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Q: I congratulate you all on the improvement in performance. What were the key reasons for the significant improvement in financial performance from 2018 to 2019?
A: The key reasons for the significant improvement in financial performance from 2018 to 2019 are as follows:
1. Increased investment income, based on an increased portfolio overall but driven by the sound performance of our equity and mutual fund holdings, especially.
2. Reduced requirement for expected credit losses, 2018 having encompassed what was necessary for initial adoption of the IFRS 9 standard, while 2019 was based on the year’s activity only.
3. Continued focused/sound management of overall expenditureQ: Interest on loans continue to drop and income from investments continue to rise – why is this?
A: Within that past two years there was a decline in the number of loans disbursed leading to reduced interest income. Additionally, due to the competitive landscape the interest rates charged on loans have been reducing which will inevitably impact the interest income. However, this did not impact operating cash flows to that extent, leaving significant liquidity which was utilized for investments as an alternative means of revenue generation, in order to assure our mandate of earning a surplus.
Q: Can I have a clearer understanding of dividend?
A: A dividend is paid from surplus based on the performance of the Society. A recommendation is made to the membership at the AGM and the membership approves same. In 2020 a partial dividend was paid from our Reserve Fund as approved by the Commissioner for Co-operatives. Upon the passage of the recommendation from the Board by the membership the remaining portion of dividend (once approved) will be paid from the 2019 surplus.
Q: I know the pandemic hindered the paying out of dividends and the rebate on interest paid on loans. I just wanted to know how soon would the balance of these renumerations be paid out.
A: Due to the pandemic, we were unable to host an AGM. As such the full dividend was not paid. At the upcoming AGM this will be resolved.
Q: Why are there so many millions in write offs every year? Does a financial statutory board
need to look into this major discrepancy.A: Historically VENTURE has not had a practice of writing off bad debts. However, these debts have been fully provided for in prior years and therefore a write-off will not affect our surplus. This is in keeping with best international practices.
Every effort is made to collect outstanding monies from errant Members, using all legally acceptable collection techniques available. These accounts are considered uncollectible as all collection measures were adopted with no success.
In spite of our aggressive techniques, some Members cannot be located and, for some of the older debts, they are statute barred. We continue to go after the delinquent Members and failing to locate and/ or obtain payment for the debts, we are left with no option than to propose write off as recommended by our Auditors and acknowledged by the Commissioner’s Office.
We note that since 2017 we have tightened our risk parameters/collection strategies to mitigate against more losses and to some extent the possibility of
non-payment. These are reviewed by the Statutory Committees.Q: Office expenses 1,639,096 and 2,160,694 Does this indicate greater internal efficiency ? if yes what steps were taken ?
A: Office Expenses comprises items such as Stationery & Supplies, Security Charges, i.e. the cost of cash courier services, Travelling, Equipment Rental, Computer Expenses, Postage, etc. The YoY decline is indeed an indicator of greater internal efficiency, as even greater focus was placed on the prudent management of all expenditure in 2019.
The largest declines occurred in Travelling, Postage and Stationery & Supplies. The decline in Travelling arose as the credit union strategically replaced its outsourced non-cash courier service with one run by staff, while the decline in the other items was obtained through the strategic usage of bulk procurement and closer monitoring of usage, as well as the use of more cost-effective modes of communication.
Q: How is dividend shared and loan rebate ?If you pay interest on you loan even if you are late on payments why are you not able to get rebate on the interest you have already paid?
A: The formula for calculating Dividend is: Average of the Lowest Daily Balance of each month, rounded down to the nearest $20, multiplied by the Rate. The result of the formula above was further multiplied by 75% to arrive at the Dividend that was paid on July 8, 2020.Regarding Rebate, members who were more than 7 days’ delinquent at the time of payout were excluded.
Q: What contributed to the almost 4 times increase in Other Expenses in 2019, and also what does this expense entail?
A: Other Expenses comprises all other operating expenditure not categorised elsewhere, e.g. the cost of consumer credit reports, fees for utilisation of the Grace Kennedy Corp bill payment service, provision of in-branch refreshments for Members, various corporate/business subscriptions, the annual bursary sponsored.
The YoY increase in Other Expenses is (mainly) attributable to the payment of outstanding Green Fund Levy due for the period 2013-2019, which totalled $1.747M.
Q: The budget suggests expected credit losses to be $7,325,953 but there is a resolution for debt write off of 19,835,829.72. Please explain.
A: Budgeted expected credit losses on loans for 2020 represents the additional credit losses expected on the the portfolio in 2020. However, expected credit losses on the amount proposed for write-off were already recognised as at December 31, 2019. This is incorporated in the expected credit loss balance of $110M, as per Note 8.1 on page 71.
Q: With respect to the Member of the future fund. Why a fund versus operational strategic initiative with staff dedicated to recruiting and on boarding new members ?
A: The allocation to Member of the Future Fund will be managed by the staff.
Q: Would the 25% remaining dividend to be credited to members accounts be done automatically as previous permission was given how to remit the 75%?
A: The remaining dividend will be paid by October 31, 2020
Q: In response to the resolution to write off $19.8M in the year 2020, I make the following comments: In 2018 $$27.4 was provisioned. In 2019 it was $7.5M. In 2020, the budget expects another $7.3M. Understandably much of these were nonperforming “legacy” loans. Has the banking technical skills hired to redress the non performing portfolio delivered? Succession planning program in place?
A: VENTURE continues to recruit the necessary persons with the required skills and capabilities to fulfill the tasks assigned. Staff assigned to addressing non-performing loans also address the quality of new loans where the delinquency factor is better than industry average. The quality of the “legacy” loans results in long cycle times to resolve. Our policy framework acknowledges the need for adequate succession planning and these recommendations are being followed.
Q: Please indicate why such a low percentage was used to calculate dividend?
A: The quantum of the Dividend payout hinges on a number of criteria. As a responsible financial institution, characterised by good governance, it is incumbent upon the credit union to observe those guidelines that serve to ensure that the strength of the institution is never compromised. VENTURE takes its fiduciary responsibilty to the membership quite seriously.
Key among these criteria is the maintenance of a minimum level of institutional capital, i.e. the ratio of reserves and undivided earnings to total assets. The Board seeks, as far as possible, to restrict payouts such that this is maintained. In this way, the membership can be assured that the credit union continues with the ability to earn returns that can possibly enable even greater payouts going forward.
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