly a financial institution, that in the capital. Hence, we maintained our
expands and diversifies its touch points in legacy as the private bank with the most
response to dynamism will eventually harvest outlying/rural branches. This signifies that we
an increasing return on its competitive edges. are working to transform the rural communi-
Even so, in a vast country like Ethiopia, where ties by reaching out to the unbanked popula-
financial inclusion is minimal and tion, which is consistent with our philosophy
bank-to-population ratios remains low, open- and business purpose. The newly opened
ing physical branches remains a major assign- branches were able to mobilize a total depos-
ment for financial institutions. it of ETB 3.02 billion during the fiscal year,
demonstrating 11.78 percent contribution to
In line with that, in tandem with raising the incremental
awareness about the use of our digital
services, we have expanded our presence in
the capital city and other major potential
cities, and the expansion of dedicated inter-
est-free branches in potential areas has
remained consistent.
The introduction of economically efficient,

and physically accessible branches in areas
with little or no access to banking services
was one of the major initiatives undertaken
during the fiscal year. Accordingly, during the
fiscal year 2021/22, 124 new branches started
operation, of which 15 branches are
full-fledged IFB branches. Hence, our total
branch network reached 593 by the end of
June 30th, 2022. New branch: Gurmu
Our People
We believe that human capital equipped with
the necessary skill sets, culture, adaptable to
dynamic banking competition and technological
advancement, and willing to go an extra mile is
critical for sustainability of Coopbank. An orga-
nized set of trainings and exposures offered to
existing and new employees at all levels is
bearing fruit and it is expected to serve as a fuel
for ongoing efforts to realize our vision.
The HCM strategy under implementation is

intended to increase employee engagement at Our employees Serving Customers
all levels and create an exemplary organizational
culture by employing the necessary capacity
building tools, merit-based rewards, and perfor-
mance management practices. Furthermore, In addition, the bank has provided various devel-
practices related to onboarding competent opmental and technical training to our employ-
human capital for their next responsibility ees in order to improve their competence and
through succession planning are underway as strategic awareness. Among the training and
the capacity of our human capital defines the development areas that received attention
quality of service we provide to our customers. during the fiscal year were leadership, digital
banking and other operational areas.
We had also executed other major key human
capital management activities to enhance the During the upcoming periods, our HCM further
availability, development, and effective utiliza- solidifies its effort and go to fully implement the
tion of our employees. Accordingly, during the HCM strategy, which drives the effective achieve-
fiscal year, we managed to recruit 1,743 new ment of our vision. In this regard, compe-
employees. This puts the total human resource tence-based HCM will be further enhanced, an
strength of the bank at 6,547 as of June 30, 2022, objective employee’s performance framework
which represents an increase of 27 percent from will be introduced, and gap-based technical and
last budget year. developmental training will continue to be
provided through a training center established
With regard to outsourced staff management, a for this purpose and dedicated internal trainers.
total of 1,021 outsourced staff members joined
the bank during the fiscal year, bringing the total
number to 5,621. The increment is shown due to
the newly opened branches in this period.
Induction to new employees

Other Strategic Achievements

In conformity with our mission, we strive to Moreover, pre-construction activities were
transform the livelihoods of our community by carried out for commencing the construction of
offering a variety of banking and advisory the Financial District Tower, a G+4B+44+2U
services. Thus, major strategic activities were tower, to be built around the National Theatre.
completed during the reporting period to Construction work has also begun in major
strengthen the business linkages between our towns such as Adama, Shashamane, and Harar.
cooperative societies and farmers. Agricultural On top of that, one of the profound achieve-
value chain financing and Collateralized Com- ments of the fiscal year, around this theme was
modity Financings were developed and the acquisition of 11,000 m2 land in the capital
launched; the deposit mobilized from farmers' Finfinne for construction of headquarters.
savings accounts reached ETB 2.17 billion; a
loan of ETB 351.93 million was disbursed to 182
farmers in the year; and four new cooperatives
and seven farmers began export business.
Strategic partnerships were established, and

Memorandums of Understanding were signed
with various partners from various sectors of the
economy in order to underpin transformation of
our society with particular emphasis to MSMEs,
cooperatives and agricultural sectors. Further-
The first individual farmer receving his warehouse
more, training and awareness creation for receipt
thousands of cooperative members and individ-

ual farmers were undertaken to improve capaci-
ty building for cooperatives and farmers.
Corporate governance, implementation of

AML/CFT to manage and mitigate risks, audits
and special investigations activities were also
carried out on a regular basis to improve the
bank's corporate governance. Change work-
shops and various strategic awareness work-
shops were also held across the bank in order to
create strategic understanding among leaders
and employees of the bank.
During the reporting period, various construc-

tion and pre-construction activities were under-
taken to support the bank's fixed asset forma-
tion. Construction of our transitional headquar-
ters is coming to the end with major finishing
works being performed though there were
critical challenges arising from the international
supply chain management process. The build-
ing at Waliso Town was also completed during
the reporting period.
MoU Agreement with Ethio Engineering Group Bg
Technologies and Digital Banking

In today's business operations, technology is a We have made digital transformation as one of
critical component that strengthens the bank's the bank's strategic pillars by recognizing the
ability to deploy products and services in a more digital dominance of future banking. A signifi-
timely and flexible manner. As a result, we have cant progress was made in improving the
continued to make significant IT investments in functionality of "Coopay-Ebirr" ecosystem; and
order to respond to the highly dynamic business we were able to integrate with 22 schools, 10
environment. Many activities were carried out water utility entities, and 8 other organizations.
during the fiscal year to upgrade existing technol-
ogies and acquire new ones. To cope with the During the fiscal year, the operating model and
disruptions of digital technologies, we managed organizational structure was redesigned for
to start and run many critical IT and digital digital banking wing so as to proactively
banking projects like SAP-ERP implementation, respond to the dynamic business environment.
contact centers, and other strategic projects. Furthermore, various awareness creation,
Moreover, a digital transformation strategy has training, and public campaigns were made to
been drafted that shows the road map with promote the functionality of the ecosystem.
respect to our aspiration towards digital bank-
ing. Moreover, the bank has launched Michu, the With regard to Coopay-Ebirr's digital ecosystem
first ever uncollateralized digital lending product performance during the fiscal year, 4,812 new
in Ethiopia. The product was made ready in agents, 24,619 new merchants, and 1.56 million
partnership with Kifiya’s Qena, and enables the new Coopy-Ebirr subscribers were recruited.
bank to provide credit access to small businesses This puts the total agents, and merchant
and MSMEs. subscribers of the bank at 7,351 and 46,827,
respectively, while the bank’s Coopay-Ebirr
subscribers stood at a staggering 3.52 million at
the end of June 2022. On the other hand, the
total number of ATM card users has reached
401,772 at the end of June 2022.
In the coming year, we will continue to invest in

upgrading our existing technological platforms
and acquiring new cutting-edge technologies
in order to respond to constantly changing
401,772
customer preferences and to pave the way for
the bank's digital transformation.
Total Debit card users
3.52 M 7,351 46,827

Coopy-ebirr Total Coopay
Subscribers
Agents Total Coopay
Merchants
Our Brand and Corporate Social Responsibility

At Coopbank, we believe that the community is
at the heart of our business model, and that as Apart from that, our staff directly delivered the
our society progresses and grows, so will our items with compassion and consideration for
company. Furthermore, we believe that as a the victims.
community bank, we are more in tune with the
rhythm of their spirit. We are proud of how we We have also sponsored a variety of cultural
cultivate relationships and use practical means affairs, events, books and art works in the belief
to serve our communities. We have a clear that they would elevate the culture, language,
vision of the future and are dedicated to and art of the society. One of such events was a
making business decisions that benefit the share capital donation made by our employees
society. to the daughters of the late Hachalu Hundessa,
iconic Oromo artist.
By far, we believe we have established an
outstanding partnership with various humani- Throughout both fruitful and challenging times,
tarian and nonprofit organizations engaged in we remained faithful to our community's
relevant endeavors in order to enhance societal demands and were able to empower several
benefits and expand opportunities that inspire other socially responsible engagements and
hope in the workforce. interact closely with the community.
As a result, we were able to respond to the In general, we have strengthened our firm
situations and reach hundreds of thousands of mission of being a socially responsible corpo-
people affected by drought and famine across rate company that serves as a spark to societal
the country. We were able to mobilize more advancement as well as a safeguard during
than ETB 70 million, of which our staff members such difficult times.
contributed more than 50 million to purchase
grains, edible oils, and other supplies for Finally, we will continue to support art and
drought-affected communities in East Bale, culture initiatives, environmentally responsible
Guji, Borana, and East Hararghe zones as well initiatives, critical humanitarian causes, and a
contributed more than ETB 8 million to the wide range of socioeconomic goals.
Somali Regional State for citizens affected by
similar adversity.
Share capital donation made to

Hachalu’s daughters
CSR Program for Drought Affected Areas

18
CSR
INTEREST FREE
B NKING REPORT
Shaikh Salih Nur Ahmed Ustaz Kamil Shemsu Siraj Dr Mohammed Salih Jamal Dr Jibril Qamar Adam
SAC CHAIRPERSON SAC DEPUTY CHAIRPERSON SAC Member SAC Member
To the Shareholders, Customers and Other Stakeholders of Cooperative Bank of Oromia.
As part of the roles and responsibilities of the In addition, we have approved the penalty fund
Shariah Advisory Committee (‘the Committee’) of collected from late payment of Interest free
Cooperative Bank of Oromia S.C (‘the Bank’) banking Financing to be distributed to eligible
stipulated under the bank’s Sharia Advisory recipients through legally registered charity
Committee charter and Term of reference, we organizations.
hereby submit our report for financial year ended
June 30,2022. As regards to the operations, we have reviewed
the IFB Financing contracts, gave sharia
As well understood, the sharia advisory commit- opinions on issues that requires sharia matters
tee shall be responsible to form an independent and visited IFB windows to check the operation-
sharia opinion based on review of operations, al correctness (segregations), on a sample
business affairs and activities in relation to basis.
interest free banking business of the bank.
Generally, the roles of this function include provid- In our Opinion,
ing sharia advisory, managing sharia non-compli- To the best of our knowledge, based on the
ance risk, delivering sharia opinion/fatwa and information provided and disclosed to us during
conducting sharia review. discussions and meetings, we hereby confirm
that the operations of the Bank for the financial
Accordingly, the committee dedicated its highest year ended 30 June 2022 have been conducted
effort and time to oversee the banks Interest free in conformity with the Shari’ah principles. All the
banking business operation. During the period Products, Contracts, Terms and Conditions of
under the review, the committee has held succes- Bank’s Interest Free Banking Operations during
sive regular and extraordinary meeting and the financial year ended June 30,2022 that we
reviewed the bank’s IFB products, terms and have reviewed are in compliance with the
conditions, IFB financing contracts in order to relevant sharia principles and rules.
determine that the relevant sharia principles and
rules are properly applied. Finally, the member of Sharia Advisory Commit-
tee of the bank would like to appreciate the
Among key developments and activities of the dedication and commitment of bank’s Board of
Committee, we have approved the Mudarabah Directors, Executive Management and Employ-
deposits (Profit-Loss Sharing) and the profit ees of the bank toward strengthening Shari’ah
allocated to customers which is estimated about Compliance in the bank’s Interest Free Banking
ETB 25 million and we believe that such activities business realm.
shall be encourages to attract prospective
customers to the bank. We have also issued
different fatwas (ruling) on all shari’ah related
matters referred to us by the bank.
IFB Deposits
In terms of deposit types, the mobilized depos-
Coopbank Alhuda segment has registered a it during the fiscal year came from Wadia
radical growth in deposit mobilization in the current, Wadia savings, Mudarabah savings,
past years since it started operation back in and Mudarabah investment accounts. Wadia
2015. During the past fiscal year, we have savings account contributed 76 percent of the
maintained outstanding performance in deposit, followed by Wadiah current and
deposit mobilization through materializing our Mudarabah current. We have also launched
strong relationship with customers, extensive Mudarabah Investment product this fiscal year
public awareness creation, branch networks, to encourage customers to save and invest,
and digital channels, and diversifying Shariah and ultimately share profits.
compliant products and services.
An additional deposit of ETB 4.23 billion was IFB Deposit Performance

mobilized, representing a 35.3 percent (in millions)
annual growth rate from the previous year's
2019/20 2020/21 2021/22
deposit position of the segment. Coopbank
Alhuda's deposit position reached ETB 16.21 Wadia Current 921.32 2,394.38 3,282.68
billion for the year ended June 30, 2022,
accounting for 16.8 percent of the total Wadia Saving 5,477.77 9,429.27 12,755.10
deposits.
Mudaraba
10.00 154.98 168.39
Accounts
Sub-total 6,409.09 11,978.63 16,206.17

IFB Deposit Accounts

In order to assure our mission of rooting our
foundation in financially excluded communi- Trend of IFB Deposit Account
ties and to realize the country's financial (in million)
inclusion strategy, we have kept up recruit-
ment of new customers as a key focus area
for this segment as well. Over half a million
new customers were recruited this year,
resulting in a 23 percent annual growth. 2.29
As of June 30, 2022, our total IFB deposit 1.86

accounts stood at 2.29 million, placing it first 1.36
among private banks in the country. The total 1.07
IFB deposit account held about 24% of the 0.66
total deposit accounts of the bank. 2017/18 2018/19 2019/20 2020/21 2021/22
2.29
Million
Total IFB deposit accounts
IFB Financing
Coopbank Alhuda segment is a market leader in .
providing huge amounts of financing to various
economic sectors. The financing amount has
increased by 102 percent on average over the
last three years. Industry Leader in
Compared to last year same time period, net
financing increased by 66 percent during the FINANCING
reporting year. As a result, ETB 5.22 billion in
new financing was invested in various sectors Shariah Compliant
of the economy. The segment's total financing
volume stood at ETB 13.511 billion at the end of
30, 2022, representing a 66 percent increase
BUSINESSES
over the previous budget year.
As to the sectoral distribution of the financing,

31 percent and 24 percent went to international
trade and manufacturing, respectively. On the
other hand, the segment's non-performing
financing (NPF) was only 0.63 percent due to a
strong asset quality management practice.
Dire Steel; Financed by Coopbank Alhuda

IFB Profit IFB Profit Trend

(in millions of ETB)
This segment remained to be an important 2021/22 2020/21 2019/20
segment for the bank, and yet to be

reinforced in terms of business volume and
value propositions. The bank’s asset on this
segment (IFB) has reached ETB 17.12 1,126.49 1,066.55
billion, increasing from last year’s ETB 552.34 529.43 746.59

370.60
11.59 billion. The segment's profit has

259.55 244.82
225.09
therefore been steadily increasing as our 59.94 22.91

14.73
operations and financing have tremendous- Total Operating

Income
Operating
Expense
Profit Before
Tax
Profit After
Tax
ly expanded. Coopbank Alhuda earned ETB

1.126 billion in income during the reporting
period, representing a 49 percent increase
over the previous fiscal year. Income from
Murabaha financing was the major source
with ETB 955.12 million, which grew by 123
percent from the last year’s ETB 426.71
million. Commission income generated from
the Coopbank Alhuda has also increased by
36.4 percent to ETB 171.35 million.
IFB Market Expansion

With the ever-increasing demand from Sharia-compliant customers, we have kept on
expanding our accessibility (dedicated branches model) beyond providing services through
a window model. During the review period, by opening 15 new branches, the aggregate
dedicated branches have reached 40 throughout the country. In the coming years, we will
broaden our accessibility channels, putting customers' needs at the center of our business
operations.
IFB Dedicated Branches

Abubeker Al-Siddiq Imam Ahmed Masjid
Al-Bukhari Iman
Al-Nasir Iqra
Al-Rahma Kali
Amal Makkat Al-Mukarrama
Amana Marwa
Ansar Medinat Al-Munawera
Arefa Mina
Bereka Mufti Dawud
Bilal Nesiha
Fajr Nejashi
Fethi Masjid Nur
Furqan Omer Ibn Al-Khattab
Garu Hira Ramadan
General Wako Gutu Salahadin Ali-Ayub
Halal Selam
Hamza Masjid Sheik Bekri Saphello
Haramain Sheikh Mohammed Reshad
Hikma Teqwa
Hilal Ummu-Ayman
AUDITED REPORT
2021/22
Cooperative Bank of Oromia Share Company
CONTENTS
Company information 2-3
Directors’ report 4
Statement of directors' responsibilities 5
Independent auditors’ report 6-7
Statement of profit or loss and other comprehensive income 8
Statement of financial position 9
Statement of changes in equity 10
Statement of cash flows 11
Notes to the financial statements 12-90
Cooperative Bank of Oromia S.C
Financial Statements
For the year ended 30 June 2022

Company registration number
LBB/008/2004
Directors
Dr Fikru Deksisa Chairperson 11-Mar-2019
Fikadu Dhugasa Deputy chairperson 11-Mar-2019
Amb. Shiferaw Jarso Director 22-Mar-2022
Girma Delessa Director 22-Mar-2022
Kebede Ejeta Director 22-Mar-2022
Terefe Senbaba Director 22-Mar-2022
Wegayehu Tsige Director 22-Mar-2022
Tadele Abdi Director 22-Mar-2022
Muktar Adem Director 22-Mar-2022
Eshetu Wakene Director 22-Mar-2022
Debelo Jabesa Director 22-Mar-2022
27-May-2016
Executive Management
Deribie Asfaw President 14-Dec-2015
Ahmed Hassen VP, Corporate Banking 1-May-2016
Aman Semir VP, Technologies and Digital Banking 1-May-2016
Gadissa Mamo VP, Banking Operations 17-Sep-2018
Liko Tolessa VP, Human Capital and Projects Mgt 27-May-2016
Desalegn Tadesse VP, Retail and MSMEs Banking 1-May-2016
Tafesse Fana Chief Internal Auditor 27-May-2016
Gutema Dibaba VP, Cooperative and Agricultural Banking 1-Jan-2021
Godana Kabato VP, Interest Free Banking 1-Jan-2021
Giragn Garo VP, Finance and Facilities Management 28-Dec-2021
Muluneh Aboye Chief Risk and Compliance Mgt Officer 16-Mar-2022
Tadele Tilahun VP, Strategy and Marketing 16-May-2022
Independent auditor
Tafesse,Shisema and Ayalew Certified Partnership
Chartered Certified Accountants /UK/ and Authorized Auditors (Ethiopia)
P.O Box 110690
Fax:251 0116221270/60
[email protected]/[email protected]
Addis Ababa
Ethiopia
Corporate Registered Office
Africa Avenue
Flamingo Get House Building
P.O Box 16936
E-Mail: [email protected]
Website: www.coopbankoromia.com.et
Addis Ababa, Ethiopia
Company Secretary
Obbo Teshome Argeta
Principal bankers
National Bank of Ethiopia

Correspondent Banks
Name Address
Mashreq Bank PSC New York, USA
Bank of China Limited Beijing, China
Commerzbank AG Frankfurt am Main, Germany
DZ BANK AG Deutsche Frankfurt am Main, Germany
UniCredit SPA Rome, Italy
Bank of Beirut SAL Beirut, Lebanon
Bank of Beirut (UK) Ltd London, United Kingdom
Aktif Yatirim Bankasi AS Istanbul, Turkey
Bank of Africa-Mer Rouge Istanbul, Turkey
CAC International Bank Djibouti, Djibouti
East Africa Bank Djibouti, Djibouti
Ecobank Kenya Limited Nairobi, Kenya
Equity Bank. (Kenya) Limited Nairobi, Kenya
Exim Bank (Djibouti). S A Djibouti, Djibouti
KCB Bank Kenya Limited Nairobi, Kenya
SALAAM African Bank Djibouti, Djibouti

The Directors’ Report

The Directors submit their report together with the financial statements for the period ended June
30, 2022 to the shareholders of Cooperative Bank of Oromia Share Company ("CBO or the Bank").
This report discloses the financial performance and the state of affairs of the Bank.
Incorporation and Address
Cooperative Bank of Oromia Share herein after may be called CBO or The Bank was established
in Ethiopia in 2004 in accordance with the Commercial Code of Ethiopia 1960 and licensed by the
National Bank of Ethiopia with the objective to engage in banking services in accordance with the
Banking Business Proclamation number 84/1994. The Bank commenced operations in 2005 and
is domiciled in Ethiopia.
Principal activities
The mission of the Bank is to provide banking solutions that create greater customer experience
with emphasis to cooperatives and agro-based businesses through proper use of human resource
and up-to-date technologies to maximize stakeholders’ value.
Results and dividends

The Bank's results for the year ended June 30, 2022 are set out on the statement of profit or loss
and other comprehensive income. The profit for the year has been transferred to Retained
Earnings, Legal Reserve and Risk Reserve. The summarized results are presented below.
30 June 2022 30 June 2021

Birr'000 Birr'000
Revenue (Interest Income, Commission and operating 12,053,249 8,022,003

income)
Profit before tax 2,843,250 1,696,056
Income tax expense (797,922) (368,876)
Profit for the year 2,045,328 1,327,180
Other comprehensive income / (loss) net of taxes 38,035 (26,324)
Total comprehensive income / (loss) for the year 2,083,362 1,300,856
Dr Fikru Deksisa
Chairperson of the Board of Directors
20 September 2022

Statement of the Director’s Responsibilities

The Bank's directors and/or management are responsible for the preparation and fair
presentation of these financial statements in conformity with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), The
Commercial Code of Ethiopia 2021 the directives issued by the National Bank of Ethiopia and
Internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
The Bank is required keep such records as are necessary to:

a) Exhibit clearly and correctly the state of its affairs;
b) Explain its transactions and financial position; and
c) Enable the Accounting and Audit Board of Ethiopia to determine whether the Bank has
complied with the provisions of the financial reporting proclamation and directives issued
for the implementation of the proclamation.
The Bank's directors accept responsibility for the annual financial statements, which ha ve been
prepared using appropriate accounting policies supported by reasonable and prudent
judgements and estimates, in conformity with International Financial Reporting Standards.
The directors are of the opinion that the financial statements give a true and fair view of the state
of the financial affairs of the bank and of its profit or loss for the reporting year.
The directors further accept responsibility for the maintenance of accounting records that may
be relied upon in the preparation of financial statements, as well as adequate systems of internal
financial control.
Nothing has come to the attention of the directors to indicate that the Bank will not remain a
going concern for at least twelve months from the date of this statement.
Signed on behalf of the Directors by:
Dr Fikru Deksisa Ob. Deribie Asfaw

Chairperson of the Board of Directors President
20 September 2022 20 September 2022

Tafesse, Shisema and Ayalew Certified Partnership
Chartered Certified Accountants /UK/ and Authorised Auditors (Ethiopia)
Opinion
We have audited the financial statements of the Cooperative Bank of Oromia Share Company
specified on page 12-89, which comprise the statement of financial position as at June 30, 2022:
the statement of profit or loss and other comprehensive income, statement of cash flows and
statement of changes in equity for the year then ended, and notes to the financial statements,
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as at June 30, 2022 and of its financial performance and cash
flows for the year then ended in accordance with International Financial Reportin g Standards
(IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). 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 Company
in accordance with the Ethiopian Code of Ethics for Professional Accountants, 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.
Key Audit Matters
in our audit of the financial statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
we do not provide a separate opinion on these matters.
As described in notes 14, 15 and 18 to the financial statements, the impairment losses have
been determined in accordance with IFRS 9 Financial Instruments. This was considered a key
determine the impairment losses.
Responsibilities of the Directors for the Financial Statements
The Directors are responsible for the preparation and fair presentation of the financial statements
in accordance with International Financial Reporting Standards (IFRSs), and for such internal
control as Directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.

Tafesse, Shisema and Ayalew Certified Partnership
Chartered Certified Accountants /UK/ and Authorised Auditors (Ethiopia)
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 directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for overseeing the company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
nancial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs 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.
Report on other Legal and Regulatory requirement
We have no comment to make on the report of your Board of Directors so far as it relates to
these financial statements in accordance with the Commercial Code of Ethiopia of 2021
(Proclamation No-1243/2021), recommend approval of the financial statements.
Tafesse, Shisema and Ayalew Certified Audit Partnership

Chartered Certified Accountants (UK)
Authorized Auditors (ETH)
Addis Ababa, Ethiopia
20 September 2022

30 June 2022 30 June 2021

Notes Birr'000 Birr'000
Interest income 5 8,083,608 5,410,166

Interest expense 6 (2,700,753) (2,028,568)
Net interest income 5,382,855 3,388,506
Commission income 7 1,610,006 1,166,681
Commission expense 7 - -
Net fees and commission income 1,610,006 1,166,681
Other operating income 8 2,359,636 1,445,157
Total operating income 9,352,497 6,000,343

Loan and other asset impairment 9 (631,367) (228,040)
Impairment losses on PPE 9 (260) -
Net operating income 8,720,870 5,772,303
Personnel expenses 10 (2,320,581) (1,617,626)

Amortization of intangible assets 19 (18,047) (8,410)
Depreciation of property, plant and equipment 20 (199,734) (127,418)
Other operating expenses 11 (3,339,258) (2,322,795)
Total Other Operating Expense (5,877,620) (4,076,248)
Income tax expense 12a (797,922) (368,876)
Profit for the year 2,045,328 1,327,180
Other comprehensive income (OCI) net on income tax
Items that will not be subsequently reclassified into profit or loss:
Re-measurement gain/loss on retirement 25

benefits obligations (4,354) (26,324)
Revaluation gain-equity investment 16 42,389 -
Net effect of gain/loss 38,035 (26,324)
Total comprehensive income for the period 2,083,362 1,300,856
Basic earnings per share (Birr) 28 34 40
The notes on pages [12] to [89] are an integral part of these financial statements.

As at 30 June 2022
30 June 2022 30 June 2021
ASSETS
Cash and balances with banks 13 16,488,220 14,093,845

Loans and advances to customers 14 69,336,114 45,783,603
Interest free Financing 15 13,362,820 7,816,229
Investment securities:
Financial asset at fair value through OCI 16 179,715 112,826
Financial assets at Amortized cost 17 8,045,538 8,966,193

Other assets 18 2,780,254 2,006,639
Right-of-use assets 37 1,499,745 758,365
Intangible assets 19 238,820 82,500
Property, plant and equipment 20 2,468,182 1,571,729
Non-Current Asset Held For Sale 20a 125,176 109,646
Deferred Asset 12e 81,217 19,384
Total assets 114,605,803 81,320,959
LIABILITIES
Deposits from customers 21 95,839,068 70,390,028

Due to other banks 22 929,933 728,376
Borrowing From NBE 23 - 41,687
Current tax liabilities 12c 773,825 396,833
Lease liabilities 37 294,552 112,632
Other liabilities 24 5,268,344 2,412,976
Retirement benefit obligation 25 124,679 93,983
Deferred tax liability 12f 63,382 49,023
Total liabilities 103,293,782 74,225,539
EQUITY
Share capital 26 7,731,771 4,651,021

Share premium 27 8,672 8,672
Retained earnings 29 1,378,523 950,393
Legal reserve 30 1,755,144 1,243,812
Regulatory risk reserve 31 433,980 237,590
Donated capital 32 3,932 3,932
Total equity 11,312,021 7,095,420
Total liabilities and equity 114,605,803 81,320,958
The financial statements were approved and authorized for issue by the board of directors on
October 30, 2022 and were signed on its behalf by:
Dr Fikru Deksisa Ob.Deribie Asfaw

Chairperson of the Board of Directors President

Statement of changes in equity
Share Share Retained Legal Donated R.Risk

capital premium earnings reserve capital Reserve Total
Notes Birr'000 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
As at 1 July 2020 3,000,000 8,672 793,223 912,017 3,932 393,033 5,110,877
28 1,327,180 1,327,180
Suspended Interest Income 16 (6,908) - - 6,908 -
Reversal of RRR (173,020) (173,020)

Transfer to RRR(severance) (10,670) 10,670
Re-measurement gains/loss
25 (26,324) (26,324)
Reversal of severance liability 363 363

Total comprehensive
income for the period 3,000,000 8,672 2,076,864 912,017 3,932 237,590 6,239,075
Issue of shares 26 1,651,021 - - - - - 1,651,021
Dividend Paid - (793,223) - - - (793,223)
24 - - (1,453) - - - (1,453)
Transfer to legal reserve - - (331,795) 331,795 - - -
1,651,021 - (1,126,471) 331,795 - - 856,345
As at 30 June 2021 4,651,021 8,672 950,393 1,243,812 3,932 237,590 7,095,420
As at 01 July 2021 4,651,021 8,672 950,393 1,243,812 3,932 237,590 7,095,420
28 2,045,328 2,045,328
Suspended Interest Income 5 (110,863) - - 110,863 -

Reversal of RRR(Loan
provision) (43,138) 43,138 -
Fair value gain-Equity
investment 16 42,389 42,389
Total comprehensive
income for the period 4,651,021 8,672 2,841,720 1,243,812 3,932 433,980 9,183,137
Issue of shares 26 3,080,750 - - - - - 3,080,750
Dividend Paid - (950,393) - - - (950,393)
24 - - (1,472) - - - (1,472)
Transfer to legal reserve - - (511,332) 511,332 - - -
3,080,750 - (1,463,197) 511,332 - - 2,128,885
As at 30 June 2022 7,731,771 8,672 1,378,523 1,755,144 3,932 433,980 11,312,022

The notes on pages [12] to [89]

30 June 2022 30 June 2021

Cash flows from operating activities
Cash generated from operations 33 (808,358) 5,948,248
Dividend Paid - (793,223)
Directors allowance (1,453) (1,590)
Profit Tax Paid (396,833) (208,436)
Withholding tax paid - (570)
Net cash (outflow)/inflow from operating activities (1,206,644) 4,944,429
Cash flows from investing activities

Purchase/ collection of NBE bills and bonds 920,655 (6,102)
Purchase of equity investments 16 (25,000) (500)
Purchase of property, plant and equipment 20 (866,720) (703,359)
Proceeds from Disposal 18,843 34,585
Right-of-use assets 20a (1,093,921)
Purchase of Intangible Asset 19 (174,367) (57,761)
Net cash (outflow)/inflow from investing activities (1,220,510) (733,137)
Cash flows from financing activities

Payment of Lease liabilities (46,376) (1,961)
Proceeds from borrowings 23 (41,687) 41,687
Dividend Paid (950,393) -
Proceeds from issues of shares 26 3,080,750 1,651,021
Net cash (outflow)/inflow from financing activities 2,042,293 1,690,747
Net increase/(decrease) in cash and cash

(384,861) 5,902,039
equivalents
Cash and cash equivalents at the beginning of the year 13a 10,369,880 4,520,536
Effects of exchange rate movement on cash and cash
7 (256,786) (62,605)
equivalents
Cash and cash equivalents at the end of the year 9,728,232 10,359,970

Notes to the Financial Statements
1. General Information
Cooperative Bank of Oromia SC ("CBO or the Bank") is a private commercial bank domiciled
in Ethiopia. The Bank was established on 24 October 2004 in accordance with the provisions
of the Commercial Code of Ethiopia of 1960 and the Licensing and Supervision of Banking
Business Proclamation No. 592/2008. The Bank’s e is at Africa Avenue
Flamingo, Get House Building, Addis Ababa, Ethiopia.
The Bank is principally engaged in providing banking solutions that create greater customer
experience with emphasis to cooperatives and agro-based businesses through proper use of
human resource and up-to-date technologies to maximize stakeholders’ value.
2. Summary of Significant Accounting Policies

2.1 Introduction to summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are
set out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
2.2 Basis of preparation

The financial statements for the year ended June 30, 2022 (the Financial Statements) have
been prepared in accordance with International Financial Reporting Standards (IFRS) and
IFRS Interpretations Committee applicable to companies reporting under IFRS. The financial
statements comply with IFRS as issued by the International Accounting Standards Board
(IASB). Additional information required by the national regulations is included where
appropriate.
The financial statements comprise;

Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
2.2.1 Statement of compliance

The preparation of financial statements in conformity with IFRS requires the use o f certain
critical accounting estimates. It also requires directors to exercise their judgment in the
process of applying the bank’s accounting policies. Changes in assumptions may have a
umptions changed.
Directors believe that the underlying assumptions are appropriate and that the bank's financial
statements therefore present the financial position and results fairly. The areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are

2.2.2 Basis of measurement
The financial statements have been prepared in accordance with the going concern principle
under the historical cost concept, except for the following;
1. Fair value through other comprehensive income and fair value through profit and loss,
financial assets and financial liabilities (including derivative instruments) and investment
properties measured at fair value.
2. Assets held for sale - measured at fair value less cost of disposal; and
3. The liability for defined benefit obligations recognized at the present value of the defined
benefit obligation less the fair value of the plan assets measured at fair value.
All values are rounded to the nearest thousands, except when otherwise indicated. The
financial statements are presented in thousands of Ethiopian Birr (Birr' 000).
2.2.3 Going concern

The bank has adequate resources to continue in operation for the foreseeable future. For this
reason, the management continues to adopt going concern assumption in preparing the
financial statements. The current credit facilities and adequate resources of the company
esses and
operations.
2.3 Changes in accounting policies and disclosures

New standards, amendments and interpretations issued but not effected for the
reporting period.
Title Description Effective Date
IAS 1 — IAS 1 "Presentation of Financial Statements" The amendments

Presentation sets out the overall requirements for financial are effective for
of Financial statements, including how they should be annual periods
Statements structured, the minimum requirements for their beginning on or
content and overriding concepts such as going after January 1,
concern, the accrual basis of accounting and the 2023. Earlier
current/non-current distinction. The standard application is
requires a complete set of financial statements to permitted.
comprise a statement of financial position, a
statement of profit or loss and other
comprehensive income, a statement of changes
in equity and a statement of cash flows.

IAS 8 — IAS 8 "Accounting Policies, Changes in The amendments

Accounting Accounting Estimates and Errors" is applied in are effective for
Policies, selecting and applying accounting policies, annual periods
Changes in accounting for changes in estimates and beginning on or
Accounting reflecting corrections of prior period errors. The after January 1,
Estimates 2023. Earlier
and Errors IFRS applying to a transaction, event or application is
condition, and provides guidance on developing permitted.
accounting policies for other items that result in
relevant and reliable information. Changes in
accounting policies and corrections of errors are
generally retrospectively accounted for, whereas
changes in accounting estimates are generally
accounted for on a prospective basis.
IAS 12 — IAS 12, "Income Taxes" implements a so-called The amendments

Income 'comprehensive balance sheet method' of are effective for
Taxes accounting for income taxes which recognizes annual reporting
both the current tax consequences of periods beginning
transactions and events and the future tax on or after
consequences of the future recovery or January 1, 2023.
settlement of the carrying amount of an entity's Early adoption is
assets and liabilities. Differences between the permitted.
carrying amount and tax base of assets and
liabilities, and carried forward tax losses and
credits, are recognized, with limited exceptions,
as deferred tax liabilities or deferred tax assets,
with the latter also being subject to a 'probable
profits' test.
IAS 16 — IAS 16 "Property, Plant and Equipment" outlines The amendments

Property, the accounting treatment for most types of are effective for
Plant and property, plant and equipment. Property, plant annual periods
Equipment and equipment is initially measured at its cost, beginning on or
subsequently measured either using a cost or after January 1,
revaluation model, and depreciated so that its 2022. Early
depreciable amount is allocated on a systematic application is
basis over its useful life. permitted.
IAS 37 — IAS 37 "Provisions, Contingent Liabilities and The amendments

Provisions, Contingent Assets" outlines the accounting for are effective for
Contingent provisions (liabilities of uncertain timing or annual periods
Liabilities and amount), together with contingent assets beginning on or
Contingent (possible assets) and contingent liabilities after January 1,
Assets (possible obligations and present obligations that 2022. Early
are not probable or not reliably measurable). application is
permitted.

IAS 41 — IAS 41 "Agriculture" sets out the accounting for The amendments
Agriculture agricultural activity – the transformation of are effective for
biological assets (living plants and animals) into annual periods
agricultural produce (harvested product of the beginning on or
entity's biological assets). The standard generally after January 1,
requires biological assets to be measured at fair 2022. Early
value less costs to sell. application is
permitted
IFRS 1 — IFRS 1 "First-time Adoption of International The amendments

First-time Financial Reporting Standards" sets out the are effective for
Adoption of procedures that an entity must follow when it annual periods
International adopts IFRS for the first time as the basis for beginning on or
Financial preparing its general purpose financial after January 1,
Reporting statements. The IFRS grants limited exemptions 2022. Early
Standards from the general requirement to comply with application is
each IFRS effective at the end of its first IFRS permitted.
reporting period.
IFRS 3 — IFRS 3 "Business Combinations" outlines the The amendments

Business accounting when an acquirer obtains control of a are effective for
Combinations business (e.g. an acquisition or merger). Such annual periods
business combinations are accounted for using beginning on or
the 'acquisition method', which generally requires after January 1,
assets acquired and liabilities assumed to be 2022. Early
measured at their fair values at the acquisition application is
date. permitted.
IFRS 17 — IFRS 17 establishes the principles for the The IASB

Insurance recognition, measurement, presentation and tentatively
Contracts disclosure of insurance contracts within the decided to defer
scope of the standard. The objective of IFRS 17 the effective date
is to ensure that an entity provides relevant of IFRS 17,
information that faithfully represents those Insurance
contracts. This information gives a basis for Contracts to
users of financial statements to assess the effect annual periods
that insurance contracts have on the entity's beginning on or
financial position, financial performance and after January 1,
cash flows 2022.

2.4 Foreign Currency Translation
2.4.1 Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary
economic environment in which the bank operates ('the functional currency'). The functional
currency and presentation currency of the bank is the Ethiopian Birr (Birr).
2.4.2 Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of foreign currency transactions and from the translation at exchange
rates of monetary assets and liabilities denominated in currencies other than the bank's
functional currency are recognized in profit or loss. Monetary items denominated in foreign
currency are translated using the closing rate as at the reporting date.
Changes in the fair value of monetary securities denominated in foreign cu rrency classified
as available for sale are analyzed between translation differences resulting from changes in
the amortized cost of the security and other changes in the carrying amount of the security.
Translation differences related to changes in amortized cost are recognized in profit or loss,
and other changes in carrying amount are recognized in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held
at fair value through profit or loss are recognized in profit or loss as part of the fair value gain
or loss. Translation differences on non-monetary financial assets measured at fair value, such
as equities classified as available for sale, are included in other comprehensive income.
2.5 Recognition of Income and Expenses

The bank earns income from interest on loan and advances given to customers, service
charges and commissions from customers, interest income from deposits with local and
correspondent bank, investment in NBE (National Bank of Ethiopia) bills. Other income
includes incomes like foreign currency transactions, dividend, rental and other miscellaneous
incomes.
Interest income and expenses are recognized in the profit or loss to the extent that it is
probable that
terms and the income/expense can be reliably measured, regardless of when the
receipt/payment is being made.
Commission and fees are measured at the fair value of the conside ration received or
receivable, taking into account contractually defined terms of payment and excluding taxes or
duty.

2.5.1 Interest Income and Expense
Interest income and expense are measured using the effective interest method for all interest -
bearing financial instruments, except for those classified at fair value through profit or loss.
The effective interest rate is the rate that exactly discounts the estimated future cash
payments or receipts over the expected life of the financial instrument to the gross carrying
amount of the financial asset (before adjusting for expected credit losses) or to the amortized
cost of the financial liability, including early redemption fees, and related penalties, and
premiums and discounts that are an integral part of the overall return.
For all government bills, bonds and interest bearing financial assets measured at amortized
cost interest income or expense is recorded using the Effective Interest Rate (EIR). The
carrying amount of the government bills and bonds is adjusted if the bank revises its estimates
of payments or receipts. The adjusted carrying amount is calculated based on the original EIR
and the change in carrying amount is recorded as 'Interest Income' for financial assets and
'Interest expense' for financial liabilities.
2.5.2 Fees and commission income and expense

Fees and commission income and expenses that are integral to the effective interest rate on
a financial asset or liability are included in the measurement of the effective interest rate. Other
fees and commission income (commission on foreign transactions, advising comm ission,
extension commission) are recognized as the related services performed.
When a loan commitment is not expected to result in the draw-down of a loan, loan
commitment fees are recognized on a straight-line basis over the commitment period.
Other fees and commission expenses relates mainly to transaction and service fees are
expensed as the services are received.
2.5.3 Interest paid on borrowings and deposits

Interest paid on borrowings and deposits are calculated on 365 days’ basis in a year and
recognized on accrual basis. Interest on lease liabilities are accounted for as per IFRS 16
Leases.
2.5.4 Dividend income

This is recognized when the bank’s right to receive the payment is established, which is
generally when the shareholders approve and declare the dividend .
2.5.5 Foreign exchange revaluation gains or losses

These are gains and losses arising on settlement and translation of monetary assets and
liabilities denominated in foreign currencies at the functional currency’s spot rate of exchange
at the reporting date. This amount is recognized in the Profit or Loss and it is further broken
down into realized and unrealized portion.

The monetary assets and liabilities include financial assets within cash and cash equivalent
and foreign currency deposits.
2.6 Financial instruments - initial recognition and subsequent measurement

2.6.1 Financial assets
Initial recognition and measurement

On initial recognition, a financial asset shall be classified either as measured at either
amortized cost, fair value through other comprehensive income (FVOCI) or fair value through
profit or loss (FVTPL).
I. Financial asset measured at amortized cost

The Bank shall measure a financial asset at amortized cost, if it meets both of the following
conditions and is not designated at FVTPL:
The asset is held within a business model whose objective is to hold assets to collect
contractual cash flows.
The contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest (SPPI).
II. Financial assets measured at fair value through other comprehensive income
A debt instrument shall be measured at FVOCI only if it meets both of the following conditions
and is not designated at FVTPL:
The asset is held within a business model whose objective is achieved by both collecting
ws and selling financial assets.
The contractual terms of the financial asset give rise on specified dates to cash flows that
are SPPI.
On initial recognition, an equity investment that is held for trading shall be classified at FVTPL.
However, for equity investment that is not held for trading, the bank may irrevocably elect to
present subsequent changes in fair value in other comprehensive income. This election is
made on an investment-by-investment basis.
III. Financial instruments measured at fair value through profit or loss

All other financial assets that do not meet the classification criteria at amortized cost or FVOCI,
above, shall be classified as measured at FVTPL.

Business model assessment
The Bank shall make an assessment of the objective of a business model in which an asset
is held at a portfolio level, because this best reflects the way the business is managed and
information is provided to management. The information considered includes:
The stated policies and objectives for the portfolio and the operation of those p olicies in
practice. In particular, whether management’s strategy focuses on earning contractual interest
revenue, maintaining a particular interest rate profile, matching the duration of the financial
assets to the duration of the liabilities that are funding those assets or realizing cash flows
through the sale of the assets;
How the performance of the portfolio is evaluated and reported to the Bank’s
management;
The risks that affect the performance of the business model (and the financial assets held
within that business model) and its strategy for how those risks are managed;
How managers of the business are compensated (e.g. whether compensation is based on
the fair value of the assets managed or the contractual cash flows collected); and
The frequency, volume and timing of sales in prior periods, the reasons for such sales and
its expectations about future sales activity. However, information about sales activity is not
considered in isolation, but as part of an overall assessment of how the ban k’s stated
objective for managing the financial assets is achieved and how cash flows are realized.
Financial assets that are held for trading and whose performance is evaluated on a fair value
basis shall be measured at FVTPL because they are neither held to collect contractual cash
flows nor held both to collect contractual cash flows and to sell financial assets.
Financial assets shall not be reclassified subsequent to their initial recognition, except in the
period after the Bank changes its business model for managing financial assets.
Assessment of whether contractual cash flows are solely payments of principal and
interest
For the purposes of this assessment, ‘principal’ shall be defined as the fair value of the
financial asset on initial recognition.
Interest shall be defined as the consideration for the time value of money and for the credit
risk associated with the principal amount outstanding during a particular period of time and for
other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as
profit margin.
In assessing whether the contractual cash flows are SPPI, the bank considers the contractual
terms of the instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash flows such that it
would not meet this condition. In making the assessment, the bank considers:

Contingent events that would change the amount and timing of cash flows;
Leverage features;
Prepayment and extension terms;
Terms that limit the bank’s claim to cash flows from specified assets (e.g. non-recourse
loans); and
Features that modify consideration of the time value of money (e.g. periodical reset of
interest rates).
Reclassifications
If the business model under which the bank holds financial assets changes, the financial
assets affected are reclassified.
The classification and measurement requirements related to the new category apply
prospectively from the first day of the first reporting period following the change in business
model that results in reclassifying the bank.
During the current financial year and previous accounting period there was no change in the
business model under which the bank holds financial assets. Therefore, no reclassifications
were made.
Derecognition of Financial assets
The bank shall derecognize a financial asset when:

The contractual right to the cash flows from the financial asset expires, or
It transfers the rights to receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of the financial asset are transferred;
Bank neither transfers nor retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset
(or the carrying amount allocated to the portion of the asset derecognized) and the sum of (i)
the consideration received (including any new asset obtained less any new liability assumed)
and (ii) any cumulative gain or loss that had been recognized in OCI s hall be recognized in
profit or loss.
Any cumulative gain/loss recognized in OCI in respect of equity investment securities

designated as at FVOCI shall not be recognized in profit or loss on derecognition of such
securities.
nancial assets that qualify for derecognition that is created or

retained by the bank shall be recognized as a separate asset or liability.

Impairment of financial assets
The impairment charge in the Profit or Loss Statement includes the change in expected credit
losses and including those arising from fraud. Expected credit losses are recognized for loans
and advances to customers, other financial assets held at amortized cost, financial assets
measured at fair value through other comprehensive income, and certain loan commitments
and financial guarantee contracts.
Expected credit losses are calculated as an unbiased and probability-weighted estimate using
an appropriate probability of default, adjusted to take into account a range of possible future
economic scenarios, and applying this to the estimated exposure of the bank at the point of
default after taking into account the value of any collateral held, repayments, or other mitigates
of loss and including the impact of discounting using the effective interest rate.
At each reporting date, the bank shall assess whether there is objective evidence that financial
assets (except equity investments), other than those carried at FVTPL, are impaired.
The bank shall recognize loss allowances for expected credit losses (ECL) on the following
financial instruments that are not measured at FVTPL:
Financial assets that are debt instruments.

Lease receivables.
Financial guarantee contracts issued
Loan commitments issued.
No impairment loss shall be recognized on equity investments.
The bank shall measure loss allowances at an amount equal to lifetime ECL, except for the
following, which are measured as 12-month ECL:
Debt investment securities that are determined to have low credit risk at the reportin g date;
and
Other financial instruments (other than lease receivables) on which credit risk has not
Loss allowances for lease receivables shall always be measured at an amount equal to
lifetime ECL.
12-Month ECL is the portion of ECL that result from default events on a financial instrument
that are possible within the 12 months after the reporting date. Financial instruments for which
a 12-month ECL is recognized are referred to as Stage 1 financial instruments.
Lifetime ECL is the ECL that result from all possible default events over the expected life of
the financial instrument. Financial instruments for which a lifetime ECL is recognized but which
are not credit-impaired are referred to as Stage 2 financial instruments.

I. Measurement of ECL
ECL is a probability-weighted estimate of credit losses. It shall be measured as follows:
For financial assets that are not credit-impaired at the reporting date (stage 1 and 2): as
the present value of all cash shortfalls (i.e. the difference between the cash flows due to
the bank in accordance with the contract and the cash flows that the bank expects to
receive).
For financial assets that are credit-impaired at the reporting date (stage 3): as the
difference between the gross carrying amount and the present value of estimated future
cash flows.
For undrawn loan commitments: as the present value of the difference between the
contractual cash flows that are due to the bank, if the commitment is drawn down and the
cash flows that the Bank expects to receive. and
For financial guarantee contracts: as the expected payments to reimburse the holder l ess
any amounts that the Bank expects to recover.
II.
Where the terms of a financial asset are renegotiated or modified or an existing financial asset
the bank shall
assess whether the financial asset should be derecognized and ECL are measured as follows :
If the expected restructuring will not result in derecognition of the existing asset, then the
expected cash flows arising from the modified financial asset are included in calculating
the cash shortfalls from the existing asset.
If the expected restructuring will result in derecognition of the existing asset, then the
expected fair value of the new asset is treated as the final cash flow from the existing
financial asset at the time of its derecognition. This amount is included in calculating the
cash shortfalls from the existing financial asset that are discounted from the expected date
of derecognition to the reporting date using the original effective interest rate of the existing
financial asset.
III. Credit-impaired financial assets

At each reporting date, the bank shall assess whether financial assets carried at amortized
cost, debt financial assets carried at FVOCI, and finance lease receivables are credit-impaired
(referred to as Stage 3 financial assets).
A financial asset shall be considered ‘credit-impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:
A breach of contract such as a default or past due event;

The restructuring of a loan or advance by the Bank on terms that the Bank would not
consider otherwise;
It is becoming probable that the borrower will enter bankruptcy or other financial
reorganization;
The disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition shall be
considered to be credit-impaired unless there is evidence that the risk of not receiving
are no other indicators of
impairment. In addition, a retail loan that is overdue for 90 days or more shall be considered
credit-impaired even when the regulatory definition of default is different.
IV. Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL shall be presented in the statement of financial position as
follows:
For financial assets measured at amortized cost: as a deduction from the gross carrying
amount of the assets;
For loan commitments and financial guarantee contracts: generally, as a provision;
Where a financial instrument includes both a drawn and an undrawn component, and the
bank cannot identify the ECL on the loan commitment component separately from on the
drawn component: The bank presents a combined loss allowance for both components.
The combined amount is presented as a deduction from the gross carrying amount of the
drawn component. Any excess of the loss allowance over the gross amount the drawn
component is presented as a provision; and
For debt instruments measured at FVOCI: no loss allowance is recognized in the
statement of financial position because the carrying amount of these assets is their fair
value; however, the loss allowance shall be disclosed and is recognized in the fair value
reserve.
V. Write-off
Loans and debt securities shall be written off (either partially or in full) when there is no
reasonable expectation of recovering the amount in its entirety or a portion there of. This is
generally the case when the bank determines that the borrower does not have assets or
sources of income that could generate sufficient cash flows to repay the amounts subject to
the write-off. This assessment shall be carried out at the individual asset level.

Recoveries of amounts previously written off shall be included in ‘impairment losses on
financial instruments’ in the statement of profit or loss and OCI.
Financial assets that are written off could still be subject to enforcement activities in order to
comply with the bank’s procedures for recovery of amounts due.
VI. Financial guarantees

Financial guarantees are contracts that require the bank to make specified payments to
reimburse the holder for a loss that it incurs because a specified debtor fails to make payment
when it is due in accordance with the terms of a debt instrument.
Types of Letter of Guarantees issued by the bank: -
Bid bond
Suppliers’ Credit Guarantee
Advance Payment Guarantee
Performance Bond
Retention Guarantee
Customs Duty Guarantee
Initial accounting for financial guarantees

The bank initially measures financial guarantee contracts at fair value. If the financial
guarantee contract was issued in a stand-alone arm's length transaction to an unrelated party,
then its fair value at inception is likely to equal the premium received unless there is evidence
to the contrary.
Subsequent measurement
Financial guarantees are subsequently measured at the higher of:
The amount of the loss allowance determined in accordance with IFRS 9; and
The amount initially recognized less, when appropriate, the cumulative amount of income
recognized in accordance with the principles of IFRS 15.
VII. Non-integral financial guarantee contracts

The bank shall assess whether a financial guarantee contract held is an integral element of a
financial asset that is accounted for as a component of that instrument or is a contract that is
accounted for separately.
Where the bank determines that the guarantee is an integral element of the financial asset,
then any premium payable in connection with the initial recognition of the financial asset shall
be treated as a transaction cost of acquiring it. The bank shall consider the effect of the
protection when measuring the fair value of the debt instrument and when measuring ECL.

Where the bank determines that the guarantee is not an integral element of the debt
instrument, then it shall recognize an asset representing any prepa yment of guarantee
premium and a right to compensation for credit losses.
Collateral valuation
The bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The
collateral comes in various forms such as cash via bank guarantees and real estate. The fair
value of collateral is generally assessed, at a minimum, at inception and based on the bank's
reporting schedule.
To the extent possible, the bank uses active market data for valuing financial assets, held as
collateral. Other financial assets which do not have a readily determinable market value are
valued using models.
Repossessed collateral
Repossessed collateral represents financial and non-financial assets acquired by the bank in
settlement of overdue loans.
The bank’s policy is to determine whether a repossessed asset is best used for its internal
operations or should be sold.
Assets determined to be used for internal operations are initially recognized at the lower of
their repossessed value or the carrying value of the original secured asset and included in the
relevant assets depending on the nature and the bank’s intention in respect of recovery of
these assets, and are subsequently re-measured and accounted for in accordance with the
accounting policies for these categories of assets.
Assets that are determined better to be sold are immediately transferred to assets held for
sale at their fair value at the repossession date in line with the bank’s policy.
2.6.2 Financial Liabilities

A. Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of other financial
liabilities, net of directly attributable transaction costs.
The bank's financial liabilities include customer's deposit, margin held on letters of credit and
other liabilities. Interest expenditure is recognized in interest and similar expense.

B. Subsequent measurement
Financial instruments issued by the b
or loss but are classified as financial liabilities at amortized cost, where the substance of the
contractual arrangement results in the bank having an obligation either to deliver cash or
another financial asset to the holder, or to satisfy the obligation other than by the exchange of
After initial measurement, financial liabilities at amortized cost are subsequently measured at
amortized cost using the effective interest rate (EIR). Amortized cost is calculated by taking
into account any discount or premium on the issue and costs that are an integral part of the
EIR.
The bank’s financial liabilities carried at amortized cost comprise of customer deposits, margin
held on letter of credit and other liabilities.
C. Derecognition of Financial Liabilities

Financial liabilities are derecognized when they have been redeemed or otherwise
extinguished.
2.6.3 Offsetting Financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement o f
financial position where the bank has a legally enforceable right to offset the recognized
amounts, and there is an intention to settle on a net basis or realize the asset and settle the
liability simultaneously.
The bank has also entered into arrangements that do not meet the criteria for offsetting but
still allow for the related amounts to be set off in certain circumstances, such as bankruptcy
or the termination of a contract.
2.7 Interest Free deposit, financing and investment products

Cooperative Bank of Oromia has started and operated interest free banking services since
February 2015 focusing on deposits, financing as well as investment.
2.7.1 Interest Free Deposits

I. Wadiah Saving Account
Wadiah saving account is the account where the bank is authorized to keep the funds of the
depositors in his or her or its safe custody for safety and convenience. The depositors are
allowed to withdraw their money at any time without restriction. The bank, with the consent of
customers, has the right to use the fund in any permissible businesses; however, the customer
does not share profit or loss from business returns.

II. Wadiah Current Account
Wadiah current account is similar to the conventional current account, and it is a non -
bearing account which is opened and operated by literate customers. The operation of the
account can be performed through the use of Cheques provided by the Bank to Wadiah
account holders. The bank can invest the collected deposits in permissible businesse s and
no return is paid out to customers on this account.
III. Labbaik Wadiah Saving Account
Labbaik Wadiah Saving Account is a type of forced and commitment saving account for Hajji
& Umrah pilgrimage. The available tenure for the Umrah package ranges from on e to three
their account as per the proposed deposit plan.
IV. Gammee-Junior Wadiah Saving Account
Gammee Junior Wadiah saving account is a type of account designated for children (Junior)
between 0-15. The account is opened in the children’s name, but parent and/or guardians
administer it until the child is old enough to operate the account by him/herself. This account
shall be converted to an ordinary savings account when the account holder reaches 18.
V. Ordinary Mudarabah Account
Mudarabah is a form of partnership in profit/loss whereby one party or customer (Rab-al-maal)

provides capital, and the bank (Mudarib) offers management, skill, or labor. The capital
provider has granted the mudarib to undertake Shari’ah compliant business activities.
Mudarabah can be in the form of a savings account or time deposit.
VI. Sinqe – Women Mudarabah Saving Account
Sinqe – Women Mudarabah

designed for women aged 30 and above. The main aim of accepting Sinqe – women
Mudarabah is saving accounts is to increase the saving culture of the women.
VII. Dargago -Youth Mudarabah Saving Account
This account is designed for both male and female segments with the age of between 15 -29
years old, especially for the student. The bank, as an incentive, applies a better profit sharing
ratio.
VIII. Gammee – Junior Mudarabah Saving Account
This account is opened by individuals, both male and female, between the age of 0 -15.
However, the account will be in the name of the child. The account will be administered by the
parents/guardian until the child becomes able to do so. This account shall be converted t o
Ordinary Mudarabah Saving Account, when the account holder reaches the age of 18.

IX. Cooperatives Mudarabah Saving Account
Cooperatives Mudarabah saving account is opened by an autonomous association of
business enterprises. The bank allots a higher profit sharing ratio to cooperative Mudarabah
saving account holders.
X. Labbaik Mudarabah Saving Account
Labbaik Mudarabah saving account is opened for Hajji and Umrah Pilgrimage; thus, the
customer will share the profit as well as be forced to saving for the purpose. Customers will
have to monthly deposit in their accounts as per the proposed deposit plan. Once the
deposited amount reaches the proposed package amount, they can apply for withdrawal by
filling the appropriate withdrawal format to credit Ethiopian Islamic Affairs account. The bank
.
XI. Gudunfa Saving Account
Gudunfa is a type of Wadi’ah saving by the use of a designated box and deposits the
accumulated fund into their account. Gudunfa box is provided by the bank, and dual control
is in place; the box is mainly designed for petty traders, semi-skilled workers, shoe polishers,
and other individuals working in private or public organizations. This account can be opened
as Wadi’ah saving account.
XII. Mudarabah Investment/Time Deposit Accounts
Mudarabah investment deposits represent the case when the owner of funds seeks a return
on their funds and are willing to spare these funds for an agreed period. Fixed-term deposits
in the conventional system operate on the basis of Interest, while investment accou nts in
-sharing, which is a straightforward Mudarabah
deposit. The bank uses flexible tenure of (3, 6, 12 18, 24 or more months) with the option to
withdraw forfeiting profits at specific times.
XIII. IFB Foreign Currency Deposit Products
Customers who fulfill the eligibility criteria can open foreign currency accounts in line with the
requirements of the NBE in USD Dollar, Pound Sterling, and Euro currencies.
2.7.2 Interest-Free Financing Products

I. Murabahah Term Financing
to the customer/buyer at a sale price based on cost plus agreed profit payable in cash or on
.

The agreed profit may be fixed in a lump sum or in a percentage of the cost price of the goods.
All the expenses incurred by the seller in acquiring the goods are included in the cost price.
Murabaha Term Financing is financing granted for working capital and/or for the acquisition
with a profit. The bank extends Short-Term Murabaha Financing, Medium-Term Murabaha
Financing, and Long Term Murabaha Financing.
II. Murabahah Revolving Financing

Murabaha Revolving Financing facility is a short or medium-term financing facility by which
the customer may use the financing for the purchase of merchandise, raw materials,
consumables, etc. to overcome the applicant’s working capital constraint.
Murabaha Revolving Financing Facility shall be availed for a maximum period of one year and
reviewed every year.
III. Murabahah Import Letter of Credit Financing

Murabaha Import Letter of Credit is a facility that the bank extends to applicants who engaged
in the import business or other applicants who import for various purposes using the bank’s
funds, at zero percent margins paid, based on markup agreement.
Murabaha financing requires the bank and the customer/importer to sign at least two
agreements separately, one for the purchase of the goods to be imported and the other for
appointing the importer as the bank (agency agreement). Once these two agreements are
signed, the importer can negotiate and finalize all terms and conditions with the exporter on
behalf of the bank.
IV. Murabahah Pre-Shipment Export Financing

Murabaha pre-shipment export financing is a facility extended for the purchase of raw
materials and/or exportable goods.
The selling price of the exportable item shall be within the acceptable range. It shall be
confirmed by the National Bank of Ethiopia (NBE) or ECX (Ethiopian Commodity Exchange)
or the concerned government organ.
Murabaha pre-shipment export financing against the sales contract can be one-time or
revolving.
V. Murabaha Post Shipment/Revolving Export Financing

Murabaha Post Shipment (Revolving Export Facility) is an advance extended to exporters
upon presenting acceptable export documents, except a bill of loading. The facility should be
advanced against valid export documents.

The exporter/customer appoints the bank as his/her/its agent to collect the proceeds on
his/her/its behalf.
VI. Murabaha Import Letter of Credit Settlement Financing

Murabaha Import Letter of Credit Settlement Financing is a form of financing extended to trade
partners/debtors/borrowers by converting the outstanding import letter of credit document’s
value to a Murabaha term financing for a maximum period of one year when a customer is
unable to clear the L/C documents due to shortage of working capital.
2.7.3 Investment Contracts

I. Musharakah Financing
Musharakah means a relationship established under a contract by the mutual consent of the
parties for sharing of profit and losses arising from a joint enterprise or venture.
II. Mudarabah Financing

Mudarabah is a special kind of partnership where one partner gives mon ey to another for
investment in a commercial enterprise. The investment comes from the first partner (Rabb-ul-
mal/bank), while the management and work is an exclusive responsibility of the other
(Mudarib/customer).
2.8 Cash and cash equivalents

Cash and cash equivalents comprise balances with less than three months’ maturity from
the date of acquisition, including cash in hand, deposits held at call with banks and other
short-term highly liquid investments with original maturities of three months or less.
2.9 Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Such cost includes the cost of replacing part of the
property, plant and equipment if the recognition criteria are met.
When significant parts of property, plant and equipment are required to be replaced at
intervals, the b
depreciates them accordingly. All other repair and maintenance costs are recognized in Profit
or Loss as incurred.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate
the item will flow to the Bank and the cost of the item can be measured reliably. The carrying
amount of the replaced part is derecognized.

are expected to arise from the continued use of the asset or at the expiration of a lease
contract for right of use assets. Gain or Loss are determined by comparing the net proceeds
from disposal with the carrying amount of the items.
Gains and losses arising on disposal of an item of property and with the carrying amount of
the item and are recognized net within ‘other operating income’ in profit or loss.
Depreciation is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
Asset class Depreciation rate (years) Residual values (%)

Buildings 50 5%
Motor vehicles 10 5%
Computer and data storage 7 1%
Furniture & fittings 10-20 1%
Equipment 5-10 1%
The Bank commences depreciation when the asset is available for use. Capital work-in-
progress is not depreciated as these assets are not yet available for use. Freehold land is not
depreciated.
The residual values, useful lives and methods of depreciation are reviewed, and adjusted if
appropriate, at each reporting date. Changes in the expected useful life, residual values or
methods of depreciation are accounted for as changes in accounting estimates.
2.10 Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Following
initial recognition, intangible assets are carried at cost less any accumulated amortization and
accumulated impairment losses. Internally generated intangibles, excluding capitalized
development costs, are not capitalized and the related expenditure is reflected in Profit or
Loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible
assets with finite lives are amortized over the useful economic life. The amortization period
and the amortization method for an intangible asset with a finite useful life are reviewed at
least at each financial year-end.
Changes in the expected useful life, or the expected pattern of consumption of future
period or methodology, as appropriate, which are then treated as changes in accounting

estimates.

The amortization expenses on intangible assets with finite lives is presented as a separat e
item in the Profit or Loss.
Amortization is calculated using the straight-line method to write down the cost of intangible
assets to their residual values over their estimated useful lives, as follows:
Computer software----------------6 years

Core application software-------6 years
Intangibles-contract based------contract period
2.11 Non-Current Assets Held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use and a sale is
considered highly probable. They are measured at the lower of their carrying amount and fair
value less costs to sell, except for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and investment property that are carried at fair value and
requirement.
An impairment loss is recognized for any initial or subsequent write -down of the asset to fair
value less costs to sell. A gain is recognized for any subsequent increases in fair value less
costs to sell of an asset, but not in excess of any cumulative impairment loss previously
recognized. A gain or loss not previously recognized by the date of the sale of the non-current
asset is recognized at the date of de-recognition.
Non-current assets are not depreciated or amortized while they are classified as held for sale.
Interest and other expenses attributable to the liabilities of a disposal bank classified as held
for sale continue to be recognized.
2.12 Impairment of Non-financial assets

The bank assesses, at each reporting date, whether there is an indication that an asset may
be impaired. If any indication exists, or when annual impairment testing for an asset is
required, the bank estimates the asset’s recoverable amount. An asset’s recoverable amount
is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal
and its value in use. Recoverable amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets
or Banks of assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset.

In determining fair value less costs of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
The bank bases its impairment calculation on detailed budgets and forecast calculations,
which are prepared separately for each of the Bank’s CGUs to which the individual assets are
longer periods, a long-term growth rate is calculated and applied to project future cash flows
after the fifth year.
For assets excluding goodwill, an assessment is made at each reporting date to determine
whether there is an indication that previously recognized impairment losses no longer exist or
have decreased. If such indication exists, the bank estimates the asset’s or CGU’s
recoverable amount. A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset’s recoverable amount since
the last impairment loss was recognized.
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the profit or loss.
2.13 Other assets

Other assets are generally defined as claims held against other entities for the future receipt
of money. The other assets in the Bank's financial statements include the following:
I. Prepayments
Prepayments are payments made in advance for services to be enjoyed in future. The amount
is initially capitalized in the reporting period in which the payment is made and subsequently
amortized over the period in which the service is to be enjoyed.
II. Other receivables

Other receivables are recognized upon the occurrence of event or transaction as they arise
and cancelled when payment is received. The Bank's other receivables are rent receivables
and other receivables from debtors.
2.14 Fair Value Measurement

The bank measures financial instruments classified as available –for-sale at fair value at each
statement of financial position date. Fair value related disclosures financial instruments and
non-financial assets that are measured at fair values are disclosed are, summarize d in the
following notes:

Disclosures for valuation methods, estimates and assumptions Note 3 and Note
4.6.1
Quantitative disclosures of fair value measurement hierarchy Note 4.6.1
Financial instruments (including those carried at amortized cost) Note 4.6.1
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes places either:
In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the assets or
liability
For all other financial instruments, fair value is determined using valuation techniques. In these
techniques, fair values are estimated from observable data in respect of similar financial
instruments, using models to estimate the present value of expected future cash flows or other
valuation techniques, using inputs existing at the dates of the consolidated statement of
financial position.
In cases when the fair value of unlisted equity instruments cannot be determined reliably, the
instruments are carried at cost less impairment. The fair value for loans and advances as well
as liabilities to banks and customers are determined using a present value model on the basis
of contractually agreed cash flows, taking into account credit quality, liquidity and costs.
The fair values of contingent liabilities and irrevocable loan commitments correspond to their
carrying amounts.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
The bank uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based on the
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
Level 2 — Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable.

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 recognized in the financial statem ents on a recurring basis,
the bank determines whether transfers have occurred between levels in the hierarchy by re-
assessing
measurement as a whole) at the end of each reporting period.
The Bank’s Director determines the policies and procedures for both recurring fair value
measurement, such as available for sale financial assets.
For the purpose of fair value disclosures, the bank 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 above.
2.15 Employee Benefits

The bank operates various post-employment schemes, including both defined benefit and
defined contribution pension plans and post-
I. Defined Contribution Plan

The Bank operates two defined contribution plans;
Pension scheme in line with the provisions of Ethiopian private organization employees’
pension proclamation No. 1268/2022. Funding under the scheme is 7% and 11% by
employees and the Bank respectively;
Provident fund contribution, funding under this scheme is 8% and 12% by employees
and the bank respectively; based on the employees' salary. Employer's contributions to
this scheme are charged to profit or loss and other comprehensive income in the period
in which they relate.
II. Defined Benefit Plan

The liability recognized in the statement of financial position in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that are denominated
approximating to the terms of the related pension obligation.

The current service cost of the defined benefit plan, recognized in the Profit or Loss in
employee benefit expense, except where included in the cost of an asset, reflects the increase
in the defined benefit obligation resulting from employee service in th e current year, benefit
changes curtailments and settlements. Post-service costs are recognized immediately in
Profit or Loss.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to equity in other comprehensive income in the period
in which they arise.
III. Termination Benefits

mployment is terminated by
the bank before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The b
is demonstrably committed to either: terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal; or providing termination
benefits as a result of an offer made to encourage voluntary redundancy.
IV. Profit-sharing and Bonus plans

The bank recognizes -sharing. The bank
recognizes a provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
2.16 Provisions
Provisions are recognized when the bank has a present obligation (legal or constructive) as a
will be required to settle the obligation and a reliable estimate can be made of the amou nt of
the obligation. When the bank expects some or all of a provision to be reimbursed, for
example, under an insurance contract, the reimbursement is recognized as a separate asset,
but only when the reimbursement is virtually certain. The expense relating to a provisio n is
presented in profit or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current
pre-
is used, the increase in the provision due to the passage of time is recognized as other
operating expenses.
2.17 Share Capital

Incremental costs directly attributable to the issue of new shares or options or to the
acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.

2.18 Earnings per Share

The Bank presents basic earnings per share for its ordinary shares. Basic earnings per share
are calculated by dividing the profit or loss attributable to ordinary shareholders of the bank
by the weighted average number of shares outstanding during the period.
2.19 Government Grants

Government grants are recognized where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. When the grant relates to an
expense item, it is recognized as income on a systematic basis over the periods that the
related costs, for which it is intended to compensate, are expensed. When the grant relates
to an asset, it is recognized as income in equal amounts over the expected useful life of the
related asset.
When the bank receives grants of non-monetary assets, the asset and the grant are recorded
at nominal amounts and released to profit or loss over the expected useful life in a pattern of
consumption of the benefit of the underlying asset by equal annual instalments.
2.20 Leases
I. Bank as a Lessee
allocates consideration on the contract to each lease component on the basis of its relative
stand-
not to separate non-lease components and accounts for lease and non-lease components as
a single lease component.
The bank recognizes a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencements date to the end of the lease term. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, at the Bank’s incremental borrowing rate.

The bank determines its incremental borrowing rate by analyzing its borrowing from various
external source and make certain adjustments to reflect the terms of the lease and type of
asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
Fixed payments, including in-

Variable lease payments that depends on an index or a rate, initially;
Measured using the index or rate as at the commencement date;
Amounts expected to be payable under a residual value guarantee; and
The exercise price under a purchase option that the bank is reasonably certain to exercise,
lease payment in an optional renewal period of the bank is reasonably certain to extension
option, and penalties for early termination of a lease unless the bank is reasonably certain
not to terminate early.
The lease liability is measured at amortized cost using effective interest method. It is re-
measured when there is a change in future lease payments arising from a change in an index
or rate, if there is a change in the bank’s estimate of the amount expected to be payable under
a residual value guarantee, if the bank changes its assessment of whether it will exercise a
purchase, extension or termination option or is there is a revised in substance f ixed lease
payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount
of the right-of-use asset has been reduced to zero.
The bank presents right-of-use assets in ‘property and equipment’ and lease liabilities in ‘other
liabilities’ in the statement of financial position.
II. Bank as a Lessor

At inception or on modification of a contract that contains a lease componen t, the bank
allocates the consideration in the contract to each lease component on the basis of their
relative stand-alone selling prices.
When the bank acts as a lessor, it determines at lease inception whether the lease is a finance
lease or an operating lease.
To classify each lease, the bank makes an overall assessment of the lease transfers
substantially all of the risks and rewards incidental to ownership of the underlying asset. If this
the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this
assessment, the bank considers certain indicators such as whether the lease is for the major
part of the economic life of the asset.

The bank applies the derecognition and impairment requirements in IFRS 16 to the net
investment in the lease. The bank further regularly reviews estimated unguaranteed residual
values used in calculating the gross investment in the lease.
2.21 Income Taxation

1. Current income tax
The income tax expense or credit for the period is the tax payable on the current period’s
taxable income based on the applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in Ethiopia. Director periodically
evaluates positions taken in tax returns with respect to situations in which app licable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
2. Deferred tax
Deferred tax is recognized as temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred tax
is not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting
nor taxable profit or loss.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively
enacted by the Statement of Financial Position date and are expected to apply when the
related deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on
a net basis.

3. Significant Accounting Judgements, Estimates and Assumptions

The preparation of financial statements requires the use of accounting estimates, which, by
definition, will seldom equal the actual results. Management also needs to exercise judgement
in applying the bank’s accounting policies. Estimates and judgements are continually
evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
This note provides an overview of the areas that involve a higher degree of judgement or
complexity, and major sources of estimation uncertainty. Detailed information about each of
these estimates and judgements is included in the related notes together with informa tion
about the basis of calculation for each affected line item in the financial statements.
The preparation of the bank’s financial statements requires management to make

judgements, estimates and assumptions that affect the reported amount of revenues,
expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure
of contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
Other disclosures relating to the bank’s exposures to risks and uncertainties include:
Capital Management Note 4.5
Financial Risk Management and policies Note 4.1
Sensitivity analysis disclosures Note 4.4.1
3.1 Judgements
In the process of applying the bank’s accounting policies, the directors have made the
financial statements.
3.2 Estimates and Assumptions uncertainties

The key assumptions concerning the future and other key sources of estimation at the
reporting dat
amounts of assets and liabilities within the next financial year, are described below. The bank
based its assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances beyond the control of the
bank. Such changes are reflected in the assumptions when they occur.

3.2.1 Impairment losses on loans and advances

The estimation of potential credit losses is inherently uncertain and depends upon many
factors, including general economic conditions, changes in individual customers’
circumstances, structural changes within industries that alter competitive positions and other
external factors such as legal and regulatory requirements.
Impairment is measured for all accounts that are identified as non -performing. All relevant
considerations that have a bearing on the expected future cash flows are taken into account
which include but not limited to future business prospects for the customer, reali zable value
of securities, the bank’s position relative to other claimants and the existence of any court
injunctions placed by the borrower. Subjective judgments are made in this process of cash
flow determination both in value and timing and may vary from one person to another and
team to team. Judgments may also change with time as new information becomes available.
The bank reviews its loans and advances at each reporting date to assess whether an
allowance for impairment should be recognized in profit or loss. In particular, judgment by the
directors is required in the estimation of the amount and timing of future cash flows when
determining the level of allowance required. Such estimates are based on the assumptions
about a number of factors and actual results may differ, resulting in future changes in the
allowance.
The following are key estimations that the directors have used in the process of applying the
in financial statements:
I. Probability of Default(PD): probability of default (PD) estimates the possibility of a loan facility
moving from the performing status (stage 1) to the non-performing status (stage 3). For
impairment purposes, the PD parameter is estimated using a transition matrix multiplication
approach that estimates the movement of loan amounts from one bucket to the next between
two subsequent time periods.
II. The loss given default (LGD): is a measure of how much (in form of a percentage) the bank is
expected to lose in the event that default events occur. This can be estimated using either
collateral, in instances where the customer has collateral against the debt instrument that they
have undertaken with the bank or an analysis of the historical cash collections after the default
event, for cases that the debt instrument is not secured.
III. Exposure at Default (EAD): EAD modelling estimates annual outstanding exposure on each
loan facility over the remaining lifetime from the reporting period. The EAD for each period is
calculated based on the contractual cash flows of each loan account using the reducing balance
method.

The exposure at default assumed by management to be the mid-year EAD for facilities with
monthly and quarterly repayment schedules. This is to reflect the assumption of uniform
distribution of default events throughout the year. For semi-annual and annual repayment
schedules, exposure at default will be assumed by management to be the reporting date EAD.
IV. Significant Increase in Credit Risk (SICR): SICR is based on migration from stage 1 to stage
2. As per the bank’s loan listing classification, these are loans that experience migration from
“Pass” to “Special Mention” as a result of arrears of over 30 days past due.
3.2.2 Fair Value Measurement of Financial Instruments

When the fair values of financial assets and financial liabilities recorded in the statement of
financial position cannot be measured based on quoted prices in active markets, their fair
value is measured using valuation techniques including the discounted cash flow (DCF)
model. The inputs to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgement is required in establishing fair values.
Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
Changes in assumptions about these factors could affect the reported fair value of financial
instruments.
3.2.3 Retirement Benefits

The bank has a comprehensive remuneration system based on
salary that reflects the individual’s role and level of responsibility along with other benefits. In
addition, the b
banking products and services, medical benefits for employees.
The cost of the defined benefit pension plan is determined using actuarial valuation. The
actuarial valuation involves making assumptions about discount rates, expected rates of
return on assets, future salary increases, mortality rates and future pension increases.
The discount rate: reflects the estimated timing of benefit payments. In practice, an entity
often achieves this by applying a single weighted average discount rate that reflects the
estimated timing and amount of benefit payments and t
to be paid.
The Inflation rate: the majority of the plans’ benefit obligations are linked to inflation both in
deferment and once in payment. Higher inflation will lead to higher liabilities.
3.2.4 Depreciation and Carrying Value of Property, Plant and Equipment

The estimation of the useful lives of assets is based on director’s judgement. Any material
adjustment to the estimated useful lives of items of property and equipment will have an
impact on the carrying value of these items.

Property and equipment are depreciated over its useful life taking into account residual values,
where appropriate. The actual lives of the assets and residual values are assessed annually
and may vary depending on number of factors. In reassessing asset lives, factors such as
technological innovation and maintenance programs are taken into account which involves
extensive subjective judgment. Residual value assessments consider issues such as future
market conditions, the remaining life of the asset and projected disposal values.
3.2.5 Impairment of Non-Financial Assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in
use.
The fair value less costs of disposal calculation is based on available data from binding sales
transactions, conducted at arm’s length, for similar assets or observable market prices less
incremental costs for disposing of the asset. The value in use calculation is based on a DCF
model.
restructuring activities that the b

that will enhance the asset’s performance of the CGU being tested. The recoverable amount
is sensitive to the discount rate used for the discounted cash flow model as well as the
expected future cash-inflows and the growth rate used for extrapolation purposes.
3.2.6 Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in
tax laws, and the amount and timing of future taxable income. Given the wide range of
international business relationships and the long-term nature and complexity of existing
contractual agreements, differences arising between the actual results and the assumptions
made, or future changes to such assumptions, could necessitate future adjustments to tax
income and expense already recorded. The amount of such provisions is based on various
factors, such as experience of previous tax audits and differing interpretations of tax
regulations by the taxable entity and the responsible tax authority.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that
taxable profit will be available again
management judgement is required to determine the amount of deferred tax assets that can
future tax planning strategies.

4. Financial Risk Management

4.1 Introduction
This note explains the bank’s exposure to financial risks and how these risks could affect the
bank’s future financial performance. The bank has documented financial risk management
policies. These policies set out the bank’s overall business strategies and its risk management
philosophy. The bank’s overall financial risk management programme seeks to minimize
potential adverse effects of financial performance of the bank.
The Board of Directors provides written principles for overall financial risk management and
exchange risk, interest rate risk and equity price risk) and liquidity risk. Such w ritten policies
are reviewed annually by the Board of Directors and periodic reviews are undertaken to
ensure that the bank’s policy guidelines are complied with. Risk management is carried out
by the banks Risk Management Unit under the policies approved by the Board of Directors.
Risk is inherent in the bank’s activities, but is managed through a process of ongoing
process of risk management is critical to the bank’s continuing profitability and each individual
within the bank is accountable for the risk exposures relating to his or her responsibilities. The
bank is exposed to credit risk, liquidity risk and market risk.
The independent risk control process does not include business risks such as changes in the
environment, technology and industry. The bank's policy is to monitor those business risks
through the Bank’s strategic planning process.
4.1.1 Risk Management Structure

The board of directors have the ultimate responsibility for establishing and ensuring the
effective functioning of the risk and compliance management activities of the bank.
The Board Risk and Compliance Management Sub-committee has the overall responsibility
for the development of the risk strategy and implementing principles, frameworks, policies and
risk appetite. It is also responsible for performing compliance monitoring and testing,
preparing periodic risk and compliance exposure reports to executive management and the
board of directors.
The executive management is responsible for translating and implementing the bank’s risk
management strategy, priorities and policies as approved by the board of directors.
The bank’s policy is that risk management processes throughout the bank are assessed
periodically by the management. This will help to adequately capture risk exposure, aggregate
exposure of risk types and incorporate short run as well as long run impact on the bank.

4.1.2 Risk Measurement and Reporting Systems

The bank’s risks are measured using a method that reflects both the expected loss likely to
arise in normal circumstances and unexpected losses, which are an estimate of the ultimate
actual loss based on statistical models. The models make use of probabilities derived from
historical experience, adjusted to reflect the economic environment. The bank also runs worst-
case scenarios that would arise in the event that extreme events which are unlikely to occur
do, in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the bank.
These limits reflect the business strategy and market environment of the bank as well as the
level of risk that the bank is willing to accept, with additional emphasis on selected regions. In
addition, the bank’s policy is to measure and monitor the overall risk bearing capacity in
relation to the aggregate risk exposure across all risk types and activities.
4.1.3 Risk Mitigation

Risk controls and mitigates, identified and approved for the bank, are documented for existing
and new processes and systems.
The adequacy of these mitigates is tested on a periodic basis through administration of control
self-assessment questionnaires, using a risk management tool which requires risk owners to
confirm the effectiveness of established controls. These are subsequently audited as part of
the review process.
4.2 Credit Risk

Credit risk is the risk of financial loss to the bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the bank’s
loans and advances to customers and other banks and other financial assets.
Exposure to credit risk is managed through periodic analysis of the ability of borrowe rs and
potential borrowers to determine their capacity to meet principal and interest thereon, and
restructuring such limits as appropriate. Exposure to credit risk is also mitigated, in part, by
obtaining collateral, commercial and personal guarantees.
The bank structures the levels of credit risk it undertakes by placing limits on the amount of
risk accepted in relation to one borrower, or banks of borrowers, and to term of the financial
instrument and economic sectors.
The National Bank of Ethiopia (NBE) sets credit risk limit for a single borrower, one related
party and all related parties to not exceed 25%,15% and 35% of bank’s total capital amount
as of the reporting quarterly period respectively.

Credit management is conducted as per the risk management policy and guideline approved
by the Board of Directors and the Risk Management Committees. Such policies are reviewed
and modified periodically based on changes and expectations of the markets where the bank
operates, regulations, and other factors.
4.2.1 Management of Credit risk

In measuring credit risk of loans and receivables to various counterparties, the bank considers
the character and capacity of the obligor to pay or meet contractual obligations, current
exposures to the counterparty and its likely future developments, credit history of the obligor;
and the likely recovery ratio in case of default obliga tions-value of collateral and other ways
out.
Our credit exposure comprises corporate and retail loans and receivables which are
developed to reflect the needs of our customers.
The bank’s policy is to lend principally on the basis of our customer’s re payment capacity
through quantitative and qualitative evaluation. However, we ensure that our loans are backed
by collateral to reflect the risk of the obligors and the nature of the facility.
4.2.2 Expected Credit Loss Measurement

The loss allowance recognized in the period is impacted by a variety of factors, as described
below:
Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing

-impaired in the
period, and the consequent “step up” (or “step down”) between 12-month and Lifetime
ECL;
Additional allowances for new financial instruments recognized during the period, as well
as releases for financial instruments de-recognized in the period;
Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period,
arising from regular refreshing of inputs to models;
Impacts on the measurement of ECL due to changes made to models and assumptions;
Discount unwind within ECL due to the passage of time, as ECL is measured on a present
value basis;
Financial assets derecognized during the period and write -offs of allowances related to
assets that were written off during the period.
A. Inputs, Assumptions and Techniques used for estimating impairment

IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since
initial recognition as summarized below:

A financial instrument that is not credit-impaired on initial recognition is classified in ‘Stage
1’ and has its credit risk continuously monitored by the bank.
If a SICR since initial recognition is identified, the financial instrument is moved to ‘Stage
2’ but is not yet deemed to be credit impaired.
If the financial instrument is credit-impaired, the financial instrument is then moved to
‘Stage 3’.
Financial instruments in Stage 1 have their ECL measured at an amount equal to the
portion of lifetime expected credit losses that result from default events possible within the
next 12 months. Instruments in Stages 2 or 3 have their ECL measured based on expected
credit losses on a lifetime basis.
A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider
forward-looking information.
POCI financial assets are those financial assets that are credit-impaired on initial
recognition. Their ECL is always measured on a lifetime basis (Stage 3).
B. Significant Increase in Credit Risk

The bank continuously monitors all assets subject to ECL. In order to determine whether an
instrument or a portfolio of instruments is subject to 12-month and Lifetime ECL, the bank
tial recognition.
When determining whether the risk of default on a financial instrument has increased
l recognition, the bank considers reasonable and supportable
information that is relevant and available without undue cost or effort.
This includes both quantitative and qualitative information and analysis, based on the bank’s
historical experience and expert credit assessment and including forward-looking information.
The bank considers a financial instrument to have experien

risk when one or more of the following quantitative, qualitative or backstop criteria have been
met.
The quantitative criteria are based on either absolute or relative changes in credit quality. In
both cases, the bank is expected to specify the percentage change, for either 12 -month or
lifetime PDs in comparison to the corresponding 12-month or lifetime PDs as calculated at
originat
origination.
I. Forward Transitions: Days Past Due

Transition from Stage 1 to Stage 2 is based on the 30 days past due presumption.
Stage Days Past Due

1 0 - 29
2 30 - 89
3 90+

II. Forward Transitions: Watch list & Restructure

The bank classifies accounts that are included on their watch list or have been restructured
as Stage 2 if the significant driver for the account being watch listed or restructured is due to
III. Forward transitions: Classification

In addition to the days past due, the bank classifies accounts as either ‘Performing’,
‘Substandard’, ‘Doubtful’ or ‘Loss’.
This classification is considered together with days past due in determining the stage
past due.
Classification Days Past Due
Performing (Current + Watch list) 0 - 89

Substandard 90- 179
Doubtful 180 - 360
Loss 365+
The internal rating systems described above focus more on credit-quality mapping from the
inception of the lending.
Current: Relates to assets classified as “Investment Grade” (no evident weakness).
Watch list: Relates to items for which there is evidence of a weakness in the financial or
operating condition of the obligor which requires management’s close attention.
Substandard: There is a well-defined weakness in the financial or operating condition of the

obligor which jeopardizes the timely repayment of its obligations.
Doubtful: There are all of the weakness that are normally seen in a substandard credit with
the additional characteristic that these weaknesses make full repayment unlikely.
Loss: These assets are considered uncollectible and of such little value that they should
be fully written-off.
A backstop is applied and the financial instrument considered to have experienced a
contractual payments.

C. Credit Risk Grades

The bank allocates each exposure to a credit risk grade based on a variety of data that is
determined to be predictive of the risk of default and applying experienced credit judgement.
Credit risk grades are defined using qualitative and quantitative factors that are indicative of
risk of default. These factors vary depending on the nature of the exposure and the type of
borrower.
Credit risk grades are defined and calibrated such that the risk of default occurring increases
exponentially as the credit risk deteriorates so, for example, the difference in risk of default
between credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2
and 3.
Each exposure is allocated to a credit risk grade on initial recognition based on available
information about the borrower. Exposures are subject to ongoing monitoring, which may
result in an exposure being moved to a different credit risk grade. The monitoring typically
involves use of the following data;
I. Term Loan Exposures
Information obtained during periodic review of customer files – e.g. audited financial
statements, management accounts, budgets and projections.
Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt
service coverage, compliance data from credit reference agencies, press articles, changes in
technological environment of the borrower or in its business activities, internally collected data
on customer behavior, affordability metrics.
II. Overdraft Exposures
Payment record this includes:

Overdue status as well as a range of variables about payment ratios
Utilization of the granted limit
Requests for and granting of forbearance
Existing and forecast changes in business, financial and economic conditions
D. Generating the term structure of PD

Credit risk grades are a primary input into the determination of the term stru cture of PD for
exposures. The bank collects performance and default information about its credit risk
exposures analyzed by type of product and borrower as well as by credit risk grading.
The bank employs statistical models to analyze the data collected and generate estimates of
the remaining lifetime PD of exposures and how these are expected to ch ange as a result of
the passage of time.

E. Determining whether credit risk has increased significantly

The bank assesses whether credit risk has increased significantly since initial recognition at
each reporting date. Determining whether an increase in credit risk is significant depends on
the characteristics of the financial instrument and the borrower.
based on qualitative factors linked to the bank’s credit risk management processes that may
not otherwise be fully reflected in its quantitative analysis on a timely basis. This will be the
case for exposures that meet certain heightened risk criteria, such as placement on a watch
list. Such qualitative factors are based on its expert judgment and relevant historical
experiences.
As a backstop, the b
when an asset is more than 30 days past due. Days past due are determined by counting the
number of days since the earliest elapsed due date in respect of which full payment has not
been received. Due dates are determined without considering any grace period that might be
available to the borrower.
If there is evidence that there is no longer a significant increase in credit risk relative to initial
recognition, then the loss allowance on an instrument returns to being measured as 12-month
ECL. Some qualitative indicators of an increase in credit risk, such as delinquency or
forbearance, may be indicative of an increased risk of default that persists after the indicator
itself has ceased to exist. In these cases, the bank determines a probation period during which
the financial asset is required to demonstrate good behavior to provide evidence that its credit
that the criteria for recognizing lifetime ECL are no longer met includes a history of up -to-date
payment performance against the modified contractual terms.
The b
credit risk by regular reviews to confirm that:
The criteria are capable of identifying significant increases in credit risk before an
exposure is in default;
The criteria do not align with the point in time when an asset becomes 30 days past due;
default appears reasonable;

Exposures are not generally transferred directly from 12-month ECL measurement to
credit- impaired; and
There is no unwarranted volatility in loss allowance from transfers between 12-month PD
(Stage 1) and lifetime PD (Stage 2).

F. Definition of Default
The Bank considers a financial asset to be in default when:
The borrower is unlikely to pay its credit obligations to the bank in full, without recourse by
the bank to actions such as realizing security (if any is held);
The borrower is more than 90 days past due on any material credit obligation to the bank.
Overdrafts are considered as being past due once the customer has breached an advised
limit or been advised of a limit smaller than the current amount outstanding; or
It is becoming probable that the borrower will restructure the asset as a result of
bankruptcy due to the borrower’s inability to pay its credit obligations.
In assessing whether a borrower is in default, the bank considers indicators that are:
Qualitative: e.g. breaches of covenant;

Quantitative: e.g. overdue status and non-payment on another obligation of the same
issuer to the Bank; and
Based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their
The definition of default largely aligns with that applied by the bank for regulatory capital
purposes.
G. Incorporation of Forward-Looking Information in the ECL Models

The Bank incorporates forward-looking information into both the assessment of whether the
measurement of ECL.
For each segment, the bank formulates three economic scenarios: a base case, which is the
median scenario, and two less likely scenarios, one upside and one downside. For each
sector, the base case is aligned with the macroeconomic model’s information valu e output, a
measure of the predictive power of the model, as well as base macroeconomic projections for
identified macroeconomic variables for each sector.
The upside and downside scenarios are based on a combination of a percentage error factor
of each sector model as well as simulated optimistic and pessimistic macroeconomic
projections based on a measure of historical macroeconomic volatilities.
External information considered includes economic data and forecasts published by Fitch
Solutions formerly known as Business Monitor International, an external and independent
market intelligence and research institution. This is in addition to industry –level, semi – annual
NPL trends across statistically comparable sectors.

Periodically, the bank carries out stress testing of more extreme shocks to calibrate its
determination of the upside and downside representative scenarios. A comprehensive review
is performed at least annually on the design of the scenarios by a panel of experts that advises
the Bank’s senior management.
The bank has identified and documented key drivers of credit risk and credit losses for each
portfolio of financial instruments and, using an analysis of historical data, has estimated
relationships between macroeconomic variables and credit risk and credit losses.
The key drivers for credit risk for each of the bank’s economic sectors is summarized below:
Sector/Product Macroeconomic factors
Cluster 1 Goods Services - - -

Agriculture exports, imports,
Consumer Loans USD USD
Overdraft
Interest Free Financing
- - - - -
Cluster 2
Domestic Trade
Services Mining and
Energy Transport
Health Merchandise
Financial Services
- -
Cluster 3 Goods Real GDP, LCU Real GDP,
Building and Construction imports USD USD (2010
Hotel and Tourism (2010 prices) prices)
Manufacturing and
Production Industry
Real Estate
Housing and Construction
Cluster 4 Goods Consumer Real GDP, Current
ExportImport imports USD USD (2010 Import
price account
Advance against Import cover
prices) balance, month
Bills
2010=100, eop USD s
International Trade
The b
No statistically significant correlation was observed for Cluster 2; as a result, no
macroeconomic adjustment is observed.

The economic scenarios used included the following key indicators for Ethiopia:
Indicator 30-Jun-21 30-Jun-22 30-Jun-23
Consumer price index inflation, 2010=100, aver 447 585 335
Exports of goods and services, USD 7,062 7,949 4,312
Government domestic debt, LCU 1,029,705 1,311,530 741,300
LCU/USD, ave 39 48 26
Nominal GDP, LCU 3,761,684 4,841,072 2,766,563
Private final consumption, LCU 2,686,027 3,602,073 2,096,494
Total domestic demand, LCU 4,094,336 5,199,565 2,953,086
Savings, LCU 1,056,115 1,058,363 525,050
Population 116,419,908 119,344,463 60,406,349
Consumer price index inflation, 2010=100, eop 440 581 328
M1, LCU 398,990 463,645 244,950
M2, LCU 1,192,960 1,450,580 776,445
Current expenditure, LCU 285,099 396,721 237,925
Goods imports, USD 13,056 14,996 7,821
Goods exports, USD 3,626 4,022 2,023
Current account balance, USD (3,353) (4,482) (2,489)
Import cover months 2 2 1
Total household spending, LCU 3,112,045 4,197,597 2,446,608
Nominal GDP, USD 95,669 100,847 53,483
Real GDP, LCU (2010 prices) 913,754,000,00 944,211,000,000 484,272,500,000
Real GDP, USD (2010 prices) 63,412,863,646 65,526,523,984 33,607,629,636
Real GDP per capita, USD (2010 prices) 545 549 278
Nominal GDP, USD (PPP) 285,914,796,233 315,978,796,495 169,280,154,928
Private final consumption, USD 68,171 74,903 40,529
Government final consumption, LCU 336,123 406,173 223,935
Government final consumption, USD 8,567 8,490 4,329
Exports of goods and services, LCU 278,927 382,338 223,026
Imports of goods and services, LCU 616,897 740,831 409,549
Imports of goods and services, USD 15,741 15,481 7,917
Total domestic demand, USD 104,195 108,379 57,089
Unemployment, % of labour force, aver 4 3 2
Real effective exchange rate index 60 27 10
LCU/USD, eop 44 52 27
Total revenue, LCU 296,550 363,207 204,726
Total revenue, USD 7,571 7,576 3,958
Total expenditure, LCU 398,379 523,143 307,089
Total expenditure, USD 10,153 10,869 5,937
Current expenditure, USD 7,242 8,225 4,600
Budget balance, LCU (101,830) (159,936) (102,363)
Budget balance, USD (2,582) 3,293) (1,979)
Services imports, USD 5,530 5,858 3,032
Services exports, USD 4,730 5,202 2,704
Total reserves ex gold, USD 3,016 2,955 1,463
Total external debt stock, USD 31,859 35,573 18,896
Long-term external debt stock, USD 30,311 33,809 18,006
Public external debt stock, USD 30,311 33,809 18,006
Total government debt, USD 55,355 60,625 32,895
Total debt service, USD 1,999 2,172 1,172

Predicted relationships between the key indicators and default rates on various portfolios of
financial assets have been developed based on analyzing semi – annual historical data over
the past 5 years.
The below scenario weightings have been observed:
Summary of scenario weightings

Scenario Base Downturn (downside) Optimistic (upside)
Cluster 1 97% 3% -
Cluster 2 94% 3% 3%
Cluster 3 91% 4.50% 4.50%
Cluster 4 94% 3% 2%
H. Modified Financial Assets

The contractual terms of a loan may be modified for a number of reasons, including changing
market conditions, customer retention and other factors not related to a current or potential
credit deterioration of the customer. An existing loan whose terms have been modified may
be derecognized and the renegotiated loan recognized as a new loan at fair value in
accordance with the accounting policy set out.
derecognition, the determination of whether the asset’s credit risk has increased significantly
reflects comparison of: its remaining lifetime PD at the reporting date based on the modified
terms; with the remaining lifetime PD estimated based on data on initial recognition and the
original contractual terms.
When modification results in derecognition, a new loan is recognized and allocated to Stage
1 (assuming it is not credit-impaired at that time).
The bank renegotiates loans to customers in financial difficulties (referred to as ‘forbearance

activities’) to maximize collection opportunities and minimize the risk of default. Under the
bank’s forbearance policy, loan forbearance is granted on a selective basis if the debtor is
currently in default on its debt or if there is a high risk of default, there is evidence that the
debtor made all reasonable efforts to pay under the original contractual terms and the debtor
is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest
payments and amending the terms of loan covenants. Both retail and corporate loans are
subject to the forbearance policy. The Bank Credit Committee regularly reviews rep orts on
forbearance activities.
For financial assets modified as part of the bank’s forbearance policy, the estimate of PD
reflects whether the modification has improved or restored the bank’s ability to collect interest
and principal and the Bank’s previous experience of similar forbearance action.

As part of this process, the bank evaluates the borrower’s payment performance against the
modified contractual terms and considers various behavioral indicators.
nd an
expectation of forbearance may constitute evidence that an exposure is credit -impaired. A
customer needs to demonstrate consistently good payment behavior over a period of time
before the exposure is no longer considered to be credit-impaired/ in default or the PD is
considered to have decreased such that the loss allowance reverts to being measured at an
amount equal to Stage 1.
I. Measurement of ECL
The key inputs into the measurement of ECL are the term structure of the following variables:
Probability of default (PD);
Loss given default (LGD); and
Exposure at default (EAD).
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD.
Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD. The methodology
of estimating PDs is discussed above under the heading ‘Generating the term structure of
PD’.
LGD is the magnitude of the likely loss if there is a default. The bank estimates LGD
parameters based on the history of recovery rates of claims against defaulted counterparties.
The LGD models consider the structure, collateral, seniority of the claim, counterparty industry
and recovery costs of any collateral that is integral to the financial asset.
EAD represents the expected exposure in the event of a default. The bank derives the EAD
from the current exposure to the counterparty and potential changes to the current amount
allowed under the contract and arising from amortization.
The EAD of a financial asset is its gross carrying amount at the time of default. For lending
commitments, the EADs are potential future amounts that may be drawn under the contract,
which are estimated based on historical observations and forward-looking forecasts.
For financial guarantees, the EAD represents the amount of the guaranteed exposure when
the financial guarantee becomes payable. For some financial assets, EAD is determined by
modelling the range of possible exposure outcomes at various points in time using sc enario
and statistical techniques.
As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial
assets, the bank measures ECL considering the risk of default over the maximum contractual
period (including any borrower’s extension options) over which it is exposed to credit risk,
even if, for credit risk management purposes, the bank considers a longer period.

The maximum contractual period extends to the date at which the bank has the right to require
repayment of an advance or terminate a loan commitment or guarantee.
However, for overdrafts that include both a loan and an undrawn commitment component, the
bank measures ECL over a period longer than the maximum contractual period if the bank’s
contractual ability to demand repayment and cancel the undrawn commitment doe s not limit
the Bank’s exposure to credit losses to the contractual notice period. These facilities do not
The bank can cancel them with immediate effect but this contractual right is not enforced in
the normal day-to-day management, but only when the bank becomes aware of an increase
in credit risk at the facility level. This longer period is estimated taking into account the credit
risk management actions that the bank expects to take, and that serve to mitigate ECL. These
include a reduction in limits, cancellation of the facility and/or turning the outstanding balance
into a loan with fixed repayment terms.
Where modelling of a parameter is carried out on a collective basis, the financial instruments
are banked on the basis of shared risk characteristics that include:
Instrument type;
Credit risk grading;
Collateral type; LTV ratio for retail mortgages;
Date of initial recognition;
Remaining term to maturity;
Industry; and
Geographic location of the borrower.
The banking's are subject to regular review to ensure that exposures within a particular bank
remain appropriately homogeneous.
J. Loss Allowance
The following tables show reconciliations of loans and advances to customers at amortized
cost (on balance sheet exposures) as of June 30, 2022
In Birr'000 2022
Loans and advances to customers at Stage 1 Stage 2 Stage 3 Total
amortized cost (on balance sheet and off
balance sheet exposures)
Balance as at 1 July 2021 283,792 1,652 617,694 903,138
Transfer to stage 1 (12 months ECL) 138,417 (671) (137,746) -
Transfer to stage 2 (Lifetime ECL not (2,068) 4,520 (2,452) -

credit impaired)
Transfer to stage 3 (Lifetime ECL credit (1,475) 1,734 (259) -
impaired)
Net re-measurement of loss allowance (66,639) (1,194) 270,139 202,306
New assets originated or 170,010 39,077 28,568 237,656

purchased

Financial assets derecognized (44,362) (452) (30,788) (75,602)
Balance as at 30 June 2022 477,675 44,666 745,157 1,267,498
In Birr'000 2021
Loans and advances to customers at Stage 1 Stage 2 Stage 3 Total
amortized cost (on balance sheet and off
balance sheet exposures)
Balance as at 1 July 2020 391,527 1,843 452,389 845,759
Transfer to stage 1 (12 months ECL) 637 (234) (404) -
Transfer to stage 2 (Lifetime ECL not credit (1,090) 1,096 (6)

impaired) 0.00
Transfer to stage 3 (Lifetime ECL credit (1,115) 1,121 (5)
impaired) 0.00
Net re-measurement of loss allowance (124,826) (1,914) 77,359
204,099
purchased 98,733 498 1,521 100,752

Financial assets derecognized (80,073) (759) (39,900) (120,732)
Balance as at 30 June 2021 283,792 1,652 617,694 903,138
In Birr'000 2022
Emergency Overdraft Stage Stage Stage
Total
guarantee contracts (off balance sheet exposures) 1 2 3
Balance as at 1 July 2021 648.27 - 389.00 1,037.27
Transfer to stage 1 (12 months ECL) 18 (18) -
Transfer to stage 2 (Lifetime ECL not credit impaired) - - - -
Transfer to stage 3 (Lifetime ECL credit impaired) (0) - 0 -
Net re-measurement of loss allowance (16) - 841 825
432.11 - 31 463
Financial assets derecognized (630) (91) (721)
Balance as at 30 June 2022 451.50 - 1,153 1,604
The following table provides a reconciliation for June 30, 2022 between amounts shown in the
above tables reconciling opening and closing balances of loss allowance per class of financial
instrument; and the ‘impairment losses on financial instruments’ line item in the consolidated
statement of profit or loss and other comprehensive income.
In Birr'000 2022
Other
Cash and Investment
receivables
Other financial assets (debt balances securities
and Total
instruments) with (debt
banks instruments)
assets
Balance as at 1 July 2021 525.68 448.31 30,759.91 32,143.25
Net remeasurement of loss allowance 67.34 (46.03) 190,867.52 190,888.83
- - - -
purchased
Balance as at 30 June 2022 593.02 402.28 221,627.43 223,032.07

The following table provides a reconciliation between amounts shown in the above tables
reconciling opening and closing balances of loss allowance per class of financial instrument;
and the ‘impairment losses on financial instruments’ line item in the consolidated statement
of profit or loss and other comprehensive income.
In Birr'000 Loans and Investment Other Total

advances to securities charge/(
customers at (debt assets credit)
amortized cost instruments)
Net remeasurement of loss allowance 202,306 (46.03) 192,585 394,845

237,656 - - 237,656
purchased
Financial assets derecognized (75,602) - - (75,602)
Amounts directly written off during the - - - -
year
Recoveries of amounts previously - - - -
written off
Balance as at 30 June 2022 364,360 (46) 192,585 556,899
4.2.3 Credit- related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer
as required. Guarantees and standby letters of credit carry the same credit risk as loans.
Documentary and commercial letters of credit – which are written undertakings by the bank
on behalf of a customer authorizing a third party to draw drafts on the bank up to a stipulated
– are collateralized by the underlying shipments
of goods to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorizations to extend credit in

the form of loans, guarantees or letters of credit. With re spect to credit risk on commitments
to extend credit, the bank is potentially exposed to loss in an amount equal to the total unused
commitments.
However, the likely amount of loss is less than the total unused commitments, as most
standards. The bank monitors the term to maturity of credit commitments because lon ger-
term commitments generally have a greater degree of credit risk than shorter term
commitments.
4.2.4 Credit quality analysis

The following table sets out information about the credit quality of financial assets measured
at amortized cost, FVOCI debt investments and available-for- sale debt assets. Unless
specifically indicated, for financial assets, the amounts in the table represent gross carrying
amounts.

The loss allowance for loans and advances to customers also includes the loss allowances
for loan commitments and financial guarantee contracts.
In Birr'000 2022 2021
Loans and advances to

Stage 1 Stage 2 Stage 3 Total Total
customers at amortized cost
Stage 1 – Pass 80,639,320 - - 80,639,320 53,192,712

Stage 2 – Special mention - 1,643,031 - 1,643,031 177,675
Stage 3 - Non performing - - 1,703,685 1,703,685 1,211,007
Total gross exposure 80,639,320 1,643,031 1,703,685 83,986,035 54,581,394
Loss allowance (477,675) (44,666) (745,157) (1,267,498) (903,138)
Net carrying amount 80,161,645 1,598,364 958,528 82,718,537 53,678,256
In Birr'000 2021 2020

Loans and advances to
customers at amortized cost
Stage 1 – Pass 53,192,712 - - 53,192,712 30,717,653

Stage 2 – Special mention - 177,675 - 177,675 135,161
Stage 3 - Non performing - - 1,211,007 1,211,007 1,083,717
Total gross exposure 53,192,712 177,675 1,211,007 54,581,394 31,936,531
Loss allowance (283,792) (1,652) (617,694) (903,138) (820,336)
Net carrying amount 52,908,920 176,023 593,313 53,678,256 31,116,195
In Birr'000 2022 2021
Emergency Overdraft , Letter of
contracts
Stage 1 – Pass 2,941,623 - 11,526 2,953,149 4,926,904

Stage 2 – Special mention - - - -
Stage 3 - Non performing - - - -
Total gross exposure 2,476,368 - 11,526 2,487,894 4,926,904
Loss allowance (527) - (1,153) (1,679) (1,138)
Net carrying amount 2,475,841 - 10,374 2,486,215 4,925,766
In Birr'000 2022
Other financial assets (debt Gross Loss Net carrying
instruments) exposure allowance amount
Cash and balances with banks 12 Month ECL 11,860,396 (593) 11,859,803
Investment securities (debt
12 Month ECL
instruments) 8,045,564 (402) 8,045,161
12 Month ECL 1,515,439 (222,037) 1,293,402
Emergency staff loans 526,992 (1,178) 525,814
Totals 21,948,390 (224,210) 21,724,180

In Birr'000 2021
Other financial assets (debt Gross Loss Net carrying
instruments) exposure allowance amount
Cash and balances with banks 12 Month ECL 10,513,556 (526) 10,513,030
Investment securities (debt
12 Month ECL
instruments) 8,966,193 (448) 8,965,745
12 Month ECL 5,640,951 (30,760) 5,610,191
Emergency staff loans 411,487 (409) 411,078
Totals 25,532,188 (32,143) 25,500,044
4.2.5 Credit Concentrations

The bank monitors concentrations of credit risk by social sector. An analysis of concentrations
of credit risk at June 30, 2022, and June 30, 2021. The bank concentrates all its financial
assets in Ethiopia.
Public
Enterprise Cooperative Private Others
30 June 2022 Birr'000 Birr'000 Birr'000 Birr'000
Cash and balances with banks
16,488,220 - - -
Loans and advances to customers
15,331,892 7,897,041 61,026,935 -
Financial asset at FVOCI - 179,715 -
Financial assets at Amortized cost 8,045,538 - - -
Other assets: - 1,323,892 -
39,865,650 7,897,041 62,530,543 -
Public
Enterprise Cooperative Private Others
30 June 2021 Birr'000 Birr'000 Birr'000 Birr'000
Cash and balances with banks
14,093,845 - - -
Loans and advances to customers
8,681,490 4,835,626 41,747,893 -
Financial asset at FVOCI 112,826 - - -
Financial assets at Amortized cost 8,966,193 - - -
Other assets: 2,006,639 - - -
33,860,993 4,835,626 41,747,893 -
4.2.6 Commitments and Guarantees

The maximum exposure to credit risk relating to a financial guarantee is the maximum amount
the bank could have to pay if the guarantee is called upon. The maximum exposure to credit
risk relating to a loan commitment is the full amount of the commitment.

The table below shows the bank’s maximum credit risk exposure for commitments and
guarantees.
30 June 2022 30 June 2021 30 June 2020

Birr'000 Birr'000 Birr'000
Loan commitments 4,256,624 3,196,000 3,401,936
Guarantees 933,243 8,535,530 5,262,566
Letters of credit 1,492,914 2,008,110 1,627,508
6,682,781 13,739,640 10,292,009
4.3 Liquidity Risk

Liquidity risk is the risk that the bank cannot meet its maturing obligations when they become
due, at reasonable cost and in a timely manner. Liquidity risk arises because of the possibility
that the Bank might be unable to meet its payment obligations when they fall due as a result
of mismatches in the timing of the cash flows under both normal and stress circumstances.
Such scenarios could occur when funding needed for illiquid asset positions is not available
to the bank on acceptable terms.
Liquidity risk management in the bank is solely determined by Asset-Liability Committee,

which bears the overall responsibility for liquidity risk. The main objective of the bank's liquidity
obligations.
4.3.1 Management of Liquidity Risk

Cash flow forecasting is performed by the Finance Department. The bank’s liquidity
management process, as carried out within the bank and monitored by fund management
team, includes:
Day-to-day funding, managed by monitoring future cash flows to ensure that

requirements can be met. This includes replenishment of funds as they mature or are
borrowed by customers;
Maintaining a portfolio of highly marketable assets that can easily be liquidated as
protection against any unforeseen interruption to cash flow;
Monitoring statement of financial position liquidity ratios against internal and regulatory
requirements; and
Managing the concentration and profile of debt maturities.
nd that sufficient
funding is available meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risk damage to the bank’s reputation.

4.3.2 Maturity Analysis of Financial Liabilities

The table below analyses the bank’s financial liabilities into relevant maturity banking's based
on the remaining period at the statement of financial position date to the contractual maturity
date. The cash flows presented are the undiscounted amounts to be settled in future.
0-30 days 31-90 days 91-180 days 181-365 day Over 1 year
30 June 2022 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
Deposits from cust. 32,600,303 - 7,130,454.86 - 56,108,310.29
Due to other banks 929,933 - - - -
Other liabilities 1,773,938 35,082.00 - - 462,373.00
Total F/Liabilities 35,304,174 35,082.00 7,130,454.86 - 56,570,683.29
Loan commitments 4,256,624 - - -
Guarantees 247,731 624,282 2,580.83 58,649.24
Letters of credit 154,581 902,749 435,583 - -
Total Off Bal.sheet 4,411,205 1,150,480 1,059,865 2,581 58,649
-30 days 31-90 days 91-180 days -365 day Over 1 year
30 June 2021 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
Deposits from cust. 24,256,857 773,270.17 1,421,245.14 1,658,282.53 42,576,490.74
Due to other banks 432,260 - - - -
Other liabilities 391,907 1,694,847 - - 326,221.00
Total F/Liabilities 25,081,023 2,468,117.17 1,421,245.14 1,658,22.53 42,902,711.74
Loan commitments 3,196,000 - - -
Guarantees 998,560.71 1,932,233 1,150,257 3,833,754.39 615,997.13
Letters of credit 1,110,245 2,100,820 76,035 - -
Total commitments 5,304,805 4,033,054 1,226,291 3,833,754 615,997
4.3.3 Financial assets pledged as collaterals

The bank does not have any assets pledged as collateral.
4.4 Market Risk

Market risk is the risk that changes in market prices, which include currency exchange rates
and interest rates, will affect the fair value or future cash flows of a financial instrument. Market
risk arises from open positions in interest rates and foreign currencies, both of which are
exposed to general and specific market movements and changes in the level of volatility.
The objective of market risk management is to manage and control market risk exposures
within acceptable limits, while optimizing the return on risk. Overall responsibility for managing
market risk rests with the Bank’s Risk Management and the Board’s Risk Committee.

The Bank Risk Management is responsible for the development of detailed risk management
policies and procedures (subject to review and approval by the Board’s Risk Committee) and
for the day to day implementation of those policies.
The bank does not ordinarily engage in trading activities as there are n o active markets in
Ethiopia.
4.4.1 Management of Market Risk
The main objective of Market Risk Management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return on risk.
I. Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will be affected by changes
in market interest rates.
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk
that the value of a financial instrument will fluctuate because of changes in market interest
rates. The bank takes on exposure to the effects of fluctuations in the prevailing levels of
market interest rates on both its fair value and cash flow risks.
The bank’s exposure to the risk of changes in market interest rates relates primarily to the
bank’s obligations and financial assets with floating interest rates. The bank is also exposed
on fixed rate financial assets and financial liabilities. The bank’s investment portfolio is
comprised of treasury bills, Ethiopian government bonds, Development Bank of Ethiopia bond
and cash deposits.
riable interest
instruments.
Non-interest
30 June 2022 Fixed Interest bearing Total
Assets
Cash and balances with banks 16,488,220 - 16,488,220
Loans and advances to customers 69,336,114 - 69,336,114
Interest free banking 13,362,820 13,362,820
Investment securities -
Financial asset at FVOCI 179,715 179,715
Financial assets at Amortized cost 8,045,538 - 8,045,538
Other assets 2,780,254 - 2,780,254
Total 96,650,127 13,542,535 110,192,662
Liabilities
Deposits from customers 43,182,565 52,656,503 95,839,068
Due to other banks 929,933 - 929,933
Other liabilities 2,780,254 - 2,780,254
Total 46,892,752 52,656,503 99,549,255

Non-interest
30 June 2021 Fixed Interest bearing Total
Assets
Cash and balances with banks 14,093,845 - 14,093,845
Loans and advances to customers 45,783,603 - 45,783,603
Interest free banking 7,816,229.08 7,816,229
Investment securities -
Financial asset at FVOCI 112,826 - 112,826
Financial assets at Amortized cost 8,966,193 - 8,966,193
Other assets 2,006,639 - 2,006,639
Total 70,963,106 7,816,229 67,693,676
Liabilities
Deposits from customers 32,696,125 37,693,904 70,390,028
Due to other banks 728,376 - 728,376
Other liabilities 2,412,976 - -
Total 35,837,477 37,693,904 71,118,405
II. Foreign Exchange Risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate due to the changes in foreign exchange rates. The bank is exposed to exchange
rate risks to the extent of balances and transactions denominated in a currency other than the
Ethiopian Birr. The bank’s foreign currency bank accounts act as a natural hedge for these
transactions. Management has set up a policy to manage the bank's foreign exchange risk
against its functional currency.
The table below summarizes the impact of increases/decreases of 10% on equity and p rofit
or loss arising from the bank's foreign denominated borrowings and cash and bank balances.
Foreign currency 30 June 2022 30 June 2021 30 June 2020

denominated balances Birr'000 Birr'000 Birr'000
USD (56,927) 87,892 37,797.35
EURO (3,884) 7,353 4,612.94
GBP 11 244 4,733
DIRAHM 1,146 868 1,074.37
RIYAL 691 377 869.33
JPY - 2,985 2,985
Total (58,963) 99,719 14,275

Sensitivity analysis for foreign exchange risk
The sensitivity analysis for currency rate risk shows how changes in the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market rates at the
reporting date.
The sensitivity of the Bank's earnings to fluctuations in exchange rates is reflected by varying
the exchange rates at 10% as shown below:
30 June 2022 30 June 2021

Sensitivity analysis Birr'000 Birr'000
(5,692.72) 8,789.17
5,693 (8,789)
(388) 735
388 (735)
1 24
(1) (24)
Effect of 10% increase in 115 87
(115) (87)
69 38
loss (RIYAL) (69) (38)
- 298.53
- (299)
4.5 Capital Management
The bank’s objectives in managing capital are:

To comply with the capital requirements set by regulators (NBE) in the markets where
the bank’s entities operate and safeguard the bank’s ability to continue as a going
concern;
To maintain a strong capital base that supports the development of the business; and
To sustain a sufficient level of returns for the bank’s shareholders.
Risk-weighted assets are calculated in accordance with regulatory guidelines.

Credit risk-weighted assets are measured by applying a hierarchy of risk weights related to
the nature of the risks associated with on and off-balance sheet asset classes.
Operational risk- weighted assets are calculated by applying a scaling factor to the bank’s
average gross income.
Market risk-weighted assets are calculated by applying factors to the bank’s trading exposures
to foreign currencies, interest rates, and prices.

4.5.1 Capital Adequacy Ratio(CAR)

According to the Licensing and Supervision of Banking Business Directive No SBB/50/2011
of the National Bank of Ethiopia, the bank has to maintain capital to risk weighted assets ratio
of 8% at all times, the risk weighted assets being calculated as per the provisions of Directive
No SBB/9/95 issued on August 18, 1995.
The capital adequacy ratio is the quotient of the capital base of the bank and the bank’s risk
weighted asset base.
Capital includes Capital contribution, Retained earnings, Legal reserve and Other reserves to
be approved by the National Bank of Ethiopia.
30 June 2022 30 June 2021 30 June 2020

Capital
Paid-up capital 7,731,771 4,651,021 3,000,000
Retained earnings - - 793,223
Capital reserves 3,932 3,932 3,932
Share Premium 8,672 8,672 8,672
Legal reserve 1,755,144 1,243,812 912,017
9,499,519 5,907,437 4,717,844
Risk weighted assets
Risk weighted balance for on-balance
sheet items 89,674,017 57,380,353 37,096,746
Credit equivalents for off-balance sheet
Items 4,087,847 6,265,116 4,939,178
Total risk weighted assets 93,761,864 63,645,469 42,035,924
Risk-weighted Capital Adequacy Ratio (CAR) 10.13% 9.28% 11.22%

Minimum required capital 8.00% 8.00% 8.00%
4.6 Fair Value of Financial Assets and Liabilities

Fair value is a market-based measurement and uses the assumptions that market participants
would use when pricing an asset or liability under current market conditions. When
determining fair value, it is presumed that the entity is a going concern and is not an amount
that represents a forced transaction, involuntary liquidation or a distressed sale.
IFRS 13 requires an entity to classify measured or disclosed fair values according to a

hierarchy that reflects the significance of observable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, which comprises of three levels as
described below, based on the lowest level input that is significant to the fair value
measurement as a whole.

4.6.1 Valuation Models

IFRS 13 specifies a hierarchy of valuation techniques based on whether the inpu ts to those
valuation techniques are observable or unobservable. Observable input reflect market data
obtained from independent sources; unobservable inputs reflect the bank's market
assumptions. All assets and liabilities for which fair value is measured or disclosed in the
financial statements are categorized within the fair value hierarchy, described as follows,
r value measurement as a whole.
Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
This category includes instruments valued using: quoted market prices in active markets for
similar instruments; quoted prices for identical or similar instruments in markets that are
considered less than active, or other valuation technique in which all s ignificant inputs are
directly or indirectly observable from market data. In conclusion, this category is for valuation
directly or indirectly observable.

Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
This category includes all assets and liabilities for which the valuation technique includes
inputs not based on observable data and the unobserv
the asset or liability's valuation. This category includes instruments that are valued based on
assumptions are required to reflect differences between the instruments.
4.6.2 Financial instruments not measured at fair value - Fair value hierarchy
The following table summarizes the carrying amounts of financial assets and liabilities at the
reporting date by the level in the fair value hierarchy into which the fair value measurement is
categorized. The amounts are based on the values recognized in the statement of financial
position.
30 June 2022 30 June 2021

Carrying amount Carrying amount
Birr'000 Birr'000
Financial assets
Cash and balances with banks 16,488,220 14,093,845
Loans and advances to customers 69,336,114 45,783,603
13,362,820 7,816,229
Investment securities - -
Equity Investment 179,715 112,826
Amortized Cost 8,045,538 8,966,193
Other asset 2,780,254 2,006,639

Total 110,192,662 78,779,335
Financial liabilities
Deposits from customers 95,839,068 70,390,028
Due to other banks 929,933 728,376
Other liabilities 5,268,344 2,412,976
Total 102,037,345 73,531,380
4.6.3 Fair Value Methods and Assumptions

I. Loans and advances to customers
Loans and advances to customers are carried at amortized cost net of provision for
impairment. The estimated fair value represents the discounted amount of estimated future
cash flows expected to be received. Expected cash flows are discounted at current market
rates to determine fair value.
II. Cash
The carrying amount of cash and balances with banks is a reasonab le approximation of fair
value.
III. Deposit from banks, due to customers and other deposits
The estimated fair value of deposits with no stated maturity, which includes non -interest
bearing deposits, is the amount repayable on demand.
The estimated fair value of fixed interest-bearing deposits not quoted in an active market is
based on discounted cash flows using interest rates for new debts with similar remaining
maturity.
For those notes were quoted market prices are not available, a discounted cash flow model
is used based on a current yield curve appropriate for the remaining term to maturity.
IV. Other Assets
The bulk of these financial assets have short term (less than 12 months) maturities and their
amounts are a reasonable approximation of fair value.
V. Other Liabilities
The carrying amount of financial liabilities in other liabilities is a reasonable approximation of

fair value because these are short term in nature with a maturity of less than one year.
4.7 Offsetting Financial Assets and Financial Liabilities

There are no offsetting arrangements. Financial assets and liabilities are settled and disclosed
on a gross basis.

30 June 2022 30 June 2021

Birr'000 Birr'000
Commission income 171,349 125,631

Income from Murahaba financing - -
Income from trade financing 955,125 426,712
Service charges - -
Other Income 13 -
1,126,486 552,343
Total operating income
Other operating expenses (59,935) (22,911)
Profit before tax 1,066,552 529,432
Profit after tax 746,586 370,602

30 June 2022 30 June 2021

Birr'000 Birr'000
ASSETS
Cash and balances with banks 863,400 737,728

Net loan and advance 13,340,720 7,816,229
Profit receivable 2,876,670 2,302,193
Other assets 39,980 737,000
Total assets 17,120,770 11,593,150
LIABILITIES
Deposits from customers 15,283,640 11,593,150

Other liabilities 1,837,130 -
CAPITAL - -
Total liabilities and Equity 17,120,770 11,593,150

30 June 2022 30 June 2021

Birr'000 Birr'000
5 Interest income
Loans and advances to customers 7,243,504 4,882,115

Suspended Interest Income 110,863 6,908
National Bank of Ethiopia bills and bonds 551,799 380,666
Due from other banks 177,441 147,385
8,083,608 5,417,074
30 June 2022 30 June 2021

Birr'000 Birr'000
6 Due to customers 2,700,753 2,028,568
2,700,753 2,028,568
30 June 2022 30 June 2021

Birr'000 Birr'000
7 Fee and commission income
Foreign currency transactions 1,133,033 811,999

Letter of guarantee 270,007 198,215
Other commission 206,966 156,467
1,610,006 1,166,681
Fee and commission expense - -
Net fees and commission income 1,610,006 1,166,681
30 June 2022 30 June 2021

Birr'000 Birr'000
8 Other operating income
Income from murabaha financing 955,125 426,712

Dividend income 6,279 7,694
Estimation and inspection fee 35,022 25,662
Gain on disposal of property plant and equipment 6,540 12,896
Gain on foreign currency transactions 1,316,942 917,946
Other income 38,528 50,871
Rental income 1,132 3,092
Telephone, postages and money bags 69 284
2,359,636 1,445,157

30 June 2022 30 June 2021
Birr'000 Birr'000
9 Impairment charge
Loans and advances - charge for the year 631,367 228,040
Impairment Loss on PPE 260 -
631,627 228,040
30 June 2022 30 June 2021
Birr'000 Birr'000
10 Personnel expenses
Salaries and wages 1,400,509 997,880
Staff allowances 127,191 101,816
Staff Award 27,020 124
Pension costs – Defined contribution plan 152,327 109,353
Pension costs – Defined Benefit plan 32,849 15,095
Prepaid staff expenses 42,354 29,833
Other staff expenses 538,332 363,525
2,320,581 1,617,626
30 June 2022 30 June 2021
11 Operating expenses Birr'000 Birr'000
Advertisement and publicity 155,608 96,103
Amortization of leasehold 16 14
Audit fee 404 386
Bank charges 110 (74.54)
Board of directors remuneration 2,108 1,200
Cleaning 2,248 3,305
Data processing 14,286 6,572
Donations 44,747 28,047
Entertainment 9,193 2,692
Fuel 20,951 10,331
Insurance 24,960 15,937
Internet 46,569 40,745
Legal and professional fee 3,052 2,799
Movable Collateral Registry 36 -
Other operating expense 612,011 386,000
Penalty 32,512 17,876
Per diem 20,455 15,746
Rent 352,541 249,831
Finance Cost of rent 7,162 2,947
Repair and maintenance 85,011 41,902
Representation allowance 103,398 62,050
Stationeries 71,473 58,658
General Supply Stock Expense 14,854 -
Subscription and membership fee 5,719 3,561
Taxes 29 24
Telephone and postage 329 225
Transportation 117,111 107,393
General Assembly 6,107 -
Water and electricity 12,529 9,048
Loss on foreign exchange transactions 1,573,728 1,159,478
3,339,258 2,322,795

30 June 2022 30 June 2021
Birr'000 Birr'000
12 Company income and deferred tax
12a Current income tax
Company income tax 773,844 397,402
Deferred income tax/(credit) to profit or loss 24,079 (28,526)
Total charge to profit or loss 797,922 368,876
Total tax in statement of comprehensive
797,922 368,876
income
12b Reconciliation of effective tax to statutory tax
The tax on the bank’s profit before income tax differs from the theoretical amount that would
arise using the statutory income tax rate as follows:
30 June 2022 30 June 2021
Birr'000 Birr'000

Add : Disallowed expenses
Entertainment 9,193 2,692
Donation 26,747 5,047
Legal provision 3,537 20
General Assembly 6,107 2,073
Penalty 32,512 17,876
Accrued Leave 63,477 23,195
Prepaid staff expense 42,354 29,832
Loss on foreign exchange transactions 256,786 241,532
Impairment Loss 259.55 -
Severance pay 30,696 41,419
Provision for loans and advances as per IFRS 631,367 228,040
Depreciation for accounting purpose 199,734 127,418
Amortization for accounting purpose 18,047 8,410
Total disallowable expenses 1,320,817 727,553
Less : Allowable expenses

Depreciation and amortization for tax purpose 255,477 186,297
Provision for loans and advances for tax NBE 80% 539,604 139,565
Dividend income taxed at source 6,039 7,264
Interest income on staff loans 54,627 28,766
Reversal of Regulatory Risk reserve - 173,020
Reversal on Severance pay - 10,670
Interest income taxed at source-NBE Bills 551,799 379,704
Interest income taxed at source-Local Deposit 177,042 147,326
Total allowable expenses 1,584,589 1,072,611
Taxable profit 2,579,479 1,324,674
Current tax at 30% 773,844 397,402

30 June 2022 30 June 2021

12c Current income tax liability Birr'000 Birr'000
Balance at the beginning of the year 396,833 208,436
Charge for the year: 773,844 397,402
Payment during the year (19) (569)
Balance at the end of the year 773,825 396,833
12d Deferred income tax
The following table shows deferred tax recorded in the statement of financial position and
charges recorded in the income tax expense;
30 June 2022 30 June 2021
Birr'000 Birr'000
The analysis of deferred tax assets/(liabilities) is as follows:
To be recovered after more than 12
months 37,404 (29,639)
To be recovered within 12 months 43,813
81,217 (29,639)
Deferred income tax assets and liabilities, deferred income tax charge/(credit) in profit or
loss(“P/L”), in equity and other comprehensive income are attributable to the following
items;
Prior Year Credit/

At 1 July
Deferred income tax Adjustment (charge) to 30 June
2021
assets/(liabilities): P/L 2022
Property, plant and equipment (49,023) 37,972 (52,331) (63,382)
Accrued leave provision 6,958 17,812 19,043 43,813
Post-employment benefit obl. 12,426 15,769 9,209 37,404
Total deferred tax
assets/(liabilities) (29,639) 71,552 (24,079) 17,835
12e Total deferred tax assets 19,384 81,217
12f Total deferred tax liab. (49,023) (63,382)
Deferred income tax At 1 July Cr.(charge) Cr.(charge) 30 June
assets/(liabilities): 2020 to PL equity 2021
Birr'000 Birr'000 Birr'000 Birr'000
Property, plant and equipment (59,754) 10,731 (49,023)
Accrued leave provision - 6,958 6,958
Post-employment benefit obl. 1,589 10,837 12,426
Total deferred tax
assets/(liabilities) (58,165) 28,526 - (29,639)
12e Total deferred tax assets 19,384

30 June 2022 30 June 2021

Birr'000 Birr'000
13a Cash and cash equivalent
Cash in hand 4,626,914 3,580,289
Deposits with local banks 1,822,717 1,890,885
Deposits with foreign banks 1,226,958 1,046,260
Balance held with National Bank of Ethiopia 2,051,643 3,852,445
9,728,232 10,369,879
30 June 2022 30 June 2021

Birr'000 Birr'000
14 Loans and advances to customers
Agriculture 1,231,824 505,233
Manufacturing 12,290,221 9,088,737
Export 17,459,220 11,927,928
Merchandise 2,162,215 1,453,053
Import 4,747,682 1,930,830
Domestic trade and service 23,042,353 17,728,655
Building and construction 3,134,246 2,124,341
Staff loans 6,466,333 1,928,373
Gross amount 70,534,094 46,687,150
Stage 1 12 month ECL (437,551) (283,812)
Stage 2 Life time ECL (3,262) (1,652)
Stage 3 Life time ECL (735,126) (618,083)
Suspended Int.IFRS Adjustment (22,041)
Net Conventional Loan Balance 69,336,114 45,783,603
Maturity analysis 30 June 2022 30 June 2021

Birr'000 Birr'000
Within 3 Months 786,786 5,568,708

3 months up to 1 year 6,804,337 13,727,832
1 Year up to 2 years 7,594,114 4,982,770
2 Years up to 3 years 9,865,864 6,149,852
3 years up to 5 years 17,332,208 6,449,587
> 5 years 28,150,786 9,808,402
70,534,094 46,687,150
14a Impairment allowance on loans and advances to customers

A reconciliation of the allowance for impairment losses for loans and receivables by class,
is as follows:
As at 30 June Charge for the As at 30 June
2022 year 2021
Specific allowance for impairment Birr'000 Birr'000 Birr'000
- Stage 1 12 month ECL 437,551 153,738 283,812
- Stage 2 Life time ECL 3,262 1,610 1,652
- Stage 3 Life time ECL 735,126 117,043 618,083
Total impairment allowance 1,175,939 272,391 903,547

30 June 2022 30 June 2021

Birr'000 Birr'000
15 Interest free Financing
Agriculture -IFB 210,992 94,948

Manufacturing -IFB 3,128,346 2,418,513
Export -IFB 3,201,593 1,747,649
Import-IFB 1,088,479 143,362
Domestic trade and service -IFB 3,587,667 1,874,578
Building and construction -IFB 2,183,171 1,514,506
Others-IFB 54,131 22,674
13,454,379 7,816,229
Less Collective Impairment -
- Stage 1 12 month ECL (40,124) -
- Stage 2 Life time ECL (41,405) -
- Stage 3 Life time ECL (10,030) -
Net Interest free Financing 13,362,820

Birr'000 Birr'000
Within 3 Months 112,354 936,950

3 months up to 1 year 3,119,181 1,292,159
1 Year up to 2 years 1,171,058 1,125,362
2 Years up to 3 years 2,117,471 1,282,064
3 years up to 5 years 2,819,716 1,510,216
> 5 years 4,114,600 1,669,478
30 June 2022 30 June 2021

Birr'000 Birr'000
16 Investment securities
Equity Investments 112,826 112,326

Additional for the year 25,000 500
Adjustment (500)
Revaluation gain or loss 42,389 -
179,715 112,826
During the year, the Bank has made additional investment of Br.25million in the equity holding
of Oromia Insurance Share Company.

16a. The following are the equity investments of the Bank as at 30 June 2022:
30 June 2022
Birr'000
Percentage Revaluation Total

Investee Company holding Cost gain/loss
Oromia Insurance Company S.C 5% 50,000 31,286 81,286
Orologo Prefabricated Factory plc 20% 15,000 - 15,000
Gutu Oromia S.C 3.5% 3,500 - 3,500
Elemtu Integrated Milk Industry 6.58% 5,000 4,999 9,999
Eth-Switch Solution S.C 2.03% 12,502 37,925 50,428
Premium Switch Solution(PSS) 3.22% 4,800 8,987 13,787
Bomoj Meat Industry S.C 1.79% 1,250 - 1,250
Melba Printing and Publishing S.C 1.46% 10,000 (5,535) 4,465
102,052 77,663 179,715
30 June 2021
Birr'000
Percentage Revaluation Total

Investee Company holding Cost gain/loss
Oromia Insurance Company S.C 5.3% 25,000 23,495 48,495
Orologo Prefabricated Factory plc 20.0% 15,000 - 15,000
Gutu Oromia S.C 17.7% 3,500 - 3,500
Elemtu Integrated Milk Industry 7.6% 5,000 (5,470) (470)
Eth-Switch Solution S.C 2.7% 12,502 18,208 30,710
Premium Switch Solution(PSS) 3.2% 4,800 (960) 3,840
Bomoj Meat Industry S.C 1.5% 1,250 1,250
Melba Printing and Publishing S.C 3.0% 10,500 - 10,500
77,552 35,274 112,826
The Bank holds equity investments in Eth-Switch of 2.03%, Premium Switch Solutions 3.22%,
Oromia Insurance Company 5%, Gutu Oromia Business 3.5%, Orologo Prefabricated PLC
20%, Elemtu Integrated Milk Industry 6.58%, Bomoj Meat Processing and Export S.C 1.79%
and Melba Printing and Publishing S.C 1.46% as at 30 June 2022. These investments are
unquoted equity securities measured at fair value through other comprehensive income
(FVOCI).
Equity instruments are instruments that meet the definition of equity from the holder’s
perspective; that is, instruments that do not contain a contractual obligation to pay and that
evidence a residual interest in the issuer’s net assets. Equity instrumen ts are measured at
FVTPL. However, on initial recognition of an equity investment that is not held for trading, the
bank may irrevocably elect for strategic or long term investment reasons to present
subsequent changes in fair value in OCI. This election is made on an investment-by-
investment basis. On adoption of the standard, the bank did designate all of its equity
instruments as FVTOCI. Gains and losses on these instruments including when
derecognized/ sold are recorded in OCI and are not subsequently reclassified to the PL."

17 Amortized Cost: 30 June 2022 30 June 2021

Birr'000 Birr'000
Ethiopian Government bills - 8,945,473
Treasury bills 7,468,968 -
Ethiopian Government Bonds 576,570 20,720
Gross amount 8,045,538 8,966,193
Birr'000 Birr'000
Current - 1,738,810
Non-Current 8,045,538 7,227,383
8,045,538 8,966,193
18 Other assets 30 June 2022 30 June 2021

Birr'000 Birr'000
Financial assets
Un cleared effects of transfers - Foreign 1,133,233 262,256
Un cleared effects of transfers - Local 15,013 8,794
ATM settlement receivables 35,402 24,063
Money transfer agents 5,013 12,044
Advance on murabaha 57,351 475,397
Account receivable 302,517 336,848
Gross amount 1,548,529 1,119,402
Less: Specific impairment allowance (224,637) (31,734)
1,323,892 1,087,668
Non-financial assets
Repossessed collateral - 12,035
Fixed asset in store 117 117
Prepaid staff expense 571,901 497,796
Prepayment for new branch opening 89,706 55,127
Prepayments 677,070 260,502
General supplies 117,542 93,394
Sundry receivables 26 -
Gross amount 1,456,362 918,971
Net Financial and Non-financial asset 2,780,254 2,006,639
Birr'000 Birr'000
Current 2,432,873 1,540,460
Non-Current 572,018 497,913
3,004,891 2,038,373
18a Impairment allowance on other assets
A reconciliation of the allowance for impairment losses for other assets is as follows:
30 June 2022 30 June 2021
Birr'000 Birr'000
Charge for the year 192,903 (26,754)

Purchased software Total
19 Intangible Assets Birr'000 Birr'000
Cost:
As at 1 July 2021 114,005 114,005
Acquisitions 174,368 174,368
As at 30 June 2022 288,373 288,373
Accumulated amortization
As at 1 July 2021 31,505 31,505
Amortization for the year 18,047 18,047
As at 30 June 2022 49,553 49,553
Net book value
As at 30 June 2021 82,500 82,500
As at 30 June 2022 238,820 238,820
Office
furniture, Construc
Motor fittings & Computer tion in
Building vehicles equipment equipment progress Total
Birr'000 Birr'000 Birr'000 Birr'000 Birr'000 Birr'000
20 Property, plant and equipment
Cost:
As at 1 July 2021 82,539 595,791 589,753 343,533 440,898 2,052,514
Additions 23,662 308,099 194,598 183,624 156,737 866,720
Disposals - 3,002 5,774 11,663 - 20,439
Reclassification - 29,445 111,283 25,767 166,495
Transfer to Non- 13,455
Asset Held to Sale - - 7,812 5,642
As at 30 June 2022 106,201 936,337 909,220 570,230 597,635 3,119,623
Accumulated depreciation
As at 1 July 2021 5,664 118,192 200,433 152,241 - 476,530
Charge for the year 2,210 67,195 74,873 55,455 - 199,734
Disposals - (2,603) (4,154) (9,561) - (16,317)
Reclassification - (447) 472 25
Transfer to Non-
Asset Held to Sale - - (6,716) (4,441) (11,157)
As at 30 June 2022 7,874 182,784 263,990 194,167 - 648,815
Accumulated Impairment
As at 1 July 2021 - - 2,888 1,366 - 4,255
Transfer to Non-
Asset Held to Sale - - (694) (935) - (1,629)
As at 30 June 2022 - - 2,195 431 - 2,626
Net book value
As at 30 June 2021 76,875 477,599 386,251 189,677 440,898 1,571,729
As at 30 June 2022 98,327 753,553 643,035 375,632 597,635 2,468,182

20a Non-current assets held for sale

30 June 2022 30 June 2021
Birr'000 Birr'000

Transfer from repossessed collateral 33,922 26,808
Transfer from property, plant and equipment 451 -
Reversal of property, plant and equipment - (8,130)
Disposals of property, plant and equipment (18,843) (34,585)
Cooperative Bank of Oromia S.C. took over collateral of some customers and classified
as non-current asset held for sale as the Bank had no intention to make use of the
property for administrative use. Management initiated a plan to dispose of these assets
to willing buyers and expects to have completed the transaction before the end of the
next financial period.
There is no cumulative income or expenses in OCI relating to assets held for sale.
20b Right of use asset and financial lease liability

Building Total
As at 1 July 2021 758,365 758,365
Depreciation charge for right-of-use assets (352,541) (352,541)
Additions 1,093,921 1,093,921
Balance at June 2022 1,499,745 1,499,745
Right use of asset and financial lease liability
A Lease Liability
Building Total
Balance at July 2020 102,722 102,722
Additions 32,149 32,149
Payment 22,239 22,239
Balance at June 2021 112,631 112,631
Balance at July 2021 112,631 112,631
Adjustment (7,162) (7,162)
Additions 228,497 181,920
Balance at June 2022 294,552 294,552

30 June 2022 30 June 2021

Birr'000 Birr'000
21 Deposits from customers
Demand deposits 29,317,406 20,963,328
Savings deposits 43,182,565 32,696,125
Time deposits 7,130,455 4,749,085
Wadiah demand deposits 3,282,896 2,394,378
Wadiah savings deposits 12,923,244 9,584,249
Mobile money savings 2,502 2,863
95,839,068 70,390,028
30 June 2022 30 June 2021

Birr'000 Birr'000
22 Due to other banks
Demand deposits 191,825 432,260
Saving deposits 738,108 296,117
929,933 728,376
30 June 2022 30 June 2021

Birr'000 Birr'000
23 Borrowing
Borrowing from NBE - 41,687
- 41,687
30 June 2022 30 June 2021

Birr'000 Birr'000
24 Other liabilities
Financial liabilities
Interest payable on deposits - 1
Letter of credit margin payables 1,535,097 1,567,019
ATM settlement payable 109,991 37,389
CTS Settlement account 1,290 462
Dividend payables 25,624 22,789
Blocked accounts 18,497 17,341
Telegraphic and Money transfer payable (41,696) 2
Over the Counter Cash Payment (OTCP) 20 -
Exchange payable 9,458 19,896
Provision for fidelity Risk 1,350 966
Money transfer agent (81,109) 10,357
Cash payment order payable 248,762 126,906
Board of directors remuneration payable 1,472 1,453
Staff payables 442,404 322,348
Cash collateral on guarantees 233 922
2,271,393 2,127,851

Blocked accounts represent customer accounts on which the court has given order to be
frozen pending the end of litigation.
Non-financial liabilities
Defined contribution liabilities 8,220 5,650
Stamp duty charges 13,735 6,702
Withholding tax payable 5,245 4,835
Other tax payable 53,825 34,745
Deferred Income Loan Processing Fee 16,880 14,155
Deferred Income Guarantee Commission 154,105 78,835
Deferred Income LC Commission 46,064 72,119
Deferred Income- IFB 44 92
Sundry payables 2,698,833 67,992
2,996,951 285,125
Gross amount 5,268,344 2,412,976

Birr'000 Birr'000
Current 1,883,297 1,066,210
Non-Current 3,385,047 1,346,766
5,268,344 2,412,976
30 June 2022 30 June 2021

Birr'000 Birr'000
Retirement benefit obligations
Defined benefits liabilities:
Severance pay (note 25a) 124,679 93,983
Liability in the statement of F/position 124,679 93,983
Profit or Loss charge included in personnel expenses:

Severance pay (note 25a) 28,495 15,095
Total defined benefit expenses 28,495 15,095
Re-measurements for:
Severance pay (note 25a) (4,354) (26,324)
(4,354) (26,324)
The Profit or Loss charge included within personnel expenses includes current service cost,
interest cost, past service costs on the defined benefit schemes.
Birr'000 Birr'000
Current 28,495 15,095
Non-Current 96,184 78,888
124,679 93,983

25a Severance pay

The Bank operates an unfunded severance pay plan for its employees who have served the
Bank for 5 years and above and are below the retirement age (i.e. has not met the requirement
to access the pension fund). The final pay-out is determined by reference to current benefit’s
level (monthly salary) and number of years in service and is calculated as 1-month salary for
the first year in employment plus 1/3 of monthly salary for each subsequent in employment to
a maximum of 12 months’ final monthly salary.
30 June 2022 30 June 2021
Birr'000 Birr'000
A Liability recognized in the financial position 124,679 93,983
30 June 2022 30 June 2021

B Amount recognized in the profit or loss Birr'000 Birr'000
Current service cost 13,121 6,682
Interest cost 15,374 8,413
28,495 15,095
C Amount recognized in other comprehensive income:
Actuarial (Gains)/Losses on demographic assumptions
Actuarial (Gains)/Losses on economic
assumptions 6,197 1,524
Actuarial (Gains)/Losses on experience (10,551) (27,848)
(4,354) (26,324)
D Change in the present value of the defined benefit obligation
The movement in the defined benefit obligation over the years is as follows:
30 June 2022 30 June 2021
Birr'000 Birr'000
At the beginning of the year 93,983 52,927
Current service cost 13,121 6,682
Interest cost 15,374 8,413
Bank Paid Benefits (2,153) (363)
Re-measurement (gains)/ losses 4,354 26,324
At the end of the year 124,679 93,983
The significant actuarial assumptions were as follows:
A Financial Assumption Long term Average

30 June 2022 30 June 2021
Birr'000 Birr'000
Discount Rate 23.60% 14.50%
Long term salary increases 19.30% 12.00%

B. Mortality in Service
The rate of mortality assumed for employees are those published in the Demographic and
Health Survey (“DHS”) 2016 report compiled by the CSA. The DHS report provides male and
female mortality rates for 5-year age bands from age 15 to age 49. For ages over 47 we have
assumed that mortality will be in line with the SA85/90 ultimate standard South African
mortality tables published by the Actuarial Society of South Africa (“ASSA”), since the rates in
these tables are similar to the DHS female mortality rate at age 47. These rates combined are
approximately summarized as follows:
Mortality rate
Age Males Females
20 0.00306 0.00223
25 0.00303 0.00228
30 0.00355 0.00314
35 0.00405 0.00279
40 0.00515 0.00319
45 0.0045 0.00428
50 0.00628 0.00628
55 0.00979 0.00979
60 0.01536 0.01536
C. Withdrawal from Service

The withdrawal rates are believed to be reasonably representative of the Ethiopian
experience. The valuation assumed a rate of withdrawal of 15% at the youngest ages falling
with increasing age to 2.5% at age 45.
The sensitivity of the main results to changes in the principal assumptions rate have been
calculated. The changes in the Defined Benefit Obligation are reflected below;
Impact on defined benefit obligation Impact on defined benefit obligation

30 June 2022 30 June 2021
Change in Impact of an Impact of a Impact of an Impact of a
assumption increase decrease increase decrease
Discount
rate;1% 118,865 130,829 88,879 99,429
Impact on current service cost Impact on current service cost

30 June 2022 30 June 2021
Change in
assumption Impact of an Impact of a Impact of an Impact of a
increase decrease increase decrease
Salary
increase:1% 131,003 118,612 99,504 88,724

The above sensitivity analysis is based on a change in an assumption while holding all other
assumptions constant. In practice, this is unlikely to occur and changes in some of the
benefit obligation calculated with the projected unit credit method at the end of the reporting
period) has been applied as when calculating the pension liability recognized within the
statement of financial position.
26 Share Capital
Authorized:
Ordinary shares-par value of Birr 100 each 13,000,000 13,000,000
Issued and fully paid:
Ordinary shares- par value of Birr 100 each 7,731,771 4,651,021
27 Share Premium 30 June 2022 30 June 2021

Birr'000 Birr'000
Addition during the year - -
8,672 8,672
28 Earnings per share

Basic earnings per share (EPS) is calculated by dividing the profit after taxation by the
weighted average number of ordinary shares in issue during the year.
30 June 2022 30 June 2021
Birr'000 Birr'000
Profit attributable to shareholders 2,045,328 1,300,856
Weighted aver No.of ordinary shares in issue 59,729 32,346
Basic & diluted earnings per share (Birr) 34 40
29 Retained Earnings

Profit/ (Loss) for the year 2,045,328 1,327,180
Director's share of profit (1,472) (1,453)
Transfer to Legal reserve (511,332) (331,795)
Transfer to Regulatory Risk reserve (154,001) (6,908)
Transfer to Dividend payable (950,393) (793,223)
Reversal Severance Liability - 363.00
Transfer to Risk reserve(Severance) - (36,994)
At the end of the year 1,378,523 950,393

30 June 2022 30 June 2021

Birr'000 Birr'000
30 Legal Reserve
At the beginning of the year 1,243,812 912,017

Transfer from profit or loss 511,332 331,795
At the end of the year 1,755,144 1,243,812
The NBE Directive No. SBB/4/95 states that the Bank to transfer annually 25% of its annual
net profit to its legal reserve account until such account equals its paid up capital. When
the legal reserve account equals the paid up capital of the Bank, the amount to be
transferred to the legal reserve account will
30 June 2022 30 June 2021
31 Regulatory Risk Reserve Birr'000 Birr'000

Transfer From Retained Earning 154,001 6,908
Revaluation Gain-Equity Investment 42,389 -
Other comprehensive income - 10,670
Reversal of Regulatory Risk reserve - (173,020)
At the end of the year 433,980 237,590
The Regulatory risk reserve is a non-distributable reserves required by the regulations of

the National Bank of Ethiopia(NBE) to be kept for impairment losses on loans and
receivables in excess of IFRS charge as derived using the incurred loss model.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE)
guidelines is higher than the loan loss impairment determined using the incurred loss model
under IFRS, the difference is transferred to regulatory risk reserve and it is non-distributable
to the owners of the Bank.
Where the loan loss impairment determined using the National Bank of Ethiopia (NBE)
guidelines is less than the loan loss impairment determined using the incurred loss model
under IFRS, the difference is transferred from regulatory risk reserve to the retained
earnings to the extent of the non-distributable reserve previously recognized.
32 Donated Capital 30 June 2022 30 June 2021
Birr'000 Birr'000
3,932 3,932

30 June 2022 30 June 2021

33 Notes Birr'000 Birr'000
Cash generated from operating activities
Profit before income tax 2,843,250 1,696,056
Adjustments for non-cash items:
Net gain/(loss) on foreign exchange

Depreciation of property, plant and equipment 20 199,734 127,418
Amortization of intangible assets 19 18,048 8,410
Net gain/Loss on disposal of property plant and
8
equipment(net) (6,540) (12,896)
Impairment on loans and receivables 14 631,108 53,584
Reversal accumulated Impairment of PPE 14 1,629 429
Suspended Interest Income 5 (110,863)
Amortization of Right use Asset 20b 352,541
Dividend income 5 (6,279) (7,694)
Adjustment on property plant and Equipment 4,391
Interest on lease liability 7,162
Retirement benefit obligations 25 30,696 15,095
Changes in working capital:
-Decrease/(increase) in restricted cash 13 (3,036,022) (1,421,036)
-Decrease/ (Increase) in loans and advances 14 (23,846,944) (16,507,701)
-Decrease/ (Increase) in interest free financing 15 (5,638,150) (3,866,303)
-Decrease/ (Increase) in other assets 18 (773,615) (570,750)
-Decrease/ (Increase) NCAHFS 20a 15,531.00 (15,907)
-Decrease/Increase in Customers deposits 21 25,449,040 25,447,361
-Decrease/Increase in Due to other banks 22 201,557 160,163
-Increase/ (Decrease) in other liabilities 24 2,855,368 851,929
(808,358) 5,958,158
34. Related party transactions
A related party transaction is a transfer of resources, services or obligations between a reporting

entity or the bank in our case and a related party, regardless of whether a price is charged. CBO
is largely owned by cooperatives with primary cooperatives having 19.15%, cooperatives union
31.13%, cooperatives federation 4.9% and non-cooperatives; organizations and associations
11.33% and individuals 33.48%. The bank has entered into a number of transactions with related
parties as at 30 June 2022.
A number of transactions were entered into with related parties in the normal course of
business. These are disclosed below:

30 June 2022 30 June 2021

Birr'000 Birr'000
34a Transactions with related parties

Loans and advance to key management 203,558 73,434
Cooperatives and union 7,897,041 4,835,626
8,100,599 4,909,060
34b Key management compensation
Key management has been determined to be the members of the Board of Directors and the
Executive Management of the Bank. The compensation paid or payable to key management for
is shown below.
30 June 2022 30 June 2021

Birr'000 Birr'000
Salaries and other short-term employee
benefits 35,700 18,029
Sitting allowance 2,354 600
Other expenses - 1,499
38,054 20,128
Compensation of the Bank's key management personnel includes salaries and non-cash
benefits.
34c Board of Directors compensation

The Bank provides monthly allowances and annual compensation fee for each member of
board of directors of the bank per the prevailing direction from the National Bank of Ethiopia
on same.
30 June 2022 30 June 2021
Birr'000 Birr'000
Profit sharing 1,472 1,453
1,472 1,453
35. Contingent liabilities
35a. Claims and litigation
The Bank is a party to numerous legal actions brought by different organizations and
individuals arising from its normal business operations. The maximum exposure of the Bank
to these legal cases as at June 30,2022 is birr 36.9 million and as at June 30 June 2021 is
birr 80.1 million provision has been made in the financial statements as at 30 June 2022 is
birr 3.5 million.

35b Contingent Assets

The Bank is a party to numerous legal actions initiated by the Bank against different
organizations, current and former employees of the Bank and individuals arising from its
normal business operations. The matter has been referred to the court and, having received
legal advice, the directors believe that a favorable outcome is probable. The maximum amount
expected from these cases as at June 30,2022 is birr 352.6 million and as at June 30,2021 is
birr 125.7 million. However, this has not been recognized as a receivable at the year-end as
receipt of the amount is dependent on the outcome of the court processes.
35c. Guarantees and Letters of Credit
To meet the financial needs of customers, the Bank enters into various irrevocable
commitments and contingent liabilities. These consist of financial guarantees, letters of credit
and other commitments to lend. Even though these obligations may not be recognized on the
statement of financial position, they contain credit risk and, therefore, form part of the overall
risk of the Bank.
The Bank conducts business involving performance bonds and guarantees. These
instruments are given as a security to support the performance of a customer to third parties.
As the Bank will only be required to meet these obligations in the event o f the customer's
default, the cash requirements of these instruments are expected to be considerably below
their nominal amounts.
The table below summarizes the amount of contingent liabilities for the account of customers:
30 June 2022 30 June 2021

Birr'000 Birr'000
Guarantees issued 933,243 8,535,530
Letters of Credit 1,492,914 2,008,110
2,426,157 10,543,640
36 Commitments
The Bank has commitments (for undrawn overdrafts and loans approved but not yet
disbursed) of Birr 4,257 million, 3,196 million and Br.3, 401 million not provided for in these
financial statements as of June 30, 2022, June 30, 2021 and June 30, 2020 respectively.
37 Right use of asset (ROA) and Lease liabilities
The Bank leases properties

The lease terms generally fall between two and the majority of these lease
agreements are renewable at the end of each lease period at market rate. Payments are made
initially for as an advance payment.

The following table shows the remaining contractual maturities of the Company's Lease
liabilities and Right use of assets at the end of the current and previous reporting periods.
30 June 2022 30 June 2021

Birr'000 Birr'000
Lease Lease
ROA ROA
Maturity liabilities liabilities
Within one year 14,103 3,355.18 77,154 3,599
After 1 year but within 2 years 85,316 10,220.17 53,952 4,786
After 2 years but within 5 years 1,080,301 225,851.16 531,088 88,390
After 5 years 320,025 55,125.13 96,172 15,856
Total 1,499,74 294,551 758,365 112,631
38 Events after reporting period
In the opinion of the Directors, there were no significant post Statement of Financial Position
events which could have a material effect on the state of affairs of the Bank as at 30 June
2022 and on the profit for the period then ended, which have not been adequately provided
for or disclosed.

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ANNUAL REPORT

THE FIRST EVER

ASSET DEPOSIT ACCOUNTS TOTAL CAPITAL

114.61 Billion 100 Billion

LOANS & ADVANCES EMPLOYEES GROSS PROFIT BEFORE TAX

ETB 84.26 Billion 6,547 1,696.06

COOPAY E-BIRR MERCHANTS 767.01

Debit Card EARNING 45.51 593

IN THIS REPORT 3 Reflections from the President

9 Loans and Advances

14 Other Strategic Achievements

15 Technologies and Digital Banking

16 Our Brand and CSR

19 Interest Free Banking Report

20 SAC Members Comment on IFB

22 IFB Deposit Accounts

25 IFB Market Expansion

Statement of the Board Chairperson

It is with these milieus that we have yet achieved

Dear valued shareholders;

This year, on the digital front, we were able to introduce

Fikru Deksisa (PhD) Fekadu Dugasa Amb Shiferaw Jarso

Eshetu Wakene Girma Delessa Tadele Abdi

Wegayehu Tsige Kebede Ejeta Muktar Adem

Terefe Senbaba Debelo Jebesa Teshome Argeta

Deribie Asfaw Aman Semir Ahmed Hassen

Gadissa Mamo Godana Kabato Desalegn Tadesse

Gutema Dibaba Giragn Garo Liko Tolesa

Tadele Tilahun Muluneh Aboye Tafesse Fana

the access points and bolstering relationship

We have made significant progress in incre-

Classification wise, saving accounts generat-

Deposit Performance by Type

Saving 28,506.82 42,576.49 56,678.31

3,718.52 4,751.95 7,298.93

The bank has used the foreign currency earned 69%

Trend of Foreign Currency Mobilized 26%

310.4 Share of Foreign Currency Earnings by Sources

2017/18 2018/19 2019/20 2020/21 2021/22

Loans and Advances

variety of economic sectors. On June 30, 2022,

The majority of the loan portfolio, 32.43 percent

On the other hand, the bank has done a decent

With regards to an emphasis given to asset

Loans and Advances Trend Waliso Road Project

ing expenses of the bank stood at ETB 9.21 billion,

from the past fiscal year. Of the total expenses, 6.0

interest expense accounts for 29.3 percent while 4.0

personnel expense accounts for 25.19 percent, 2.36

other operating expenses.

Expense trend by category

2019/20 2020/21 2021/22

Interest Salaries Operating

During the fiscal year, we have managed

New Accounts Opening for our

The introduction of economically efficient,

The HCM strategy under implementation is

Induction to new employees

Other Strategic Achievements

Strategic partnerships were established, and