Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697784667561.pdf (Fiji)
Smart with Money.

Smart with Life.

FIJI DEVELOPMENT BANK 2019 Annual Report FDB has been in existence for more than 50 years and remains Fiji’s only national development financial institution.

The award-winning Bank is also the first development bank in the South Pacific to be accredited to the Green Climate Fund, the world’s largest climate fund, as a Direct (National) Access Entity.
FDB is an autonomous statutory body, the operations of which are controlled by a Board of Directors appointed by the Minister for Economy.

Under the Act, the Bank provides finance for projects and businesses that contribute to the development of Fiji’s economy and improves the quality of life for the people of Fiji.
FDB continues to pursue its mandate by focusing on inclusive growth for all Fijians, sustainable development and forging public private partnerships to promote the growth of small and medium enterprises, development of the rural-agro sectors and the growth of the industrial and commercial sectors.
Our strategies are crafted to strengthen FDB’s role as a direct contributor to employment and job creation, promotion of women and youth entrepreneurship, and a community that is financially informed and empowered to sustain growth and development for future generations.

The vision for FDB in 2020 is that of a development bank that is strongly positioned as one that drives for changes that promote inclusive, green and sustainable development through the provision of innovative financing.
Contents Our Vision, Mission, Values and Goals ............ 01 Smart with Money.

Smart with Life.
................ 56 Chairperson’s Letter ............................................ 02 Executive Report .................................................. 04 About the Fiji Development Bank .................... 12 Board of Directors ................................................ 16 Realising Equity through Financial Literacy .................................................. 58 From Garment Factory to Aqua-Farmer ........ 60 FDB’s Commitment in advancing the SDGs and the National Development Plan (NDP) ............ 62 Corporate Governance ........................................ 18 Green Banking ....................................................... 70 Executive Management ....................................... 26 FDB’s Climate Action Initiatives ........................ 72 Fiji Development Bank’s Organigram ............. 28 Corporate Social Responsibility ...................... 74 Review of Finance and Administration ........... 30 FDB’s Market Share as at 30th June 2019 ......... 36 Review of Relationship & Sales ........................ 38 Review of Business Risk Services .................... 44 FDB’s New Financial Solution: Agriculture Family Loan Facility ....................... 50 Strengthening Access to Finance for Agro-SMEs ........................................ 54 FDB’s 2018 National Small and Medium Enterprise (SME) Awards ..................................... 76 Review of Talent and Organisational Development ......................................................... 80 Creating a Culture of Corporate Wellness .... 86 Financial Report ................................................... 88 Innovation: FDB continuously strives to exceed customers’ expectations with products and services that would meet the changing needs of all customers and also taking advantage of emerging opportunities before competitors can.
Collaboration: FDB always works as one team and communicates one message for the development of Fiji and its people.

of Integrity: FDB exhibits the highest honesty, levels transparency, and responsibility at all times.

objectivity, fairness assumes responsibility Accountability: FDB acknowledges and for its actions with the overarching obligation explain and be answerable for resulting consequences.

report, to OUR OBJECTIVES Our objectives direction for FDB.
set the broad OUR VISION To be a dynamic financial service provider in the development of Fiji.

To improve the socio-economic status of people by assisting them with their needs making the right development investments and financing; and To stay financially and economically sustainable.

OUR MISSION OUR GOALS We provide finance, financial and advisory services to assist in the economic development of Fiji, and in particular in the development of Agriculture, Commerce and Industry.
OUR VALUES The values our staff embrace in the execution of their duties reflect the pivotal role the Bank plays in the development of Fiji.

The acronym ‘DICIA’ brings these values readily to mind.

Development: FDB continuously the economic development of our country that is why we exist.

We believe in the development of Fiji and bringing success to its entire people.

focuses on The goals are specific aims set to achieve the wider objectives of the current Strategic Plan.
Each is addressed under one of six clearly defined thematic areas of focus: 1.

Financial – Deployment of Prudent Financial Management Practices 2.

Customers – Industry Level Customer Service Experience 3.

Internal Business Processes – Focused Internal Business Processes 4.

Learning and Growth – Developing a Culture of Innovation and Growth 5.

Employee Engagement – Employee Engagement throughout the Network 6.
Community and Environment – Integrated Approach to Community and Environment 1 Fiji Development Bank 2019 Annual Report Chairperson’s Letter grew lending The Bank’s portfolio to $539.75 million at the end of the Financial Year, an increase of $52.70 million or 10.82% from the previous year.

Mr. Robert G. Lyon, Board Chairman.


2 Fiji Development Bank 2019 Annual Report RGL/MC/SH/ST/pg 27th August 2019 The Honourable Aiyaz Sayed-Khaiyum, Attorney-General and Minister for Economy, Public Enterprises, Civil Service & Communications, Level 7 Suvavou House, Victoria Parade, SUVA.
Dear Minister, RE: 2019 ANNUAL REPORT On behalf of the Board, I have much pleasure in submitting The Board commends the Executive Management the enclosed Fiji Development Bank 2019 Annual Report and staff for their continued efforts and commitments and accounts for the Financial Year ending 30th June, throughout the financial year and in their endeavour to 2019. strengthen FDB’s role as a direct contributor to economic growth, creation of employment, and a community The Bank’s lending portfolio grew to $539.75 million that is financially informed, thus empowered to sustain at the end of the Financial Year, an increase of $52.70 development for future generations.
million or 10.82% from the previous year.

The major driver of this increase were disbursements of $112.94 The Government’s continued collaboration with FDB and million.

The loan portfolio represents a customer base the Bank’s engagement with its public and private sector of 5,149 accounts.

stakeholders have collectively contributed favourably with regard to the quality of projects and businesses The Bank achieved a net profit of $4.07 million.

Despite financed during the year.


increased revenue, the Bank also experienced rising funding, staff and operational costs and increased As this is my 10th and final report, I would like to place Allowance for Expected Credit Losses.

More widely, on record my thanks to you and the Fiji Government for the Bank continued to experience tightened funding the support that you have given to me and the Bank.
It is availability and higher funding costs that it expects a much larger, stronger and more complex business than to continue into the near term.

These factors will be it was in 2010 and hopefully we have contributed to the managed through smarter strategies to maintain the significant growth in Fiji’s economy over the last decade.

Bank’s financial sustainability.


Yours sincerely, This report documents the Bank’s journey with a focus on financial literacy initiatives, which is a multi-dimensional tool delivering whole-of-life and loan outcomes.

It reflects not only financial knowledge but also skills, attitudes, Robert G. Lyon and actual behaviour of our customers, which, if applied CHAIRMAN effectively, leads to a strong foundation for the financial wellbeing of individuals, projects and businesses.
3 Fiji Development Bank 2019 Annual Report Executive Report Mr. Mark Clough Chief Executive Officer 4 Transformation at the individual and Bank level was a key focus for the 2019 Financial Year for the Fiji Development Bank (FDB).

FDB believes that transformation will translate to delivering financial solutions that are relevant, impactful, efficient and responsive for its customers, staff and stakeholders.
In this regard FDB commenced the 2019 Financial Year with the launch of the ‘Yaubula’ Term Deposit Facility, thus providing an attractive savings and investment option for customers as well as diversification of the Bank’s funding base.

Within a few months, the Bank delivered another financial solution to its largest customer base – the agriculture sector – with the launch of FDB’s Agriculture Family Loan (AFL) Facility.
This product breaks the barrier to accessing finance, and creates opportunities for women participation in the agricultural sector, through loan finance which does not require landed security.

The Bank steered forward with another financial solution, a ‘Matching Grant’ support scheme for Small and Medium Enterprises (SMEs), to promote market-oriented agricultural production by farmers in remote and rural areas.
This product is a result of a strategic partnership between the Ministry of Agriculture (MoA) and the International Fund for Agricultural Development (IFAD).

Common in these new solutions has been FDB’s strategic focus on financial literacy as a foundation of good financial management and business performance.

To achieve this, the Bank has rolled out a number of financial literacy programmes aligned to specific products.
A unique element of these programmes was the incorporation of cropping plan and cash flow management tools that are specific to the agriculture sector customers.

Financial literacy training such as this is an extension of the FDB $mart Series that includes Money $mart, a programme targeted at inculcating a savings culture in the children of Fiji.

It is the Bank’s firm belief that financial literacy is a whole-of-life and whole-of-loan cycle process which can drive prosperity and growth.
Given, this, the theme for the 2019 Annual Report is Financial Literacy.

Fiji Development Bank 2019 Annual Report Market Conditions The Bank was tested in the second half of the 2019 Financial Year with a higher cost of funds and reduced availability of capital.

This resulted in increased scrutiny on the application of its capital, and cost saving measures.
In line with FDB’s key Strategic Plan theme of diversifying funding sources to counter fluctuations in the cost and availability of its capital, the Bank launched the ‘Yaubula’ Term Deposit Facility.

It has also been examining offshore funding options, and is more focused on increased facilities available through the Reserve Bank of Fiji (RBF).

During the year the Government announced that Bank-issued bonds would be tax-free.
The Bank will continue to respond to economic conditions, the needs of customers and the direction of Government to develop financial solutions relevant for Fijian individuals, businesses and projects.

Continued Financial Robustness The Bank continued to fund important projects and businesses to contribute to economic growth; often in high-risk sectors and in sectors not supported by other banks.

The Asian Development Bank refers to this as ‘additionality’, and is a crucial role for development banks.
To remain financially sustainable, the Bank continues to balance higher risk lending as outlined above with lower risk and corporate loans, but in the face of increasing competition.

This approach needs to be accompanied by rigorous cost control measures and a dedicated focus on maintaining loan quality through monitoring and supervision.

The Bank achieved a net profit of $4.07 million in the face of challenging market conditions.
Despite increased revenue, the Bank experienced tightened funding availability and rising funding, staff and operational costs and increased Allowances for Expected Credit Losses.

The International Financial Reporting Standards (IFRS) 9 was implemented for the financial year and unlike the previously used IAS 39, it includes Credit Loss Allowances once loans are booked as opposed to once a credit loss event has occurred or is likely to occur.
As a result, the Bank’s Allowance for Expected Credit Losses relating to lending assets increased by $3.00 million in comparison to the previous financial year.

On a positive note, a decrease of $0.45 million in allowance for interest and fees suspended was noted during the 2019 Financial Year, indicating successful recovery of arrears from defaulting loan accounts.
The Bank’s Net Operating Income for the 2019 Financial Year was $31.79 million (reflecting a growth of 4.97%), while Total Operating Expenses amounted to $16.06 million.

The Bank’s financial position strengthened with an increase in total assets from $467.65 million to $545.30 million as well as an increase in the Bank’s gross loan portfolio.
Also included in total assets and capital figures is a re-valuation increment on owned properties, as well as higher cash levels to reflect pending End of Year (EOY) disbursements.

The Bank’s total capital and reserves increased to $172.05 million, representing a capital adequacy ratio of over 40% - far in excess of the minimum required.

This level of capital will provide greater opportunity for the Bank to pursue further quality lending.
The Bank’s financial position strengthened with an increase in total assets from $467.65 million to $545.30 million as well as an increase in the Bank’s gross loan portfolio.

5 Fiji Development Bank 2019 Annual Report Overall, a slowdown in economic activity is likely to put compared to $487.05 million and 5,150 accounts for the pressure on revenue.

The Bank must maintain marketing 2018 Financial Year.

initiatives, including product development momentum to generate new and relevant income streams.
The Bank In number, the Focused Sector accounts comprised will also seek to initiate projects in partnership with 79.55% of the FDB portfolio, and 43.35% by value, or existing or prospective customers where appropriate 4,096 accounts worth $234.00 million.

to fill market gaps and generate new income streams.
A renewed focus will be on maintaining loan quality In comparison to the 2018 Financial Year, an increase of from inception, but accelerating the non-performing $13.02 million was noted in value despite a decrease in loan recovery process and realising value from bad the number (32) of accounts.

debt portfolios.

Process improvements will continue to be pursued to mitigate the likelihood of operating cost The bulk of the Focused Sector portfolio comprised increases.
Portfolio Growth The Bank’s lending portfolio grew to $539.75 million at the end of the 2019 Financial Year, an increase of $52.70 million or 10.82% from the previous year.

The major driver of this increase were disbursements of $112.94 million, a 4.37% increase from the previous year.

A profile of the Bank’s portfolio, by value and number of accounts, is shown in the tables that follow.
Portfolio as at 30th 2019 2018 Number of % Number of % June 2019 Accounts Accounts Focused Sector Non- 4,096 79.55 4,128 80.16 Focused 1,053 20.45 1,022 19.84 Sector Total Portfolio as at 30th June 2019 Focused Sector Non- 5,149 5,150 2019 2018 Value of Accounts ($mm) % Value of % Accounts ($mm) 234.00 43.35 220.98 45.37 Focused 305.75 56.65 266.07 54.63 Sector Total 539.75 487.05 agriculture loans at $110.62 million, followed by the Transport, Communication & Storage at $50.64 million.
The bulk of the Non-Focused Sector portfolio comprised Wholesale, Retail, Hotels & Restaurant loans at $148.88 million, followed by the Building and Construction at $69.57 million.

The Non-Focused Sector comprised 20.45% by number of loans, and 56.65% by value of the total portfolio, which equated to 1,053 accounts worth $305.75 million respectively.

An increase of 3.03% and $39.68 million, respectively, was noted in comparison to the previous financial year.
Approvals as at 30th June 2019 Focused Sector Non- 2019 2018 Number of % Number of % Approvals Approvals 1,313 82.32 1,311 80.88 Focused 282 17.68 310 19.12 Sector Total Approvals as at 30th June 2019 Focused Sector Non- 1,595 1,621 2019 2018 Value of Accounts ($mm) % Value of % Accounts ($mm) 87.48 46.63 84.51 69.35 The Bank’s total portfolio stood at $539.75 million for 5,149 accounts at the end of the 2019 Financial Year, Focused 100.11 53.37 37.35 30.65 Sector Total 187.59 121.86 6 Fiji Development Bank 2019 Annual Report In 2019, the Bank approved a total of 1,595 loans, valued projects and programmes, FDB commenced institutional at $187.59 million.
building with knowledge development for staff.

The year started with a two day GCF Awareness Session Of this, 1,313 loans valued at $87.48 million, were for staff to strengthen their knowledge on the Fund, its approved in the Focused Sector.

This reflects 82.32% of requirements, the science behind climate change and loan approvals in number and 46.63% in value.

climate financing.

This followed workshops on newly There were 282 loans approved in the Non-Focused GCF’s requirements.
By financial year end, the Bank had Sector, valued at $100.11 million.

This reflects 17.68% of submitted its first Entity Work Programme to the GCF.

developed policies that were drafted in response to loan approvals in number and 53.37% in value.
The Bank’s focus in the coming year will be on improving turnaround time (TAT) and the quality of its portfolio, through continued improvements in credit assessment and account management, as well as through the development of products which are relevant and have impact in the context of more challenging market conditions.
Green Climate Fund Accreditation Multifaceted Solutions for Climate Action The Bank has submitted its first Concept Note to access climate financing from the GCF for Fiji’s first Agro-Photovoltaic project to be developed in the old capital, Ovalau.

In responding to the Bank’s focus area (Agriculture) and the Government’s Fiji 2020 Agriculture Policy, the Bank hopes to gain the GCF’s support for the project.
Ovalau is part of the Government’s planned area for transformation to renewable energy as detailed in the Fiji LEDS Strategy Development, 2018-2050.

The The Bank proudly executed its accreditation with the project also fulfills both the Government’s and the Bank’s Green Climate Fund (GCF) on 5th November 2018, and commitment towards the Sustainable Development became effective on 28th March 2019.
This milestone Goals (SDGs) of eradicating poverty, food security, zero ignites the Bank towards increasing foreign investment in hunger, affordable and clean energy and clean water.

local climate change mitigation and adaptation projects.

It also supplements the Bank’s effort in promoting Combining renewable energy technology with new sustainable development in Fiji.
technology in agriculture, including research and The GCF is a global fund that supports developing participate in, addresses the country’s plan to maximize countries’ efforts to adapt their economies to the land utilization in a sustainable manner.

This innovative impacts of climate change through low-emission and approach has the potential to be replicated in other parts capacity building that the Ministry of Agriculture will climate-resilient initiatives.
It is pleasing to note that, in of Fiji and the Region.

the absence of readiness funding, development partners such as the UN Environment Programme, the USAID Envelops Co. LTD, a Korea-based company, with the Ready Project and the Asian Development Bank (ADB) assistance of Korea International Cooperation Agency came on board to support the Bank.

These development (KOICA), has developed this project.
The project involves partners assisted in fulfilling three of the four conditions an Independent Power Producer (IPP) renewable energy that were to be met prior to the submission of the first business and a farming operation underneath elevated funding proposal to the GCF.

solar panels, which is supplemented by an energy storage system.
Smart Farm technology promoting high value To generate high quality proposals for climate finance agriculture and climate-resilient crops will include solar investment in low emission and climate-resilient pumping of water for irrigation.

7 Fiji Development Bank 2019 Annual Report The Facility will also allow businesses to contribute to the growth of the Fijian economy by choosing to collaborate with a development finance institution.
The Facility also reinforces FDB’s brand story of the need for financial literacy and savings to its customers.

The name “Yaubula” means natural resources in the i-Taukei language and that too is a call to nurture the environment and natural resources similar to the idea of nurturing any term deposit investment.
Multi-dimensional Financial Solution those Lacking Formal Land Tenure for In breaking the barrier to accessible finance, FDB introduced a financial solution in December 2018 for the further development of the agriculture sector in Fiji.
Farmers that have more than ten years of farming experience but who have previously lacked access to finance due to the absence of savings, assets or formal land lease to put forth as collateral for loans from banks can now take advantage of the FDB Agriculture Family Loan (AFL) Facility.
This Facility focuses on the growth of farming families by providing finance for land development on the farm, construction of farmhouses and infrastructure such as farm inroads, water supply and irrigation, or renewable energy to support the farm.

This milestone achievement is a multi-dimensional solution to achieving sustainable agriculture in Fiji, which at the same time promotes rural development and contributes towards achieving the Government’s financial inclusion agenda.
For those whose loans are approved, the Bank has a financial literacy training programme available.

The Facility has its own financial literacy guide booklet in the English and vernacular languages.

The launch of the Facility was also one of its kind, with FDB inviting various stakeholders to establish information booths on various related products and services.
It was a “literacy festival” in some sense that allowed farmers to access information and services such as those of plant doctors, renewable energy and farm implant service providers.

Fiji’s first Agro-Photovoltaic project will be developed in the old capital, Ovalau.

Source: Fraunhofer ISE.

During the year FDB continued to direct efforts in finalizing another GCF Concept Note.
In March of 2019, it signed a Memorandum of Understanding (MOU) with the Global Green Growth Institute (GGGI) on Green Growth and Climate Finance Co-operation.

GGGI has been providing technical support to FDB through the secondment of a staff member to develop a GCF Concept Note on electric bus and to access climate finance through the GCF.
The partnership primarily aims at finalizing a pilot programme Concept Note on Promoting the Decarbonization of the Public Bus Transport in Fiji for submission to the GCF.

With this FDB will take a lead role in driving the use of new green transport technologies in Fiji.

New Financial Solution for Fijian Investors In July 2018, FDB announced the launch of the Government-guaranteed Yaubula Term Deposit Facility.
The Bank is grateful to the Asian Development Bank (ADB) and the Reserve Bank of Fiji (RBF) for their input into the development of the Facility.

The objectives of the Facility are threefold - to provide a holding option for large customers with periodicity in their cash flows, to provide an attractive, secure, longer- term investment option generating recurrent income, as well as means of diversifying the Bank’s funding base.

8 Fiji Development Bank 2019 Annual Report Customers & staff at the AFL launch.
Access to Financing for Agro-SMEs In April 2019, FDB and one of its core partners, the MoA, signed a MoU on a Matching Grant support scheme for SMEs to promote market-oriented agricultural production by farmers in remote rural areas.

This was possible through a strategic partnership between MoA and IFAD which funded the Fiji Agricultural Partnerships Project (FAPP).
Agriculture-based SMEs that previously lacked access to finance in expanding their business to work with small- scale farmers, particularly to the more rural areas, can now invest through a matching grant and loan package that will meet up to 75% of the total investment cost.

With IFAD providing an incentive grant that will meet 25% of the total investment cost, FDB is the only bank that will provide a financial solution constituting a loan sum meeting half of the total cost of the planned investment.
The grant amount equals the borrower’s equity contribution for the expansion project.

By year end, FDB and its partners were nearing completion of necessary groundwork to initiate disbursements.

Culture Change and Organisational Development Other than its Vision and Mission, the Bank’s guiding principles include values of Development, Innovation, Collaboration, Integrity and Accountability (DICIA).
These values continued to partner with cultural change, process improvement and organisational development initiatives with the objectives of reducing costs, increasing efficiencies and productivity, reducing risk and improving outcomes for customers.
The Bank completed a major structural review during the year, from which will be implemented: • the merger of the Legal and Credit Administration Unit (CAU) functions to generate a seamless, end-to- end loan origination legal process; • the separation of Prime Lending (servicing corporate customers) from the Suva branch lending operations; • establishment of a separate Marketing and Business Development function to provide more focus on relevant and impact financial solutions and the Bank’s place in the market; and • separation of the Enterprise Risk Management (ERM) function for governance purposes and to provide additional risk and reporting focus.
In addition, further work will be undertaken with the Asset Management Unit (AMU) to increase its efficiency and the velocity and value of non-performing loan and bad debt recoveries.

A major Projects function has been established to review and monitor large project exposures as well as initiate projects where there are fulfilment gaps in the market and additional revenue can be generated for the Bank.

The Bank continually pursues process improvements.


Front of mind this year has been the implementation of an upgraded Core Banking System.

FDB will continue its march towards digitization and the reduced use and movement of paper.

All files will be substantially digitized by the end of the next financial year.
9 Fiji Development Bank 2019 Annual Report An asset quality review will be undertaken of the With shock and sadness we also experienced the passing Bank’s loan portfolio to determine its robustness and of three dear staff members: opportunities for improvement also.

In keeping with the • Viliame Bauleka – Manager Nausori Branch; and Bank’s move to ‘public company’ levels of efficiency and • Mere Naise – Administration Officer Lautoka accountability, it will attempt to release its Annual Report Branch.
within 4 months of the financial year end.

The Bank wishes their family, friends and colleagues A comprehensive, Bank-wide scheduled training plan peace in their grief.

continues to enable staff development but, ultimately, to deliver higher-quality outcomes for customers.

Ad hoc Environmental Action training addresses more pressing needs as well as new policy and product releases.
Training and staff engagement highlights include: • enlisting the Association of Development Financing Institutions in the Asia Pacific (ADFIAP) to provide a case study-based training session for 25 Bank officers over four days in April on Risk-Based Credit Appraisal; • GCF Awareness sessions in August for Bank GCF Champions engaging partners USAID and the University of the South Pacific; • continuation of the Emerging Leaders Programme (ELP) as well as commencement of the process of designing the programme for the next; • wellness themes, with the focus on awareness, check-ups, diet and activity.
In addition, the Bank finalised the implementation of a medical scheme at competitive rates for staff and their families to provide genuine and comprehensive protection; • re-launch of the FDB Sports & Social Club with family-based events, activities and benefits planned.
There is an important inter-relation between wellness, community and social club activities – including team building initiatives to increase productivity; and • the Women’s Forum provided energy to specific Bank and community initiatives over the year.

Earlier in the year, FDB launched a call for climate action to be strategic, and not merely voluntary.

The Bank was the first financial institution to commit to supporting reforestation.
In February of 2019, in partnership with the Ministry of Forestry and i-Taukei Affairs Board, FDB entered into a MoU with the Ministry to assist with the Four Million Trees in Four Years (‘4MT4Y’) reforestation initiative.

Such projects contribute not only towards climate change mitigation initiatives but also contributes towards coastal communities’ adaptation capabilities.
The programme operates with the goal of rehabilitating degraded forest sites, and is closely aligned to FDB’s strategic priorities of generating positive environmental outcomes and engaging its staff with communities to build lasting relationships and enhance their socio- economic livelihoods.

FDB had embarked on its ambitious journey of contributing towards environment sustainability and employee engagement with the launch of its 2018-2020 Strategic Plan in 2017.
2019 saw a number of other initiatives that involved staff organizing foreshore clean-ups, mangrove replanting and Farewell of Long Serving Staff recycling campaigns.

During the year, we celebrated the departure of some long-serving staff, including: Inclusive and Green Development for SMEs • Aisake Radu – Regional Manager Central/Eastern; and • Sikeli Ralulu – Manager Seaqaqa Branch.

The Bank is grateful to them for their service and wish them well in their future endeavors.
The Bank hosted yet another successful National SME Awards in February of 2019.

The national awards programme is being driven with the vision of promoting the inclusive and sustainable growth of the SME sector, through recognition of successful and innovative entrepreneurs.

It is a platform to advocate for good 10 Fiji Development Bank 2019 Annual Report business practices as is evident from the awards eligibility It was also an opportunity to initiate ideas for technical and judging criteria.
It is also the only awards platform assistance, assistance in developing new financial that recognizes SMEs for being responsive to the impacts products and structures, particularly for the unbanked of climate change.

and for economically significant projects.

FDB is grateful to His Excellency Major-General (Ret’d) FDB, Stakeholders and the Community Jioji Konusi Konrote, the President of the Republic of Fiji, for officiating at the event for the second consecutive year.
The awards would not be possible without the support of the sponsors and partners, the Development Ambassadors of the Fijian business community.

FDB Executive Management members and colleagues at the ADB Annual Meeting.

Source: Arif Khan, Cacao Fiji.

ADB Annual Meeting Social, environmental and community outcomes are important to FDB.

A point of differentiation is that FDB has an intimate relationship with Government and other stakeholders, as well as the community.
Other than its strategic environmental activities, the Bank also: • attended the National Co-operatives Day in Suva in July 2018; • launched the University of the South Pacific Entrepreneurial Fair in February 2019; • presented to Pacific Island Countries on climate change and disaster risk finance in June 2019; • organised ‘Talanoa’ sessions in all regions; • supported a number of charities with donations.
Further to the Government agency interaction, the Bank continued to engage throughout the year with the Ministry of Industry, Trade & Tourism (MITT) in its programme of grant disbursements to aspiring micro and small business entrepreneurs.

To date the Bank has assisted in the disbursement of near 40,000 grants.

Most importantly, the Bank continually refines its financial literacy programmes, and not just for customers.
In the near term, it will incorporate the need for insurance and discretionary savings into its programmes.

FDB’s senior management attended the ADB’s Annual The Bank does not see a start or end for financial Meeting and Conference that was hosted by Fiji in early literacy.

It sees it as a foundation for prudent financial May 2019.

It was an important event to glean what global management – in the household or in business.
A whole- issues and initiatives are relevant to Fiji and the Bank, of-life and whole-of-loan approach must be taken, and if how Fiji and the Pacific fit into the strategic plans for ADB the Bank is convinced of this in a customer then it reflects and other international agencies, and an opportunity to favourably in its assessment of finance for that customer.

interact and determine areas of co-operation with those agencies.
11 Fiji Development Bank 2019 Annual Report About the Fiji Development Bank The Fiji Development Bank (FDB) provides financing that Fiji, and in particular in the sustainable development contributes to the development of the Fijian economy of the agriculture, manufacturing, wholesale and leading to the enhancement of the quality of life for all retail, professional and business services, building and Fijians.
construction, sustainable mining and quarrying, real estate (development), tourism, transportation, communication The Bank was established under the Fiji Development technology, storage, and the renewable energy sectors.

Bank Act (Cap 214) on 1st July 1967, sixteen years after Its core business is initiating and delivering on financial development banking started in Fiji with the Agricultural solutions.

and Industrial Loans Board.


It is an autonomous statutory body, the operations of mandate is balanced with generating financial returns which are controlled by a Board of Directors appointed that are necessary in ensuring the Bank is able to Unlike commercial banks, FDB’s strong development by the Minister for Economy.

remain commercially viable.


However, the Bank aims to be financially sustainable in the long term to allow it to The award-winning Bank is also the first development deliver consistently on its development mandate.

bank in the South Pacific to be accredited to the Green Climate Fund (GCF), the world’s largest climate fund, as a This focus on overall financial sustainability rather than Direct (National) Access Entity.
profitability allows FDB to fund areas that are riskier, but emerging, innovative and technologically advanced.

Such The Bank has been in existence for more than 50 years lending involves some degree of risk that commercial now and remains Fiji’s only national development lenders may not be willing to take on.

financial institution to this date.

It has contributed significantly to the success story of the Fijian economy Targeting Development Impact Finance across generations.
Development Financial Institution (DFI) Role As a DFI, the Bank is in a position to finance directly those sectors of the economy that contribute towards achieving the national development goals, National FDB’s mandate is unique.

It clearly distinguishes it from Budget initiatives and the Sustainable Development commercial institutions for the following broad reasons: Goals (SDGs).
Strong Development Mandate The Bank is committed to its mission of delivering on objectives that support the economic development of It adds value by targeting strategic sectors of the economy.

This includes supporting those customers that are in need of access to finance as well as those projects The Bank has been in existence for more than 50 years now and remains Fiji’s only national development financial institution to this date.
It has contributed significantly to the success story of the Fijian economy across generations.

12 Fiji Development Bank 2019 Annual Report Source: Arif Khan, Cacao Fiji.

Source: King Prawns (Fiji) PTE Limited.

that have the highest multiplier effect, both economically Balance Study confirmed this ‘additionality’ provided by and socially.

development banks.
development banks.

Local communities and vulnerable groups, including Supports Economic Stability women, youths, cooperatives and Small and Medium Enterprises are unlikely to be supported by traditional financial institutions in their initial development.

FDB targets such customers and businesses and helps improve them by providing access to finance and invests in improving their skill sets through training and financial literacy programs.
These help mitigate risks involved in sustaining businesses and ensures consistent loan conduct with the Bank.

Fills the Credit Supply Gap FDB contributes towards building a robust financial sector in Fiji by stepping in to fill gaps in credit supply, allowing it to lend to businesses and projects that cannot normally access finance from commercial banks.

FDB manages and mitigates risks of lending to such businesses and projects.
The Asian Development Bank (ADB) in its recent Finding The Bank is also an instrument in promoting economic stability by playing a counter cyclical role during financial and economic downturns when the commercial financial sector may be in distress, by maintaining supply of financing.

Social and Environmental Safeguards As a DFI, the Bank has the responsibility of improving standards by incorporating social and environmental safeguards in its operations and of those it finances.
This is not only critical in terms of maximizing the development impact of activities and minimizing negative impacts, but helps improve investments and promotes long term sustainable project outcomes.

Apart from just supporting the national development agenda, this supports the delivery of the SDGs.

13 Fiji Development Bank 2019 Annual Report FDB has taken a strong stance on incorporating social The Bank is committed to its standing as the ‘preferred and environmental safeguards in its lending.
Compliance banker’ when it comes to development financing.

This towards social, labour, gender and environmental laws commitment motivates it to meet needs, deliver diverse and policies are embedded in the Bank’s lending policies.

solutions, improve its service delivery, and enhance value The Bank also carries out its due diligence in ensuring that and create business linkages for its customers.

its customers uphold financial transparency as regulated.
The Bank is also one of the first local financial institutions diversifying its revenue and funding base and managing to develop a Gender Equity and Social Inclusion Policy costs prudently, the Bank is able to contribute towards Being financially and economically sustainable, by (GESI).

improving the socio-economic status of the Fijian people by making important development financing decisions.
Apart from GESI, to effect the GCF conditional accreditation, the Bank rolled out its new Procurement FDB hopes to improve its responsiveness as an institution Policy and also revised its Complaints Management by focusing on its internal business processes.
Process Framework, Information Disclosure Policy, Insider re-engineering, ensuring compliance, implementing best Trading & Countering the Financing of Terrorism Policy practices and mechanisms for risk identification and and Anti-Money Laundering Policy.

mitigation are strongly reflected in the work of all parts FDB’s Strategic Vision of the Bank.
Being relevant, meeting customers’ changing needs, and developing a culture of learning, innovation, and growth is at the forefront of the Bank’s personality under the Strategic Plan 2018-2020.

Creating dynamic and empowering teams, fostering a culture of learning, innovation and growth and employee engagement are primary focus areas of management, and is led by the Talent and Organisational Development team.
The Bank continually strives to exceed customers’ expectations by tailoring financial solutions and offering products and services that meet its customer needs and the expectations of its stakeholders.

FDB is extending its commitment to the community and the environment.

The Bank has advocated for strategic actions rather than just ticking off corporate social responsibility boxes while interacting with its stakeholders, the community and to the environment.
Being financially and economically sustainable, by diversifying its revenue and funding base and managing costs prudently, the Bank is able to contribute towards improving the socio-economic status of the Fijian people by making important development financing decisions.

14 Fiji Development Bank 2019 Annual Report The Bank has been providing development financing across generations.
15 Fiji Development Bank 2019 Annual Report Board of Directors The Board is ultimately responsible for all decision-making, with the core objective of adding long-term value to the Bank while upholding the interests of its shareholder and stakeholders.

The Board strives to achieve a balance of skills, knowledge, experience and perspective among its Directors.

3 2 5 1 6 4 16 Fiji Development Bank 2019 Annual Report 1.
Mr. Robert Gordon Lyon - Chairman Appointed Reappointed September 2016 August 2010; and Mr. Lyon is one of the most experienced respected business leaders in the South Pacific.

He spent over 43 years with the Australia and New Zealand Banking Group (ANZ) and worked extensively in the Asia Pacific region, including 12 years as Managing Director Pacific.

He has also looked after ANZ’s retail operations in Asia.
His vibrant career has seen him serve on numerous boards, including as Chairperson of FINTEL/ Kidanet and Melbourne City Marketing, and Board Member of Melbourne Chamber of Commerce, Pacific Economic Bulletin, APNGBC and APIBC.

Mr. Lyon also spent 14 years with the Australia Fiji Business Council and was President for five years.

Currently, he chairs the Fiji Development Bank, Foundation for Development Cooperation, Sunergise Group, Kula Fund Investment Board and FHL Investment & Strategy Committee.
He sits on the Board of Fijian Holdings Limited, Fiji Television Limited, and is Patron of the Australia Fiji Business Council.

He holds a Graduate Diploma in Organisation Development from RMIT University and is a Fellow of the Australian Human Resources Institute, Member of the Australian Institute of Company Directors, a Senior Fellow of the Financial Services Institute of Australasia.
In 2005, he was awarded the 30th Independence Anniversary Commemorative Medal by the PNG Government for services to the banking industry.

and 2.

Mr. Vadivelu (Wella) Pillay - Deputy Chairman start up his business ventures in the Western Division.

Mr. Pillay sits on FDB’s Board Credit Risk Committee which review, is established assess the implementation of the risk policy and plan.

and monitor to Prior to his migration to New Zealand, he had worked at the Bank of New Zealand’s Sigatoka branch.
A golf enthusiast, Mr. Pillay also gives time to community work for TISI Global Sangam, and is a Trustee for Friends of Fiji Heart Foundation.

He is the Director and Chief Executive Officer of Gecko Trucking (Fiji) Ltd, Construction Equipment Hire (Lautoka) Ltd and Wairiki Logging Ltd. 3.
Mr. Inia Naiyaga - Board Member Appointed December 2015; Reappointed December 2017 the Fiji Mr. Naiyaga is a Chartered Accountant, Life Member of Institute of Accountants, Fellow of the Fiji Institute of Bankers (Hon) and was a Fellow of the Australian Institute of Directors.

He was a career Central Banker for 40 years and retired the Deputy Governor of the Reserve Bank of Fiji in May 2014. as Prior to that, he was the Deputy Governor of the National Reserve Bank of Tonga for five years.
He is the current Managing Director of Sun Insurance, Director of NFA, Member of the USP Investment Finance and Member Committee the Christian Mission of Fellowship International Executive Board.

and 4.

Ms. Kalpana Kushla Lal - Board Member Appointed December 2015; Reappointed December 2017 Appointed April 2019 Mr. Pillay is a well-known and seasoned Fijian businessman.
After spending some time in New Zealand, he returned to Fiji to a chartered Ms. Lal, the Fiji accountant with Institute of Accountants, is the Head of Finance & Administration at the German International Cooperation (GIZ) Pacific Operations and is part of the Executive Management Team of GIZ Pacific.

She has over a decade of professional experience in accounting financial management.
and Ms. Lal is a Board Director at Fijian Holdings Limited (FHL), Fiji National Provident Fund and is the Chair of FHL Fund Management Limited.

She has served as an Independent Board Director on FHL subsidiary, Basic Industries since November Limited 2016 where she also served as Chair of the Audit and Risk Committee.

Ms. Lal is a CPA and a member of CPA Australia.

She is also a member of the Australian Institute Company of Directors and Member of Association of Certified Fraud Examiners.
Ms. Lal holds a Bachelor of Arts Degree from the University of the South Pacific in Accounting and Financial Management and Information Systems.

She is the first female to have been awarded the Chartered Accountant of the Year by Fiji Institute of Accountants at their Annual Congress in April 2017.

5.

Mr. Rajesh Patel - Board Member Appointed December 2015; Reappointed December 2017 Mr. Patel is the Director for R.C.

Manubhai Group of Companies and for Nando’s Fiji.


He chairs the FDB Board Audit Committee and sits on the Talent and Organisational Development Board Committee.

He also sits on the FIFA Council.

He holds a Diploma in Textile Engineering from is the M.S.

University.

He President of the Fiji Football and Association Vice President of the Oceania Football Confederation He is also a Justice of Peace, and PTFA President for the Board of Governance at Xavier College.

6.
6.

Mr. Romit Parshottam Meghji - Board Member Appointed April 2019 Mr. Meghji is the Executive Director of P. Meghji Group of Companies.

He also holds at Ritam a Directorship Investments (Property owners of Sheraton Tokoriki Resort and Spa), Cloud Investments, Virtualflex Company, IT Fresh Choice Supermarket, Krisp Investments, P. Meghji Trading and P. Meghji Co. Ltd. Mr. Meghji holds a Bachelor of Business in Accounting degree from the Auckland University of Technology.
He has over a decade of experience in managing businesses family-owned and has been instrumental in guiding these businesses to their strategic goals.

Mr. Meghji is a keen sports enthusiast representing Fiji in Squash to the Commonwealth and Pacific Games.

He holds leadership positions within the Gujarati Community in Fiji and the Region focusing on Education, Sports Community and Development.
various 17 Fiji Development Bank 2019 Annual Report Corporate Governance FDB recognizes the importance of upholding good corporate Corporate Governance Structure governance at every level.

The Fiji Development Bank (FDB) believes that a strong corporate governance framework, founded in the principles of good governance, is critical to building and maintaining a corporate culture of credibility and accountability.

The following illustrates the corporate governance structure of the Bank.
Shareholder (Government of Fiji) Elect Regulators The basic principles of good governance of fairness, transparency, integrity, disclosure and accountability are embedded in the corporate governance structure of the Auditor Appoints BOARD OF DIRECTORS Bank.
The Code of Corporate Governance The Bank’s strategic objectives, corporate plans, and the overall risk management procedures are all developed with the aim of ensuring that good corporate governance practices are upheld at all times and across all levels.

The Bank’s Code of Corporate Governance, reviewed in 2019, governs the Board’s appointment, composition, functions and practices.
The Code meets the standards set out in the Fiji Development Bank Act (Cap 214) 1st July 1967 (FDB Act) and the Fiji Companies Act 2015.

This Code is periodically reviewed and enhanced to incorporate changes in law and best practices.
Board Audit Committee Board Credit Risk Committee Board TOD Committee A p p o n t s i Compliance Internal Audit Service Group Risk Management Independent Control Functions (Compliance, Finance, Internal Audit Service & Group Risk Management) CEO Internal Audit Management The Fiji Development Bank (FDB) believes that a strong corporate governance framework, founded in the principles of good governance, is critical to building and maintaining a corporate culture of credibility and accountability.
18 Fiji Development Bank 2019 Annual Report FDB Board of Directors The Bank’s Board of Directors recognizes the role of good corporate governance in enabling the Bank to implement controls and monitoring mechanisms to ensure compliance, accountability, transparency, and to achieve sustainability.

The Board is responsible to the shareholder (Government) for the governance of FDB, oversees its operations and financial performance.
It sets the strategic direction and financial objectives, determines the appropriate risk appetite of the Bank and monitors operational performance.

The Board appoints the Chief Executive Officer (CEO) who is also the main point of contact with the Board of Directors on behalf of the Bank.

The Board also determines the structure of the management of the Bank and delegates day to day operations to the CEO.

The Board performs a number of critical functions such as these.
Approve management, structure, responsibilities and succession.

Act independent when it comes to decision making.

Approve annual budget and annual financial results.

Oversight of Bank's strategic direction.

Approve major capital projects, investments or divestments.

Ensure effectivness of internal controls.

Ensure appropriate policies and procedures are in place.
Board Composition and Directors While the Board and CEO are responsible for the overall The Minister and Board strive to achieve a balance of management of the Bank, staff are also responsible skills, knowledge, experience and perspective among its to ensure that the Bank is governed with policies and Directors.

This is particularly important for the banking systems that uphold good corporate governance.
sector, as banks have close relationships with their During the year, staff took ownership of incorporating to understand events in the local and global economy.

good governance practices into their work plans by living up to the five values of FDB: development, innovation, Aligned to the FDB Act, the Code of Corporate collaboration, integrity and accountability.

‘Living Governance determines the Board’s composition.
customers across every sector of the economy and need up to these values’ was incorporated into staff Key Performance Indicators.
19 Fiji Development Bank 2019 Annual Report The appointed Board Members for the 2019 Financial Year are tabulated below: Directors Position Appointment Date Term of Appointment Mr. Robert G. Lyon Chairman Reappointed-September 2016 Third Term Mr. Wella Pillay Deputy Chairman Reappointed-December 2017 Second Term Mr. Inia Naiyaga Mr. Rajesh Patel Ms. Kalpana Lal Mr. Romit Meghji Director Director Director Director Reappointed-December 2017 Second Term Reappointed-December 2017 Second Term April 2019 April 2019 First Term First Term In the 2019 Financial Year, the Board was chaired by Mr.
The current Board Secretary is FDB’s General Manager Robert Lyon, who has been the longest serving member Finance and Administration, Mr. Saiyad Hussain.

of the Board.

He shouldered the responsibility to oversee that the Bank’s vision, mission, strategic and operational Delegation objectives are realised.

Board Directors included Mr. Wella Pillay (Deputy Chairman), Mr. Inia Naiyaga, Mr. Rajesh Patel, Ms. Kalpana Lal and Mr. Romit Meghji.
Appointment of the Chairperson, Deputy Chairperson and the Chief Executive Officer The Board delegates aspects of its Management Function to the Executive Management.

Such delegation clearly articulates the extent of the authority level.

Overall, the Board in executing its power to delegate ensures that it does not hinder its overall ability to discharge its function.

At the same time, the Board ensures that there is balance and transparency.
A periodic review of such delegation is conducted by the Board to ensure relevance The Minister for Economy, as prescribed by the FDB and adaptability to the Bank’s evolving needs.

Act, appoints the Bank’s Chairperson and the Deputy Chairperson.

The initial appointment of Directors is normally for a period of three years and each Director is eligible for re- appointment.

The required number of Directors to form a quorum is four.
Directors’ Skills and Knowledge Pool While recognizing that no single Director will be fully qualified and experienced in every area of the Bank’s operations, the Board ensures that the Directors are collectively empowered or have access to the overall required expertise and skill set.

Appointment of Board Secretary Directors’ professional development and capacity The Board Secretary is the administrative link between building is incorporated into capacity building plans.

the Board and the CEO.


Directors are offered opportunities to attend conferences The Board Secretary is accountable to the Board through the Chairperson, on all governance issues.

and seminars to this effect.

They also engage in community initiatives led by the Bank and are invited to observe initiatives financed by The Directors have direct access to the Board Secretary.

the Bank to enhance their understanding of the Bank’s role as a Development Financing Institution (DFI).
The Secretary carries out functions specified by the Code of Corporate Governance relating to Board secretarial Directors’ Remuneration services, and strongly focuses on ensuring that there is a smooth flow of information within the Board, its Committees and between the Management and the Board.

20 The Directors receive fixed Board and Sitting Allowances as compensation for the responsibilities they shoulder and the time and commitment they offer FDB in discharging their duties.
Fiji Development Bank 2019 Annual Report These allowances as regulated by the Ministry of The Code of Corporate Governance sets out the process Economy and, if a Director is required to travel out of that the Bank must apply if a conflict of interest arises for his/her area of residence to attend meetings or events its Directors.

Directors who have a conflict with respect or for any other purpose on behalf of the Bank, travel to a matter are, without the Chairperson’s consent, not allowance is paid.
In addition, Directors who perform allowed to be involved in any decision making process.

additional services in Board Committees are paid Sitting The Deputy Chairperson presides over matters in which Allowance.

Conflict of Interest the Chairperson has a conflict.
Board and Board Committee Meetings Directors are required to notify the Chairperson of any During the 2019 Financial Year, the Board met physically conflict of interest at the commencement of the Board on six occasions, with additional meetings and discussions meeting.

The Board Secretary records such declarations held via the use of communication technologies.

While and the subsequent decisions in the meeting minutes.
the Board meetings were chaired by the Chairman, and Board Committee meetings were chaired by their respective chairpersons.

Invitations were extended to the CEO and relevant EXCO members to have direct communication and discussions when required.
21 Fiji Development Bank 2019 Annual Report Attendance details concerning Board and Board Committee meetings held during the reporting period are shown below: Directors Board Meetings Audit Committee Talent and Organizational Credit Risk (6 per year) Meetings (3 per year) Development Committee Committee Meetings (3 per year) Meetings Mr. Robert G. Lyon Mr. Wella Pillay Mr. Inia Naiyaga Mr. Rajesh Patel Ms. Kalpana Lal Mr. Romit Meghji 6/6 6/6 6/6 6/6 2/6 2/6 2/3 N/A 3/3 3/3 N/A N/A 3/3 N/A 2/3 3/3 N/A N/A Flying Minutes Flying Minutes Flying Minutes N/A N/A N/A Whilst there were no in person meetings for the Board Audit Committee Members Credit Risk Committee during the 2019 Financial Year, Members communication and discussions were held through flying minutes.
Board Committees Mr. Rajesh Patel Mr. Robert G. Lyon Mr. Inia Naiyaga Position Chairman Member Member The Board is supported in its role by three Board Board Credit Risk Committee Committees, namely, Audit Committee, Talent and • Reviews and monitors implementation of the risk Organizational Development (TOD) Committee and the policy and plan, and Credit Risk Committee.

• Assesses the integrity and adequacy of the Credit Risk Management function of the Bank.
Members are selected based on the skills and experience that they can contribute towards the Board Credit Risk Committee Members respective committees.

Appropriate structures for these Members delegations are in place, accompanied by monitoring and Mr. Robert G. Lyon Mr. Wella Pillay Mr. Inia Naiyaga Position Chairman Member Member reporting systems to ensure transparency and efficiency.

These Committees are authorized to make decisions in accordance with their delegated powers.
Each committee acts within its respective Committee Charter.

Details concerning the Board Committees are shown below: Board Audit Committee • Oversees the financial reporting and disclosure process; • Monitors choice of accounting policies and principles; • Oversees the hiring, performance and independence of the external auditors; • Oversights regulatory compliance, ethics and whistle-blower policy; and • Monitors internal control processes.
22 Board TOD Committee • Ensures that necessary policies and processes are in place under which all the employees are fairly and competitively rewarded.
Board TOD Committee Members Members Mr. Robert G. Lyon Mr. Rajesh Patel Mr. Inia Naiyaga Position Chairman Member Member Fiji Development Bank 2019 Annual Report Executive Committee (EXCO) Audit and Regulatory Compliance While the Board is responsible for ensuring principles and Internal Audit objectives of good corporate governance are adhered to and enforced, it is the Management’s responsibility to see it is implemented and to ensure corporate objectives of the Bank as approved by the Board are achieved.
The CEO chairs the EXCO.

Members include the General Manager Business Risk Services (GMBRS), General Manager Relationship and Sales (GMRS), General Manager Finance and Administration (GMFA) and General Manager Talent and Organisational Development (GMTOD) and assisted by an appointed EXCO Secretary.

The Bank has an Internal Audit Department, which provides independent assurance that the Bank’s governance, risk management and internal controls are functioning effectively.
The Board approved Internal Audit Charter guides the Department’s operations.

The Manager Internal Audit reports directly to the Board Audit Committee but with day to day reporting to the CEO to ensure the independence of the Internal Audit Department.

Internal Audit also works collaboratively with the external auditor to ensure that a comprehensive audit scope is always maintained and managed.
Chief Executive Officer External Audit General Manager Business Risk Services Executive Committee (EXCO) General Manager Talent and Organisational Development General Manager Relationship & Sales In accordance with the Financial Management Act (FMA) of 2004 and under the Fiji Development Bank Act (Cap 214) 1st July 1967, the Auditor General of Fiji independently audits the Bank’s financials annually.
For the 2019 Financial Year, the Office of the Auditor General audited the Bank’s financial accounts, evaluated the operations and internal controls, and provided reasonable assurance based on its evaluation.

General Manager Finance and Administration This provided a transparent, independent and unbiased assessment of the Bank’s governance and financial health.

EXCO sits weekly to review operations and make decisions.
The key functions of EXCO are: • implement corporate objectives, policies, and strategic direction set by the Board; • allocate resources within the allocated budget approved by the Board; Reserve Bank of Fiji The Bank ensures full compliance with the Banking Supervision Policy of the Reserve Bank of Fiji (RBF) as part of prudential requirements.

The Bank reports to RBF on a regular basis.


The Bank consults RBF on policy changes and when articulating • ensure compliance of all regulations and laws, and • establish and implement an effective internal control new policies.

system, aligned to the business requirements.

Internal Control and Risk Management Internal controls for the management of risk are essential to promote the achievement of the Bank’s goals and enhance preservation of both the Bank’s assets and the investment of its shareholder.
23 Fiji Development Bank 2019 Annual Report The internal control system is aimed at improving the effectiveness and efficiency of activities, keeping reliable and accurate financial and management accounts, and ensuring compliance with the requirements applicable to FDB.
Shareholder The Bank strives to assist in the economic development of Fiji and in particular, the development of agriculture, commerce and industry, to contribute towards realizing the goals of the national development agenda set by the Asian Development Bank (ADB) is assisting the Bank in aligning its Enterprise Risk Management Framework to international standards and Basel guidelines in 2019 as well.
It is the responsibility of the Board of Directors and EXCO to set the Bank’s internal control and risk management systems.
Following considerations are taken into account in determining its policies regarding internal controls and risk management: • • • • • the nature and extent of the risks facing the Bank; the extent and categories of risk; the tolerance limit and the risk appetite of the Bank; the likelihood of the risks concerned materializing; the Bank’s ability to reduce the incidence and impact on the Bank of risks that do materialize, and Fijian Government.
Employees The dynamic Bank continues to strengthen its corporate culture and build a working environment that enables productivity, career progression, coupled with appropriate remuneration.

The Talent and Organisational Development Division ensures that the Bank’s Code of Conduct, Oath of Secrecy, and other policies guide employees.
The Bank manages terms of employment in accordance with the law, the General Instructions of the Bank, and through procedures stipulated through collective agreement with the Fiji Bank and Finance Sector • the costs of operating particular controls relative to Employees Union.

the benefits obtained.


Stakeholder Interests As a development financing institution, FDB is accountable to its shareholder (Government), customers, employees and stakeholders, as well as to the community and to the environment in which it operates in.

The Bank as part of its professional development programmes has provided capacity building for its staff both in-house and externally on a regular basis.
External training for staff in the 2019 Financial Year included both overseas and locally sourced opportunities.

24 Fiji Development Bank 2019 Annual Report Customers Customer contentment is a priority for the Bank as it continues to build and nurture life-long relationships with its customers.

The financial solutions offered by the Bank are some of the most flexible and tailor-made products in the market to suit customer needs.
Regular consultation and engagement with customers are maintained through visitations by the Relationship and Sales Officers to project sites, including to the maritime islands where the Bank has a handful of customers.

To safeguard the interest of its customers, the Bank has strict guidelines to ensure customer information confidentiality is maintained at all times.
The Bank has a Complaints Management Framework to allow customers to lodge written complaints directly to the CEO, should a customer feel that s/he was treated unfairly.

These complaints are dealt directly by the Office of the CEO allowing complaints to be addressed promptly, within five working days.
Community and the Environment The Bank has strongly positioned itself as a good given recognition and assistance to Small and Medium Entrepreneurs, participated in various clean up drives and other community initiatives.

In 2019, the Bank in advancing its commitment to climate action advocated for businesses to move away from taking up community programmes or corporate social responsibility initiatives to merely tick off boxes.
The Bank called for a strategic approach towards community, environment and climate action initiatives.

corporate citizen reflecting responsibility and ownership Further, the Bank continued to support various charitable of its commitment to the community and to the works through sponsorship programmes.

environment.

Over the years, the Bank has supported financial literacy and irrevocably embedded in the Bank’s culture and programmes in schools and the community at large, values.
All of this will continue.

Such community support is firmly Over the years, the Bank has supported financial literacy programmes in schools and the community at large, given recognition and assistance to Small and Medium Entrepreneurs, participated in various clean up drives and other community initiatives.

25 Fiji Development Bank 2019 Annual Report Executive Management 4 3 2 5 1 26 Fiji Development Bank 2019 Annual Report 4.
Mr. Shaukat Ali General Manager Relationship and Sales He leads the Bank’s twelve branches’ Relationship and Sales teams across Fiji.

He was appointed to the position in 2018 prior to which he served as the Regional Manager, Relationship and Sales for the Western region.

on Shaukat has over 30 years of in development experience predominantly banking, focusing relationship banking and sales.
Building sustainable and acquisition of a reputable customer base in a crowded and competitive market is Shaukat’s core focus.

growth is in instrumental His role team to empowering his decisions informed make to contribute towards an increase in the Bank’s loan collaboration portfolio, internal with stakeholders and external Business Services, Risk Talent and Organizational Development and Finance and Administration teams.
both the in Before been appointed to the GM Relationship and Sales role, Shaukat served in various managerial positions within the Bank, since joining in 1987, lending, including audit, business risk services, corporate business services and asset management team.

Shaukat holds a Bachelor of Arts in Business Studies from the University of the South Pacific and a Diploma in Business Studies from Fiji Institute of Technology.

1.
1.

Mr. Mark Clough Chief Executive Officer He is responsible for leading the Bank in its new strategic it as direction, positioning one that drives innovative and inclusive development and climate financing solutions for all Fijians.
an is financial investment Mark and services professional, with over 30 years of experience as an advisor to governments, and as a senior executive of large international institutions focusing primarily on social infrastructure, renewable energy transactions and real estate and investment.

development Within these sectors, Mark has continually specialised in the marriage of strategy, innovation, funding and social outcomes.
His non-executive roles have included Board positions for schools, community housing, disability services and child welfare organisations.

is an experienced Mark practitioner in industry corporate, structured and project financing, and has held leadership roles in Australia Investment Bank, at ANZ Baulderstone/Lend Lease and Challenger Financial Group, in addition to his own consulting firm.
a degree He holds in Mathematics and Statistics, as well as post-graduate finance, actuarial governance qualifications and professional memberships.

and He was appointed CEO on 20 November 2017.

2.

Mr. Nafitalai Cakacaka General Manager Business Risk Services He is also the key liaison officer with the Green Climate Fund Accreditation Panel for FDB’s accreditation.

Nafitalai has over thirty years’ experience in development banking and strategic risk management.
He is involved capacities in in various engagements, stakeholder sustainable promoting development projects in Fiji’s rural Agro-based sectors, Infrastructure, Clean Energy and Small & Medium Enterprises.

He has been instrumental in incorporating the principles inclusion and of financial literacy both within the Bank’s internal policy and development agenda, and at the national level.
A Member of the Fiji Institute of Bankers and of Fiji’s National Financial Inclusion force, he serves as Task Inclusive Chairman of the Products & Services Working Group.

Nafitalai holds a Bachelor of Arts in Business Management from the University of the South Pacific, and a Certificate in Banking Masters-level the Pacific Bankers from Management - Pacific Coast Banking School.

Institute 3.

Mr. Saiyad Hussain General Manager Finance & Administration He also serves as FDB Board Secretary.
He has been with the Bank for more than 27 years.

senior to his Appointed role in 2010, he manages FDB’s Finance and Treasury, Properties, and Information Communication and departments.

Technology A Chartered Accountant, he is a Board Director of the South Pacific Stock Exchange and a Member of the Fiji Institute of Bankers.
qualified He has a Postgraduate Diploma in Banking and Financial Management and holds a Bachelor of Arts Degree in and Financial Accounting Management, Economics and Public Administration & Management the University of the South Pacific.

from 5.

Ms.

Mere Aisake Asi General Manager Talent & Organisational Development She is the first woman to be appointed to an Executive Management the in Bank’s fifty-year history.
role has over twenty Mere years of local, regional and international experience in the financial sector, joining the Bank in July 2017 to fill a newly-created GM position to strengthen service delivery through change, culture empowering teams, guiding career development, coaching and leadership development programmes.
initiating having of Mere is dedicated to applying her experience in the financial sector, delivered international projects standards on talent and leadership development with the end result of enhancing our business strategies and performance.
Scientific Prior to joining the Bank, Mere was Manager Policies & Product at the HFC Bank, Sales & Marketing Manager at Computer Services Limited (CSL) Samoa, Administration at & Finance Manager the Research Organisation of Samoa (SROS), and NZAID Development Program Coordinator Samoa.

Even before this, she had held leadership roles with ANZ Bank in Fiji, Samoa and Tonga, and at the ANZ Pacific in Melbourne, Head Office Australia.
She holds a Master of Business Administration from the Central Queensland University, a Postgraduate Diploma, in Management and Bachelor of Arts Degree in Business Studies from the University of the South Pacific.
Certificate 27 Fiji Development Bank 2019 Annual Report Fiji Development Bank Organigram S R E M O T S U C S T C U D O R P & e r u t l u c i r g A e t a r o p r o C E M S • • • / l a r t n e C n r e t s a E n r e t s e W n r e h t r o N • • • S E L A S & t i n U n o ti a r t s i n m d A i & s d r o c e R , l a g e L t i n U t n e m e g a n a M & & k s i R t i d e r C l a v o r p p A t i d e r C • • • • • n o ti a c i n u m m o C & n o ti a m r o f n I l y g o o n h c e T & e c n a n F i y r u s a e r T • • n o ti a r t s i n m d A i & s e ti r e p o r P • & ti a s i n a g r O t n e m p o e v e D l • • • R E G A N A M & T N E L A T L A R E N E G g n ti r o p e r l a n o ti c n u F y t i l i b a t n u o c c a d n a f o n o ti a g e e D l i , s t n o p p A y t i l i b i s n o p s e r & g n ti ti a r t s i n m d A i g n ti ti d u a d e s a b - k s i r f o n o ti a g e e D l y t i l i b i s n o p s e r & g n ti r o p e R y t i l i b a t n u o c c A O C X E .
s M G d n a O E C e h t s e s i r p m o C o t s i n o ti c n u f e r o c ’ s O C X E f o s e v ti ti c a r p d o o g d n a s d r a d n a t s .
) y m o n o c E f o y r t s i n M i ( i s t n o p p A & g n ti 28 Fiji Development Bank 2019 Annual Report 29 Fiji Development Bank 2019 Annual Report Review of Finance and Administration Overview Despite a challenging year with greater operating costs, increasing allowances for expected credit losses, higher cost of funds and a slowdown in economic performance, the Bank achieved a modest net profit of $4.07 million during the year.
Net Profit ) m m $ ( 10 9 8 7 6 5 4 3 2 1 0 .

4 1 9 6 8 4 .

.

5 1 1 8 3 7 .

1 4 7 .

7 0 4 .

3 1 4 .

8 4 3 .

6 8 2 .

0 5 2 .

6 3 2 .

 (Year) On a positive note, the Bank’s total operating revenue recorded a growth of 4.97%.

In addition to achieving a growth of 10.82% in its total loan portfolio, the Bank was able to maintain the quality of its portfolio.
* Net Interest Income is gross interest income after inclusion of subsides received and borrowing costs.

Income The Bank’s main income stream, interest earnings increased by 10.26% compared to the 2018 Financial Year.

The impressive performance on interest income was largely attributable to a significant growth in the Bank’s overall loan portfolio and a slight increase in the weighted average lending rate to new customers.
Other income such as insurance commission and rental income also noted an increase.

Gross Interest Income ) m m $ ( .

3 7 4 6 3 3 0 3 .

.

5 7 5 3 .

2 4 2 3 .

0 9 2 3 3 3 7 2 .

4 5 5 2 .

.

7 3 5 2 4 2 4 2 .

5 8 3 2 .

4 2 9 3 .

45 40 35 30 25 20 15 10 5 0 Operating Revenue 4 7 7 2 .

4 8 7 2 .

2 0 6 2 .

4 8 5 2 .

.

8 1 8 2 2 5 4 2 .

.

9 7 1 3 .

9 2 0 3 5 9 9 2 .

6 8 9 2 .

7 0 9 1 .


 35 30 25 20 15 10 5 - (Year) Interest and Borrowing Expenses Increased disbursements and growth in the Bank’s customer base resulted in an increase of $2.53 million in the Bank’s interest expenses compared to the 2018 Financial Year.
Furthermore, the Bank’s cost of fund also increased from 3.28% at the end of June 2018 to 3.89% at the end of June 2019, an increase of 61 basis points.

Higher maturity obligations during the year coupled with a drop in market liquidity levels resulted in an increase in the Bank’s borrowing expenses as new borrowings were largely acquired at higher interest rates. )
m m $ ( Net Interest Income* (Year) Fee Income Other Income 30 Fiji Development Bank 2019 Annual Report Borrowings Portfolio and Average Cost of Fund Borrowings Portfolio/Average Cost of Fund ) m m $ ( 400 350 300 250 200 150 100 50 0 % 2 6 5 .

.

6 5 4 8 2 .

5 6 4 5 2 % 9 5 6 .

% 8 0 6 .

% 5 4 4 .

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1 6 6 5 3 % 8 2 3 .

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 (Year) 7% 6% 5% 4% 3% 2% 1% 0% Short Term (Term Deposit & Promissory Notes) Long Term (Bond-held-to maturity) Average weighted cost of funds With the launch of a new financial solution, the Bank had diversified its borrowings portfolio to better manage its borrowing expenses.
In July 2018, FDB launched its Government-guaranteed Yaubula Term Deposit Facility, which offers customers a secure investment opportunity with attractive returns.

The Bank faced stiff competition from other banks and financial institutions on terms and interest rates offered, but achieved a portfolio of $15.25 million at the end of the 2019 Financial Year.

Operating Expenses Operating expenses grew by 16.68% compared to the same period last year.
The increase was mainly due to increased marketing and public relations activities undertaken during the launch of two new products – the Agriculture Family Loan Facility and the Yaubula Term Deposit Facility, depreciation expenses due to the revaluation of Bank properties and internal office renovations of FDB branches in Taveuni, Sigatoka, Ba and Labasa rental properties.

Substantial effort was also put into improving the Bank’s corporate image, branding and visibility.
Similarly, the Bank also engaged in reforestation programmes across the country, as part of its call for strategic climate action initiatives in collaboration with the Ministry of Forestry.

Employee cost also increased with an increase in staff complement by 14 and further marking of salaries to market.

The Bank also introduced a staff medical insurance scheme with Capital Insurance and significant capacity building programmes were undertaken in 2019.
Though there has been an increase in the overall operating expenses, close monitoring, coupled with stringent control measures enabled the Bank to manage its day to day expenses within the budgeted levels. )

m m $ ( 16 14 12 10 8 6 4 2 0 6 0 6 1 .

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 Operating Expenses Staff Cost Allowance for Expected Credit Losses The Bank’s Accounting Policy changed with the implementation of International Financial Reporting Standards (IFRS 9), which introduced a ‘forward-looking’ provision model, replacing the ‘incurred loss’ provision model under International Accounting Standard (IAS 39).
As a result, the Bank’s Allowance for Expected Credit Losses relating to lending assets increased by $3.00 million in comparison to the previous financial year.

On a positive note, a decrease of $0.45 million in allowance for interest and fees suspended was noted during the 2019 Financial Year, indicating successful recovery of arrears from defaulting loan accounts.
31 Fiji Development Bank 2019 Annual Report Income Statement A summary of the income statement as at 30th June 2019 is as follows: Income Statement ($mm) 2019 ($mm) 2018 ($mm) Change ($mm) Change rate (%) Interest Income Interest & Other Borrowing Expenses Net Interest Income Net Fees Income 35.748 (11.779) 23.969 4.779 Other Income 3.046 Total Operating Income Operating Expenses Profit before Allowances Total Allowances Net Profit Assets Structure 31.794 (16.057) 15.737 (11.671) 4.066 32.423 (9.251) 23.172 4.249 2.867 30.288 (13.761) 16.527 (9.116) 7.411 3.325 (2.528) 0.797 0.530 0.179 1.506 (2.296) (0.790) (2.555) (3.345) 10.26 27.33 3.44 12.47 6.24 4.97 16.68 (4.78) 28.03 (45.14) A summary of the Bank’s asset structure as at 30th June 2019 is as follows: Composition (%) 2018 Composition (%) Balance Sheet Review ($mm) Liquid Assets Investments Net Loans and Advances Receivables Fixed Assets with Intangibles 2019 65.919 2.035 12.09% 0.37% 442.915 81.22% 4.007 30.421 0.73% 5.58% 44.682 2.035 397.529 2.870 20.529 9.55% 0.44% 85.01% 0.61% 4.39% Total Assets 545.297 100.00% 467.645 100.00% The Bank’s financial position strengthened during 2019 with a 16.60% increase in total assets from $467.65 million to $545.30 million.
32 Fiji Development Bank 2019 Annual Report The Bank’s gross loan portfolio stood at $539.75 million, There was a growth of 20.53% in the Bank’s Total a growth of $52.70 million (10.82%) in comparison to the Liabilities for the 2019 Financial Year.

The increase same period last year.

in borrowings was mainly to cater for increased loan disbursements.
An increase of $61.53 million in total The growth in the portfolio was due to effective customer borrowings took place during the financial year to cater relationships and efficient lending methods used to for disbursements of $112.94 million.

increase its agricultural, small and medium enterprise and corporate customer base and retaining its existing customers.

The Bank’s Liquid Assets, Fixed Assets and Other Receivables also recorded an increase compared to the same period last year.
A major increase was noted in the Bank’s Fixed Assets with Intangibles as a result of an upward revaluation of Bank owned properties.

A summary of the Net Loans and Advances as at 30th June 2019 is as follows: ) m m $ ( 500 450 400 350 300 250 200 150 100 50 0 Net Loans and Advances .

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 (Year) ) m m $ ( 300 250 200 150 100 50 0 .

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4 7 4 3 Bank’s Borrowings .

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Short term liabilities Long term liabilities Capital Structure A summary of the Bank’s capital structure as at 30th June 2019 is as follows: Balance Sheet Review 2019 2018 ($mm) Total Assets 545.297 467.645 Total Liabilities 373.247 309.667 Total Equity 172.050 157.978 Liabilities Structure A summary of the Bank’s liability structure as at 30th June 2019 is as follows: Balance Sheet Review ($mm) Accounts Payable & Accruals Short Term Borrowings Other Liabilities Bond-Held to Maturity Total Liabilities 2019 5.831 109.077 10.808 247.531 373.247 Composition (%) 1.07% 20.00% 1.98% 45.39% 100.00% 2018 3.824 111.799 10.765 183.279 309.667 Composition (%) 1.23% 36.10% 3.48% 59.19% 100.00% 33 Fiji Development Bank 2019 Annual Report Other Finance and Administrative Activities Properties Administration Department The Bank’s Properties Department is responsible for the management and upkeep of all the Bank’s buildings and fleet around Fiji, including office space that have been leased out to other parties.
This involves frequent liaison with stakeholders to manage relationships and facilitate timely deliverables by contractors, architects, engineers, consultants, other service providers, tenants and regulatory/compliance authorities.

The Bank is committed to providing its customers with comfortable, convenient, and safe banking amenties.

Concurrently, it also strives to provide its staff with functional and aesthetically pleasing facilities conducive to a productive work environment.
As such, the Bank has commenced preliminary planning and design works for the Fiji Development Bank Center (FDBC) garage and recreational facility at the Head Office.

A new look Lautoka Branch office on Level 1 is also in the pipeline.

Groundwork on both projects is anticipated to start in the new financial year.

A revamp of customer reception and meeting areas was undertaken to make customers feel comfortable while waiting to be served at all branches.
Yaubula Term Deposit Product was launched in July 2018.

Furthermore, the Bank has provided mobile access with emails to its Relationship & Sales Officers across its network to enable greater connectivity, and communication with customers and higher productivity and efficiency.
The services of our telecommunication The Bank also undertook significant upgrading works to its properties including electrical, plumbing and fire alarm system upgrades in order to enhance organizational safety and adhere to regulatory requirements.

This upgrading program will continue into the next financial partners have also been secured to remind customers on year.

their obligatory loan payments through a short message service (SMS) platform.
ICT Operation Professional valuations of all Bank properties undertaken teams: Systems Support & Development and during the year has seen a significant increase in the Network & Infrastructure Support.

Collectively, the value of its properties.

Overall, the Bank’s rental income team is responsible for the planning, development, performance was pleasing with consistent occupancy implementation and maintenance of technology based The ICT Department comprises of two specialist rates throughout the year.
information system(s) to provide a cost effective operational solution to meet current and future user needs.
34 Fiji Development Bank 2019 Annual Report The Bank is heavily reliant on the ICT infrastructure In addition to the on-going work on the scoping of the and it is, therefore, important to ensure that the Bank’s new core banking software, the programmers had a busy information system adequately supports its core business year with many process automation as part of the overall area of lending by ensuring continuous availability of Bank’s process re-engineering.
applications, networked infrastructure, internet, email and other office automation tools.

The system also The Bank also undertook a facelift of the Bank’s Intranet supports the Management team by providing timely data – INSIDER as a one-stop shop for information on all and information for decision-making.

departments.

Overall, the 2019 Financial Year was an exciting year The Bank upgraded its border security by implementing a for the ICT Department.
Further to the announcement brand new two-tier firewall solution with the help of our of the Request for Proposals (RFP) for the Bank’s new partners from Datec Fiji Ltd. core banking software project in June, a third-party consultant was engaged to assist the Bank in performing The Bank’s Help Desk facility was also revamped to the vendor selection due diligence.

The process began standardize the system administration and interface.
This with the drafting of the tender evaluation matrix in system also has a comprehensive IT asset module that consultation with the ICT team.

In addition to their tender will streamline asset inventory management.
analysis, the consultants were onsite for two weeks and conducted a thorough study of the existing Banking Procurement of 145 computers was also carried out Management System (BMS) by consulting a wide range during the year in an effort to refresh the aging end-user of users and stakeholders to gauge their views about equipment in the Bank.

This saw the replacement of the BMS business rules and processes.
The consultants 95% of computers in all Branches and at the Head Office also looked at the datacentre specifications, network through this periodic computer renewal exercise.

and Disaster Recovery configurations.
A detailed study culminated in the presentation of an overview of Whether property, technology or communications, the findings to the FDB Management team followed by the Bank intends to continue its programme of renewal and submission of a comprehensive report articulating the process re-engineering to generate greater efficiencies gaps between the desired scope of work in the RFP and provide a seamless service for both customers and document and what actually existed in the current staff.
This will result in significant expenditure in the system.

The upgrade of the core banking software will short-term offset by cost savings in the longer-term.

continue in the new financial year with a GoLive target date set for 2020.

The Bank also undertook significant upgrading works to its properties in order to enhance organizational safety and adhere to regulatory requirements.

This upgrading program will continue into the next financial year.
35 Fiji Development Bank 2019 Annual Report FDB’s Market Share as at 30th June 2019 FDB Commercial Credit Fiji Total FDB as a CB as a CI as a ($mm) Banks (CB) Institutions ($mm) % of Fiji % of Fiji % of Fiji ($mm) (CI) ($mm) 107.05 71.00 22.70 200.75 Agriculture Sugarcane Growing Forestry & Logging Fisheries Others Mining & Quarrying Manufacturing 20.77 1.60 5.47 4.94 21.90 8.80 75.89 38.70 2.37 27.40 49.66 459.40 Food, Beverages and Tobacco 31.11 179.40 Textiles, Clothing and Footwear 1.94 Metal Products and Machinery 0.22 75.00 42.60 Others 16.41 162.40 Building and Construction 164.00 792.10 Real Estate (Development) 67.58 1,107.70 Non-Bank Financial Institutions 2.67 4.90 Public Enterprises - 48.60 0.20 8.70 1.10 12.70 6.50 16.20 0.60 2.90 4.60 8.10 71.60 3.80 13.80 1.10 Total 53.33 92.02 15.16 33.27 59.62 6.54 9.46 22.57 36.07 14.84 127.29 36.27 525.26 211.11 14.73 79.84 47.42 186.91 2.42 0.46 8.78 1,027.70 15.96 1,179.08 5.73 21.37 49.70 12.50 - Total 35.37 7.09 60.72 59.32 30.40 75.54 87.46 84.98 93.94 89.84 86.89 77.07 93.95 22.93 97.79 Total 11.31 0.89 24.12 7.41 9.98 17.92 3.08 0.28 3.63 9.70 4.33 6.97 0.32 64.57 2.21 Wholesale, Retail, Hotels and Restaurants 63.13 1,462.80 50.60 1,576.53 4.00 92.79 3.21 Hotels and Restaurants 63.13 402.60 7.50 473.23 13.34 Other Commercial Advances - 1,060.20 43.10 1,103.30 - 85.07 96.09 1.58 3.91 Transport, Communications and Storage 38.02 299.30 157.90 495.22 7.68 60.44 31.88 Electricity, Gas and Water - 198.30 Professional & Business Services 20.19 116.50 0.60 31.90 198.90 - 168.59 11.98 Private Individuals 19.37 2,087.90 201.10 2,308.37 0.84 99.70 69.10 90.45 98.96 0.30 18.92 8.71 0.00 1,668.20 1.04 120.26 0.55 99.45 0.00 318.81 0.41 11.10 - 341.99 1.66 99.59 99.10 95.29 0.00 0.90 3.04 Housing 17.40 1,650.80 Car or Personal Individual Transport Others 0.66 119.60 1.31 317.50 Central and Local Government - 11.00 5.69 325.90 - - - 0.10 10.40 Other Sectors TOTAL 539.75 7,012.80 588.30 8,140.85 6.63 86.14 7.23 NOTE: Fiji total refers to total loans and leases advances
 outstanding by all commercial banks, licensed credit institutions and the Fiji Development Bank as at 30th June 2019.
The Bank’s market share is highlighted.

36 Fiji Development Bank 2019 Annual Report FDB financed the resort development of the multi-million dollar Pullman Nadi Bay Resort & Spa that sits on Wailoaloa Beach, Nadi.

Photo courtesy: Gokal Group of Companies.


37 Fiji Development Bank 2019 Annual Report Review of Relationship & Sales In the 2019 Financial Year, the Bank diversified its portfolio The Bank made significant further progress in lending by offering new financial solutions for building innovative, to key economic sectors and positively contributed to resilient and sustainable businesses in Fiji.
supporting projects associated with agricultural exports, Overview FDB offers financial solutions for Agriculture, Small and Medium Enterprises and Corporate business purposes.

As a development bank, it has continually strived to exceed customer expectations with products and services that meet the changing needs of its customers.

renewable energy, tourism developments, and assisted the transition of small businesses to medium sized businesses.
The overall performance during the 2019 Financial Year was remarkable in achieving the Bank’s strategic goals.

Lending Activities during the Year In the 2019 Financial Year, FDB committed $112.94 The Bank achieves this by providing risk capital for million in loan disbursement, representing 76.93% of economic development projects.

its target and an increase of 5.02% when compared to $107.45 million disbursed in the previous financial year.
It commits strongly to supporting resource-based businesses and projects and, as such, takes on risks The challenging liquidity position of the market affected such as unpredictable weather conditions, political and the targeted portfolio growth, which was 10.82% (or socio economic changes as well as fluctuating market $52.70 million) for the 2019 Financial Year.

conditions.
conditions.

Although these risks are common for most lenders, FDB attempts to fill gaps in the demand for finance not met by other finance institutions.

FDB is well-known for its encouragement of business entrepreneurship from the grass roots level.

In the 2019 Financial Year, the Bank remained firm in its commitment on delivering solutions that were strategically driven to be relevant, innovative and sustainable for all Fijians.
With a strong backdrop of sound achievements of advancing ambitious national development priorities for over fifty years, FDB continues to respond to the Government’s call for partnership in the delivery of officially sanctioned development projects and special assistance programmes.
Year in Review Despite operating in some high-risk sectors, accompanied by a backdrop of an increasingly competitive business environment in the 2019 Financial Year, FDB maintained its market share by focusing on strengthening compliance and portfolio quality.

Bank’s Portfolio The Bank’s total portfolio stood at $539.75 million for 5,149 accounts at the end of the 2019 Financial Year, compared to $487.05 million and 5,150 accounts for the 2018 Financial Year.
This was achieved as a result of aggressive marketing, mid-stream settlement of accounts and run offs.

The Bank’s Performing Loan Portfolio (PLP) increased from $404.21 million from the 2018 Financial Year to $450.77 million for the 2019 Financial Year, representing an 11.52% increase.

Non-Performing Loan (NPL) portfolio increased by 7.42% from $82.84 million to $88.99 million in the 2019 Financial Year.
Similarly, there was an increase from 4,384 Performing Loan accounts from the last financial year to 4,515 for the 2019 Financial Year.

The number of Non-Performing Loan accounts were actively managed to reduce from 766 accounts in the 2018 Financial Year to 634 in the 2019 Financial Year.

38 Fiji Development Bank 2019 Annual Report The outlook for the coming year is optimistic in terms of classification purpose.
The Focused Sector portfolio is portfolio growth with the national development agenda most closely aligned to the Bank’s Mission and Vision, strongly committed to the development of resource- while the Non-Focused Sector comprises investment based sectors, renewable energy, transforming the opportunities that are essentially commercial/corporate transportation sector and expanding rural economy to and essential for the long-term sustainability of the Bank.

name a few.
name a few.

Focused and Non-Focused Portfolio as at 30th June 2019 $234.00 million towards the Agriculture, Mining & At the end of the 2019 Financial Year, FDB had disbursed 2 0.5% Quarrying, Manufacturing, Transport, Communication & Storage, and Small and Medium Enterprises (SME) in the Wholesale, Retail, Hotels & Restaurants sectors and to SMEs in the Professional & Business Services industry.

% 3 By number, the Focused Sector accounts comprised % 27.6 8 .

5 % 1% 3% 3.1% 0.5% .

% 4 5 % 1 .

0 % 5 .


0 % 2 % 9.4 % 2 .
5 12 .9% Focused Sector Agriculture Electricity, Gas & Water Manufacturing Mining & Quarrying Professional & Business Services Public Enterprises Transport, Communication & Storage (SMEs only) Wholesale, Retail, Hotels & Restaurants (SMEs only) Non-Focused Sector Building and Construction Non-bank Financial Institutions Others Private Individual Professional & Business Services Real Estate Wholesale, Retail, Hotels & Restaurants Focused Sector In 2008, the Bank realigned its business into two key sectors - Focused and Non-Focused sectors for 79.55% of the FDB portfolio, and 43.35% by value, or 4,096 accounts worth $234.00 million.
In comparison to the 2018 Financial Year, an increase of $13.02 million was noted in value despite a decrease in the number (32) of accounts.

The bulk of the Focused Sector portfolio comprised Agriculture loans at $110.62 million, followed by the Transport, Communication & Storage at $50.64 million.
Non-Focused Sector At the end of the 2019 Financial Year, FDB had disbursed $305.75 million towards the Building & Construction, Private Individuals, Real Estate, and Others and towards larger loans (above $500,000) in the Wholesale, Retail, Hotels & Restaurants sectors and the Professional & Business Services industry.

The Non-Focused sector comprised 20.45% by number of loans, and 56.65% by value of the total portfolio, which equated to 1,053 accounts worth $305.75 million respectively.
An increase of 3.03% and $39.68 million, respectively, was noted in comparison to the previous financial year.

A notable contribution to the increase in Non-Focused sector in the Wholesale, Retail, Hotels & Restaurant portfolio valued at $148.89 million followed by Building and Construction valued at $69.57 million.
39 Fiji Development Bank 2019 Annual Report Portfolio Based on RBF Classification as at 30th June 2019 Number Percentage $mm Percentage Focused Sectors Agriculture Electricity, Gas & Water Manufacturing Mining & Quarrying Professional & Business Services Public Enterprises Transport, Communication & Storage Wholesale, Retail, Hotels & Restaurants Non-Focused Sectors Building and Construction Non-bank Financial Institutions Others Private Individual Professional & Business Services Real Estate Wholesale, Retail, Hotels & Restaurants TOTAL PORTFOLIO 5,149 100.00 Market Share For the 2019 Financial Year, the total market share of the Bank’s portfolio in relation to total loans and lease advances outstanding by all Commercial Banks and other Licensed Credit Institutions stood at 6.63%.
Agriculture lending continues to be the Bank’s priority.

The Bank holds the highest market share of lending in the Agriculture sector at 53.33%.

The Bank continues to dominate the Sugarcane portfolio at 92.02%.

Applications A total of 1,595 applications to the value of $187.59 million were approved in the 2019 Financial Year, reflecting a decrease of 1.60% by number and increase of 53.94% by value in comparison to the previous financial year.
A slight change was noticed as the value of approvals for the Focused Sector increased by 3.51% while a significant increase in approvals for Non-Focused Sector by 168.07% was noted in comparison to the previous financial year.

40 Chandra Lekha is one of the oldest customers of FDB in the Central Eastern division.
Fiji Development Bank 2019 Annual Report Loan Approvals Based on RBF Classification as at 30th June 2019 Number Percentage $mm Percentage Focused Sectors Agriculture Electricity, Gas & Water Manufacturing Mining & Quarrying Professional & Business Services Public Enterprises Transport, Communication & Storage Wholesale, Retail, Hotels & Restaurants Non-Focused Sectors Building and Construction Non-bank Financial Institutions Others Private Individual Professional & Business Services Real Estate Wholesale, Retail, Hotels & Restaurants TOTAL APPROVALS Access to Financial Knowledge, Tools and Solutions As alluded by the FDB Board Chairperson in his letter to the Minister, FDB has confirmed to strengthen its role of developing a community that is financially informed, and thus, empowered to sustain themselves for future generations.
With the Bank mandated to contribute towards the development of the Fijian economy which would lead to the enhancement of the quality of life for all Fijians, FDB has a focus on the financial wellbeing of individuals/ businesses.

In order to ensure financial wellbeing, a community first needs to be financially informed to make sound decisions for its sustainability.
In 2019, there was continued strong focus on financial literacy initiatives, including one-on-one financial advisory services, conducted by Branch Staff as part of relationship banking.

Internal Business Processes Under the Realignment 2018-2019, the Bank’s service center that provides tailored services to the high-end network corporate customers, the Prime Lending unit became a stand alone branch from its parent, Suva Branch.
The Prime Lending Branch reports directly to the Regional Manager Centre Eastern.

The move was aimed at strengthening operational productivity and customer service delivery for both the Suva Branch and the Prime Lending Branch.

The Relationship and Sales team in the following financial year will continue to propose process re-engineering and capacity building initiatives.

This reflects the Bank’s commitment towards offering a seamless service.
41 Fiji Development Bank 2019 Annual Report FDB relocated to Waiyevo, Taveuni, taking access to financing closer to the administrative hub of Taveuni.

The Bank also increased staff complements at its Nadi, Strengthening Outreach and Presence Ba, Labasa and Nausori branches following an increase The Bank operates in twelve (12) strategic locations in in portfolio by account numbers (staff to portfolio Suva, Nausori, Sigatoka, Nadi, Lautoka, Ba, Rakiraki, ratio).
A manageable portfolio distribuition per staff was Labasa and Savusavu.

Most importantly, it also operates maintained to ensure efficient and effective account full offices in more remote locations such as Nabouwalu, monitoring.

Vacant positions were filled on a timely basis Seaqaqa and Taveuni with these former sub- branches to maintain quality customer service levels.

now reclassified as branches in 2019.


This wide network is a commitment on the part of the Bank to increase Internal capacity building activities were continuously engagement and outcomes for rural dwellers by undertaken and these resulted in new knowledge, skills providing access to affordable financial solutions and and management capabilities for the Relationship and boost investments in the rural sector.

Sales Team.
Sales Team.

Staff rotations and promotions between branches were also undertaken where appropriate.

During the year, the Bank continued its participation in Further, communication between the Relationship by the Ministry of Agriculture, Fiji National Provident and Sales officers and their customers was enhanced.
Fund, Ministry of Industry, Trade and Tourism (MITT), The Bank provided mobile phones with data to access Ministry of Sugar, Ministry of Forests and the Reserve community based expositions and road shows organized official emails for the team.

This resulted in improved Bank of Fiji.

communication and access to customers and the management team.
The overall outcome of this move In addition, the Relationship and Sales team conducted has been rewarding through the impact on operational its own Roadshows/Talanoa Sessions in the Northern efficiency, productivity and service levels.
and Western regions to increase brand awareness and During the year, the Bank introduced a Relationship and empowerment, including encouraging women and youths product knowledge with the aim of promoting economic Sales Monthly Reporting Template as part of Operations in business.

Reporting to the Management and the Board to better manage and monitor branch and individual officer Overall, the Bank contributed towards increasing the performance.
financial knowledge, management, skills, attitudes, and behavior of customers through these engagements.

The For the year under review, Bank continued to prioritise financial wellbeing of individuals/businesses through monitoring and recovery of impaired accounts.
the Bank’s financial literacy initiatives was part of its An Appraisal System was also proposed for the Bank becoming financially informed to make sound financial Management System as well as a Sugar Cane Template decisions for their sustainability.

commitment to individuals, businesses and households enhancement to promote accuracy in loan assessment and data management and to generate efficiency and productivity.
42 Fiji Development Bank 2019 Annual Report The Bank participates in a number of community expositions across Fiji.

43 Fiji Development Bank 2019 Annual Report Review of Business Risk Services 2019 FDB Planning Conference Team.

The Conference was organized by Business Risk Services Division at Warwick Fiji, Korolevu.

44 Fiji Development Bank 2019 Annual Report The Bank like any other financial institution is exposed increases in the Agriculture and Transportation sectors.
continually, to various degrees of risk.

This is part and parcel of its mandate as a catalyst to economic development, focusing largely on the agriculture and rural sectors.

Working within a sound set of risk management policies, and under the supervision of the governance vested with the Board and the Credit Risk Committee, the Business Risk Services (BRS) Division is tasked with the execution of the Bank’s risk and governance programmes, including regulatory compliance.
The BRS Division comprises of 5 teams, including the Legal Services (inclusive of Records and Insurance), Credit Risk and Approval, Credit Administration, Asset Management and Enterprise Risk and Business Development.

The Bank, through its mandate, inherits high levels of risks as other development financial institutions do.

Therefore, these units are interlinked in ways to support the Bank’s risk recognition, assessment and mitigation.
Total Bank and NPL Portfolio Historical Trend (Jul 18 - Jun 19) $550.00 $500.00 $450.00 $400.00 $350.00 ) M $ ( o i l o tf r o P k n a B l a t o T $300.00 Jul-1 8 A u g-1 8 S e p-1 8 N o v-1 8 O ct-1 8 Ja n-1 9 D ec-1 8 F e b-1 9 M ar-1 9 A pr-1 9 M ay-1 9 Ju n-1 9 $100.00 ) m $ ( o i l o tf r o P L P N $95.00 $90.00 $85.00 $80.00 $75.00 $70.00 $65.00 $60.00 Total Portfolio NPL Portfolio There was also a gradual rise in the NPL value from July 2018 to April 2019.
However, from May 2019 onwards, through efforts by the Asset Management Unit (AMU) there was a downwards trend with a lower amount of $88.99 million from the highest in the 2019 year of The Division is responsible for protecting the Bank from $93.37 million.

all risk; in particular credit risk.

Financial In terms of asset quality and revenue sources, the overall Non-Performing Loans (NPL) ratio to the Performing Loans Portfolio (PLP) was 16.49% for the Financial Year 2019.

The target was to achieve 10%.


New accounts downgraded to the NPL portfolio of $5.27 million were recorded during the year against slow recovery of $1.60 million in sales of asset and account upgrades.

Bad Debts recovered were $0.31 million and loan writes off amounted to $2.53 million.
The sale of assets for two large accounts in the NPL and Bad Debt portfolios did not attract the value expected and sales conversion of major land development projects took longer to complete due to engineering compliance related to environmental issues.
There was a notable increase in allowances for doubtful debts at 14% compared to the target of 12.3%, with significant Prudent Approach to Revenue and Expenses The Bank also embarked on identifying new revenue streams by extending the function of Legal Services to cover other existing customer needs like transfers, which commenced during the year.

The prospect of extending the services to other external customers will be explored.
Other sources of revenue generation, including an agency agreement with Sun Insurance, were revisited.

Although no changes were made to the rates, increase in volumes was the objective.

Sun Insurance also committed to support internal staff training on insurance products and benefits.

The overall operational cost for the Division exceeded budget due to unbudgeted costs of recovery for NPL and Bad Debt accounts.

These costs included court and legal services, bailiff and security services fees.
The proceeds from the sale of assets are used to recover the costs incurred.

45 Fiji Development Bank 2019 Annual Report Other savings were managed through streamlining of platforms that are in place.

This included discussions held processes and adopting a cost conscious culture within with the Fiji Sugar Corporation to digitalize payments to the teams.

Green Banking The Bank’s Green Climate Fund (GCF) Accreditation was completed during the year through the signing of the Master Agreement.
The formulation of pipeline projects were under development with various key partners and agencies.

The Bank has submitted its first concept note to access climate financing from the GCF for Fiji’s first Agro- Photovoltaic project to be developed in the old capital island of Ovalau.

This was submitted to the GCF under two years since approval in 2018.

Envelops, a Korea-based company, with the assistance of Korea International Co-operation Agency (KOICA) has developed this project.
The project focuses on developing a renewable Independent Power Producer (IPP) business and farming underneath the solar panels for agriculture produce and is expected to commence in 2020.

During the year, FDB continued to direct efforts in finalizing another GCF concept note.

In March of 2019, it signed a MOU with the Global Green Growth Institute (GGGI) on Green Growth and Climate Finance Cooperation.
GGGI has been providing technical support to FDB through the secondment of a staff member to develop Fiji’s GCF proposal on electric transport and strengthen Fiji’s stance on accessing critical climate finance through the GCF.

The partnership primarily aims to finalize a pilot programme concept note on Promoting farmers directly after deducting all dues, including FDB loan repayments.

This will reduce time and resources involved in the manual process of receiving and refunding payments to farmers.
Blended finance opportunities with government and other agencies provided the catalyst to encourage economic participation, with FDB being the conduit for development.

In search of these prospects, the ‘SME Matching Grant Finance’ was introduced.

It offers a loan, grant, borrowers’ equity, mentoring programme, monitoring and evaluation components to SMEs that a willing to invest in expanding business with small scale farmers, particularly those in the highland target areas.
The SME Matching Grant Finance is part of the Fiji Agriculture Partnerships Project (FAPP) funded by the International Fund for Agricultural Development (IFAD) through the Ministry of Agriculture.

The small-holder farmers in the targeted areas identified under FAAP also underwent relevant skills training to prepare them to undertake commercial agriculture activities.

The IFAD funded the training in addition to infrastructure funding.
Ongoing meetings with the Reserve Bank of Fiji on the extension and roll over opportunities for various low cost funding facilities have been fruitful in the extension of the assistance towards the identified sectors.

Customer Needs Decarbonization of Public Bus Transport in Fiji for The outcomes of the Customer Survey reflected the submission to the GCF.

Customer Focus customer’s perceptions, expectations and experience of the Bank’s services, products and general behaviour.
Promoting mobile and digital banking has been a focus for the Division and various meetings and forums explored ways of introducing or taking advantage of the existing The various outcomes formed the basis of reviews and changes to the Bank’s service culture especially in delighting customers through efficient delivery of services.
46 Fiji Development Bank 2019 Annual Report Majority responses in most areas commended the FDB followed by Transport, Communication & Storage with services but there were inherent gaps that required 218 approved accounts.

The Focused Sector accounted short, medium and long terms solutions.

for 1,313 out of the total loan approved of 1,595 accounts this reflects the Banks commitment towards fulfilling its A large number of small agricultural and SME customers mandate.
are still under the Micro level threshold.

They qualify for Government loan incentive schemes with low interest Approval for the Financial Year 2019 rates and flexible terms conducive to the nature of business.

13 181 The high value customers at the large end demand 41 2 29 competitive commercial rates and faster delivery of services.

Established underwriting guidelines and more 133 regular EXCO meetings enable faster delivery to these customers.
However, rates offered by commercial banks could not be matched due to increasing cost of funds.

It is noticeable that Agricultural and Small and Medium Enterprise customers account for almost 80% of the Bank’s total customer base.

The emphasis on these customers has grown over the years despite the fact that high levels of risks are prevalent.

In particular, sectors such as Agriculture, Wholesale, Retail, Hotels and Restaurants and Transport, Communication and Storage.
The Bank’s cost of funds for the 2018 Financial Year was at 3.28% and the rate spiked to 3.89% for the 2019 Financial Year.

This increase in the cost of funds was passed on to new customers effective from February of 2019 when the revised Bank’s pricing model came into effect.

Bulk of the Bank’s approvals for the 2019 Financial Year was under the Agriculture Sector, Transport, Communication & Storage, Private Individual and Wholesale, Retail, Hotels & Restaurants, respectively.
Looking at the approvals for the 2019 Financial Year, 919 approvals were made for the Agriculture Sector, costly 218 0 34 2 11 12 919 Agriculture Electricity, Gas & Water Manufacturing Mining & Quarrying Professional & Business Services Public Enterprises Transport, Communication & Storage Wholesale, Retail, Hotels & Restaurants Building and Construction Non-bank Financial Institutions Others Private Individual Real Estate In addition to the usual customers, the Bank makes effort to engage in rural awareness programmes on the two main islands and other maritime islands, thus, educating the unbanked communities.
With regular research and business development carried out by the Bank, it has previously devised products and facilities of significance to the people of Fiji and is continuing to do so in the future.

47 Fiji Development Bank 2019 Annual Report Asset Quality Majority of the loans portfolio asset are performing at 83.51%, the rest of 16.49% are non-performing and most number of customers have the Client Quality Rating of ‘E’ which is of a performing category.
0% 1 0 % 12% % 3% 3 % 7 65% Client Quality Rating G E F H I C D 48 The Bank needs to continually assess the competencies of staff and identify capacities that are lacking for a desirable outcome, as well as refine business process.

FDB hires people with high caliber and appropriate experience to accomplish the Bank’s overall objectives through smaller intricate tasks.

This, in turn, improves our overall customer satisfaction.
The focus moving forward to reduce our cost base and improve efficiency and responsiveness will be the increased use of technology and refinement of business process.

To realize the full value of large NPL accounts is the ideal target in the AMU unit.

Loan upgrade is a priority to realise our development mandate of reinstating long term business relations with recovery of suspended interest and restoring long term future income.
There were medium to large NPL accounts with ongoing repayment arrangements not qualifying for upgrade due to the prevailing non performing parameters that could not be fulfilled such as irregular remittances and absence of data and financial reports.

Fiji Development Bank 2019 Annual Report The sale of long-term assets as opposed to sale of business as a going-concern present some difficulties in attracting the right value even with vigorous marketing and numerous negotiations.
The general tightening of lending with banks was one of the deterrents in domestic tender market as buyers needed to secure finance prior to indicating their interest.

Loan write offs are the last step whereby all avenues have been exhausted or recovery through sale of assets or legal action would take its due course.
Accountability assessment became part and parcel of write offs to ensure that there is transparency and compliance in our system and processes and decisions were made at the appropriate authority levels.

Staff in the Asset Management Unit work to rehabilitate accounts against willful defaulters, lack of financial discipline and frequent intervention from external parties on foreclosure action.
The cost of recovering a debt is assessed with the rehabilitation opportunities and the probability of success through commitment from customers (which may show signs of deterioration) and at the same time, protect the Bank by minimizing risk through potential default of accounts.

Even though rehabilitation is prioritised, recovery at times is a necessity to protect the Bank’s interest.
The Unit has accumulated debts from non-performing accounts for the year, but with proper action plans, we have managed to maintain it below the benchmark.

Employee Engagement and Learning & Growth There were a number of staff programs and collaborations during the year, one of which was the activation of the ideas shared on the Ideation 360 platform by the staff engaged in the ‘Emerging Leaders Program’ of the Bank.

The BRS team actively participated in the Ideation 360 platform.
In addition to the Ideation 360 platform, the Enterprise Risk and Business Development Unit disseminates the “This Way” newsletters on a monthly basis informing staff of events and updates that are occurring at the Bank.

The Bank staff also have their departmental meeting on a regular basis to discuss operational level outputs, projects, as well as challenges and solutions.
The Way Ahead The 2020 Financial Year looks promising with completion of policies required for the Green Climate Fund accreditation which would now advance work on the concept notes for climate resilient projects in the country.

New financial products and solutions are in development stage that addresses evolving customer expectations.

Moreover, FDB will continue in its pursuit of becoming the bank of choice for Fijians who want to develop and prosper.
The 2020 Financial Year looks promising with completion of policies required for the Green Climate Fund accreditation which would now advance work on the concept notes for climate resilient projects in the country.
49 Fiji Development Bank 2019 Annual Report FDB’s New Financial Solution: Agriculture Family Loan Facility Financing Available without Formal Land Title Farmers that have previously lacked access to finance due to the absence of a formal land title to put forth as collateral to obtain loans from banks can now take advantage of the, one-of-its kind Fiji Development Bank [FDB] Agriculture Family Loan Facility.
The Facility is an innovative tailor-made financial solution that provides access to finance to those farming for 10 years or more who do not have a formal land title.

In breaking the barrier to accessing finance, this Facility focuses on the growth of farming families by providing finance for land development on the farm, construction of farmhouse and infrastructure such as farm inroads, water supply and irrigation, or renewable energy to support the farm.
Launched in December 2018 in Labasa by the Minister for Agriculture, Rural and Maritime Development, Waterways and Environment, the Hon.

Dr. Mahendra Reddy, the Facility is specifically designed for families who have a viable farming business on communally owned land, estate or privately owned land with consent given by the land-owning unit.
‘FDB’s Agriculture Family Loan is a multi-dimensional solution to achieving sustainable agriculture in Fiji, and contributes towards the Government’s financial inclusion agenda,’ said Dr. Reddy.

A large number of experienced farmers in Fiji are crippled without access to finance to progress from subsistence farming to becoming either semi-commercial or commercial farmers.
‘The existing entrepreneurs who are not able to mobilise their own savings or do not have any assets to use as collateral to obtain loans from banking institutions may thus find it impossible to survive in a competitive industry.
While one may say that all farmers can use their land for collateral, this may not be possible in the case of Fiji as significant number of farmers may not be holding a formal title of the land which can be transferable should the lending institution get to that stage,’ said Dr. Reddy.
‘I am convinced that the product aims to contribute to our national agricultural development strategy in improving the livelihoods of smallholder farmers by accessing inputs and modern technologies, strengthening their linkages to markets, and improving access to information, research, and knowledge,’ said Dr. Reddy.

For those whose loans will be approved, the Bank will deliver financial literacy and management skills training.
FDB’s Be Financially $mart booklet is designed to promote and develop entrepreneurial and business skills and capacities of farming families and SMEs that will be fundamental to their full market participation, and to take advantage of new opportunities.

In the development stage of this new financial solution, the Bank and Ministry of Agriculture have closely collaborated.

One of the areas of collaboration has been administering the common goal of financial literacy programmes for farmers.
The Bank and the Ministry both recognize the need for improved financial management skills amongst farmers.

50 Fiji Development Bank 2019 Annual Report In the development stage of this new financial solution, the Bank and Ministry of Agriculture have closely collaborated.

51 Fiji Development Bank 2019 Annual Report Launch of FDB Agriculture Family Loan Facility.
52 Fiji Development Bank 2019 Annual Report FDB has delivered on financial literacy for communities through workshops which were designed to promote and develop entrepreneurial and business skills.

The objective included improving capacities of farming families and SMEs that will be fundamental to their full market participation, and to taking advantage of new opportunities.
53 Fiji Development Bank 2019 Annual Report Strengthening Access to Finance for Agro-SMEs Agriculture-based Small and Medium Enterprises (SMEs) that lacked access to finance in expanding their business to work with Small-Holder farmers, particularly from the more rural areas, can now invest through a matching grant and loan package that will meet up to 75% of the total investment cost.
The Fiji Development Bank (FDB) and the Ministry of Agriculture, through its Fiji Agricultural Partnerships Projects (FAPP) funded by the International Fund for Agricultural Development (IFAD), on 8 April 2019, signed a Memorandum of Understanding (MoU) to oprationalise the ‘SME Matching Grant Facility’.

The Facility promotes market-oriented agricultural production by farmers in remote rural areas.
With IFAD providing an incentive grant that will meet 25% of the total investment cost, FDB is the only bank that will provide a financial solution constituting a IFAD’s Monitoring and Evaluation team met with FAPP and FDB to evaluate the project implementation progress.

loan sum meeting half of the total cost of the planned be supported by SMEs that buy at farm gate leading to investment.

The grant amount equals the borrower’s sustainable agribusiness.

equity contribution.


Possible uses of the investment capital raised might this incentive and through this partnership, FDB will include a vehicle to enable the SME to access remote collaborate with FAPP to create an enabling environment farming areas, other infrastructure to promote improved to promote an agribusiness approach.

FDB is proud to partner with IFAD and the Ministry in market-oriented production, working capital or inputs support for a contract farming venture.
The Bank was responsive to FAPP’s proposal to With access to grant finance of up to $50,000 and loan the livelihoods of people particularly those in rural and funding of up to $100,000, Small-Holder farmers can remote areas.

collaborate as both share the common value of improving The SME Matching Grant Facility promotes market- oriented agricultural production by farmers in remote rural areas.
54 Fiji Development Bank 2019 Annual Report FDB CEO, Mr. Mark Clough and Permanent Secretary for Agriculture, Mr. David Kolitagane at the MoU signing.

55 Fiji Development Bank 2019 Annual Report Smart with Money.

Smart with Life.

Whole-of-life Solutions through Financial Literacy Financial literacy initiatives, which is a multi-dimensional tool, delivers whole-of-life and loan outcomes.

Traditionally, financial literacy was popular as a set of skills that involved managing money.
The ultimate goal was to be able to make sound financial decisions to accumulate wealth or savings.

Supplementary skills on budgeting, tracking income and expense, having a savings and record keeping dominated this understanding.

However, as entrepreneurship evolved and as unique challenges surfaced, financial literacy initiatives also adapted to address such barriers to business sustainability.
This adaptation strengthened the ultimate goal of wealth accumulation or savings that may lead to reducing inequalities.

Today, financial literacy has a broader purpose to fulfil.

It is no longer limited to just possessing the skills of budgeting, tracking expense, having a culture of savings but also having the ability to apply these financial management skills to find opportunities for business development.
The skills are now accompanied by awareness on financial business opportunities and risks under the whole-of-life Solutions approach.

Combined, these lead to nurture an attitude that leads to positive change in behaviour when it comes to managing money.

Now those skills of financial literacy could be understood better, and applied more innovatively.

The Fiji Development Bank’s journey in 2019 focused on financial literacy initiatives.
Those initiatives involved designing templates for improving skills related to managing financials, use of cropping plans, creating business linkages for value chain financing, investing in term deposits, advocating for a culture of savings, involving women and youths in business, promoting record keeping and debt management, improving marketing and securing access to markets.
The Bank focussed on educating stakeholders such as Ministry of Agriculture and Ministry of iTaukei Affairs to assist in educating farmers and valuable communities.

The year began with the launch of a term deposit product, the Yaubula Term Deposit Facility in July.

Through this product, FDB offered Fijians an opportunity to invest their savings for reliable returns.
The Bank held numerous awareness sessions in particular the rural part of Fiji, including in the island of Gau, on the importance of savings and investments.

Later in November, the Bank launched its FDB’s National Small and Medium Enterprise Awards with a focus on reinforcing the importance of proper record keeping, having healthy banking habits and savings plans.

The award criteria featured these aspects that is verified through on-site visitations for the nominees.
In breaking the barrier to access finance, FDB introduced another financial solution for farmers that lacked access to finance due to the absence of savings, assets or a formal land title to put forth as collateral.

The FDB Agriculture Family Loan Facility was launched in December 2018, which followed a series of awareness and financial literacy presentations to targeted customers.

56 Fiji Development Bank 2019 Annual Report Financial literacy workshops conducted by FDB for Ministry of iTaukei Affairs.
For those whose loans are approved, the Bank has a financial literacy and management skills training programme in place.

The product has its own financial literacy guide booklet in the English and vernacular languages.

The launch of the product was also one of its kind with FDB inviting various stakeholders to have information booths on various related products and services.
It was a “literacy festival” in some sense that allowed farmers to access information and services such as those of plant doctors, renewable energy and farm implant service providers.

Over the year, the Bank promoted financial literacy at various Talanoa Sessions hosted by the Bank across the country.

Here are stories of customers whose journey sums up the overall objective of FDB’s initiatives.
Financial literacy workshops conducted by FDB for Extension Officers from the Ministry of Agriculture in Labasa.

57 Fiji Development Bank 2019 Annual Report Realising Equity through Financial Literacy The story of Sakeasi Tivika of Tailevu, who is featured Financial Literacy Tool Kit, crucial to increasing returns on the cover page, documents how financial literacy from their agricultural businesses.

initiatives improved his farming production through a changed behaviour towards financial record keeping.
Then in December of 2019, FDB participated at a Today, Sakeasi has a better understanding of linking his workshop organised by FCLC and the Ministry of cropping plan to ‘Cash Flow’ projections.

Agriculture with over 50 ginger farmers from Tailevu, on His business is part of an agriculture value chain and the main land.
he has been able to secure a market for his ginger with ‘FDB brought a consultant from ADB, Simon Thompson, Kaiming Agro Processing Ltd. Further, he has accessed who talked about the Agri value chain financing and the financing by assigning the contract with Kaiming to new reform by Government, the Personal Properties secure the loan with FDB.
Security Act (PPSA) that would allow farmers to use assets such as crops and contracts as collateral for loans,’ Despite having farmed Dalo and Cocoa as well as he said.

managing a cattle farm for over 20 years, Sakeasi did not have a habit of keeping farm or financial records.

He ‘When I initially approached FDB for a loan, it was was not tracking his income or expense.

As a result, he declined because I did not have any form of security nor could not have a budget or a savings plan.
While he had records to prove my financial management skills or bank farming experience, his attempt at accessing financing statements,’ said Sakeasi.

was initially declined.

‘I started ginger farming in 2018 on a small scale just to of Agriculture and support from the Agriculture Ministry, increase my income,’ said Sakeasi.

FCLC and my cluster group,’ he said.


‘What I did have was a viability farm report from Ministry ‘After being assisted by the Ministry of Agriculture in Sakeasi is the head of the smallholder ginger farmers of 2017 through aid money, I was able to buy farming the ‘Drekenivuci Ginger Farmers Cluster’, based in the tools such as spade, forks and knives.

Then I started to Naloto district in Tailevu.

concentrate on ginger,’ he said.


He said that the Fiji Crop and Livestock Council (FCLC) in ginger in particular, I had to start from scratch.

I had assisted him with the hiring of a diger service provider.

It to concentrate my attention to changing my attitude was through this assistance he was able to complete land towards farming and start treating farming as a business,’ clearing which is a costly exercise.

he said.
he said.

‘With no security, no cash deposit, no farming experience ‘FCLC also assisted me in securing a market for my ginger ‘Through the FDB team I was introduced to cropping with a large processing company and open the doors to plan and budgeting templates to use in recording my FDB,’ said Sakeasi.
farm activities as well as my income and expenses,’ said In November 2018, FCLC and FDB signed a memorandum of understanding to work together to improve farmers’ understanding of financial management through its Sakeasi.

58 Fiji Development Bank 2019 Annual Report Sakeasi, a ginger farmer, was introduced to FDB’s Financial Literacy Tool Kit.
‘We talked about the balance sheet, income statement, ‘The Ginger cluster that I belong to has signed an monthly farm trading account, cash flow, and I was agreement with Kaiming Agro Processing Limited and able to understand one thing – recording helps to make I also have a contract farming agreement which I used decisions,’ he said.

to get a loan from FDB for my land development, agro- inputs, land clearing and planting materials,’ he said.
He said that the facility that FDB financed him through also required the business to engage his family in it.

In order to sustain his contract with Kaiming, Sakeasi ‘The loan account is under my wife, Merewalesi, and my changed behaviour has helped him to be more productive.

now has a positive attitude towards record keeping.

His name and our children and my brothers are all involved in the farm,’ said Sakeasi.
Sakeasi’s story reflects how financial knowledge combined with skills, attitudes, and actual behavior change when He said now that he knows more about his projected applied effectively, lead to a strong foundation for the income, expense and cropping plan, he is able to plan financial wellbeing of him and his business.

effectively.

Sakeasi had also undertaken ‘Contract Farming’ training through the Fiji Crop Livestock Council, funded by Food & Agriculture Organization (FAO).
59 Fiji Development Bank 2019 Annual Report From Garment Factory to Aqua-Farmer Arun’s story documents how financial literacy initiatives, ‘I would work at the garment factory and farm as well.

in particular her culture of savings and managing her Those vegetables that I would sell at the market helped finances, contributed towards her family and her well- us get through and allowed me to save some money too.

being.

Even if that meant that I would eat less,’ she said.
Arun is an award-winning aquaculture fisherwoman and ‘I have always thought of living a life that would help me a cash crop farmer whose business has been financed by to sustain myself and my family,’ said Arun.

the Fiji Development Bank and the Pacific Community (SPC).

With that mind-set, it was not long before Arun saved up enough to be able to buy a piece of land.
She had also From a garment factory worker, she has today ventured neared retirement by then and accessed her retirement into becoming one of the very few fisherwomen in Fiji funds.

who has established her very own male-only cultured Tilapia ponds.

Despite her primary level education, Arun was always She sells vegetables and fish, and supplies fingerlings to the commercial and semi-commercial Tilapia farmers in In 2004, she finally took the big step that would change Fiji.

her and her children’s life.


smart when it came to money.

As a daughter, Arun always told her mother that she Her attitude towards money and savings and her habit could not live a life being dependent on anyone.

As a of planning for the rainy days allowed her to understand victim of circumstances, she could only finish her studies that her money decisions regarding her pension and up to class seven.
Nevertheless, as an individual, she kept savings would determine her financial wellbeing and telling herself that she had faith in herself despite the ultimately her quality of life.

numerous personal trials that came her way.

As a mother, she told her children to find a way for the increase my income – that was the main goal,’ said Arun.

‘I knew I had to make a decision that would allow me to rainy days.

‘When my daughters were in school and we would build a farmhouse.
Then I realized that I would also need see financial hardships coming our way, I would bake some cash flow to start the farming,’ she said.

‘I used my savings and pension money to buy a land and puddings or fry Bhajia and give it to them to sell it at the school canteen,’ said Arun.

‘FDB came to help.

After all FDB is there to improve our quality of life.
So, I took a loan thinking in case I needed As a garment worker and the sole breadwinner, Arun some cash on standby since building a farmhouse and realized that she needed to find other means of earning starting all over again at a new place could bring about additional income.

some unexpected expenses.

We must think about all that could come up unexpectedly along the way,’ said Arun.

60 Fiji Development Bank 2019 Annual Report This was her first loan to finance vegetable and rice farming.
Customers of FDB are required to develop business plans and have some form of financial literacy.

While Arun had not attended a single financial literacy workshop back then, she was still able to showcase impressive budgeting, planning, risk monitoring, expense tracking and savings trends.

‘I would discuss these (issues) with my FDB Relationship and Sales Officer and would ask a lot of questions – that is how I learnt along the way too,’ she said.
‘One day I read about an all-male Tilapia farm in Indonesia and I wrote a hand-written letter to Ministry of Fisheries to help me.

They put me in touch with SPC,’ she said.

Through the assistance from the Pacific Community (SPC) Sustainable Pacific Aquaculture Development Project, Ministry of Fisheries and FDB, today, she has more than a decade of fish farming experience, has improved her sales, and has four new ponds and an all-male Tilapia incubator hatchery.
‘The right attitude towards money and savings combined with financial literacy skills is important,’ she said.

‘There is no point in just attending financial literacy training if you are not going to change your behaviour and attitude towards managing your money and planning for the rainy days.

I was lucky that I always had a positive mind-set when dealing with money,’ said Arun.

‘You have to think about savings even before you feel like you will need it,’ she explained.
Arun uses her fish sales income to repay her loan, cater for her business expenses and uses her vegetable sales income to cater for her household running expenses.

‘From whatever is left, I make sure I save something as well.

That is what budgeting is, planning is and that is what leads to savings – savings that got me here today,’ she said.
61 Fiji Development Bank 2019 Annual Report FDB’s Commitment in advancing the SUSTAINABLE DEVELOPMENT G ALS and the National Development Plan (NDP) 62 Fiji Development Bank 2019 Annual Report The Fiji Development Bank (FDB) has continued to Bank has also addressed youth unemployment and pursue its mandate for over fifty years.

During this promoted women in business.


FDB has also committed time, it has positioned itself as an important financially towards improving the transportation sector and digital sustainable institution critical to the development of the connectivity while nurturing new and emerging growth Fijian economy.

sectors.

Building vibrant cities and towns and a stronger rural economy has also been part of FDB’s financial FDB is committed to the Sustainable Development mandate.
Goals (SDGs), which is expressed in the Bank’s 2018- 2020 Strategic Plan.

The Plan is a development financing In 2019, the Bank approved a total of 1,595 loans, valued roadmap that is inclusive and engaging in FDB’s history.

at $187.59 million.

The Bank plays an important role in providing financial Of this, 1,313 loans valued at $87.48 million, were solutions that promote prosperity, which is the overall approved to sectors in its Focused Sector.

This reflects objective of the SDGs.


82.32% of loan approvals in number and 46.63% in value.

The Focused Sector portfolio reflects 43.35% in value The Bank’s focus has been on delivering not only on ($234.00 million), with 4,096 number of loans (79.55%) outputs related to the SDGs and its own mission and of FDB’s total loans disbursed as at the end of the 2019 vision, but also on Government budget initiatives, the Financial Year.
National Development Plan (NDP), and on obligations attached to its Green Climate Fund (GCF) accreditation.

There were 282 loans approved in the Non-Focused FDB has contributed towards realizing the goals in the of loan approvals in number and 53.37% in value.
The NDP by supporting and promoting inclusive socio- Non- Focused Sector portfolio reflects 56.65% in value economic development, reducing unemployment, ($305.75 million), with 1,053 number of loans (20.45%) promoting food and nutrition security initiatives, of FDB’s total disbursement as at the end of the 2019 Sector, valued at $100.11 million.

This reflects 17.68% access to clean and safe water, proper sanitation, clean Financial Year.

energy, quality education and healthcare facilities.
The 63 Fiji Development Bank 2019 Annual Report adoption of mechanization.

Loans advanced to Fiji Sugar Corporation, cane co-operatives and individual farmers in 2019 were allocated to the purchase of harvesters and other machinery.

Tractors and farm implements for cane farmer co-operatives were financed to contribute to efficiency in this sector.

The Bank closely collaborated with the Ministry of Sugar Industry in this regards.
Forestry Similarly, FDB disbursed $5.47 million into the market during 2019 to support sustainably managed and developed forestry resources in Fiji.

FDB was also the first financial institution to collaborate with the Ministry of Forestry to support its 4 Million Trees in 4 Years initiative.

The Bank also introduced mangrove restoration programs as part of its staff community projects.
Further, it has called on customers and stakeholders to adopt a Agriculture The portfolio value of $110.62 million reflects FDB’s strategic approach, rather than just a corporate social commitment in supporting a competitive, sustainable responsibility stance, for climate-action initiatives.

and value-adding agriculture sector in Fiji.

This value represents 20.50% of FDB’s total portfolio.

Fisheries The total number of loans in this portfolio is 3,017, reflecting 58.59% by total number of loans.
In the 2019 Financial Year, the Bank approved 919 loans in the agriculture sector, comprising 57.62% of the total approvals.

These were valued at $30.72 million (16.38% by value of total approvals).

The Bank is notable for holding a majority of agriculture sector lending in the country, with 53.33% market share.

Sugar Industry FDB invested $20.77 million into the market during 2019 to support a sustainable sugar industry in Fiji.
With the industry playing an important role in Fiji’s socio-economic development, FDB has committed to support the 64 In 2019, FDB invested $4.94 million into the market in supporting one of Fiji’s key resource-based sectors, the fisheries sector.

The Bank continued to finance projects that implements sustainable fisheries practices.
Mining and Quarrying FDB’s investment in promoting a sustainable mining sector that has continued to provide employment, income, foreign exchange earnings and revenue for the government saw the portfolio stand at $0.55 million in 2019.

This comprised of 0.10% in value of the total portfolio in 2019.

There were four (4) loans in total, reflecting 0.08% of total loans by number.

These were mainly for rock quarry.

A calculated credit risk applied aimed at managing environmental risk.
In 2019, FDB committed $0.05 million through loan approval for the mining and quarrying industry by encouraging quarry instead of river-bed rock.

By value, this stood at 0.03% of FDB’s total approvals for the year.

This reflected only two (2) loan approvals, standing at 0.13% of the total approvals for the year.

FDB’s market share for this industry stood at 6.54%.
Fiji Development Bank 2019 Annual Report Manufacturing FDB is committed to supporting the NDP of developing Fiji as a manufacturing hub of the Pacific.

The manufacturing portfolio stood at $29.13 million at the end of 2019.

There were a total of 48 loans (0.93% of the total loans by number).

In 2019, FDB disbursed $7.49 million through approval to 11 new accounts.

By value, this reflected 3.99% of total approvals and 0.69% by number of loans in the Focused Sector.
FDB’s market share for this sector stood at 9.46%, with 14.73% in the food, beverages and tobacco sectors; 2.42% in the textiles, clothing and footwear sectors, and 0.46% in the metal products and machinery sector.

Of the total approvals for the year, 22 loans were approved to SMEs, to the value of $1.48 million.

Building and Construction FDB has disbursed $69.57 million (portfolio value) to this sector, reflecting 12.89% of the Bank’s portfolio value.
There were 76 loans in this sector, reflecting 1.48% of the Bank’s total portfolio by number of accounts.

In 2019, there were 29 approvals, 1.82% by number to the value of $19.60 million.

This represented 10.45% of the Bank’s total approvals by value.

Of the total approvals for the year, two loans were approved to SMEs, to the value of $0.18 million.

FDB’s market share in this sector stood at 15.96%.


65 Fiji Development Bank 2019 Annual Report Real Estate (Development) The Bank improved its lending into this sector and saw a market share increase from 5.71% to 5.73%.

The portfolio was valued at $46.13 million, comprising 61 loans.

This reflected 1.18% by number and 8.55% by value of the total portfolio.

There were 13 approvals in 2019 (0.82%) valued at $22.47 million, comprising 11.98% in total value of approvals.
Of the total approvals for the year, nine loans were approved to SMEs, to the value of $1.07 million.

7.63% of the number of total loans, by number and 30.06% by value.

FDB committed $51.84 million to this sector through approval of 133 accounts in the year.

This reflected an increase in the market share as well.

This reflected 8.34% of the approvals for the year, by number and 27.64% by value.

Of the total approvals for the year, 155 loans were approved to SMEs, to the value of $5.18 million.
Transport, Communication and Storage FDB’s third largest investment of 2019 was its disbursement of $22.70 million in the Transport, Communication and Storage sector, comprising 12.10% by value of the total approvals for the year.

There were 218 approvals, reflecting 13.67% of the total approvals for the year.

Of the total approvals for the year, 181 loans were approved to SMEs, to the value of $7.14 million.
The portfolio stood at $50.64 million, comprising 9.38% in value of the total portfolio with a total of 561 loans.

Wholesale, Retail, Hotels and Restaurants This portfolio, FDB’s largest at year end, stood at $162.29 The market share increased to 7.68% in 2019. million, comprising 393 loans by number.

This reflected 66 Fiji Development Bank 2019 Annual Report Professional and Business Services This portfolio stood at $8.36 million, comprising 87 loans by number.
FDB committed $5.39 million to this sector through approval of 34 loans in the year.

This reflected an increase in the market share as well.

Of the total approvals for the year, loans approved to SMEs was to the value of $45.73 million.

This sector includes businesses providing services in the legal, dental, accounting, beautician, photography and consultancy and domestic services industry.
Electricity, Gas and Water FDB’s commitment to the energy sector saw it provide financing for reliable, adequate, and affordable energy Non-Bank Financial Institutions for economic growth in a socially, economically, and FDB approved $1.69 million in the year to this sector.

environmentally sustainable way.

This reflected two approvals which saw the portfolio stand at $2.67 million.

There were three loans in total for FDB is looking to broaden support for greater energy this portfolio.
access by also identifying innovative solutions, sharing information with partner development institutions, and Of the total approvals for the year, one loan was approved with the private sector.

to SMEs, to the value of $0.19 million.

In 2019, the portfolio stood at $16.21 million, comprising Public Enterprises 17 loans.

This reflected 0.33% by number and 3.00% by The portfolio stood at $10.67 million with only one loan value.

account.
account.

There were 12 approvals in the year, valued at $20.48 million, 10.92% in value of total approvals.

Of the total approvals for the year, three loans were approved to SMEs, to the value of $0.17 million.

SME and Agriculture Sectors At the end of 2019 Financial Year, FDB achieved its ‘Mission 500’, targeted at a portfolio worth of $500 million that was set for 2018 Financial Year.

Total portfolio at end of 2019 Financial Year stood $539.75 million compared to $487.05 million in 2018.
The SME and Agriculture Sector contributed to the achievement of this target.

67 Fiji Development Bank 2019 Annual Report This collaboration needs to continue in a consistant and structured manner if the real benefits are to be realised.

The Bank is committed to enhancing its financial literacy programmes in the years ahead.
Access to Financial Services (Loans) FDB was firm in its commitment to promote an entrepreneurial culture by supporting micro, small and medium as well as large enterprises by providing access to financial solutions by committing $187.59 million through loans by approving a total of 1,595 applications.

This was a decrease of 1.60% by number when compared to 2018.

The value of applications received during the year rose by 53.94% when compared to the 2018 Financial Year.
Financial Literacy Working on having our customers become financially literate was a key pillar for the Bank in 2019.

The approach undertaken included a collaboration between the Bank and Ministry of Agriculture and iTaukei Affairs.

The wider collaborative ensures that more customers are educated.
68 Fiji Development Bank 2019 Annual Report 69 Fiji Development Bank 2019 Annual Report Green Banking The Bank is grateful to The United States Agency for International Development [USAID], through its Ready Project, for assisting the Bank in drafting two critical policies.

The Fiji Development Bank (FDB), was the first development bank in the South Pacific to be accredited to the Green Climate Fund (GCF), the world’s largest climate fund, as a Direct (National) Access Entity in 2017.
By accessing the global funds directly, FDB will be able to engage and manage financing that better enables Fiji’s businesses to implement projects that are climate- resilient.

With the Direct Access accreditation, FDB will be able to blend GCF funding of up to US $10M per project with other financing instruments to provide the best and most affordable financing package, while also continuing to deliver on its primary mandate of contributing to the sustainable development of the economy.
To effect the GCF conditional accreditation, the Bank Global Green Growth Institute (GGGI) and the Bank cooperate on advancing Green Growth and Climate Finance through a MOU.
rolled out its new GESI and Procurement Policy as well To generate high quality proposals for climate finance as revised its Complaints Management Framework, investments in low emission and climate-resilient projects Information Disclosure Policy, Insider Trading & and programmes, FDB first prioritized institutional Countering the Financing of Terrorism Policy and Anti- capacity building with knowledge development for the Money Laundering Policy.

staff.
staff.

70 Fiji Development Bank 2019 Annual Report GGGI provided interim technical support to FDB through the secondment of a staff member to develop GCF Concept Note on electric transport.

USAID Ready Project consultant, Ms. Colleen Peacock-Tautai, conducted an information session on FDB’s Gender Equity and Social Inclusion (GESI) Policy.
Professor Elisabeth Holland, Director of the Pacific Center for Environment and Sustainable Development (PaCE-SD), USP, presented on “The Science behind Climate Change”.

The Bank in August 2018 facilitated a two-day Green Climate Fund [GCF] Awareness Session for staff.

71 Fiji Development Bank 2019 Annual Report FDB’s Climate Action Initiatives The Fiji Development Bank’s (FDB) message to its stakeholders has been ‘to be strategic towards climate action’.
The call was to move away from merely engaging in corporate social responsibility initiatives to take a more strategic approach to raising awareness as well as taking on ownership of climate action initiatives in our communities.

FDB’s climate action initiatives was mostly involved with reforestation and mangrove restoration projects.

Launch of FDB’s Reforestation Initiative in the Central/Eastern Region at Silana Village in February 2019.
FDB Leads in Reforestation Initiative FDB became the first financial institution to partner with the Ministry of Forestry and I-taukei Affairs Board to commit to the Four Million Trees in Four Years (‘4MT4Y’) reforestation initiative.

Launch of FDB’s Reforestation Initiative in the Northern Region at Dogoru Village, Macuata in May 2019.

72 Fiji Development Bank 2019 Annual Report Launch of FDB’s Reforestation Initiative in the Western Region at Vatutu Village, Nawaka, Nadi in May 2019.
FDB Calls for Climate Action to be Strategic, Not Mere Voluntary FDB team’s mangrove restoration activity in Namatakula Village, Sigatoka.

Clean Up Campaigns FDB team’s mangrove restoration activity at Nawi Island Mangrove Planting – Savusavu.

Team Legal from the Head Office took time out to clean the foreshore along the Queen Elizabeth Drive in May 2019.
73 Fiji Development Bank 2019 Annual Report Corporate Social Responsibility A Bank wide blood drive campaign was coordinated in partnership with the Fiji Red Cross Society.

Pinktober fundraiser morning tea proceeds donated to the Fiji Cancer Society, facilitated through the FDB Women’s Forum.

August Undies Campaign – group drive to provide complimentary Dignity items for underprivileged young women.
74 Fiji Development Bank 2019 Annual Report An annual norm, the Business Risk Services team visited the Children’s Cancer Unit at the Colonial War Memorial Hospital during the Christmas season.

Donation of school stationery items and pre-loved storybooks to the Silana Village Primary School, facilitated through the FDB Women’s Forum.
FDB Team Properties’ took a long journey to the interior of Namosi to the only school there to add colour to the class 7 students learning experience come the new school year by painting their classroom.

The Talent and Organisational Development Team as a Unit gave back to the community via visitations to the Elderly People’s Home in Samabula with presentations of general hygiene care products.
75 Fiji Development Bank 2019 Annual Report FDB’s 2018 National Small and Medium Enterprise (SME) Awards Extending on the previous year’s theme of ‘Promoting SME Growth for Future Generations’, the FDB’s 2018 National SME Awards advocated and promoted the synergies between economic growth, social equity, and environmental sustainability with the theme ‘Promoting Inclusive and Green Development for SMEs’.
The application drive for the FDB’s 2018 National SME Awards, the longest for any SME Awards so far, attracted an unprecedented 532 category applicants from 193 individual SMEs.

The application drive ran for seventy days from 9 November 2018 to 18 January 2019.

The judging panel had four members this year comprising of: 1.

Ms. Sangita Kumar, Senior Business Adviser, Market Development Facility.

2.

Ms. Alisi Tuqa, Chief Executive Officer, Pacific Islands Private Sector Organization.

3.
3.

Mr. Trevor Ole, Chief of Party, USAID Ready Project.

4.

Mr. Dwain Qalovaki, two-time international award winning Sustainability Manager.

There were two observers on the panel to reinforce the integrity of the judging process: 1.

Mr. Tevita Gade, Reserve Bank of Fiji/National Financial Inclusion Taskforce 2.
Mr. Arjun Karwal, Manager, New India Assurance Company Ltd Meena Gounden of Gopal’s Poultry Farm was the winner of the Best Risk Managed SME Award and the winner of the FDB’s 2018 National SME of the Year.
‘These awards are one of a kind and I applaud the Fiji Development Bank for providing such an incentive and a visionary platform to our SME sector,’ ~ His Excellency, Major- General (Ret’d) Jioji Konusi Konrote, President of the Republic of Fiji at the FDB’s 2018 National SME Awards, 28.02.19, Grand Pacific Hotel.
76 Fiji Development Bank 2019 Annual Report Winners of the FDB’s 2018 National SME Awards are tabulated below: Sponsored by: Name of Award: Winner: Type of Business: Vinod Patel & Agriculture Award Iferemi Mataiedrau Tilivalevu Beef Scheme farmer Company PTE Limited Sun (Fiji) News PTE Ltd Tourism Award Sabeto Mud Pool & Hotspring Provides therapeutic natural Kookai Manufacturing Award 8Mountains spa treatment in its mud pools and hot springs.
Fashion designer and production house reaching export markets Quality Print PTE Wholesale/Retail Award Raju's Golden Roots Impex (Fiji) Kava wholesaler/retailer Limited Merchant Finance Ltd Professional Business Maui Bay Chemist Was the first retail chemist/ and FDB Services Award pharmacy in Sigatoka that offered certain medical services that were only accessible in health care facilities/hospitals.
New India Assurance Green Conscious SME Automan (Fiji) Repairs and sells automatic Fiji Award transmission kits and supplies burnt clutches, plates and oil to scrap metal dealers and the burnt oil to Fletcher steel oil recyclers.
Sun Insurance Company Best Risk Managed SME Gopal's Poultry Farm Poultry farming PTE Limited Award Mechanical Services Climate Change Farm Tech Ltd Hydroponics Farming PTE Ltd Responsive SME Reserve Bank of Fiji Most Disaster Resilient Dayanand Harideo Poultry, Taro and Kava farming SME Ministry of Industry, Youth Entrepreneur of Health Plus Diagnostics PTE Provides quality and affordable Trade and Tourism the Year Ltd diagnostics to GPs, Corporates and the General Public specialising in Laboratory and Ultrasound imaging services.
Ministry of Women, Woman Entrepreneur of The Greenhouse Studio A multi-disciplinary creative Children and Poverty the Year Alleviation design and communication studio.

Fiji Development Bank National SME of the Gopal's Poultry Farm Poultry farming Year 77 Fiji Development Bank 2019 Annual Report Hightlights from the FDB’s 2018 National SME Awards, held on 28 February 2019 at the Grand Pacific Hotel.
78 Fiji Development Bank 2019 Annual Report The Bank is grateful to its Development Ambassadors (award sponsors and partners) for collaborating with FDB to recognize Fijian SMEs.

The total prize money for the year’s awards remained at the grand total of $61,000.
To become a sponsor or a partner, please email your interest to info@fdb.com.fj 79 Fiji Development Bank 2019 Annual Report Review of Talent and Organisational Development In the 2019 Financial Year, the Bank strengthened its efficiency with the establishment of a separate Credit institutional capacity and business culture to deliver Administration Unit [CAU] from the Legal Services unit outcomes that promoted a culture of continuous did not meet expected outcomes of enhancing security improvement, innovation, growth and employee documentation processing customer response times for engagement.
Overview FDB has a strong culture of upholding its values of Development, Innovation, Collaboration, Integrity and Accountability in its commitment to deliver on its Vision to be a dynamic financial service provider in the development of Fiji.

Culture is an important driver of business outcomes for any organisation with its people as the backbone and key element in its overall performance.

Organisational culture is at the heart of how an organisation and its staff think and do things.
The TOD Unit is responsible for developing the Bank’s business culture strategies and predominantly focuses on facilitating and delivering cultural transformation programs that would positively influence people’s mindsets, behaviours, practices and ultimately the way things are done at FDB.
The 2019 Financial Year focused on implementing transformational programs that advocated continuous operational excellence, enhanced people development, staff engagement and community engagement initiatives, which were driven through FDB values and outcome driven approaches.
Internal Business Processes Culture of Continuous Improvements Committed to continuously enhance the Bank’s operational efficiency levels, key structural and process improvement activities and initiatives were successfully implemented in the 2019 Financial Year.

A post review of a realignment exercise of 2016 found that the ultimate goal of enhancing operational 80 six out of twelve branches.
Consequently, the two units were merged in the 2019 Financial Year to integrate and house all legal related functions, workflow processes and documentation under one business centre, under the leadership of the Manager Legal Services.

This merge was aimed at enhancing customer service turnaround times [TAT], improving access to in-house legal expertise and clarity around accountability.
The merger also resulted in the review of the Legal Services structure and position job descriptions to support streamlined workflow processes and return of core customer-facing functions back to the Relationship and Sales team.
This also allowed for centralisation of key security documentation, consent and searches to the Legal Services, and the opportunity to standardise and automate routine functions, including further process re- engineering and possible policy reviews in collaboration with relevant stakeholders.
Subsequently, the Business Risk Services [BRS] Business Division was also streamlined to focus on minimising the Bank’s credit exposure and losses by providing quality credit management services, legal counsel and asset management through the transfer of the Enterprise Risk Business Development [ERBD] Centre out of BRS.

ERBD had housed three teams, namely, Enterprise Risk Management [ERM], Planning Unit, and External Relations Unit.
The first phase, implemented in the 2019 Financial Year, was the setup of ERM as a standalone independent unit, reporting directly to the CEO.

ERM was established with the aim of protecting the Bank from potential risks.

Its Fiji Development Bank 2019 Annual Report functions focus on minimizing disruptions to FDB’s business and customers by using a systematic process of positively identifying, assessing, treating and managing risks that threaten the attainment of the Bank’s goals.
In the next financial year, the ERBD Centre would be rebranded as the Marketing & Business Development Unit, with reporting direct to the CEO.
The establishment of the new Marketing & Business Development Unit is aimed at improving the Bank’s market share and focusing on branding FDB as a responsive development financing institution, one that is relevant to meet the changing needs of its customers, the goals of the National Development Plan and to support the operationalization of the Bank’s function as an accredited GCF Direct Access Entity.
Enhancing Customer Focus With FDB’s strong focus on being responsive to the changing needs of its customers, the Bank made further improvements to enrich customer experience for both its customers and staff.

Previously, the Bank’s Prime Centre, which provided customized service to the Bank’s high net worth corporate and individual customers, and the Suva Branch were merged as one Unit.
In the 2019 Financial Year, the Prime Centre became a standalone branch led by a dedicated Manager separate from the Suva Branch.

This move was aimed at providing the Bank’s high net worth corporate and individual customers personalised service with dedicated attention on meeting their development and financial needs.
In turn, this presented the Suva Branch an opportunity to review its structure, customer portfolio mix and workflow processes to better serve its client base in the agriculture and Small and Medium Enterprise (SME) sectors.

Further, to enhance staff productivity, the Bank reviewed its customer hours following the review of an in- house customer traffic flow survey findings.
The change will come into effect in the next financial year, with an extra FDB is committed to investing in capacity building initiatives for its people.

hour now allocated to the Relationship and Sales (RS) Team to attend to administrative and back-office tasks.

Process Improvement and Re-engineering Groundwork for the automation of the recruitment process in the next financial year was established and work in progress.
The move away from the current manual and paper-based process would see the Bank’s recruitment process reduce to less than 30 days from the closing date of vacancy advertisements to the appointment of the successful candidate.
A significant team achievement for the TOD Unit in the 2019 Financial Year has been the development of the Unit’s Standard Operating Procedures (SOPs) to provide clarity on its diverse functions, outlining detailed systematic process descriptions, supplemented with process flow charts.
The SOP aimed at ensuring each new and existing team member understands how to accomplish assigned tasks/functions has helped reduce staff training time, maintained consistency and provided quality assurance standards by reducing errors and enhancing productivity by the team.

It has also established levels of authority and made transfer of work simple.

The SOP will be used as a guide and benchmark for the Unit’s next scheduled in house audit as well.
81 Fiji Development Bank 2019 Annual Report Learning and Growth Staff Development FDB’s commitment to investing in its people through opportunities of enhancing internal competencies and capabilities was reflected in more than 80% completion rate of in-house training programs conducted in response to the Bank’s and individual staff’s Training Need Analysis (TNAs).
These TNA derived trainings featured in the Bank’s the 2019 Financial Year Training Plan were successfully completed and evaluated in accordance with a monitoring and evaluation framework using Kirkpatrick’s Evaluation Model.
As part of the Bank’s commitment to encourage innovative and effective ways of learning and developing its people, the Bank partnered with the Association of Development Financing in Asia and the Pacific [ADFIAP] to conduct a “Risk Based Credit Appraisal & Management” training over five days at FDB.
The ADFIAP Consulting Group in collaboration with FDB designed the program to support the Bank’s green project financing based on best practice risk-based parameters, criteria and processes that guide investment and lending decisions towards climate and ecofriendly business models.
01 Reaction Evaluation Form This form is filled on the final day of training 02 Learning Evaluation Form 5 working days for Local Training 03 Behavioral Evaluation Form 3 months from Training date 04 Result Evaluation 6 months from Training date Experienced trainers with great subject matter knowledge A B Addressed the importance of including environment of all loan applications Better understanding of risk based projects and analysis C D Refresher on financial ratios Content of the course was very useful to apply at workplace E In house staff development programs ranging from technical, behavioural, leadership, policy and mandatory occupational health and safety related training, supplemented with external local and overseas development programs, workshops and conventions in Staff Feedback on the ADFIP conducted on-site workshop on risk-based lending at FDB respective business specific areas, adding value to the Leadership Development Bank’s operations and business growth were all part of The Bank’s Emerging Leaders Program [ELP] provides development activities implemented during the year.
The a practical leadership platform for select staff to apply use of internal resource personnel and external facilitators key leadership learning outcomes and practices back in to provide specialist practical insight and perspective to their respective work units.

The aim is to positively also provided different and real life dimensions to staff’s influence the Bank’s organisational culture in the way learning experience.
82 staff think and do things in their daily activities and interactions in the Bank and with the community.

Fiji Development Bank 2019 Annual Report Members of the ELP group in one of their sessions.

Success measures of ELP can be attributed to some extent by the number of ELP members’ promotions, nominations to and recipients of the TOD initiated CEO’s Employees Excellence Award (CEO’s EEA), enhanced individual members’ performance appraisal ratings, and engagement in various Bank committees.
These include membership in committees such as the Labour Management Consultation and Cooperation Committee (LMCC), Realignment, Ideation 360, and active participation in the Bank community and social extra- curricula activities.

The success also includes positive findings of the Leadership Culture Survey (LCS) initially conducted in April 2018 and re-run in April 2019.
Additionally, a Scrum Team concept was formulated to provide a platform for exposure to learn new skills, develop new capabilities and to test capacity of ELP participants with the purpose of delivering on an assigned task were meant to be self-organizing and cross- functional by participating above and beyond members’ current job responsibilities.
Using the online Ideation 360 platform, 134 ideas were registered by ELP participants PHASE 01 Discover & Define (Complete) Leadership Culture Survey (LCS), stakeholder consultation & design - April 2018 PHASE 02 PHASE 03 PHASE 04 NEXT STEPS Transformation Delivery (Complete) 3x2 day workshops & workshop material - 18 & 19 April, 10 & 11 May, 28 & 29 May 2018 Develop & Deliver (Complete) Remote coaching support, Ideation 360 and 3x1 day workshop - 6, 8 & 10 August, 2018 Post Implementation (Complete) Re measure by leadership culture survey (LCS) - April 2019 Next Steps (Complete) Report to EXCO & Board 2019/2020 leadership Trainings Using the online Ideation 360 platform, 134 ideas were registered by ELP participants and two scrum teams established to prioritise, evaluate and coordinate appropriate implementation actions of Management ELP Schedule Employee Engagement approved ideas with relevant stakeholders as part of With a commitment to creating an environment that is identified Business Units Work Plans.
conducive to staff engagement, the following employee engagement activities were undertaken with positive outcomes recorded.

83 Fiji Development Bank 2019 Annual Report Staff Surveys Staff surveys were conducted during the year to ascertain staff feedback on their observations, experiences and preferences on various Bank leadership and operational related practices and matters.
These were featured in the re-run of the Leadership Culture Survey [LCS], a combined Staff Values, Engagement and Satisfaction Survey with positive outcomes evidenced in findings and appropriate strategies developed to strengthen positive findings, including areas requiring improvement.

Detailed comparative LCS results analysis between the two years clearly evidenced a proven correlation between achieving desired behavioural attributes and high performance, effectiveness and engagement.
In short, the 2019 survey findings reveal significant improvement in many aspects of leadership between the LCS completed in 2018 and April 2019, mainly in the Reactive (Below-the-Line) Leadership Competencies.

Reactive leadership competencies defined as leadership behaviors that have significant strengths associated with them, but also reflect inner beliefs and behaviors that limit effectiveness, authentic expression and empowerment.
Ongoing formal and informal staff awareness, education and Talanoa sessions conducted by the TOD team on key TOD specific developments across the network continued in the year to advocate on open and effective communication in building trusting relationships amongst staff and teams.
Staff Recognition The continuation of the CEO’s Employee Excellence Award [CEO’s EEA] program into its second year recorded a total of 52 nominations for the full year comprising six in the outstanding leadership award, 33 in the employee excellence award and 13 in the extraordinary teamwork award categories.
The importance of recognizing behaviours that are aligned to the Bank’s values and its correlating positive impact on the Bank’s business and culture in general is evident in nominees and recipients’ performance, interactions and relationships with internal and external stakeholders.
84 Fiji Development Bank 2019 Annual Report 85 Fiji Development Bank 2019 Annual Report Creating a Culture of Corporate Wellness The Fiji Development Bank (FDB) had launched its 2019 Corporate Wellness Program in February to strengthen its effort in steering the Bank towards a wellness- oriented mindset in the interest of reinforcing employee well-being, physically, mentally and spiritually.
As a responsible and caring organization, FDB has a strong commitment of creating a wellness conducive work environment for its staff.

As such, key wellness activities were implemented in the year.

FDB collaborated with the Fiji Cancer Society, WOWS Kids Fiji, Suva Golden Oldies Rugby Club, Reproductive Family Health Association Fiji, Fiji Albinism Project, Adventist Health, Colgate Palmolive and Van Med Labs to advance its wellness campaign.
Executive Management Committee members took the lead role in monitoring their health and well-being.

86 Fiji Development Bank 2019 Annual Report The localized motto at FDB is “We are FDB, and We will be responsive in driving dialogue and discussion around awareness, and debunking myths and misinformation about cancer.” National Advisor for Non-Communicable Diseases, Dr. Isimeli Tukana spoke to staff about the importance of monitoring health.
The revival of the Bank’s Staff Social and Sports Club, also supplements the Bank’s Wellness Programme.

FDB participated at the 6am Health Walk for Cancer in February at My Suva Park.

FDB’s Women’s Forum took a lead role in organizing health walks and fundraising activities for occasions such as Pinktober.
87 Fiji Development Bank 2019 Annual Report FINANCIAL REPORT Directors’ Report Statement by Directors Independent Audit Report Consolidated Statement of Financial Position Consolidated Statement of Profit and Loss and Other Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 89 91 92 95 96 97 98 Notes to and forming part of the Financial Statements 99 - 132 Source: Fraunhofer ISE 88 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 In accordance with the resolution of the Board of Directors, the Directors herewith submit the statements of financial position of the Fiji Development Bank (“the Bank”) and of the Group, being the Bank and its subsidiary (“FDB Nominees Ltd”) as at 30 June 2019, the related statement of profit and loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date and report as follows.
DIRECTORS The following are Directors of the Bank at any time during the financial year and up to the date of this report: Current Directors - Mr. Robert G. Lyon - Mr. Vadivelu Pillay - Mr. Inia Rokotuiei Naiyaga Mr. Rajesh Patel - Mr. Romit Meghi Parshottam - - Ms. Kalpana Kushla Lal Chairperson; reappointed on 29/09/2016 Deputy Chairperson; reappointed on 23/12/2017 Reappointed on 23/12/2017 Reappointed on 23/12/2017 Appointed on 02/04/2019 Appointed on 02/04/2019 PRINCIPAL ACTIVITIES The principal business activities of the Bank and the Group during the course of the financial year were providing finance, financial and advisory services to assist in the development of agriculture, commerce and industry in Fiji.
There were no significant changes in the nature of the activities of the Bank and the Group during the year.

RESULTS The consolidated profit for the year ended 30 June 2019 was $4,067,412 (2018: $7,411,742) after providing an income tax expense of $251 (2018- Nil).

The profit for the Bank for the year was $4,066,408 (2018: $7,411,091).

DIVIDENDS The Directors recommend that no dividend be declared or paid for the year.

GOING CONCERN The Directors consider the Bank and the Group to be a going concern.
The Directors believe that the basis of preparation of the financial statements is appropriate and the Bank and the Group will be able to continue in operations for at least 12 months from the date of signing this report.

BAD AND DOUBTFUL DEBTS Prior to the completion of the financial statements, the Directors took reasonable steps to ascertain that action had been taken in relation to writing off of bad debts and allowance recorded by the Bank and the Group.
In the opinion of the Directors, adequate allowance has been made for doubtful debts.

As at the date of this report, the Directors are not aware of any circumstances, which would render the amount written off for bad debts, or the allowance for doubtful debts in the Bank and the Group inadequate to any substantial extent.
UNUSUAL TRANSACTIONS Apart from those matters and other matters specifically referred to in the financial statements, in the opinion of the Directors, the results of the operations of the Bank and the Group during the year were not substantially affected by any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Bank and the Group in the current financial year.
89 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY DIRECTORS’ REPORT (continued) FOR THE YEAR ENDED 30 JUNE 2019 NON-CURRENT ASSETS Prior to the completion of the financial statements of the Bank and the Group the Directors took reasonable steps to ascertain whether any non- current assets were unlikely to be realized in the ordinary course of the business compared to the values as recorded in the accounting records of the Bank and its subsidiary.
Where necessary these assets have been written down or adequate provision has been made to bring the values of such assets to an amount that they might be expected to realise.

As at the date of this report, the Directors are not aware of any circumstances that will cause the value of non-current assets in the financial statements to be misleading.

SIGNIFICANT EVENTS There were no significant changes in the state of affairs of the Bank or its subsidiary during the financial year.
EVENTS SUBSEQUENT TO BALANCE DATE There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Bank and the Group in subsequent financial years.
OTHER CIRCUMSTANCES As at the date of this report: (i) no charge on the assets of the Bank and the Group have been given since the end of the financial year to secure liabilities of any other person; (ii) no contingent liabilities have arisen since the end of the financial year for which the Bank and the Group could become liable; and (iii) no contingent liabilities or other liabilities of the Bank and the Group have become or is likely to become enforceable within twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Bank and the Group to meet its obligations as and when they fall due.
As at the date of this report, the Directors are not aware of any circumstances that have arisen, not otherwise dealt with in this report or the financial statements, which would make adherence to the existing method of valuation of assets or liabilities of the Bank and the Group misleading or inappropriate.
DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than those included in the aggregate amount of emoluments received or due and receivable by the Directors shown in the financial statements or received as the fixed salary of a full-time employee of the Bank and the Group or of a related corporation) by reason of contract made by the Bank and the Group or by a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.
Signed on behalf of the Board of Directors in accordance with a resolution of the Directors this 19th day of December 2019.
Director Director 90 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY STATEMENT BY DIRECTORS FOR THE YEAR ENDED 30 JUNE 2019 In accordance with a resolution of the Board of Directors of the Bank and the Group, we state that in the opinion of the Directors: (i) the accompanying statement of comprehensive income are drawn up so as to give a true and fair view of the results of the Bank and the Group for the year ended 30 June 2019; (ii) the accompanying statement of changes in equity are drawn up so as to give a true and fair view of the changes in equity of the Bank and the Group for the year ended 30 June 2019; (iii) the accompanying statement of financial position are drawn up so as to give a true and fair view of the state of affairs of the Bank and the Group as at 30 June 2019; (iv) the accompanying statement of cash flows are drawn up so as to give a true and fair view of the cash flows of the Bank and the Group for the year ended 30 June 2019; (v) at the date of these statement there are reasonable grounds to believe the Bank and the Group will be able to pay their debts as and when they fall due; and (vi) all related party transactions have been adequately recorded in the books of the Bank and of the Group.
(vii) the financial statements of the Bank and of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and Fiji Development Bank Act (Cap 214).

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors this 19th day of December 2019.
Director Director 91 Fiji Development Bank 2019 Annual Report 92 Fiji Development Bank 2019 Annual Report 93 Fiji Development Bank 2019 Annual Report 94 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 Notes CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Assets Cash and cash equivalents Debt financial assets at amortised cost Loans and advances Receivable due from subsidiary Other receivables Investment in subsidiary Investments Property and equipment Computer Software -Intangibles TOTAL ASSETS Liabilities Accounts payable and accruals Debt securities issued Other liabilities Employee entitlements Deferred income TOTAL LIABILITIES Equity Capital Reserves Accumulated profits TOTAL CAPITAL AND RESERVES TOTAL LIABILITIES AND EQUITY 65,921,380 2,330,370 442,914,552 - 4,008,533 - 15,001 30,247,123 174,611 545,611,570 5,916,667 356,608,437 6,420,099 797,424 3,590,264 373,332,891 44,683,382 2,049,316 397,529,316 - 3,109,716 - 15,001 20,389,179 140,638 467,916,548 3,866,334 295,078,368 6,960,293 767,990 3,036,756 309,709,741 65,919,401 2,000,000 442,914,552 - Signed on behalf of the Board of Directors in accordance with a resolution of the Directors this 19th day of December 2019.
Director Director The statements of financial position are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 99 to 132.
95 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 INCOME Interest income Interest expense Notes CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ 3 35,751,404 32,423,538 35,747,572 32,423,538 6 (11,778,538) (9,251,202) (11,778,538) (9,251,202) Net interest income 23,972,866 23,172,336 23,969,034 23,172,336 Fee income Other income 4 5 4,778,784 4,248,986 4,778,784 4,248,986 3,046,095 2,869,389 3,046,095 2,867,470 OPERATING INCOME 31,797,745 30,290,711 31,793,913 30,288,792 OPERATING EXPENSES 7 (16,059,802) (13,762,521) (16,057,225) (13,761,253) OPERATING PROFIT BEFORE ALLOWANCES 15,737,943 16,528,190 15,736,688 16,527,539 Allowance for Expected Credit Loss 11 (8,037,760) (5,035,555) (8,037,760) (5,035,555) Allowance for Interest and Fees 8 (3,632,520) (4,080,893) (3,632,520) (4,080,893) PROFIT BEFORE TAX Tax expense 4,067,663 7,411,742 4,066,408 7,411,091 1(q) (251) - - - PROFIT FOR THE YEAR 4,067,412 7,411,742 4,066,408 7,411,091 OTHER COMPREHENSIVE INCOME Items that will not be re-classified to profit or loss - Revaluation of property and equipment 17 10,004,460 - - TOTAL COMPREHENSIVE INCOME FOR THE YEAR 14,071,872 7,411,742 - 10,004,460 14,070,868 - - 7,411,091 The statements of profit and loss and other comprehensive income are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 99 to 132.
96 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED Notes Capital $ General reserve $ Revaluation Accumulated Total reserve $ profits $ $ Balance at 30 June 2017 24 56,050,636 8,064,000 6,984,508 79,695,921 150,795,065 Net profit for the 2018 year - - - 7,411,742 7,411,742 Balance at 30 June 2018 56,050,636 8,064,000 6,984,508 87,107,663 158,206,807 Adjustment of initial application of IFRS 9 - - - - - Adjusted balance as at 1 July 2018 56,050,636 8,064,000 6,984,508 87,107,663 158,206,807 Total other comprehensive income Net profit for the 2019 year Balance at 30 June 2019 - - - 10,004,460 - 10,004,460 - - 4,067,412 4,067,412 56,050,636 8,064,000 16,988,968 91,175,075 172,278,679 THE BANK Capital $ General reserve $ Revaluation Accumulated Total reserve $ profits $ $ Balance at 30 June 2017 24 56,050,636 8,064,000 6,984,508 79,468,603 150,567,747 Net profit for the 2018 year - - - 7,411,091 7,411,091 Balance at 30 June 2018 56,050,636 8,064,000 6,984,508 86,879,694 157,978,838 Adjustment on initial application of IFRS 9 - - - - - Adjusted balance as at 1 July 2018 56,050,636 8,064,000 6,984,508 86,879,694 157,978,838 Total other comprehensive income - 10,004,460 - 10,004,460 Net profit for the 2019 year Balance at 30 June 2019 - - - 4,066,408 4,066,408 56,050,636 8,064,000 16,988,968 90,946,102 172,049,706 The statements of changes in equity are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 99 to 132.
97 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED 2019 $ Inflows 2018 $ Inflows THE BANK 2018 $ 2019 $ Inflows Inflows Notes (Outflows) (Outflows) (Outflows) (Outflows) OPERATING ACTIVITIES Interest and subsidy received 34,352,866 32,312,065 34,352,866 32,312,065 Interest and other costs of borrowing paid (11,172,029) (8,624,230) (11,172,029) (8,624,230) Net additional loans and advances provided (59,574,390) (51,044,941) (59,574,390) (51,044,942) Fees received 1,180,446 1,077,539 1,180,446 1,077,539 Cash paid to suppliers and employees (9,566,149) (9,953,628) (9,566,303) (9,938,481) Other receipts 4,283,505 2,020,556 4,283,505 2,020,556 Net additional loans in Small and Micro Grant Portfolio 1,538,630 39,211 1,538,630 39,211 Net cash (used in) Operating Activities (38,957,121) (34,173,428) (38,957,275) (34,158,282) INVESTING ACTIVITIES Proceeds from the sale of property, plant and equipment VAT refunds for rental properties - - 60,000 153,644 - - 60,000 153,644 Payments for property, plant and equipment (1,334,950) (3,824,583) (1,334,950) (3,824,583) Net cash used in investing activities (1,334,950) (3,610,939) (1,334,950) (3,610,939) FINANCING ACTIVITIES Net increase in long-term borrowings Net increase in short-term borrowings 71,524,483 39,300,646 71,524,483 39,300,646 (9,994,414) 18,600,250 (9,994,414) 18,600,250 Net cash provided by Financing Activities 61,530,069 57,900,896 61,530,069 57,900,896 Net increase in cash and cash equivalent 21,237,998 20,116,529 21,237,844 20,131,675 Cash and cash equivalents at the beginning of the financial year 44,683,382 24,566,853 44,681,557 24,549,882 Cash and cash equivalents at the end of the financial year 9 65,921,380 44,683,382 65,919,401 44,681,557 The statements of cash flows are to be read in conjunction with the notes to and forming part of the financial statements set out on pages 99 to 132.
98 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Fiji Development Bank (“FDB or the Bank”) is a fully owned Government of Fiji (“Government”) entity domiciled in Fiji Islands.

The address of the registered office is 360 Victoria Parade, Suva, Fiji.
The financial statements of the Bank and the Group for the year ended 30 June 2019 comprise the Bank and its subsidiary company (collectively “the Group”).

The Bank and the Group is primarily involved in the provision of finance, financial and advisory services to assist in the development of agriculture, commerce and industry in Fiji.

The financial statements were authorised for issue by the directors on 29th August, 2019.
The significant policies, which have been adopted in the preparation of these financial statements, are: (a) Statement of compliance The financial statements are presented in Fiji dollars, rounded to the nearest dollar.

The financial statements have been drawn up in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and the requirements of the Fiji Development Bank Act.
(b) Basis of preparation The measurement base adopted is that of historical cost as modified by the fair value through other comprehensive income measurement and financial instruments held at fair value through profit or loss.

Loans and Advances are measured at amortised cost.

In addition, land and buildings are carried at re-valued amount.
(c) Changes in accounting policies Except for the changes below, the Bank and the Group has consistently applied the accounting policies to all periods presented in these financial statements.

The Bank and the Group adopted the following standards with a date of initial application of 1 July 2018.
As a result, the Bank has changed its accounting policies as detailed below: IFRS 9 Financial Instruments The Bank and the Group has adopted IFRS 9 Financial Instruments issued in July 2014 with a date of initial application of 1 July 2018.

The requirements of IFRS 9 represent a significant change from IAS 39 Financial Instruments: Recognition and Measurement.
The nature and effects of the key changes to the Bank and the Group’s accounting policies resulting from its adoption of IFRS 9 are summarised below.

As a result of the adoption of IFRS 9, the Bank and the Group adopted consequential amendments to IAS 1: Presentation of Financial Statements which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and Other Comprehensive Income (OCI).
Additionally, the Bank adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures, which are applied to disclosures relating to 2019 but generally have not been applied to comparative information.

i.

Classification of financial assets and financial liabilities IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value thorough other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL).
The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

IFRS 9 replaces the previous IAS 39 categories of held to maturity, loans and receivables and available for sale.

For an explanation of how the Bank and the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, see Note 1(k).
99 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Changes in accounting policies (continued) ii.

Impairment of financial assets IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model.
The new impairment model applies to financial assets measured at amortised cost, contract assets, debt investments at FVOCI and loan commitments issued, but not to investments in equity instruments.

Under IFRS 9, credit losses are recognised earlier than under IAS 39 - see Note 11. iii.

Transition Changes in accounting policies resulting from the adoption of IFRS 9 which was issued in 2014 have been applied retrospectively, except as described below.

- Comparative periods have not been restated.


Differences in the carrying amount of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in retained earnings as at 1 July 2018.

Accordingly, the information presented for 2018 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2019 under IFRS 9.
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application: - - - The determination of the business model within which a financial asset is held; The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL; and The designation of certain investments in equity instruments not held for trading as at FVOCI.
The following table summarises the impact of transition to IFRS 9 on retained earnings at 1 July 2018: Retained earnings Closing balance under IAS 39 (30 June 2018) Recognition of expected credit losses under IFRS 9 Opening balance under IFRS 9 (1 July 2018) 86,879,694 - 86,879,694 iv.
Classification of financial assets and financial liabilities on the date of initial application of IFRS 9 The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Bank and the Group’s financial assets and financial liabilities as at 1 July 2018.
Note Original classification under IAS 39 New Classification under IFRS 9 Original carrying amount under IAS 39 New carrying amount under IFRS 9 10 Held to maturity Amortised cost 2,000,000 14 &15 Available-for-sale FVOCI-equity instrument 35,001 2,000,000 35,001 11 Loans and receivables Amortised cost 397,529,316 397,529,316 Cash and cash equivalents 9 Loans and receivables Amortised cost 12 &13 Loans and receivables Amortised cost 2,870,204 44,681,557 2,870,204 44,681,557 447,116,078 447,116,078 20 & 22 Other financial liabilities Other financial liabilities 10,783,943 21 Other financial liabilities Other financial liabilities 295,078,368 10,783,943 295,078,368 305,862,311 305,862,311 Financial Assets Debt securities Equity securities Loans & advances Other receivables Total Financial Assets Financial Liabilities Payables Borrowings Total Financial Liabilities 100 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (c) (i) Changes in accounting policies (continued) iv.
Classification of financial assets and financial liabilities on the date of initial application of IFRS 9 (continued) The Bank and the Groups accounting policies on the classification of financial instruments under IFRS 9 are set out in Note 1(c).

The application of these policies resulted in the reclassifications set out in the table above and explained below.

a.

The equity securities represent investments that the Bank and the Group intends to hold for the long term for strategic purposes.
As permitted by IFRS 9, the Bank and the Group has designated these investments at the date of initial application as measured at FVOCI.

b.

Debt securities that were previously classified as held-to-maturity are now classified at amortised cost.

The Bank and the Group intends to hold the assets to maturity to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding.
c. Loans, Advances, and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortised cost.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on transition to IFRS 9 on 1 July 2018.
IAS 39 carrying amount at 30 June 2018 Re-measurement IFRS 9 carrying amount at 1 July 2018 Financial assets Amortised cost Cash and cash equivalents: Brought forward: Loans and receivables 44,681,557 Re-measurement Carried forward: Amortised cost Loans & Advances to customers: Brought forward: Loans and receivables 397,529,316 Re-measurement Carried forward: Amortised cost Other receivables: Brought forward: Loans and receivables 2,870,204 Re-measurement Carried forward: Amortised cost Debt securities: Brought forward: Held-to-maturity 2,000,000 Carried forward: Amortised cost Total amortised cost 447,081,077 FVOCI Equity investments: Brought forward: Available-for-sale Reclassified to: FVOCI – equity Total FVOCI 35,001 35,001 - - - - - 35,001 44,681,557 397,529,316 2,870,204 2,000,000 447,081,077 35,001 35,001 101 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (d) New standards and interpretations not yet adopted The Bank and the Group has not adopted early any other standard, interpretations or amendments that has been issued but not effective.
The Bank and the Group will apply IFRS 16 from 1 July 2019.

IFRS 16 removes the classification of leases as either operating leases or finance leases – for the lessee – effectively treating all leases as finance leases.

Short-term leases (less than 12 months) and leases of low-value assets are exempt from the lease accounting requirements.

There are also changes in accounting over the life of the lease.
In particular, companies will now recognize a front-loaded pattern of expense for most leases, even when they pay constant annual rentals.

Lessor accounting remains similar to current practice i.e.

lessor continue to classify leases as finance and operating lease.

The Bank and the Group is assessing all the leasing contracts.
(e) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are included in the following notes: • Note 1(k) and Note 11 – Impairment of Loans and advances • Note 1(i) – Valuation of land and buildings (f) Principles of consolidation Subsidiary The consolidated financial statements of the Group include the financial statements of the Bank and the Group and its wholly owned subsidiary as disclosed in Note 14.
Control exists when Bank and the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity as to obtain benefits from its activities.

The financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences until the date that controls ceases.

The investment in subsidiary is measured at cost less impairment loss in the financial statements of the Bank.
Transactions eliminated on consolidation The balances and effects of transactions between Bank and the Group and the controlled entity have been eliminated in the consolidated financial statements.

(g) Revenue recognition Under IFRS 15, revenue is recognised with reference to the satisfaction of performance obligation either at a point in time (when) or over time (as).

Despite the level of costs incurred, revenue will only be recognised once performance obligation fulfilment can be assessed.
The impact as at 1 July 2018 as a result of changes in accounting for contracts is $Nil.

This is because as at 1 July 2018, there were no contracts that were determined to be not complete.

Interest income Interest income on investments, loans and advances is recognised in profit or loss using the effective interest method.

Unearned interest on lease finance is brought into account at the time of realization.
102 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (g) Revenue recognition (continued) Government interest subsidies Government provides interest subsidies on certain loans schemes.

These interest subsidies are recognised as interest income in profit or loss using the effective interest rate method.
Fees and charges Lending fees Fees and direct costs relating to loan origination, financing or restructuring and to loan commitments are deferred and amortised to profit or loss over the term of the loan.

Lending fees not directly related to the origination of a loan are recognised as and when the service has been renewed.
Other fees and charges When other fees and charges relate to specific transactions or events, they are recognised in profit or loss over the period that the service is provided to the customer.

Fees on impaired loans are recognised as income and impaired as doubtful debts to profit or loss.

(h) Debt securities issued FDB registered bonds and promissory notes are measured at fair value on initial recognition.
Subsequent to initial recognition they are measured at amortised cost using effective interest method.

Any discount on these bonds is amortized to interest expense on a straight-line basis over the term of the bond to which it relates.

(i) Property and equipment Items of equipment are measured at cost less accumulated depreciation and impairment loss.

Items purchased at less than $500 are expensed.


Land and buildings are measured at revalued amounts being the fair value at the date of revaluation less any subsequent accumulated depreciation and impairment losses.

Revaluations reflect independent assessments of the fair market value of land and buildings based on existing use.

Revaluation increments are credited directly to the revaluation reserve in equity via other comprehensive income.
Revaluation decrements are debited directly to equity via other comprehensive income to the extent they reverse a previous revaluation surplus.

Any remaining decrease is debited to statement of profit and loss and other comprehensive income.

The Directors have adopted a policy of obtaining regular independent valuations for all of the Bank’s properties on an existing use basis of valuation.
The Bank and the Group’s land and buildings were last revalued by Professional Valuations Limited and these valuations were adopted by Bank and the Group within the 2019 financial year.

The next revaluation on land and building is expected to be conducted after three years.

All other items of property and equipment are carried at cost less accumulated depreciation and impairment losses.
103 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Property and equipment (continued) Depreciation Property and equipment with the exception of freehold land are depreciated over their expected useful lives using the straight-line method of depreciation at the following rates, whilst leasehold land and improvements are amortised over the shorter of their useful lives and the terms of their respective leases.
Buildings and improvements Equipment, furniture and fittings Motor vehicles Computer hardware Computer software Leasehold land 1-2% 10% 20% 20% 20% Term of the lease The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the asset or cash-generating units are written down to their recoverable amount.

The recoverable amount of property and equipment is the higher of fair value less costs to sell and value in use.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Impairment losses are recognised in profit or loss statement of profit and loss and other comprehensive income.

(j) Intangible assets The Bank and the Group recognises internally generated Banking Software (Bank Management System) and any other externally purchased software as intangible assets.

Due to the finite life of the software, it is amortised on a straight-line basis at 20% per annum.

(k) Financial assets and liabilities i.)


Recognition and initial measurement The Bank and the Group initially recognised loans and advances, other receivables and debt securities issued on the date on which they are originated.

All other financial assets and financial liabilities are initially recognised when the Bank and the Group becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue.

ii.)

Classification and subsequent measurement Financial assets – Policy applicable from 1 July 2018 On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI or FVTPL.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: - - it is held within a business model whose objective is to hold assets to collect contractual cash flows; and, its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: - - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and, its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
104 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Financial assets and liabilities (continued) On initial recognition of an equity investment that is not held for trading, the Bank and the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI.
This election is made on an investment by investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL.

On initial recognition, the Bank and the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Business model assessment The Bank and the Group makes an assessment of the objective of the business model in which a financial 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 policies in practice.
These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets; how the performance of the portfolio is evaluated and reported to the Bank and the Group management; the risks that affect the performance of the business model (and the financial assets held within that business model) and 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 of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are 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.

Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as 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 a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank and the Group 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 this assessment, the Bank and the Group considers: - - - - contingent events that would change the amount or timing of cash flows; terms that may adjust the contractual coupon rate, including variable rate features; prepayment and extension features; and, terms that limit Bank and the Group claim to cash flows from specified assets (e.g.

nonrecourse features).


105 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Financial assets and liabilities (continued) iii.)
Derecognition Financial assets The Bank and the Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, 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 or in which the Bank and the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Bank and the Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets.

In these cases, the transferred assets are not derecognised.

Financial liabilities The Bank and the Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Bank and the Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in statement of profit and loss and other comprehensive income.

iv.)

Modifications of financial assets If the terms of a financial asset are modified, the Bank and the Group evaluates whether the cash flows of the modified asset are substantially different.
If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired.

In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.

Policy applicable from 1 July 2018 If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset.
In this case, the Bank and the Group recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in statement of profit and loss and other comprehensive income.

If such a modification is carried out because of financial difficulties of the borrower 1(k)(vi), then the gain or loss is presented together with impairment losses.

In other cases, it is presented as interest income 1(g).
Policy applicable before 1 July 2018 If the terms of a financial asset were modified because of financial difficulties of the borrower and the asset was not derecognized, then impairment of the asset was measured using pre-modified interest rate 1(k)(vi).
v.) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Bank and the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

vi.)
vi.)

Impairment of assets Policy applicable from 1 July 2018 The Bank and the Group recognises loss allowances for ECLs on: - financial assets measured at amortised cost; and, 106 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Financial assets and liabilities (continued) vi.)
Impairment of assets (continued) The Bank and the Group measures loss allowances at an amount equal to lifetime ECL, except for the following, which are measured as 12 month ECL: - - debt securities that are determined to have low credit risk at the reporting date; and, other debt securities and Bank and the Group balances for which credit risk (i.e.

the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
The Bank and the Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date.
Measurement of ECL ECLs are a probability-weighted estimate of credit losses.

They are measured as follows: - financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Bank and the Group expects to receive); financial assets that are credit-impaired at the reporting date; as the difference between the gross carrying amount and the present value of estimated future cash flows; and undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Bank and the Group if the commitment is drawn down and the cash flows that the Bank and the Group expects to receive.
- - ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets At each reporting date, the Bank and the Group assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired.

A financial asset is ‘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: - - - - - significant financial difficulty of the borrower or issuer; a breach of contract such as a default or being more than 90 days past due; the restructuring of a loan or advance by the Bank and the Group on terms that the Bank would not consider otherwise; it is probable that the borrower will enter bankruptcy or other financial reorganization; or 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 is usually considered to be credit impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment.

In addition, a loan that is overdue for 90 days or more is considered impaired.
Presentation of allowance for ECL in the statement of financial position financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; loan commitments: generally, as allowance for credit impairment; Loss allowances for ECL are presented in the statement of financial position as follows: - - - where a financial instrument includes both a drawn and an undrawn component, and the Bank and the Group cannot identify the ECL on the loan commitment component separately from those on the drawn component, the Bank and the Group presents a combined loss allowance for both components.
107 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Financial assets and liabilities (continued) vi.)

Impairment of assets (continued) Write-off The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.
This is generally the case when the Bank and the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Bank and the Group’s procedures for recovery of amounts due.
Bad debts are written off against the allowance in the year in which the debt is recognised as being irrecoverable.

Where not previously included in the allowance, bad debts are written off directly to profit or loss.

Debts previously written off and subsequently recovered are credited to profit or loss in the year in which they are recovered.
Policy applicable before 1 July 2018 Impairment of Loans and Advances The Bank and the Group assesses at each balance date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

Credit impairment provisions were raised for exposures that are known to be impaired.

Loan accounts are reviewed throughout the year to assess the allowance for impairment.

The Bank and the Group had individually assessed allowances and collectively assessed allowances.
Individually assessed allowances Individually assessed allowance is maintained to cover identified impairment.

The individually assessed allowance requirement (representing new and increased individually assessed allowances less individually assessed releases) is recorded in profit or loss.

Individually assessed allowances are made against individually significant financial assets and groups of financial assets with similar credit risk characteristics for those that are not individually significant.
The determination of the amount of specific allowance is based on many factors including credit evaluation of the borrowers, value of security and collateral held, current economic conditions and past experience.

Recoveries, representing excess transfers to the specific allowance, are credited to the profit or loss.

Collective allowance All other loans and advances that do not have an individually assessed allowance are assessed collectively for impairment.
Collective allowances are maintained to reduce the carrying amount of portfolios of similar loans and advances to their estimated recoverable amounts at the balance date.

Collective allowance is maintained on all loans based on the Credit Risk Rating “(CRR)” and is allocated to reflect the associated risk.

The collective allowance is based on a percentage and is reviewed on a yearly basis.
(l) Investments Investments are those securities that the Group has purchased with positive intent and ability to hold until maturity.

These securities are initially recorded at fair value and subsequently adjusted for amortisation of premium or discounts.

Premiums and discounts are capitalised and amortised using the effective interest method from date of purchase to maturity.

Interest income is recognized using the effective interest method.
Borrowing costs are recognised as expenses in the period in which they are incurred.

(m) Land held for resale The cane estate and other land held for subdivision and resale are carried at the lower of their carrying amount and fair value less cost to sell.
108 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (n) Cash and cash equivalents Cash and cash equivalents includes cash on hand and at Bank and highly liquid financial assets with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short- term commitments.
(o) Other debtors Other receivables are stated at amortised cost less impairment losses.

(p) Accounts payable and accruals Accounts payable and accruals are stated at amortised cost.

(q) Taxation The Bank has made no provision for taxation, as it is not subject to income tax in accordance with the Income Tax Act; 2016.
However, the Bank’s subsidiary FDB Nominees Ltd adopts the principles of tax effect accounting and thus is the basis of recognition of tax expense in consolidated financial statements of the Group.

(r) Employee entitlements Annual leave The accrual for annual leave represents the amount which the Bank and the Group has a present obligation to pay, resulting from employees’ services provided up to the balance date.

The accrual is based on current wage and salary rates and includes related on-costs.
Long service leave The liability for employees’ entitlements to long service leave represents the amount payable to employees, based on current wage and salary rates, for services provided up to balance date.

The liability for long service leave increases according to the number of years of service completed by the employee.
Gratuity The accrual for gratuity represents amounts payable to permanent employees who have achieved in excess of the minimum ten years of service on retirement, and is based on current wage and salary rates.

Triennial leave The triennial leave is payable to employees on completion of every three years of service and is based on staff’s grade.

Number of employees The number of employees as at 30 June 2019 was 208 (2018: 194).
(s) Contingent liabilities and credit commitments The Bank and the Group is involved in a range of transactions that give rise to contingent and / or future liabilities.

The Bank and the Group discloses a contingent liability when it has a possible obligation arising from past events that will be confirmed by the occurrence or non- occurrence of one or more uncertain future events not wholly within the Bank and the Group control.
A contingent liability is disclosed when a present obligation is not recognised because it is not probable that an outflow of resources will be required to settle an obligation, or the amount of the obligation cannot be measured with sufficient reliability.
109 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (s) Contingent liabilities and credit commitments (continued) The Bank and the Group issues commitments to extend credit, letters of credit, guarantees and other credit facilities.
These financial instruments attract fees in line with market prices for similar arrangements.

They are not sold or traded.

The items generally do not involve cash payments other than in the event of default.

The fee pricing is set as part of the broader customer credit process and reflects the probability of default.

They are recorded as contingent liabilities at their face value.

Information on the face value and credit equivalents of commitments and contingent liabilities is shown in note 26.
(t) Deferred income Deferred income represents establishment fees charged and is deferred and amortised using the effective interest rates over the term of the loan.

(u) Deposits and other borrowings Deposits and other borrowings include certificates of deposits, interest bearing deposits and other related interest bearing financial instruments.

They are measured at amortised cost.

The interest expense is recognised using the effective interest method.
(v) Debt financial asset at amortised cost Debt financial assets are those which carry fixed or determinable payments and have fixed maturities and which the Bank and the Group has the intention and the ability to hold to maturity.

After initial measurement, debt financial assets are subsequently measured at amortised cost using the effective interest rate method, less allowance for impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate.

Amortisation is included as ‘other income’ in the income statement.

The losses arising from impairment of such investment are recognised in the income statement line ‘impairment losses on financial investments’.
(w) Other receivables Other receivables include interest receivable investments, interest subsidy receivable, deposits, prepayments and receivable from the subsidiary the Bank and the Group.

In the consolidation process, receivables from the subsidiary the Bank and the Group in the Bank’s book of accounts are eliminated against corresponding payables recorded in the subsidiary the Bank’s general ledger.

2.
2.

FAIR VALUE ESTIMATION “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 in the principal or, in its absence, the most advantageous market to which the Bank and the Group has access at that date.

When available, the Bank and the Group measures the fair value of an instrument using the quoted price in an active market for that instrument.
A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.

The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
The Bank and the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of relevant observable inputs and maximising the use of unobservable inputs.
110 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 The different levels have been defined as follows: • Level 1 fair value measurement are those instruments valued based on quoted prices (unadjusted) in active markets for identical assets and liabilities.
• • Level 2 fair value measurements are those instruments valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.

as prices) or indirectly (i.e.

derived from prices).

Level 3 fair value measurements are those instruments valued based on inputs for the asset or liability that are not based on observable market data (unobservable) inputs.
The following table analyses financial instruments measured at fair value at the reporting date by level in the fair value hierarchy into which the fair value measurement is categorised.

It does not include fair value information for financial assets and financial abilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
2019 Carrying amount Fair value Total Level 1 Level 2 Level 3 Total $ $ $ $ $ Debt financial asset at amortised cost Other financial $ 2,000,000 2,000,000 $ - - 2,000,000 2,000,000 - - 235,800,000 235,800,000 31,999,999 31,999,999 267,799,999 267,799,999 2,000,000 2,000,000 - - 2,000,000 2,000,000 - - 178,800,000 178,800,000 24,000,000 24,000,000 202,800,000 202,800,000 Assets Debt financial asset at amortised cost Liabilities Bonds Promissory notes 2018 Assets Debt financial asset at amortised cost Liabilities Bonds Promissory notes - - - - - - - - - - 2,363,696 2,363,696 234,274,301 31,389,144 265,663,445 2,586,303 2,586,303 179,588,227 23,407,564 202,995,791 - - - - - - - - - - 2,363,696 2,363,696 234,274,301 31,389,144 265,663,445 2,586,303 2,586,303 179,588,227 23,407,564 202,995,791 111 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ 3 INTEREST INCOME Interest Income (non – subsidised) 31,047,810 28,421,157 31,043,978 28,421,157 Interest Subsidies – (received / receivable from the Government for: - Agricultural loans 2,999,569 2,785,570 2,999,569 2,785,570 - Commercial Loans to Fijians Scheme 72,911 100,649 72,911 100,649 - Economic Rehabilitation Package Scheme 1,387 1,297 1,387 1,297 - Small Business Scheme 809,933 826,622 809,933 826,622 - Northern Rehabilitation Package 819,794 288,243 819,794 288,243 4,703,594 4,002,381 4,703,594 4,002,381 35,751,404 32,423,538 35,747,572 32,423,538 Interest income is recognised in statement of profit and loss and other comprehensive income using effective interest method.
4 FEE INCOME Application fees Establishment fees Commitment fees Bank Service fees Arrears fees Legal fees Other fee income OTHER INCOME The following items are included in other income: Gain on sale of property, plant and equipment 11,528 267,823 11,528 267,823 398,745 566,450 398,745 566,450 179,347 137,667 179,347 137,667 900,106 839,294 900,106 839,294 1,556,369 1,058,155 1,556,369 1,056,236 3,046,095 2,869,389 3,046,095 2,867,470 Bad debts recovered Insurance commission Rental income Other Income 112 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ 6 INTEREST EXPENSES Interest paid - Bonds Interest paid on Call 9,158,068 6,876,251 9,158,068 6,876,251 1,225,512 1,135,250 1,225,512 1,135,250 Interest paid on Promissory Notes 1,228,701 1,147,283 1,228,701 1,147,283 Other administrative cost 166,257 92,418 166,257 92,418 11,778,538 9,251,202 11,778,538 9,251,202 7 OPERATING EXPENSES Items included in administrative expenses: Amortisation of bond discounts 4 4 4 4 Auditors’ remuneration Directors’ fees 39,996 39,996 39,996 39,996 114,134 174,710 114,134 174,710 Depreciation and amortisation 1,436,963 989,101 1,436,963 989,101 Employee costs Other Expenses 10,732,528 9,263,159 10,732,528 9,263,159 3,736,177 3,295,551 3,733,600 3,294,283 16,059,802 13,762,521 16,057,225 13,761,253 8 ALLOWANCE FOR INTEREST AND FEES Allowance for Interest Allowance for Fees 3,308,107 3,790,715 3,308,107 3,790,715 324,413 290,178 324,413 290,178 3,632,520 4,080,893 3,632,520 4,080,893 113 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND
 FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 9 CASH & CASH EQUIVALENTS CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Petty cash Overdraft facility Western Union facility Deposit accounts - Branches 1,680 1,980 1,680 1,980 15,500 15,500 15,500 15,500 - 12,000 - 12,000 40,753,243 24,819,261 40,751,264 24,817,436 Bank of South Pacific - Call account 961,079 1,476,011 961,079 1,476,011 Bank of Baroda - Head Office HFC Bank - Head Office Westpac Bank - Head Office 4,786,560 2,237,514 4,786,560 2,237,514 18,935,809 16,026,171 18,935,809 16,026,171 467,509 94,945 467,509 94,945 65,921,380 44,683,382 65,919,401 44,681,557 The Bank and the Group maintains an overdraft facility of $15,000 to cater for staff withdrawals based on their eligibility level and Western Union facility is no longer offered.
Deposit accounts are maintained for the Bank and the Group ‘s daily transactions with its clients and the accounts earn interest at floating rates based on daily rates.

Restricted Funds The cash at bank includes money received from the Government to be distributed to small and micro enterprises as grant.

As at 30 June 2019, $1,538,630 (2018: $39,211) were yet to be disbursed and thus payable to Government.
These funds are payable at call and since it is only provided by the Government to be distributed by way of grant to small and micro enterprises meeting certain criterions it cannot be used for any other activity.
10 DEBT FINANCIAL ASSETS AT AMORTISED COST Investment In bonds 2,330,370 2,049,316 2,000,000 2,000,000 CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Investment in bonds relates to $2,000,000 of investments with the Reserve Bank of Fiji at 12.31%, with maturity year being 2022 and three term deposit aggregating to $330,370 (2018: $49,316) held by FDB Nominees Limited in Home Finance Corporation at 2.75% for a term of 12 months, 5% for a term of 2 months, 5 months and 12 months at Fiji Development Bank and 4.8% at a term of 12 months at Kontiki Finance Limited.
114 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 11 LOANS AND ADVANCES CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Loans and advances 539,755,425 487,058,189 539,755,425 487,058,189 Allowance for interest and fees suspended (20,620,603) (19,186,493) (20,620,603) (19,186,493) Allowance for Expected Credit Loss (76,220,270) (70,342,380) (76,220,270) (70,342,380) Net loans and advances 442,914,552 397,529,316 442,914,552 397,529,316 519,134,822 467,871,696 519,134,822 467,871,696 Loans and advances include finance lease provided to customers.
There were no new finance leases granted in the current financial year.
The Bank’s split for gross loans and advances to customers is as follows: Current Non-current Total 38,884,447 35,211,501 38,884,447 35,211,501 500,870,978 451,846,688 500,870,978 451,846,688 539,755,425 487,058,189 539,755,425 487,058,189 Allowance for credit impairment as per ECL (Expected Credit Loss) model is represented as follows: Balance at the beginning of the year as at 30th June 2018 (IAS 39) 70,342,380 66,057,288 70,342,380 66,057,288 Impact Adjustment of Initial application of IFRS 9 - Adjusted balance as at 1 July 2018 70,342,380 - - - 70,342,380 Charge to the profit or loss 8,037,760 5,035,555 8,037,760 78,380,140 71,092,843 78,380,140 - - 5,035,555 71,092,843 Bad debts written off against impairment allowances (2,159,870) (750,463) (2,159,870) (750,463) Total allowance for credit impairment as per ECL (Expected Credit Loss) model 76,220,270 70,342,380 76,220,270 70,342,380 115 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 12 RECEIVABLE FROM SUBSIDIARY FDB Nominees Limited 13 OTHER RECEIVABLES CONSOLIDATED THE BANK 2019 $ - 2018 $ - 2019 $ 2018 $ - 406,820 Government guarantees & grants 5,499,216 5,499,216 5,499,216 5,499,216 Impairement loss - government guarantee & grants (5,499,216) (5,499,216) (5,499,216) (5,499,216) Government interest subsidies 2,014,624 731,391 2,014,624 722,546 Others 1,993,909 2,378,325 1,992,091 1,740,838 4,008,533 3,109,716 4,006,715 2,463,384 Impairment loss is represented as follows: Total impairment at the beginning of the year 5,499,216 5,499,216 5,499,216 5,499,216 Charge to profit or loss - - - - Total impairment at the end of the year 5,499,216 5,499,216 5,499,216 5,499,216 14 INVESTMENT IN SUBSIDIARY FDB Nominees Ltd - 20,000 20,000 The Bank has 100% beneficial interest in the ordinary share capital of the subsidiary company which is incorporated in Fiji.
116 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 15 INVESTMENTS CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Shares in companies - at cost Impairment 3,334,291 3,334,291 3,334,291 3,334,291 (3,319,290) (3,319,290) (3,319,290) (3,319,290) Equity securities are valued in accordance with Note of the financial statement 15,001 15,001 15,001 15,001 Shares in subsidiary company FDB Nominees Limited Shares in other companies South Pacific Stock Exchange Adfip Trustees Total Investments - - 20,000 20,000 15,000 1 15,001 15,000 1 15,001 15,000 1 35,001 15,000 1 35,001 Equity securities designated as at FVOCI As a 1 July 2018, the Bank designated the investments shown above as equity securities as at FVOCI because these equity securities represent investments that the Bank intends to hold for the long term for strategic purposes.
16 LAND HELD FOR RESALE Nasarawaqa Estate Cost at beginning of the year 99,426 99,426 Impairment at the beginning of the year (94,531) (94,531) Impairment expense during the year Impairment at the end of the year Contributions to project - - 4,895 4,895 (4,895) (4,895) - - 99,426 (94,531) - 4,895 (4,895) - 99,426 (94,531) - 4,895 (4,895) - 117 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 17 PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED AND THE BANK Cost or valuation Land and Buildings $ Plant and Equipment $ Fixtures and Fittings $ Work in Progress $ Total $ Balance at 1 July 2017 15,035,076 6,813,806 121,860 742,728 22,713,470 Acquisitions during the year - 531,908 - 3,277,075 3,808,983 Transfer in /(out) Disposals 3,289,522 632,623 (58,000) (882,022) - (3,479) (3,922,145) - - (943,501) Balance at 1 July 2018 18,266,598 7,096,315 118,381 97,658 25,578,952 Acquisitions during the year - 263,058 Revaluation Disposal Transfer In/(out) 9,396,313 - 239,720 - (199,727) 533,339 3,618 - (13,114) 977,821 1,244,497 - - 9,396,313 (212,841) - (773,059) - Balance at 30 June 2019 27,902,631 7,692,985 108,885 302,420 36,006,921 Accumulated Depreciation Balance at 1 July 2017 276,330 4,683,306 115,930 - 5,075,566 Depreciation charge for the year 183,438 748,662 1,472 - 933,572 Disposal (1,748) (814,142) (3,475) - (819,365) Balance at 1 July 2018 458,020 4,617,826 113,927 - 5,189,773 Depreciation charge for the year 569,087 810,089 1,307 - 1,380,483 Revaluation Disposal Balance at 30 June 2019 (608,147) (8,954) 410,006 - (180,240) 5,247,675 - (13,117) 102,117 (617,031) (193,427) 5,759,798 - - Carrying amount Balance at 1 July 2017 Balance at 30 June 2018 14,758,746 17,808,578 2,130,500 2,478,489 Balance at 30 June 2019 27,492,625 2,445,310 5,930 4,454 6,768 742,728 97,658 17,637,904 20,389,179 302,420 30,247,123 The Directors have adopted a policy of obtaining regular independent valuations
 for all of the Bank’s properties on an existing use basis of valuation.
The land and buildings were re-valued by Professional Valuations Ltd and these valuations were adopted by the Bank within the financial year 2019.
118 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 18 COMPUTER SOFTWARE - INTANGIBLES CONSOLIDATED THE BANK Balance at the beginning of the year Acquisitions during the year 2019 $ 378,537 11,572 Work in Progress 78,881 2018 $ 362,937 15,600 - 2019 $ 2018 $ 378,537 11,572 362,937 15,600 78,881 - Balance at the end of the year 468,990 378,537 468,990 378,537 Accumulated Amortisation Balance at the beginning of the year 237,899 182,370 237,899 182,370 Amortisation charge for the year 56,480 55,529 56,480 55,529 Balance at the end of the year 294,379 237,899 294,379 237,899 Carrying amount Balance at the beginning of the year 140,638 180,567 140,638 180,567 Balance at the end of the year 174,611 140,638 174,611 140,638 19 OPERATING LEASE Leases as Lessee Minimum lease payments under non-cancellable operating leases are payable as follows: Not Later than one year 48,056 50,045 48,056 50,045 Between one and five years 192,224 200,182 192,224 200,182 More than 5 years 1,682,652 2,103,613 1,682,652 2,103,613 1,922,932 2,353,840 1,922,932 2,353,840 The above operating Lease Rentals relate to TLTB and Government of Fiji lease payments the Bank is required to make annually.
20 ACCOUNTS PAYABLE AND ACCRUALS Interest accruals Others 2,336,583 1,741,633 2,336,583 1,741,633 3,580,084 2,124,700 5,916,667 3,866,333 3,494,890 5,831,473 2,082,017 3,823,650 119 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 21 DEBT SECURITIES ISSUED Short term borrowings Term deposits Promissory Notes RBF Export Facility CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ 10,515,826 25,170,250 10,515,826 25,170,250 31,999,999 24,000,000 31,999,999 24,000,000 7,061,600 18,628,717 7,061,600 18,628,717 FDB Registered bonds - face value 59,500,000 44,000,000 59,500,000 44,000,000 Total Short term borrowings 109,077,425 111,798,967 109,077,425 111,798,967 Non-current - Bonds Term deposits RBF Export Facility 4,740,010 80,000 4,740,010 80,000 66,479,443 48,383,999 66,479,443 48,383,999 FDB Registered bonds - face value 176,300,000 134,800,000 176,300,000 134,800,000 Long term borrowings Total borrowings 11,559 15,402 11,559 15,402 247,531,012 183,279,401 247,531,012 183,279,401 356,608,437 295,078,368 356,608,437 295,078,368 The above short term borrowings have a repayment term of less than 1 year and have been guaranteed by the Government of Fiji.
The interest rate for the short term borrowing ranges from 3.50% to 7.00% in (2018: 2.50%-4.55%).

The borrowings under RBF Export Facility have term of 2 to 5 years.

The FDB registered bonds have a repayment term varying between 1 to 15 years and have been guaranteed by Government of Fiji.
22 OTHER LIABILITIES Current Seed Capital Fund Staff Savings account Export Facility Tractors and Farm Implements Farmers Assistance Scheme 2,225,400 1,578,785 1,227,228 1,260,000 128,686 6,420,099 2,350,356 1,409,023 1,227,228 1,845,000 128,686 6,960,293 2,225,400 1,578,785 2,350,356 1,409,023 1,227,228 1,227,228 1,260,000 128,686 6,420,099 1,845,000 128,686 6,960,293 Seed Capital Fund is a revolving fund from the Government of Fiji for lending to specialised business activities in forestry, fishing and eco-tourism.
Principal repayments for the seed capital loans are added back to the initial fund for re-lending.

Seed Capital Fund amounts that are not utilised are repayable to the Government.

Staff savings are stated at amortised cost and are repayable on demand at an average interest rate of 2.5% per annum.
120 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 23 EMPLOYEE ENTITLEMENTS At 1 July 2018 Utilised during the year Arising during the year At 30 June 2019 CONSOLIDATED THE BANK 2019 $ 767,990 (651,063) 680,497 797,424 2018 $ 1,031,309 (1,034,100) 770,781 767,990 2019 $ 2018 $ 767,990 1,031,309 (651,063) (1,034,100) 680,497 797,424 770,781 767,990 The employee entitlement includes accrued leave and gratuity.
The gratuity is accrued for all tenure staff after continuous service of 10 years and the staffs is eligible for payment on retirement after reaching the age of 55 years.
The split for employee entitlement’s is as follows: Current Non-current Total 24 CAPITAL Authorised capital Contributed capital 680,495 116,929 797,424 500,663 267,327 767,990 680,495 116,929 797,424 500,663 267,327 767,990 100,000,000 100,000,000 100,000,000 100,000,000 56,050,636 56,050,636 56,050,636 56,050,636 The Bank was formed by an Act of Parliament and the contributed capital of $56,050,636 consists of equity contribution from the Government of Fiji.
25 COMMITMENTS AND CONTINGENT LIABILITIES 2019 $ 2018 $ (a) Commitments (i) Loans approved but not disbursed 86,430,682 71,895,147 (b) Capital Commitments (i) Work In Progress (c) Contingent liabilities (i) Guarantees (ii) Litigation 168,331 815,714 4,959,949 2,149,941 - - 121 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 26 RELATED PARTY TRANSACTIONS Government The related party transactions with Government have been disclosed in the respective notes of the financial statements.
This includes notes 1,3,9,13, 21, 22 and 24.

Directors The following are Directors of the Bank and the Group during the financial year ended 30 June 2019 and up to the date of this report.
Current directors Mr. Robert G. Lyon Mr. Vadivelu Pillay Mr. Rajesh Patel Mr. Inia Rokotuiei Naiyaga Mr. Romit Meghi Pharshottam Ms. Kalpana Kushla Lal Chairperson Deputy chairperson CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Directors’ Expenses 114,134 174,710 114,134 174,710 Other related party transactions Loans amounting to $2,734,885 (2018: $1,786,651) were advanced to a Company where a Director has a related party interest and are included in “Loans and Advances” (refer note 11).
The loans were provided under normal terms and conditions.

Key Management Personnel Details of Compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
During the year the following persons were the executives identified as key management personnel, with the greatest authority and responsibility for the planning, directing and controlling the activities of the Bank and the Group.
Name Mark Clough Shaukat Ali Saiyad Hussain Nafitalai Cakacaka Mere Tausie Aisake Current title Chief Executive Officer General Manager Relationship & Sales General Manager Finance and Administration General Manager Business Risk Services General Manager Talent & Organisational Development 122 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 26 RELATED PARTY TRANSACTIONS Key Management Personnel (continued) The aggregate compensation of the above key management personnel (excluding Directors) comprises only short-term benefits and is set out below: CONSOLIDATED THE BANK 2019 $ 2018 $ 2019 $ 2018 $ Short-term benefits 1,064,366 1,066,313 1,064,366 1,066,313 The Key Management Personnel are contracted employees and are entitled to short term benefits only.
There is no long term benefits payable.

Loans amounting to $11,981 (2018: $28,244) to executives are included in “Loans and Advances” (refer note 11).

The loans were provided at arm’s length transaction.

27 RISK MANAGEMENT POLICY Credit Risk Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from loans and advances.
The credit risk framework is in place across the organization with the end-objective of ensuring a structured and disciplined approach in pursuing the targets mutually set by the board and management.

The framework focuses on corporate mission, policies, procedures, people, skills, values, controls and portfolio balance exposures.
It is supported by regular portfolio analysis and detailed underwriting evaluation that identifies risk areas / concentrations, with recommended risk remedies and monitoring procedures in order to avert any probable negative impact of the account and of the portfolio.

The authority to make credit decision is layered.

The Board credit committee retains the authority to approve loan amounts above a threshold that is set by the board.
On the other hand, the management (EXCO) has authority and discretion to delegate defined approving limits to Risk Officers under certain conditions.

The delegated credit decision authority, particularly below the threshold level is reviewed from time to time in respect of each Officer’s performance, exercise of delegated authority and changes to the Bank and the Group policy guidelines.
Managers are also obliged to meet reporting and review requirements, to monitor credit risk exposure under their control and to report promptly any deteriorating situations that affect the Bank and the Group.

The other component of the Bank and the Group’s rating system for customers is a Client Quality Rating (CQR).

This rating represents the Bank and the Group’s view as to the “financial health” of the business during the past and in future.
Furthermore, the Bank and the Group uses Credit Risk Rating (CRR) Systems, which were developed internally and integrates the different qualitative and quantitative variables of a borrower.

The grading method takes into focus the history of the borrower, its financial performance, regulatory mandates (e.g.
RBF regulations, Basel 2), industry/sectoral outlook, customer’s liquidity to meet its contractual obligation and the probable loss in the event of default, a factor of the security value taken to support the facility.

The credit risk grading system is robust and consistently applied on all borrowing customers.

Any exceptions or variations on the risk grading for specific borrower is brought to EXCO or Board for final approval.
The Bank and the Group considers and consolidates all elements of credit risk exposure (such as individual default risk, country risk and sector risk).
123 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Credit Risk (continued) Forecasts are made using different statistical methodologies and pricing models in order to determine the relative volatility of the portfolios against market conditions.
This includes forms of analysis such as but not limited to value-at-risk; durated term of loan assets; interest rate elasticity and gaps, with the end-objective of maintaining a balance structure between the Bank and the Group’s assets and liabilities; and a balance between developmental and commercial activities.
As part of credit risk management process, portfolios are subjected to systematic stress tests in order to determine the probable loss of values due to changes in interest rates (financial market condition), default ratios and durated term structure.

The stress testing also covers asymmetric risk-radicals that are unexpectedly sprouted on the portfolio thereby changing the estimated risk pattern previously established.

CREDIT RISK CONCENTRATION The Bank lends to various industry sectors.
The concentration of credit risk in relation to these industry sectors is set out below: Industry Agriculture Building and construction Manufacturing Mining and quarrying Private individuals Professional and business services Real estate Transport, communication and storage Wholesale, retail, hotels and restaurants Others Total gross loans and advances 2019 $ 2018 $ 110,622,085 105,509,759 69,568,332 29,133,820 554,942 16,282,421 8,360,416 46,129,776 50,635,908 57,528,949 29,243,148 573,995 18,929,568 4,861,905 42,464,420 40,975,219 162,285,032 142,629,031 46,182,693 44,342,195 539,755,425 487,058,189 124 Fiji Development Bank 2019 Annual Report 2019 $ 2018 $ FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) IMPAIRED AND PAST-DUE ASSETS Non-accrual loans Gross Less: Interest and Fees suspended Less: allowance for expected credit loss THE BANK 2019 $ 2018 $ 88,371,586 82,163,096 (20,574,762) (19,120,852) 67,796,824 63,042,244 (63,565,180) (60,316,447) Net non-accrual loans without allowance for expected credit loss 4,231,644 2,725,797 Restructured loans without allowance for expected credit loss Gross Less: Interest and Fees suspended 3,256 149,183 - (7,267) Net restructured loans without allowance for expected credit loss 3,256 141,916 Restructured loans with allowance for expected credit loss Gross Less: Interest and Fees suspended Less: Allowance for expected credit loss 182,102 108,199 (41,220) (25,168) 140,882 83,031 (29,867) (23,182) Net restructured loans with allowance for expected credit loss 111,015 59,849 Other impaired loans Gross Less: Interest and Fees suspended Less: Allowance for expected credit loss Net other classified loans Total impaired and past-due loans Past-due loans but not impaired Gross Less: Interest and Fees suspended 428,254 415,771 - - 428,254 415,771 - - 428,254 415,771 4,774,169 3,343,333 16,642,532 11,902,023 (170) (377) Total past-due loans
 16,642,362 11,901,646 125 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) IMPAIRED AND PAST-DUE ASSETS (continued) Ageing analysis of financial assets that are past due but not impaired or restructured 2019 Loans & Advance 2018 Loans & Advance ($) ($) Default Risk 1-3 months 13,163,698 3-6 months 3,471,266 6-9 months 4,508 9-12 months 1,301 More than 1 year 1,759 1-3 months 7,754,845 3-6 months 4,115,250 6-9 months 2,718 9-12 months 6,371 More than 1 year 22,839 Default risk is a risk that some loans may not be repaid; implications of asset mix on risk based capital and asset quality on ability to leverage the Bank and the Group’s capital.
Credit risk details relating to the Bank and the Group are set out below: Amounts arising from ECL Inputs, assumptions and techniques used for estimating impairment.

See accounting policy in Note 1(k).

Significant increase in credit risk When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Bank and the Group 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 and the Group’s historical experience and expert credit assessment and including forward-looking information.
The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing: - - the remaining lifetime probability of default (PD) as at the reporting date; with the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure.
The Bank and the Group allocates credit risk grades to each exposure based on certain data that is determined to be predictive of the risk of default and applying experienced credit judgement.

A combination of qualitative and quantitative factors are used to assess risk of default.

These factors vary depending on the nature of the exposure and the type of borrower.
Customer accounts are graded internally and all existing customers are categorised A to F. Further, the individual accounts/customer groups are classified as Standard, Special Mention, Sub Standard, Doubtful and Loss for credit risk management purposes.

Each exposure is allocated to a credit risk grade at 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.

- 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 and compliance with covenants; - Payment record – this includes overdue status as well as a range of variables about payment ratios; and - Existing and forecast changes in business, financial and economic conditions.
Generating the term structure of Probability of Default (PD) Credit risk grades are a primary input into the determination of the term structure of Probability of Default (PD) for exposures.

The Bank and the Group collects performance and default information about its credit risk exposures by credit risk grading.
126 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Significant increase in credit risk (continued) The Bank and the Group employs statistical models to analyse the data collected and generate estimates of the remaining lifetime Probability of Default (PD) of exposures and how these are expected to change as a result of the passage of time.
This analysis includes the identification and calibration of relationships between changes in default rates and changes in key macro-economic factors as well as in-depth analysis of the impact of certain other factors (e.g.

forbearance experience) on the risk of default.


For all exposures, key macro-economic indicators used is percentage change in tourism arrival as the main indicator and other indicators such as GDP, unemployment rate, based on publications by the trading economics (Bureau of Statistics) and Reserve Bank of Fiji.

Determining whether credit risk has increased significantly.
The criteria for determining whether credit risk has increased significantly vary by portfolio and include quantitative changes in PDs and qualitative factors, including a backstop based on delinquency.
Using its expert credit judgement and, where possible, relevant historical experience, the Bank and the Group may determine that an exposure has undergone a significant increase in credit risk based on particular qualitative indicators that it considers are indicative of such and whose effect may not otherwise be fully reflected in its quantitative analysis on a timely basis.

Renegotiation of loans to customers in financial difficulties is a qualitative indicator of a significant increase in credit risk.
As a backstop, the Bank and the Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due.
The Bank and the Group monitors the effectiveness of the criteria used to identify significant increases in 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; and there is no unwarranted volatility in loss allowance from transfers between 12-month Probability of Default (PD) (stage 1) and lifetime Probability of Default (PD) (stage 2).
Definition of default The Bank and the Group considers loans and advances to be in default when: - the borrower is unlikely to pay its credit obligations to the Bank and the Group in full, without recourse by the Bank and the Group to actions such as realising security (if any is held); or the borrower is past due more than 90 days on any material credit obligation to the Bank and the Group.
- In assessing whether a borrower is in default, the Bank and the Group 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 the Group; and based on data developed internally and obtained from external sources.

Inputs into the assessment of whether loans and advances are in default and their significance may vary over time to reflect changes in circumstances.
127 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Incorporation of forward-looking information The Bank and the Group incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and its measurement of Expected Credit Loss (ECL).
Based on consideration of a variety of external actual and forecast information, the Bank and the Group formulates a ‘base case’ view of the future direction of relevant economic variables as well as a representative range of other possible forecast scenarios.

This process involves developing economic scenarios and considering the relative probabilities of each outcome.

External information includes economic data and forecasts published by Reserve Bank of Fiji.
The base case represents a most-likely outcome.

The other scenarios represent more optimistic and more pessimistic outcomes.

Periodically, the Bank and the Group carries out stress testing of more extreme shocks to calibrate its determination of these other representative scenarios.
The Bank and the Group has identified and documented key drivers of credit risk and credit losses for each portfolio of loans and advances and, using an analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses.

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); - exposure at default (EAD).
These parameters are generally derived from internally developed statistical models and other historical data.

They are adjusted to reflect forward-looking information as described above.

Probability of Default (PD) estimates are estimates at a certain date, which are calculated based on statistical rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures.
These statistical models are based on internally compiled data comprising both quantitative and qualitative factors.

If a counterparty or exposure migrates between rating classes, then this will lead to a change in the estimate of the associated PD.

PDs are estimated considering the contractual maturities of exposures.

Loss Given Default (LGD) is the magnitude of the likely loss if there is a default.
The Bank and the Group estimates Loss Given Default (LGD) parameters based on the history of recovery rates of claims against defaulted counterparties.

The Loss Given Default (LGD) model considers the structure, collateral, seniority of the claim and recovery costs of any collateral that is integral to individual loans and advances.

Loss Given Default (LGD) estimates are recalibrated for different economic scenarios.
They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.

Exposure at Default (EAD) represents the expected exposure in the event of a default.

The Bank and the Group derives the Exposure at Default (EAD) from the current exposure to the counterparty and potential changes to the current amount allowed under the contract including amortisation.

The Exposure at Default (EAD) of loans and advances is its gross carrying amount.
For lending commitments, the Exposure at Default (EAD) includes the amount drawn, as well as potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-looking forecasts.
As described above, and subject to using a maximum of a 12-month PD for loans and advances for which credit risk has not significantly increased, the Bank and the Group measures Expected Credit Loss (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 risk management purposes, the Bank and the Group considers a longer period.
The maximum contractual period extends to the date at which the Bank and the Group has the right to require repayment of an advance or terminate a loan commitment.

Loans and advances are grouped on the basis of shared risk characteristics that include loan purpose and credit risk gradings.

The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
128 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Measurement of ECL (continued) 2019 2018 12 months ECL Lifetime ECL not credit impaired Lifetime ECL not credit impaired Lifetime ECL credit impaired Total Total Loans and advances to customers $ Grade-Standard 413,079,794 Grade-Special mention Grade-Substandard Grade-Doubtful Grade-Loss - - - - $ - 36,997,151 $ - - - - - 15,399,126 17,984,009 - $ - - - - $ $ 413,079,794 367,525,871 36,997,151 35,940,794 15,399,126 17,007,136 17,984,009 11,515,078 56,295,345 56,295,345 55,069,310 Loss on Allowance (20,593,242) (4,714,656) (13,338,180) (37,574,192) (76,220,270) (67,109,418) 413,079,794 36,997,151 33,383,135 56,295,345 539,755,425 487,058,189 Allowance for Interest and Fees (20,620,603) (19,186,493) Carrying amount 392,486,552 32,282,495 20,044,955 18,721,153 442,914,552 400,762,278 Liquidity Risk Management Liquidity risk involves the inability of the Bank and the Group to fund increases in assets, manage unplanned changes in funding sources and to meet obligations when required, without incurring additional costs or inducing a cash flow crisis.
The Bank and the Group generates its funding through issuance of bonds, with one to seven years maturities, term deposits and promissory notes of maturities less than a year.

The Bank and the Group’s strong and effective liquidity risk management policy and framework ensures that the Bank and the Group has sufficient liquid assets to meet liabilities that fall due in the short term and to meet any unexpected demands for funds by its depositors or creditors.
The Bank and the Group’s executive committee manages the Bank’s liquidity and cost of funds.

The Bank and the Group performs a daily cash forecast for the next three months (one quarter) to identify any probable liquidity stress points.
In addition to this, the Bank and the Group performs a stress-test on its cost of funds twice a month to measure any probable deviation from its forecasted forward rates and cost benchmarks by: • quantifying liquidity outflows in all scenarios for each risk driver; • • determine net liquidity position under each scenario.
identifying cash flows to mitigate liquidity shortfalls identified and; Since the Bank and the Group does not have trading activities or hedge facilities to cushion unexpected liquidity gaps, it retains a policy of maintaining 10% of its total liability position in liquid assets at all times.

Fully aware of maturity mismatched between its assets and liabilities, the Bank and the Group places a heavy emphasizes on collection efficiency of its lending units.
The determination of the adequacy of FDB’s liquidity position depends upon an analysis of the Bank and the Group’s position relative to the following factors: • historical funding requirements • current liquidity position • anticipated future funding needs • present and anticipated asset quality • present and future earning capacity • sources of funds.

All of the Bank and the Group’s interest rates during the time of borrowing are fixed.
Therefore, there is no material sensitivity to changes in interest rates.

129 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Liquidity Risk Management (continued) Maturity Analysis The following analysis of financial liabilities is based on remaining contractual terms to maturity.
2019 At call 1 day to 3 Over 3 months months to 1 year Over 1 year to 5 years Over 5 years Specific provision Total $ $ $ $ $ $ $ Assets (000) (000) (000) (000) (000) (000) (000) Debt financial assets at amortised cost Loans and advances Other Receivables 2,000 6,728 1,992 61 185 9,149 2,014 174,645 - 439 250,248 - - - 2,685 98,985 (43,468) 496,287 - - 4,006 Total 10,720 11,224 174,830 250,687 98,985 (43,468) 502,978 Liabilities Other Liabilities 10,808 Accounts Payable Borrowings Total 5,831 - 16,639 2018 Assets Debt financial assets at amortised cost Loans and advances Other Receivables Total Liabilities Other Liabilities Accounts Payables Borrowings Total 2,000 5,552 723 8,275 10,765 4,826 - 15,591 130 - - - - - - 38,193 38,193 76,429 76,429 241,986 241,986 - - - - - - - - 10,808 5,831 356,608 373,247 61 185 127,362 - 6,336 1,740 8,137 685 254,300 - - - 2,931 93,508 (37,685) 449,373 - - 2,463 127,547 254,985 93,508 (37,685) 454,767 - - - - - - 39,145 39,145 78,516 78,516 177,402 177,402 - - 15 15 - - - - 10,765 3,824 295,078 309,667 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Market Risk Market risk refers to the uncertainty of future earnings resulting from changes in interest rates, exchange rates, market prices and volatilities.
Normally financial institutions assume market risk from consumer and corporate loans, position taking, and trading and investment activities.

Interest rate movement as it impacts the overall weighted cost of funds; The impacts of market risks to the Bank and the Group are on three dimensions, namely: • • As it impacts the interest rate margin; and • As it changes the value of the earning assets; or putting it in another perspective, as it changes the value-at-risk of earning assets.
The strategy for controlling the Bank and the Group’s market risk involves: • Investing surplus funds in other banks and financial institutions; • Stringent control and limits; • Timely Review of loan and deposit pricing; • Regular independent review of all controls and limits; and • Rigorous testing and auditing of all pricing, trading, risk management and accounting systems.
Market risk analysis is focused on the contemplated term of borrowing, which is then expressed by the rate offers of the Bond or Promissory Note buyers.

In line with the term structure of interest rate defined by the financial market (investors or lenders), the Bank and the Group further consider the impact of such rates to its overall cost of funds.
To achieve this, the Bank and the Group determines a benchmark on its weighted average cost of funds and stresses this benchmark by simulating different rate levels which the market may tender, when the Bank and the Group makes its offering.

In relation to overall cost of borrowings, the Bank and the Group re-calibrates its interest rate margin, which is the difference between the average interest yield of earning assets and the projected weighted average cost of funds.
To cure the probable risk on margins, the Bank and the Group uses the reference curve approach where the durated term of groups of earning assets is matched with the durated term of group of fund sources.

By matching the durated term and yield of earning assets with specific durated term and cost of borrowings, the target margin is often achieved under normal conditions.
While the Bank and the Group’s assets are of longer term maturities, they are repriced after a certain period thereby enabling the Bank and the Group to change its pricing structure and protecting its target interest margins.

The volatility of market interest rates impacts the value of the Bank and the Group’s earning assets (also known as value-at-risk).
While loan assets carry a repricing provision, they are committed for a fixed and long term, thereby making the asset structure immobile for probable contraction when warranted.

Given these conditionalities, the Bank and the Group forecasts the probable market interest rates and measures its value-at-risk on its assets under the forecast conditions.

Historical value at risk is used to determine the relative depletion of asset value at existing conditions.
Forecast value at risk is then computed based on simulated conditions, integrating thereto the other risk variables that would impact the value at risk.

The value-at-risk is analyzed base on “likelihood to happen” (very low, low, medium, high and very high) and the respective consequences of each likelihood which is then measured in terms of probable losses (dollar values – quantitative; and reputational impact - qualitative).
131 Fiji Development Bank 2019 Annual Report FIJI DEVELOPMENT BANK AND ITS SUBSIDIARY COMPANY NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2019 27 RISK MANAGEMENT POLICY (continued) Market Risk Sensitivity Analysis Market Risk Market risk sensitivity due to ± 2.50% fluctuation in weighted average lending rate As at June 2019 Increase in Lending Rate (+2.50%) Decrease in Lending Rate (-2.50%) 6.00 35,747,661 4,066,408 8.50 13,493,886 13,493,886 3.50 (13,493,886) (13,493,886) Weighted Average Lending Rate (%) Interest Income ($) Impact on profit or loss ($) Operational Risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
This definition includes legal risk but excludes strategic and reputational risk.

The Business & Risk Services Division, through its Planning Unit develops the policies governing the operations of the Bank and the Group.

The Internal Audit Department oversees the implementation of these policies and procedures across the organization.

A more recent development is the application of Risk Base Audit in contrast with the traditional audit approach where compliance is the focus.
Most operational risks are best managed within the departments in which they arise.

However, overall planning, coordination, and monitoring should be provided by a centralized operational risk management department.

This should closely coordinate with market risk and credit risk management departments within an overall enterprise risk management framework.
28 COMPARATIVES Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures.
29 SUBSEQUENT EVENTS There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the management, to affect significantly the operations of the Group or the Bank, the results of those operations, or the state of affairs of the Group or the Bank in subsequent financial years.
132 Fiji Development Bank 2019 Annual Report Labasa Seaqaqa Nabouwalu Taveuni Rakiraki Ba Lautoka Nadi Sigatoka Nausori Suva Suva Branch 360 Victoria Parade, G.P.O.

Box 104, Suva.

Ph: (679) 331 4866 Fax: (679) 331 4886 Ba Branch Varoka, P.O.

Box 110, Ba.

Ph: (679) 667 4211 Fax: (679) 667 4031 Labasa Branch Nasekula Road, P.O.

Box 41, Labasa.

Ph: (679) 881 1944 Fax: (679) 881 4009 Lautoka Branch 38 Vitogo Parade, P.O.

Box 716, Lautoka.

Ph: (679) 666 0639 Fax: (679) 666 5950 Nabouwalu Branch Bua, P.O.
Box 51, Bua.

Ph: (679) 883 6055 Fax: (679) 883 6056 Nadi Branch Main Street, P.O.

Box 1718, Nadi.

Ph: (679) 670 1900 Fax: (679) 670 3552 Nausori Branch 60 Main Street, P.O.

Box 317, Nausori.

Ph: (679) 347 7277 Fax: (679) 340 0484 Rakiraki Branch Vaileka Parade, P.O.

Box 82, Rakiraki.

Ph: (679) 669 4088 Fax: (679) 669 4784 Savusavu Branch Hugh Street, Verevere, P.O.

Box 42, Savusavu.

Ph: (679) 885 0055 Fax: (679) 885 0629 Seaqaqa Branch Seaqaqa Township, P.O.

Box 62, Seaqaqa.
Box 62, Seaqaqa.

Ph: (679) 886 0166 Fax: (679) 886 0168 Sigatoka Branch Vunasalu Road, P.O.

Box 81, Sigatoka.

Ph: (679) 650 0122 Fax: (679) 652 0399 Taveuni Branch Ground Floor, First Light Inn Building, Waiyevo.

P.O.

Box 215, Waiyevo, Taveuni.

Ph: (679) 888 0084 Fax: (679) 888 0057 133 Fiji Development Bank 2019 Annual Report HEAD OFFICE: 360 Victoria Parade, Suva, Fiji.

G.P.O.

Box 104, Suva, Fiji.

Ph: (679) 331 4866 Fax: (679) 331 4886 Website: www.fdb.com.fj Fiji Development Bank info@fdb.com.fj