Asa Int Regulatory News (ASAI)

Press Release

ASA International Group plc reports FY 2022 results

Amsterdam, The Netherlands, 18 April 2023 - ASA International Group plc ('ASA International', the 'Company' or the 'Group'), one of the world's largest international microfinance institutions, today announces its unaudited results for the year ended 31 December 2022.

Key performance indicators

FY 2022 highlights

· The Company's operational and financial results continued to improve compared to 2021 with profit before tax increasing to USD 46.3 million in FY 2022 from USD 25.7 million in FY 2021.

· Net profit stood at USD 17.9 million for FY 2022, compared to USD 6.4 million in FY 2021.

· The improvement was led by the strong operational and financial performance of Pakistan, the Philippines, Ghana and Tanzania microfinance institutions ('MFI's), which delivered significant OLP growth and increased profitability in constant currency terms.

· Nigeria, Kenya, and Uganda also made significant positive contributions to the Group's net profitability.

· As portfolio quality improved or stabilised across most markets, the Company significantly reduced expected credit losses ('ECL') charged to the Income Statement to USD 0.6 million (FY 2021: USD 37.5 million). Reserves for expected credit losses on OLP in the Balance Sheet, including the off-book BC portfolio in India and interest receivables, reduced from USD 27.5 million in FY 2021 to USD 16.9 million in FY 2022.

· PAR>30 for the Group's operating subsidiaries increased to 5.9% in 2022 from 5.2% in 2021, partially due to the decrease in portfolio quality in India, combined with a shrinking OLP in USD terms in some of our other major better performing countries due to substantial currency devaluation. PAR>30 for the Group excluding India is 3%.

· ASA India's collection efficiency continued to improve, reaching 87% in December 2022. As of 31 December 2022, ASA India had collected USD 3.7 million from a total of USD 22.9 million in written-off loans since 2020.

· The Group derecognised deferred tax assets amounting to USD 8 million related to deductible temporary differences and past losses for mainly India and Myanmar, in adherence to IFRS guidelines. This resulted in a substantial increase in tax expenses and a high effective tax rate for FY 2022.

· The Group's cash and cash equivalents reduced from approximately USD 91 million as of 31 December 2021 to approximately USD 55 million as of 31 December 2022, following large debt settlements primarily in India. The Company maintains a healthy cash position and has a significant funding pipeline.

Outlook

Whilst inflation and the related foreign exchange ('FX') movements will continue to impact the Group's operating subsidiaries' financial performance in USD terms, based on the positive developments throughout 2022, the Company expects the operating environment for its clients to continue to improve in most of its operating markets.

As most of the Group's operating subsidiaries have returned to growth and increased profitability, and subject to improved performance in India and reduced currency devaluation in most of our operating countries, the Company is confident of continued progress during 2023.

Dirk Brouwer, Chief Executive Officer of ASA International, commented:

"We are pleased that all but three of our operating subsidiaries reached or exceeded pre-covid operating and financial performance on a constant currency basis in 2022. The performance of most of our major operating subsidiaries, particularly Pakistan, the Philippines, Ghana and Tanzania, was excellent in terms of portfolio quality, growth and profitability. Though as expected, and against the backdrop of global market volatility, FX movements have significantly impacted the Group OLP and financial performance in USD terms, most of our clients and their businesses in these countries have again proved their resilience despite operating in an environment with high inflation.

As a result of the improved operating performance in 2022, profit before tax and net profit of the Group for 2022 is substantially better than what was achieved in 2021. The Group's profit before tax increased to USD 46.3 million in FY 2022 from USD 25.7 million in FY 2021, and the Group's net profit increased to USD 17.9 million in FY 2022 from USD 6.4 million in FY 2021.

Based on the positive developments throughout 2022 and despite the challenging operating environment in some of our operating subsidiaries, overall, we expect higher demand for our loans in 2023. This should lead to continued progress as we continue to invest in the future with our digital strategy."

CHIEF EXECUTIVE OFFICER'S REVIEW

Business review 2022

The improvement in the operating environment in most of our markets saw demand for our loan products increase as clients experienced an upturn in business activity. Against the backdrop of the macroeconomic challenges faced in our operating markets due to the global impact of food, commodities and energy inflation, the high demand from clients contributed to the growth of our operations.

Excluding India, Myanmar and Sri Lanka, the Group added 112 additional branches and increased number of clients from 1.7 million to 1.9 million in 2022. On a constant currency basis, OLP, excluding India, Myanmar and Sri Lanka, grew to USD 360 million in 2022 from USD 282 million in 2021. The growth in OLP was combined with improved portfolio quality in these markets with PAR>30 at 3% as of December 2022 in all markets excluding India.

To limit financial losses and, simultaneously, maintain sufficient capital in India and Myanmar, the Group decided to downsize the operations in these two countries for now.

In India, the Company maintained its strategy to reduce disbursements and focus on the recovery of existing and overdue loans, which resulted in OLP shrinking by USD 61 million in 2022. We do expect that the major change of the regulatory environment in India, including the removal of the margin and interest rate cap, should translate into a positive effect on the future profitability of our operations in India.

In Myanmar, the operating environment remained challenging following the military takeover of government in February 2021. This resulted in our inability to operate in a few regions where the levels of civil unrest remained high. We do not expect the operating environment to substantially improve until a governmental settlement is reached.

In Sri Lanka, one of our smallest markets, the economic and political crisis faced in 2022 resulted in disruptions to our operations. However, we expect a gradual improvement of business and the operating environment in 2023 which should allow our operations to start gradually reaching new clients.

I express my gratitude to all of our colleagues in our head offices and in the field in all our countries for their commitment, hard work and for always keeping their focus on supporting our clients in difficult operating circumstances.

Financial performance

As a result of the improved operating performance in FY 2022, and the significantly reduced expected credit losses charged to the Income Statement from USD 37.5 million in FY 2021 to USD 0.6 million in FY 2022, the Group realised net profits of USD 17.9 million, which was a substantial improvement over the USD 6.4 million achieved in FY 2021. I am pleased that all but three of our major operating subsidiaries exceeded pre-covid operating and financial performance on a constant currency basis in 2022. The performance of most of our operating countries, particularly Pakistan, the Philippines, Ghana and Tanzania, was excellent in terms of portfolio quality, growth and profitability.

The Group maintains a diversified risk profile with operations across thirteen markets in Asia and Africa. As the impact of global market volatility, inflation and adverse FX movements in our operating markets substantially varies per country, the Company benefits from this relatively high level of diversification.

Expected credit losses

The Company reduced its reserves in the Balance Sheet for expected credit losses from USD 27.5 million in FY 2021 to USD 16.9 million in FY 2022, for its OLP, including the off-book BC portfolio and interest receivables. Following an additional write-off of the outstanding Covid affected portfolio (USD 10.8 million in FY 2022 vs USD 32.9 million in FY 2021), the Company maintained significant reserves, primarily due to the overdue loans in India and Myanmar.

The USD 16.9 million ECL reserves on OLP is concentrated in India (57%) and Myanmar (20%), with the remainder spread across the other countries as a percentage of each country's outstanding loan portfolio or as an aggregate amount. Further details on the ECL calculation, including the selected assumptions, are provided in note 2.5.3 to the consolidated financial statements.

Digital financial services

In anticipation of a rapidly digitising world, also in the segment of our low-income clients, the Group made progress with the implementation of its digital strategy to have a more attractive and competitive client proposition. Our digital strategy entails the implementation of the newly acquired core banking system, our digital financial services platform ('DFS App'), and our route to embedded finance with the so-called Supplier Market Place ('SMP'). Along with the digitalisation of our client relationship, we will make progress in further digitising our employee processes as well.

The implementation of the core banking system (T24) in Pakistan as the first country in the Group continues as planned and is targeted to go live in the second half of 2023.

The SMP app is currently being rolled out in Ghana. The first clients are onboarded and placing their online orders. The DFS app, in combination with the new core banking system (T24) in Ghana, will go live after the Pakistan implementation.

Competitive environment

The competitive landscape has not changed much across the Group. Our strongest competitors are in India, the Philippines, Nigeria, Tanzania and Uganda. In most other markets, we face less competition from traditional microfinance institutions. Up until now, we have not noticed significant competition from pure digital lenders.

Dividend

After careful consideration, the Board has decided not to declare a dividend in 2023 on the 2022 results. However, the Company looks to return to its pre-Covid dividend policy in 2024 on the 2023 results, assuming the operating and financial performance continues to improve and flows of dividends from major operating subsidiaries return to normal.

Changes to the Board of Directors post 31 December 2022

On 24 February 2023, the Board has approved the following succession plan. Mr. Brouwer will remain as CEO until the Annual General Meeting ('AGM') on Thursday 15 June 2023, at which point Ms. Karin Kersten, currently Executive Director, Corporate Development, will be appointed CEO. Ms. Kersten joined ASA International from ABN AMRO Bank in October 2021 and became an Executive Director in April 2022. In the Board's view she is very well qualified to lead the Group going forward.

Webcast

Management will be hosting an audio webcast and conference call, with Q&A today at 14:00 (BST).

To access the audio webcast and download the 2022 FY results presentation, please go to the Investor section of the Company's website:  Investors | Asa (asa-international.com) or use the following link: https://stream.brrmedia.co.uk/broadcast/641c56bd2168855f70e653c7

The presentation can be downloaded before the start of the webcast.

In order to ask questions, analysts and investors are invited to submit questions via the webcast.

2022 Statutory accounts

The financial information in this document do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). A copy of the accounts for the year ended 31 December 2021 was delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified but made reference to a material uncertainty in respect of going concern and did not contain statements under section 498 (2) or 498 (3) of the Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2022 is not yet complete. The Directors expect the auditors' report to be unqualified and to make reference to a material uncertainty in respect of going concern due to expected portfolio quality covenant breaches in India and lack of waivers or no-action letters that cover the entire going concern period under assessment, and expect not to contain a statement under section 498 (2) or (3) of the Act. These accounts will be finalised on the basis of the financial information presented by the Directors in these preliminary results and will be delivered to the Registrar of Companies following the Company's annual general meeting.

Full Year Annual Report and Accounts

On 24 April 2023, the Company will publish the Annual Report and Accounts for the 12 months period ended 31 December 2022 on Investors | Asa (asa-international.com).

Annual General Meeting

The Annual General Meeting will be held on 15 June 2023.

Enquiries:

ASA International Group plc

Investor Relations

Mischa Assink

ir@asa-international.com

GROUP FINANCIAL PERFORMANCE

Regional performance

South Asia

· Pakistan continued to maintain a strong portfolio quality throughout 2022. 

· A shrinking OLP in India and significant currency depreciation in Pakistan and Sri Lanka (PKR down 28% and LKR down 81% YoY against USD) contributed to overall OLP reduction in 2022.

· South Asia recovered from a net loss of USD 12.4 million in 2021 and posted a net profit of USD 3.1 million in 2022.

Pakistan

ASA Pakistan grew its operations over the past 12 months:

· Number of clients increased from 512k to 606k (up 18% YoY).

· Number of branches up from 325 to 345 (up 6% YoY).

· OLP up from PKR 13.8bn (USD 77.7m) to PKR 17.9bn (USD 79.1m) (up 30% in PKR).

· Gross OLP/Client up from PKR 27.3K (USD 154) to PKR 29.8k (USD 131) (up 9% YoY in PKR).

· PAR>30 increased from 0.2% to 0.7%.

India

ASA India intentionally shrank its operations over the past 12 months, as it focused on recovery of overdue loans:

· Number of clients down from 541k to 284k (down 47% YoY).

· Number of branches down from 387 to 261 (down 33% YoY).

· OLP declined from INR 4.5bn (USD 61m) to INR 1.2bn (USD 14m) (down 74% YoY in INR).

· Off-book portfolio declined from INR 2.7bn (USD 35.7m) to INR 1.8bn (USD 21.5m) (down 33% in INR).

· Gross OLP/Client down from INR 16K (USD 211) to INR 13K (USD 158) (down 17% YoY in INR).

· PAR>30 increased from 19.7% to 49.0%, although PAR>30 amount decreased from INR 1.1bn (USD 15.1m) to INR 903.4m (USD 10.9m).

*See note 13.1 to the consolidated financial statements for details on the off-book portfolio.

Sri Lanka

Lak Jaya shrank its operations over the past 12 months as a result of the political and economic crisis in Sri Lanka:

· Number of clients down from 53k to 45k (down 15% YoY).

· Number of branches decreased from 66 to 64 (down 3%).

· OLP decreased from LKR 1.6bn (USD 7.7m) to LKR 1.4bn (USD 3.8m) (down 11% YoY in LKR).

· Gross OLP/Client up from LKR 32.0K (USD 158) to 32.4k (USD 89) (up 1% YoY in LKR).

· PAR>30 increased from 6.0% to 8.5%.

South East Asia

· South East Asia saw return to operational growth and profitability led by improvement of operations in the Philippines.

The Philippines

Pagasa Philippines operations grew over the last 12 months:

· Number of clients up from 289k to 325k (up 13% YoY).

· Number of branches up from 324 to 345 (up 6% YoY).

· OLP up from PHP 2.3bn (USD 44.6m) to PHP 2.8bn (USD 49.6m) (up 21% YoY in PHP).

· Gross OLP/Client increased from PHP 8.2K (USD 161) to PHP 8.6k (USD 153) (up 4% YoY in PHP).

· PAR>30 decreased from 2.5% to 1.7%.

Myanmar

ASA Myanmar saw a decline in clients and OLP over the last 12 months as a result of the political situation and the related civil unrest halting operations in certain regions:

· Number of clients down from 111k to 99k (down 11% YoY).

· Number of branches remained at 96.

· OLP down from MMK 31.5bn (USD 17.7m) to MMK 28.9bn (USD 13.8m) (down 8% YoY in MMK).

· Gross OLP/Client up from MMK 324k (USD 182) to MMK 362k (USD 172) (up 12% YoY in MMK).

· PAR>30 increased from 1.1% to 20.4%.

West Africa

· West Africa saw a deterioration in operational performance and profitability in USD terms due to the depreciation of GHS (65% down against USD in FY 2022) and SLL (68% down against USD in FY 2022). In constant currency, West Africa demonstrated an improvement in operational performance.

Ghana

ASA Savings & Loans operations improved with OLP above pre-Covid levels with excellent portfolio quality:

· Number of clients up from 158k to 177k (up 12% YoY).

· Number of branches up from 133 to 137 (up 3% YoY).

· OLP up from GHS 301.7m (USD 48.9m) to GHS 416.3m (USD 40.8m) (up 38% YoY in GHS).

· Gross OLP/Client up from GHS 1.9k (USD 310) to GHS 2.4K (USD 231) (up 24% YoY in GHS).

· PAR>30 increased from 0.3% to 0.6%.

Nigeria

ASA Nigeria saw an improvement of operations with OLP also above pre-Covid levels in NGN:

· Number of clients down from 254k to 220K (down 13% YoY).

· Number of branches maintained at 263.

· OLP up from NGN 15.9bn (USD 38.5m) to NGN 16.7bn (USD 37.3m) (up 5% YoY in NGN).

· Gross OLP/Client up from NGN 65k (USD 157) to NGN 80k (USD 179) (up 24% YoY in NGN).

· PAR>30 increased from 4.6% to 7.1%.

Sierra Leone

ASA Sierra Leone continued to successfully expand with branch and OLP growth:

· Number of clients down from 45k to 37k (down 18% YoY).

· Number of branches up from 44 to 46 (up 5% YoY).

· OLP up from SLL 76.1bn (USD 6.7m) to SLL 80.7bn (USD 4.3m) (up 6% YoY in SLL).

· Gross OLP/Client up from SLL 1.7m (USD 154) to SLL 2.3m (USD 123) (up 34% YoY in SLL).

· PAR>30 increased from 7.5% to 10.7%.

East Africa

· East Africa saw an improvement in operational performance and profitability due to continued growth in Tanzania and Kenya and improvements in the operating environment in Uganda, Rwanda and Zambia.

Tanzania

ASA Tanzania managed to significantly expand its operations over the last 12 months:

· Number of clients up from 174k to 217k (up 25% YoY).

· Number of branches up from 143 to 180 (up 26% YoY).

· OLP up from TZS 79.0bn (USD 34.3m) to TZS 119.5bn (USD 51.2m) (up 51% YoY in TZS).

· Gross OLP/Client up from TZS 460k (USD 200) to TZS 553k (USD 237) (up 20% YoY in TZS).

· PAR>30 decreased from 0.5% to 0.4%.

Kenya

ASA Kenya expanded its operations over the 12 months period:

· Number of clients up from 119k to 141k (up 19% YoY).

· Number of branches up from 112 to 124 (up 11% YoY).

· OLP up from KES 1.8bn (USD 16.1m) to KES 2.1bn (USD 16.9m) (up 14% YoY in KES).

· Gross OLP/Client down from KES 16K (USD 140) to KES 15K (USD 120) (down 6% YoY in KES).

· PAR>30 decreased from 1.1% to 0.8%.

Uganda

ASA Uganda saw a growth in operations over the last 12 months:

· Number of clients up from 92k to 107k (up 16% YoY).

· Number of branches up from 103 to 110 (up 7% YoY).

· OLP up from UGX 31.8bn (USD 9.0m) to UGX 43.0bn (USD 11.6m) (up 35% YoY in UGX).

· Gross OLP/Client up from UGX 378k (USD 107) to UGX 405k (USD 109) (up 7% YoY in UGX).

· PAR>30 decreased from 3.8% to 0.9%.

Rwanda

ASA Rwanda saw a growth in operations over the last 12 months:

· Number of clients up from 18k to 21k (up 17% YoY).

· Number of branches maintained at 30.

· OLP up from RWF 3.4bn (USD 3.3m) to RWF 4.6bn (USD 4.3m) (up 34% YoY in RWF).

· Gross OLP/Client up from RWF 193k (USD 187) to RWF 220k (USD 207) (up 14% YoY in RWF).

· PAR>30 slightly increased from 4.5% to 4.6%.

Zambia

ASA Zambia managed to expand its operations:

· Number of clients increased from 15k to 21k (up 43% YoY).

· Number of branches increased from 18 to 27 (up 50% YoY).

· OLP up from ZMW 36.4m (USD 2.2m) to ZMW 51.7m (USD 2.9m) (up 42% YoY in ZMW).

· Gross OLP/Client remained ZMW 2.5k (USD 139).

· PAR>30 increased from 0.3% to 5.0%.

Regulatory environment

The Company operates in a wide range of jurisdictions, each with their own regulatory regimes applicable to microfinance institutions.

Key events 2022

Pakistan

· ASA Pakistan received the Microfinance Banking ('MFB') licence from the State Bank of Pakistan ('SBP') on 24 May 2022 and is expected to receive a formal certificate of commencement any time.

· ASA Pakistan approved the dividend declared in 2022, and it has applied to the SBP for approval of the remittance. The approval is still pending.

India

· Following the Reserve Bank of India ('RBI') announcement on 14 March 2022, new regulation is in place for the microfinance sector in India, applicable to all banks, NBFC-MFIs and other participants in the microfinance sector. The key changes include the removal of the interest rate cap and margin cap which allowed the Company to raise the client rate, loans shall be collateral-free (also for banks providing microfinance loans), and lenders will be restricted to provide microfinance loans to clients up to a maximum of 50% of the client's household income. As a result of these changes, ASA India increased interest rates on new loans from 1 April 2022.

Sri Lanka

· The interest cap of 35% in Sri Lanka was removed by the Central Bank of Sri Lanka on 10 June 2022.

Myanmar

· Throughout 2022, the Central Bank of Myanmar prohibited or limited the servicing of foreign loans due to controls on foreign reserves.

· The Central Bank of Myanmar issued a circular dated 13 July 2022 suspending interest and principal repayments on foreign loans and directed companies to restructure the same. Subsequently, a new circular was issued on 16 August 2022 permitting certain transactions with approval from the Foreign Currency Supervision Committee.

Ghana

· The application for Digital Financial Services submitted in 2021 was still pending in 2022. In Q1 2023, the Bank of Ghana approved the application for Digital Financial Services.

Nigeria

· In 2022, the Central Bank delayed the approval of payment of dividends declared in the past. The 2021 dividend was approved in March 2023. The dividend declared in 2022 is still pending for approval.

Kenya

· In 2022, the Digital Credit Providers Act took effect, which prohibits credit-only MFIs to take collateral. MFIs are required to apply for a Digital Credit Providers licence, Microfinance Bank licence or any other suitable licence.

· ASA Kenya submitted a pro forma application for Digital Credit Providers licence to ensure it is compliant with the law, but is desirous to acquire a deposit taking license in the near future.

Regulatory capital

Many of the Group's operating subsidiaries are regulated and subject to minimum regulatory capital requirements. As of 31 December 2022, the Group and its subsidiaries were in full compliance with minimum regulatory capital requirements.

Asset/liability and risk management

ASA International has strict policies and procedures for the management of its assets and liabilities as well as various non-operational risks. In 2022, the Group has established an Asset-Liability Committee ('ALCO'), and the Terms of Reference of the ALCO has been approved by the Board. The ALCO will continuously manage the Group's assets and liabilities to ensure that:

· The average tenor of loans to customers is substantially shorter than the average tenor of debt provided by third-party banks and other third-party lenders to the Group and any of its subsidiaries.

· Foreign exchange losses are minimised by having all loans to any of the Group's operating subsidiaries denominated or duly hedged in the local operating currency. All loans from the Group to any of its subsidiaries denominated in local currency are also hedged in US Dollars.

· Foreign translation losses affecting the Group's balance sheet are minimised by preventing over-capitalisation of any of the Group's subsidiaries by distributing dividends and/or hedging capital.

Nevertheless, the Group will always remain exposed to currency movements in both (i) the profit and loss statement, which will be affected by the translation of profits in local currencies into USD, and (ii) the balance sheet, due to the erosion of capital of each of its operating subsidiaries in local currency when translated in USD, where the US Dollar strengthens against the currency of any of its operating subsidiaries.

Funding

The funding profile of the Group has not materially changed during FY 2022:

In USD millions

The Group maintains a favourable maturity profile with the average tenor of all funding from third parties being substantially longer than the average tenor at issuance of loans to customers which ranges from six to twelve months for the most of the loans.

Cash and cash equivalents reduced to approximately USD 55 million as of 31 December 2022 following large debt settlements, primarily in India. The Group maintains a healthy cash position. The Group managed to raise approximately USD 157 million in new debt funding in 2022. In line with market developments, funding costs have increased by approximately 100 bps, which will have limited impact on our 2023 results. Also, the Group has a strong funding pipeline of USD 201 million fresh loans, with over 88% having agreed terms and can be accessed in the short to medium term as of 31 March 2023.

The Group and its subsidiaries have existing credit relationships with more than 60 lenders throughout the world, which has provided reliable access to competitively priced funding for the growth of its loan portfolio.

During 2022, a number of loan covenants were breached across the Group, particularly related to the portfolio quality in India. As of 31 December 2022, the balance for credit lines with breached covenants and which does not have waivers amounts to USD 65 million out of which waivers have been subsequently received for USD 64 million .

The Group has also received temporary waivers, no-action and/or comfort letters from some of its major lenders for expected portfolio quality covenant breaches (primarily PAR>30) in 2023 caused primarily by the overdue loans in India. The impact of these potential covenant breaches was further assessed in the evaluation of the Group's going concern as disclosed in note 2.1.1 of the Full Year Financial Report. As the waivers and no-action letters do not cover the entire going concern period under assessment, and due to the expected portfolio quality covenant breaches in India, the Directors have concluded that there is a material uncertainty that may cast significant doubt over the Group's ability to continue as a going concern. Nevertheless, given the historical and continuing support received from lenders regarding these particular covenant breaches and based on continued improved operating performance in the other markets, the Group has a reasonable expectation that it will have adequate resources to continue in operational existence throughout the Going Concern assessment period.

Impact of foreign exchange rates

As a USD reporting company with operations in thirteen different currencies, currency movements can have a major effect on the Group's USD financial performance and reporting.

The effect of this is that generally (i) existing and future local currency earnings translate into less US Dollar earnings, and (ii) local currency capital of any of the operating subsidiaries will translate into less US Dollar capital.

During FY 2022, the local currencies PKR -28%, GHS -65%, NGN -9% and LKR -81% particularly weakened against US Dollar. This had an additional negative impact on the USD earnings contribution of these subsidiaries to the Group and also contributed to an increase in foreign exchange translation losses. The total contribution to the foreign exchange translation loss reserve during FY 2022 amounted to USD 34.0 million of which USD 9.4 million related to the depreciation of the PKR, USD 17.4 million related to the depreciation of the GHS, USD 2.5 million related to the depreciation of the NGN, and USD 1.4 million to depreciation of the LKR.

High effective tax rate

The Group derecognised deferred tax assets amounting to USD 8.0 million, which related to deductible temporary differences and past losses for mainly India and Myanmar, as these entities failed to meet the future profitability threshold required under IFRS. The Group will be able to recognise these deferred tax assets provided these entities turn profitable again. This resulted in a substantial increase in our tax expenses and effective tax rate for the year. Further details are provided in note 11 to the consolidated financial statements.

Transfer pricing

The South East Asia and East Africa regions are contributing intercompany franchise fees and corporate service fees to the holding companies of the Group, whereas approval for most of such intercompany charges are pending in certain countries in South Asia and West Africa. The intercompany charges per region are detailed in the Segment Information as included in note 3 to the consolidated financial statements.

Forward-looking statement and disclaimers

This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restriction.

ASA INTERNATIONAL GROUP PLC

UNAUDITED PRELIMINARY CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

The notes 1 to 39 form an integral part of these unaudited preliminary financial statements.

1See note 2.1.2 for details

Company number: 11361159

ASA INTERNATIONAL GROUP PLC

UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2022

The notes 1 to 39 form an integral part of these unaudited preliminary financial statements.

ASA INTERNATIONAL GROUP PLC

UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

ASA INTERNATIONAL GROUP PLC

UNAUDITED PRELIMINARY CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2022

The notes 1 to 39 form an integral part of these unaudited preliminary financial statements.

See note 2.1.2 for details

ASA INTERNATIONAL GROUP PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

1. CORPORATE INFORMATION

ASA International Group plc ('ASA International', the 'Group') is a public company limited by shares bearing registration number 11361159 in England and Wales. The entity was incorporated by Catalyst Microfinance Investors ('CMI') on 14 May 2018 for the purpose of the initial public offer of ASA International Holding. ASA International Group plc acquired 100% of the shares in ASA International Holding and all its subsidiaries on 13 July 2018 in exchange for the issue of 100 million shares in ASA International Group plc with a nominal value of GBP 1.00 each.

Investment strategy

ASA International is an international microfinance holding company with operations in various countries throughout Asia and Africa.

Abbreviation list

ASA INTERNATIONAL GROUP PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

ACCOUNTING POLICIES

2.1 General

The consolidated financial statements of ASA International Group plc have been prepared on a historical cost basis, except for derivative and equity instruments, which have been measured at fair value. The consolidated financial statements are presented in USD and all values are rounded to the nearest thousand (USD'000), except when otherwise indicated. The consolidated financial statements for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the Directors on 17 April 2023.

After the issue of the financial statements the Company's owners or others do not have the power to amend the financial statements.

2.1.1 Basis of preparation

The 2022 consolidated financial statements have been prepared on a going concern basis. It should be noted that in the 2021 Annual Report and Accounts, approved on 29 April 2022, senior management and the Directors concluded that the that the uncertainty relating to debt covenant breaches over the going concern period, and potential actions to mitigate debt being called due, represented a material uncertainty that may cast significant doubt over the Group's ability to continue as a going concern. In performing the going concern assessment for the 2022 consolidated financial statements the Directors have considered the global economic challenges arising out of high inflation in major operating markets and the strengthening of the USD against operating currencies in major operating markets for the period up to 31 May 2024 (the 'Assessment Period'). The conclusion of this assessment remains consistent with that of the 2021 Annual Report. Senior management and the Directors have concluded that there is a material uncertainty that may cast significant doubt over the Group's ability to continue as a going concern.

The Group has updated its detailed financial model for its budget and projections (the 'Projections') in line with current market conditions. The management team used the actual numbers up to December 2022 and updated the operating projections for the Assessment Period. These Projections are based on a detailed set of key operating and financial assumptions, including the minimum required cash balances, capital and debt funding plan per operating subsidiary, post-pandemic economic conditions of the countries, senior management's estimation of increased credit and funding risks, and current economic challenges faced by different operating subsidiaries resulting from increased inflation, which has a possibility to reduce demand for new microfinance loans. As a microfinance lender, the Group sees the service it provides to clients as an important factor for them to continue their businesses and their livelihoods as it provides resources and access to capital to the financially underserved. Therefore, The Group expects that rising inflation will not increase arrears materially based on historical evidence, however, this remains a risk.

The Group remains well capitalised and in compliance with minimum capital requirement in all markets. In terms of liquidity, the Group has USD 54.5 million of cash as of 31 December 2022. Also, the Group has a strong funding pipeline of USD 194 million with over 63% having agreed terms and which can be accessed in the short to medium term at the time of approval of the consolidated financial statements. This continues to reaffirm the confidence lenders have in the strength of the Group's business model and senior management's ongoing strategies to steer the Group through the current economic situation. It should be noted that the majority of this additional funding contains loan covenants and there is a risk of covenant breaches in certain stress scenarios, consistent with the risks detailed in the remainder of the going concern assessment. The Group is confident it will generate positive cash flows and will be able to fully fund the projected loan portfolio throughout the assessment period.

The Group does not expect a significant increase in credit loss expenses during the Assessment Period as in most of the entities, collections are back to the high 90% range and the proportion of loans with outstanding payments greater than 30 days (portfolio at risk greater than 30 days, or 'PAR>30') have generally stabilised. However, the Group expects increased PAR>30 in India, Myanmar and Sri Lanka as these entities are still struggling with overdue loans, economic and political challenges, which are creating operational and liquidity challenges for these entities. However, the Group has curtailed its disbursement in those entities and their portfolio size is expected to be much lower in comparison to the Group's Outstanding Loan Portfolio ('OLP'). The management team is closely following up on the developments.

Due to the above challenges, the Group expects further breaches of loan covenants during the Assessment Period. These covenants would mainly relate to arrears levels (portfolio at risk greater than 30 days, or 'PAR>30'), risk coverage ratios, the cost to income ratio, and write-off ratios. These breaches have not historically resulted in the immediate repayment request from lenders and are further evidenced by the supportive attitude of lenders in the last three years where the Group has been continuously able to raise new funds from the lenders. Out of total loans of USD 257 million, USD 82.5 million had breached loan covenants. As of 31 December, the balance for credit lines with breached covenants and which does not have waivers amounts to USD 65 million out of which waivers have been subsequently received for USD 64 million. Senior management is in constant communication with the other lenders for the waivers. However, the waivers received do not cover all of the Assessment Period. The international funders have been supportive of the Group and the microfinance sector in general during the last three years. In the absence of waivers, breaches of covenants that are not rectified within the time specified in the respective agreements, as applicable, would cause an event of default under the loan agreements. The Group is experiencing restrictions on the movement of funds between certain countries, due to laws or regulations, which could restrict the ability of the Group to support the funding or debt repayment requirements in the countries in which it operates.

Unless the majority of the covenant breach waivers are obtained the debt may be called due, which could materially impact the ability of the Group to meet its debt obligations. Although the Group has a history of negotiating covenant waivers, across particular locations, the current economic and market conditions make it difficult to assess its likely scale of debt covenant breaches and whether the waivers necessary to avoid the immediate repayment of debt will be forthcoming. As a result, senior management and the Directors have concluded that this represents a material uncertainty that may cast significant doubt over the Group's ability to continue as a going concern.

ASA INTERNATIONAL GROUP PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

2. ACCOUNTING POLICIES

2.1.1 Basis of preparation (continued)

In terms of mitigations, the Group is shrinking its exposure in certain countries by focusing on the collection of existing loans and curtailing disbursements. This is being applied to India, Myanmar and Sri Lanka. In India, additional focus has been on off-book disbursements and finding new business correspondent partners ('BC Partners') as this serves to increase the available cash in the business. This is not a preferred action but can be utilised to create liquidity in any country's operation when unexpected repayments are requested by lenders. Further, the holding entities within the Group did not provide parent guarantees to funders of the operating subsidiaries, which protects the Group against cross defaults.

Senior management and the Board of Directors extensively challenged the Projections and their underlying assumptions including the above considerations and factors. They also considered the risks around economic uncertainties resulting from high inflation, devaluation of local currencies, delays in dividend repatriation, increased operational costs, and the risk of not obtaining waivers for prospective covenant breaches. They also considered that since the beginning of 2022 most of the operating subsidiaries are fully operational, which has allowed the field operations to open new branches, with collections and new disbursements gradually returning to pre-pandemic levels. The Group also prepared stress and reverse stress scenarios for cash flows including the mitigating actions which include repatriation of dividends and short-term loan from subsidiaries which have sufficient cash reserves.

Senior management and the Directors have also assessed the probable impact of any subsidiary failing to maintain its required regulatory ratios. Given the level of arrears and challenge in India there is a probable risk of breaching capital requirements of the Reserve Bank of India ('RBI') if the realisation significantly declines. Should these requirements be breached then the possible implications could be that the RBI provides management with a remediation plan and/or further capital could be required. As stated earlier, the Group did not provide parent guarantees to funders of the operating subsidiaries and hence in case of dissolution, the Group's risk is limited to its capital investment and any shareholder loans.

Nevertheless, having assessed the Projections, downtrend analysis and mitigations described above, senior management and the Directors have a reasonable expectation that the Group has adequate resources to continue in operation existence for at least twelve months from the date of the authorisation of these financial statements, and the going concern assessment period through to 31 May 2024. For these reasons, they continue to adopt a going concern basis for the preparation of the consolidated financial statements. Accordingly, these financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group was unable to continue as a going concern.

2.1.2 Statement of compliance

The Group and Parent Company financial statements are prepared in accordance with UK adopted International Accounting Standards ('IAS' or 'IFRS').

The preparation of the consolidated financial statements in conformity with IFRS 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.

Change in accounting policy

The Group has reassessed its accounting policy for restricted cash as cash and cash equivalents following the release of IFRS Interpretations Committee agenda decision in March 2022. The Group has concluded that the restricted cash meets the definition of cash as the underlying terms and conditions do not prevent the Group from accessing restricted cash on demand. Therefore, the Group has concluded that restricted cash will be presented as a component of cash and cash equivalents in the consolidated statement of cash flows. This change in accounting policy has been applied retrospectively. The consolidated statement of cash flows and related notes have been restated in the consolidated financial report.

Correction of an error

The Group recognises interest income using effective interest rate method. The calculation includes all amounts paid or received between parties to the contract that are an integral part of the effective interest rate of a financial instrument including transaction costs, and all other premiums or discounts. Loan processing fees that is integral to the effective interest rate was previously reported under other interest income instead of interest income calculated using EIR.

The presentation error has been corrected by restating each of the affected financial statement line items by USD 8.9 million for the prior periods, as follows:

ASA INTERNATIONAL GROUP PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

ACCOUNTING POLICIES (continued)

2.1.3 Consideration of climate change

In preparing these financial statements, the Group has given consideration to the recommendations laid out by the Task Force on Climate-related Financial Disclosures (TCFD). The relevant assessment of the climate-related risks outlined in the Group's Annual Report on page 49 has been incorporated into judgements associated with recognition, measurement, presentation and disclosure, where so permitted by the UK adopted International Accounting Standards. The accounting judgements relating to climate change are presented in note 2.5.1.

While there is currently no significant impact expected from climate change, the Directors are aware of the constant evolving risks attached to climate change and will regularly assess these risks against judgements and estimates made in preparation of the financial statement.

2.1.4 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December for each year presented. The financial statements of subsidiaries are similarly prepared for the year ended 31 December 2022 applying similar accounting policies. Two new subsidiaries, ASA Zanzibar Limited and ASA Dwaso, were incorporated during the period. These do not have any significant impact on the financial position and results of the Group. All intra-Group balances, transactions, income and expenses and profits and losses resulting from intercompany transactions are eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. The Company has control over a subsidiary when it is exposed, or has rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The results of subsidiaries acquired or disposed of during the year are included (if any) in the consolidated statement of comprehensive income from the date of acquisition or up to the date of disposal, as appropriate. Non-controlling interests represent the portion of profit or loss and net assets not owned, directly or indirectly, by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from the equity attributable to equity holders of the parent.

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

2.2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below:

2.2.1 Foreign currency translation

The consolidated financial statements are presented in USD, which is also the Group's presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation.

Transactions and balances -Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. All differences are taken to 'Exchange rate differences' in the statement of profit or loss and other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Group companies - As at the reporting date, the assets and liabilities of subsidiaries are translated into the Group's presentation currency (USD) at the rate of exchange ruling at the reporting date except investments in subsidiaries and issued capital, which are translated at historical rate, and their statements of profit or loss and other comprehensive income are translated at the weighted average exchange rates for the year. Currency translation differences have been recorded in the Group's consolidated statement of financial position as foreign currency translation reserve through other comprehensive income.

ASA INTERNATIONAL GROUP PLC

NOTES TO THE UNAUDITED PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

ACCOUNTING POLICIES (continued)

2.2.2 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

a) Financial assets - initial recognition and subsequent measurement

(1) Date of recognition

Purchases or sales of financial assets that require the delivery of assets within the time frame generally established by regulation or convention in the marketplace are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

(2) Initial recognition and measurement

The Group recognises a financial asset in its statement of financial position, when, and only when, the entity becomes a party to the contractual provisions of the instrument. Financial assets are classified, at initial recognition, and measured at fair value. Subsequently they are measured at amortised cost, fair value through Other Comprehensive Income ('OCI'), and Fair Value Through Profit or Loss ('FVTPL'). The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them.