RESILIENCE. PARTNERSHIPS. REBUILDING. 2020 dfcu GROUP ANNUAL REPORT AND FINANCIAL STATEMENTS PB dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 1 2 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 3 Table of contents Our Vision and Mission 5 List of Acronyms 6 About dfcu Who we are 8 Our Business 9 Our Journey 10 Our Footprint 11 Operating Environment 12-13 Strategic Snap Shot 14-16 Our Leadership dfcu Limited Board of Directors and Management 19 dfcu Bank Board of Directors 20 dfcu Bank - Women Business Advisory Council 21 dfcu Bank - Senior Management Team 22 Chairman’s Statement 23-25 Message from the Chairman, dfcu Bank Board of Directors 26 Message from the Chief Executive Officer 27-29 2 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 3 Financial Review Financial Definitions 31 2020 Financial Highlights 32 2020 at a Glance 33 Chief Financial Officer’s Report 34-38 5 year performance highlights 39 Key performance indicators 40 Chief Commercial Officer’s Report on Business 41 Supporting Lasting Interventions 42-49 Supporting our Customers 50 Supporting our Staff 51 Digital Transformation|Key Achievements And Next Steps 52 Risk Management and Control 53-60 Corporate Governance, Audit committee and Nominations report 61-80 Sustainability Reporting 81-101 Financial Statements 102-226 4 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 5 Our Mission dfcu seeks to grow shareholder value while playing a key role in transforming the economy and enhancing the well-being of the society. Through our dynamic and responsive teams, we will provide innovative financial solutions and maintain the highest level of customer service and professional integrity. Our Vision To be the preferred financial institution, providing a broad range of quality products to our chosen customer segments. 4 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 5 ABC - Anti-bribery and Corruption ADC - Agribusiness Development Centre AGM - Annual General Meeting ALCO - Asset and Liability Committee AML - Anti-Money Laundering ATM - Automated Teller Machine BCP - Business Continuity Planning BIS - Bank for International Settlement BOU - Bank of Uganda CAR - Capital Adequacy Ratios CB - Corporate Banking CDC - Common Wealth Development Corporation CDO - Cotton Development Organisation CSI - Corporate Social Investment CSR - Corporate Social Responsibility EAD - Exposure at Default ECL - Expected Credit Loss FIA - Financial Institutions Act (2016) FVOCI - Fair Value Through Other Comprehensive Income FVTPL - Fair Value Through Profit and Loss ICPAU - Institute of Certified Public Accountants of Uganda IEASBA - International Ethics Standards Board for Accountants IFC - International Finance Corporation (IFC) IFRS - International Financial Reporting Standards ISA - International Standards on Auditing IT - Information Technology GDP - Gross Domestic Product GOU - Government of Uganda GRI - Global Reporting Initiative KPIs - Key Performance Indicators KYC - Know Your Customer LGD - Loss Given Default NPL - Non Performing Loans NSSF - National Social Security Fund OECD - Organisation for Economic Co-operation and Development OCI - Other Comprehensive Income PBB - Personal and Business Banking PD - Probability of Default RoE - Return on Equity RoU - Right of Use SACCOs - Savings and Credit Cooperative Organisations Shs M - Shillings in Millions Shs Bn - Shillings in Billions Shs Trn - Shillings in Trillions SME - Small and Medium Enterprise UGX - Uganda Shillings ULS - Uganda Law Society USE - Uganda Securities Exchange USSD - Unstructured Supplementary Service Data WiB - Women in Business 6 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 7 About dfcu 6 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 7 Who We Are dfcu Limited was established in 1964 as a development finance institution. In 2000, dfcu diversified into commercial banking and established dfcu Bank to extend universal banking services alongside the pre-existing equity finance, long term development finance, leasing and working capital finance. Over the years dfcu has been associated with many success stories in Uganda’s economy in various sectors including transport, education, floricultural, agricultural, manufacturing and agro- processing. dfcu Limited is listed on the Uganda Securities Exchange (USE) enabling over 3,000 Ugandans to own part of the company. The major shareholders of dfcu Limited with their shareholdings are as below: 58.70% 9.97% 7.46% 23.87% What we do dfcu Limited 8 dfcudfcu ANNUAL ANNUAL REPORT REPORT AND AND FINANCIAL FINANCIAL STATEMENTS STATEMENTS 2020 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 9 Our Business Our purpose is ‘making more possible’ Our values We are guided by our values: Our strategic aspirations Customer reach Our purpose, vision and values are aligned to • 58 branches, 1,543 active agents strategic aspirations that drive our competitive • 450 ATM points (including Interswitch) advantage in a changing business environment. • 66 Cash Deposit ATMs • Visa Contactless Credit and Debit Cards Our execution priorities are: • Omni Online Banking Platform – Internet, • Become market leader • Transform from a niche to a universal Mobile and App player • Become Bank 4.0 • Savings App • Superior financial performance Financial strength Our business areas • Deposit funding of 70% • Commercial Banking • Tier 1 capital ratio of 19% - Personal & Business - Corporate & Institutional - Global Financial Markets Talent • Bancassurance • Real Estate • 1,034 employees • Gender diversity – 52% female staff 8 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 9 Our Journey 1965 - dfcu Limited, Uganda Development 2008 – Rationalisation of the Group structure Corporation and CDC jointly invest in Housing and consolidation of all financial service Finance Company, Nytil, Uganda Consolidated offerings into dfcu Bank. Properties, Uganda Cement Industries, Uganda Grain Milling, Uganda Distillers and 2013 – Realigning dfcu Limited shareholding Uganda Hotels. bringing on board Rabobank as a strategic banking partner resulting in intensified focus 1973 – Economic war resulting in significant on supporting Agribusiness. scaling down of operations. 2014 – Consolidation of operations in one 1982 - Full scale operations resume with location at dfcu Towers, our wholly owned company capitalisation. customised, state-of-the-art Head Office. 1995 – Pioneering of the leasing business in 2017 – Uganda as an alternative financing option for January - dfcu Bank acquires some assets SME growth and expansion. and assumes certain liabilities of Crane Bank becoming one of the three leading banks on 1999 – Rebranding of Development Finance the market. Company of Uganda into dfcu Limited. May 2017 - Rabobank, Norfinance A.S. and 2000 – Start of commercial banking through FMO consolidate their 58.70% stake in dfcu acquisition and recapitalisation of the defunct Limited into one major shareholder ARISE Gold Trust Bank later rebranded to dfcu Bank. B.V. 2004 - dfcu Limited listed on Uganda September 2017 - dfcu Limited floats a Securities Exchange. Initial Public Offering successful Rights Issue to raise necessary sees IFC, DEG and the Ugandan Government capital for dfcu Bank to implement its divesting from the Company and NORFUND aggressive growth strategy. coming on board. 2019 - Danish Investment Fund for 2007 – Establishment of the Women in Development (IFU) buys Common Wealth Business (WIB) programme with support of Development Corporation (CDC) stake in dfcu the International Finance Corporation (IFC). limited and now owns 9.97% of the company. 10 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 11 Bigger and Stronger with 58 branches and over 100 ATMs Amuru Kyengera Abayita Ababiri Rushere Ishaka OUR BRANCHES IN KAMPALA • 6th Street Branch • Kireka Branch • Nsambya Branch • Acacia Branch • Kyadondo Road Branch • Ntinda Branch(Capital • Banda Branch • Lugogo Branch Shoppers) • Bugolobi Branch • Luwum Street • Ntinda II Branch(Ntinda • Bwaise Branch • Makerere Branch Trading Centre) • Entebbe Road Branch • Market Street Branch • Owino • Impala Branch • Naalya Branch • Sun City Branch • Jinja Road Branch • Nabugabo Branch (Gagawala • William Street Branch • Kampala Road Shauliyako) • Wilson Lane • Kawempe Branch • Nateete Branch • Kyengera Branch • Kikuubo Branch • Ndeeba Branch 10 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 dfcu ANNUAL REPORT AND FINANCIAL STATEMENTS 2020 11 Operating Environment • Emphasis on employee health and safety to guarantee COVID-19 Impacts; continuity of the business Uncertainty regarding • Support to customers through loan restructures, the duration and impact rescheduling repayment holidays, to ensure their businesses of Covid-19, and the survive associated disruption to • Operational resilience -ensuring stability of critical bank both the domestic and operations to minimize service disruption, enhancement of global economy. alternative banking channels, facilitating work from home mechanisms for staff • Financial strength -close monitoring of lending portfolios, maintaining liquidity buffers, continuous stress testing as the basis