Annual Report 2006

Angola

Annual Report 2006

 Annual Repor t 2006

Key Figures

USD ’000 2006 2005* Change

Balance Sheet Data
Total Assets 14,055 7,763 81%
Gross Loan Portfolio 7,583 4,367 74%
Business Loan Portfolio 7,566 4,367 73%
USD < 10,000 5,163 2,723 90%
USD > 10,000 < 50,000 2,403 1,646 46%
USD > 50,000 < 150,000 – – –
USD > 150,000 – – –
Agricultural Loan Portfolio – – –
Housing Loan Portfolio – – –
Other 417 947 -56%
Allowance for Impairment on Loans -489 -156 213%
Net Loan Portfolio 7,094 4,163 70%
Liabilities to Customers 7,405 2,718 172%
Liabilities to Banks and Financial Institutions 996 – –
Shareholders’ Equity 4,987 4,914 1%

Income Statement
Operating Income 3,109 1,122 177%
Operating Expenses 3,066 1,357 126%
Operating Profit Before Tax 43 -235
Net Profit 43 -235

Key Ratios
Cost/Income Ratio 89.1% 106%
ROE 0.4% -4.9%
Capital Ratio 51.2% 83%

Operational Statistics
Number of Loans Outstanding 2,307 1,093 111%
Number of Loans Disbursed within the Year 2,839 1,365 108%
Number of Business and Agricultural Loans Outstanding 2,305 1,093 111%
Number of Deposit Accounts 23,661 11,169 112%
Number of Staff 115 49 135%
Number of Branches and Outlets 3 2 50%

* Some figures differ slightly from those in the 2005 an-

nual report as they have been adjusted to reflect new calcu-
lation methods.
 Contents 

Mission Statement 4

Letter from the Board of Directors 5

The Bank and its Shareholders 6

The ProCredit Group – Neighbourhood Banks for Ordinary People 8

ProCredit in Africa 10

The Year in Review 14

Management Business Review 16

Special Feature 23

Risk Management 24

Branch Network 26

Organisation, Staff and Staff Development 28

Business Ethics and Environmental Standards 29

Our Clients 30

Financial Statements 34

Contact Addresses 43
 M ission Stat e men t

Mission Statement

NovoBanco Angola is a development-oriented full-service bank. We offer excellent cus-

tomer service and a wide range of banking products. In our credit operations, we focus

on lending to very small, small and medium-sized enterprises, as we are convinced that

these businesses create the largest number of jobs and make a vital contribution to the

economies in which they operate.

Unlike other banks, our bank does not promote consumer loans. Instead we focus on

responsible banking, by building a savings culture and long-term partnerships with our

customers.

Our shareholders expect a sustainable return on investment, but are not primarily inter-

ested in short-term profit maximisation. We invest extensively in the training of our staff

in order to create an enjoyable and efficient working atmosphere, and to provide the

friendliest and most competent service possible for our customers.

 Le t ter from the Board of Directors 

Letter from the Board of Directors

At NovoBanco Angola we believe in the value of consistently applying our unique approach to banking
and to customer service. We are proud that, despite growing competition in the Angolan banking sector,
we upheld our target-group focus and our commitment to responsible lending.

NovoBanco’s rapid expansion in 2006 demonstrates that the public values its innovative banking prod-
ucts and customer-oriented account services. In line with its neighbourhood banking concept, NovoBanco
launched a savings campaign aimed at children, the first of its kind in Angola. The campaign, supported
by UNDP and Chevron, was very well received.

Although still a relatively young institution, NovoBanco is increasingly recognised by national policy-
makers and international institutions as Angola’s market leader for small business finance. In 2006,
NovoBanco’s second full year of operations, the bank nearly doubled its loan portfolio and more than
doubled its deposit base. It disbursed over USD 14 million in small and very small loans to 2,850 entre-
preneurs and welcomed nearly 12,000 new depositors. We opened a branch in the province of Benguela,
the first branch outside the capital city, Luanda. NovoBanco’s presence outside Luanda is extremely
important for the country’s reconstruction and economic development.

In 2006 total assets grew by more than 80%, and we earned a small profit for the first time. We do not
take our success for granted; the bank’s dynamic development is attributable to our outstanding, hard-
working staff, our trusting and appreciative customers, and a business model that is straightforward
and unique. We are confident that we can sustain the upward trend in 2007, during which we will further
expand our business.

I would like to express my gratitude to our shareholders for their ongoing support. Without their work
on the bank’s governing bodies and their technical assistance contributions, the bank’s start-up phase
would not have been possible. I thank all employees for their untiring efforts and their consistent imple-
mentation of our corporate strategy. Finally, I would like to thank our customers for the trust they have
placed in our bank.

Members of the
Board of Directors as at
December 31, 2006:
Gabriele Heber
Gabriele Heber Stefan Wolff
Chairperson of the Board of Directors NovoBanco Jasper Snoek
Michael Callaghan
Tunde Onitiri

Members of the
Management Board as at
December 31, 2006:
Stefan Wolff
Simon Herrmann
 Annual Repor t 2006

The Bank and its Shareholders

NovoBanco was established in 2004 as a full- mercial banks or microfinance organisations.

fledged commercial bank by a strong alliance of As Angola emerges from decades of civil war,
international shareholders. We provide credit NovoBanco is playing a critical role in the coun-
and other financial services to small entre- try’s private sector development, helping to cre-
preneurs and low-income households, a target ate prosperity and a stable economic environ-
market that was not previously served by com- ment.

Shareholder Sector Headquarters Share Paid-in Capital

(as of Dec. 31, 2006) (in USD)
ProCredit Holding Investment Germany 42.86% 2,100,000
IFC Banking USA 14.29% 700,000
DOEN Investment Netherlands 14.29% 700,000
BIO Investment Belgium 14.29% 700,000
Chevron Energy Germany 14.29% 700,000

Total Capital 100% 4,900,000

ProCredit Holding AG is the FY05, IFC has committed more than USD 49
parent company of the global billion of its own funds and arranged USD 24 bil-
group of ProCredit banks located in transition lion in syndications for 3,319 companies in 140
and developing countries across three conti- developing countries. IFC’s worldwide committed
nents. It was founded as Internationale Micro portfolio as of FY05 was USD 19.3 billion for its
Investitionen AG (IMI) in 1998. The ProCredit own account and USD 5.3 billion held for parti-
group of banks aim to make a difference by pro- cipants in loan syndications.
viding banking services to people whom other
banks either do not serve at all (usually on the
grounds of cost or risk) or only serve inadequately. DOEN Foundation promotes
The holding company, working closely with Inter- a liveable world in which
nationale Projekt Consult GmbH (IPC), guides the everyone can play a part, by subsidising and
development of the ProCredit institutions, provid- financing initiatives in the field of sustainable
ing support in all key areas of banking operations development, culture and welfare. DOEN Foun-
and human resources management. The company dation receives financial contributions for this
currently has an equity base of more than from the Dutch charity lotteries: the Nationale
EUR 200 million. Its shareholders consist of a Postcode Loterij (National Postcode Lottery), the
sound mix of private and public investors. BankGiro Loterij (BankGiro Lottery) and the Spon-
sor Loterij (Sponsor Lottery).

The International Finance Corpora-
tion (IFC) is the private sector arm of
the World Bank Group and is headquartered in
Washington, D.C. The mission of IFC is to promote
sustainable private sector investment in devel-
oping and transition countries, helping to reduce
poverty and improve people’s lives. IFC finances
private sector investments in the developing
world, mobilises capital in the international DOEN Foundation was set up in 1991 by the Na-
financial markets, helps clients improve social
and environmental sustainability, and provides
technical assistance and advice to governments
and businesses. From its founding in 1956 through
DOEN Foundation supports both small and large
initiatives which contribute to a more colourful
and liveable society, focussing particularly on
initiatives that require active entrepreneurship
and have a sustainable character. In implement-
ing such initiatives, the emphasis is on people’s
ability to motivate themselves.
tionale Postcode Loterij. The name DOEN (to do)
reflects what the foundation stands for: action
and results; stepping in where others will not; de-
termination and dedication to a liveable society.

The Belgian Investment Company for
Developing Countries (BIO), was set up
in December 2001 as a public-private partnership
between the Belgian government – through the
Department of Development Cooperation – and
the Belgian Corporation for International Invest-
ment. BIO’s mission is to support the sustainable
development of the private sector in develop-
ing countries by providing long-term financing through community and private sector develop-
(equity, quasi-equity and long-term loans) to
micro, small and medium-sized enterprises
(MSMEs). BIO’s interventions are either direct
or indirect (i.e. through investment funds and
financial intermediaries). To date, BIO has com-
mitments of over EUR 100 million.
The B a nk a nd i t s S h a r e hol de r s 
Chevron Sustainable Development Com-
pany Ltd. (CSDC) is a wholly-owned sub-
sidiary of Chevron Corporation, a lead-
ing U.S.-based oil company. Chevron has been
operating in Angola since the 1950s and is one
of the largest foreign investors in the country.
Founded in 2002, the CSDC is part of a wider initi-
ative to support the reconstruction of Angola
ment. Chevron has committed USD 25 million to-
wards a USD 50 million programme for Angola’s
reconstruction.
 Annual Repor t 2006

The ProCredit Group – Neighbourhood Banks for Ordinary People

In the developing countries and transition econ-

omies in which the ProCredit group operates,
conventional commercial banks tend to neglect
The ProCredit group currently comprises 19 tar- small and very small businesses because they
get group-oriented banks operating in as many are thought to keep inadequate records, have
countries. We focus on developing countries and insufficient collateral and generate high admin-
transition economies in three regions: Eastern istrative costs. However, these businesses are
Europe, Latin America and Africa. The group the main engine of economic growth and of job
has 470 branches staffed by 12,600 employ- creation. Over the years, the ProCredit group and
ees. Currently, ProCredit banks disburse more IPC, which developed the lending methodology
than 60,000 loans totalling more than EUR 185 used by the ProCredit group, have gained a pro-
million every month. By the end of 2006, the found understanding of both the problems faced
number of loans outstanding had grown to more by small businesses and the opportunities avail-
than 740,000 (amounting to EUR 2.1 billion). The able to them, and have tailored the credit technol-
average loan amount outstanding is EUR 2,850 ogy to reflect the realities of their operating envi-
and the loan portfolio quality remains excellent ronment. Thanks to this credit technology, which
with a ratio of loans in arrears (>30 days) to total combines careful analysis of all credit risks with
loan portfolio of only 1.2%. Over 2006, the group’s a high degree of standardisation and efficiency,
deposit base increased from EUR 1.3 billion to the ProCredit institutions are able to reach a large
EUR 1.8 billion, with nearly one million new number of small borrowers.
accounts having been opened.
In contrast to ProCredit, other commercial banks
The ProCredit group is led by the Frankfurt-based give priority in their lending operations to corpo-
ProCredit Holding AG, founded by the consulting rate finance and consumer lending, especially the
firm IPC in 1998. The staff of ProCredit Holding latter. Consumer finance is attractive because
and IPC provide centralised support, super- it usually does not require skilled staff or much
vision and management of all the ProCredit banks. financial analysis of the client, allowing banks
ProCredit Holding is a private-public company, focused on market share to grow quickly. However,
with international shareholders that include KfW, this quest for market share can lead to irrespon-
IFC, FMO, and the DOEN Foundation. In 2006, the sible lending and overindebtedness on the part
shareholder group was joined by two new US- of the client. ProCredit never forgets that a loan
based private shareholders, TIAA-CREF and the is also a debt. We place great emphasis on the
Omidyar-Tufts Microfinance Fund. careful evaluation of a borrower’s debt capacity
and on building lasting relationships. In this way,
But what do these facts and figures mean and ProCredit is characterised by a responsible, long-
what are these shareholders trying to achieve? term attitude towards business development and
ProCredit is building a global group of neighbour- client relationships.
hood banks. But what is a neighbourhood bank?
Wherever we are, we aim to be the accessible, Furthermore, ProCredit institutions strive to fos-
trusted, socially responsible bank for the local ter a savings culture. We aim to build public con-
small businesses and the ordinary people who fidence in banks by setting new standards in cus-
live and work in the area. In our lending business, tomer service, transparency and business ethics.
we focus on very small, small and medium-sized ProCredit deposit facilities are appropriate for a
enterprises. At the same time ProCredit provides broad range of customers, especially low-income
retail banking services to “ordinary” people, with groups. We offer simple savings products with no
a focus on low-income families. In this way we minimum deposit requirement. Eighty percent of
aim to be the long-term banking partner for tar- all deposit accounts have a balance of less than
get groups which most conventional commercial EUR 100. This illustrates our target group orien-
banks neglect. By providing socially responsible tation and highlights the challenge of serving
products we aim to contribute to the economic this target group of small savers who account for
development of the countries in which we work. only 1% of our total deposit volume. In the spirit
 The P r o C r e di t G r oup – N e ighbour ho od B a nk s f or O r din a r y P eop l e
of a neighbourhood bank, ProCredit banks place
great emphasis on children’s savings products
and education campaigns as well as on sponsor-
ing local community events. In addition to deposit
facilities, clients are offered a full range of stand-
ard non-credit banking services.
The shareholders of the group aim to strike the
right balance between their prime developmen-
tal goals: reaching as many small enterprises and
small savers as possible, and achieving commer-
cial success. For 2006, the return on equity for
the group as a whole, expressed in hard currency
after deduction of profit taxes, is expected to
reach 13%. This level of profitability is required
to support our rapid growth, to ensure our long-
term sustainability and to generate a reasonable
return for our shareholders.
The neighbourhood bank concept is not limited
to our target customers and how we reach them.
It is also about our staff: how we work with one
another and how we work with our customers. The
neighbourhood bank approach requires a high
degree of decentralised decision-making and
therefore judgement and creativity from all staff,
especially our branch managers. Our corporate
values embed principles such as honest commu-
nication, transparency and professionalism into
ProCredit
Mexico
(planned)
Banco ProCredit
Honduras
(planned)
Banco ProCredit
El Salvador
Banco ProCredit
Nicaragua
Banco ProCredit
Colombia
(planned)
Banco ProCredit
Ecuador
Banco Los Andes
ProCredit Bolivia

our day-to-day business. Key to our success is
therefore the selection and training of the right
staff. We maintain a corporate culture that har-
nesses the creativity and entrepreneurial spirit
of our staff, while fostering their deep sense of
personal and social responsibility. This entails
not only intensive training in technical and man-
agement skills, but also a continuous exchange
of personnel between our member institutions in
order to take full advantage of the opportunities
for staff development which are created by their
membership of a truly international group.
A central plank in our approach to training is the
group’s ProCredit Academy in Germany, which pro-
vides a three-year, part-time “ProCredit Banker”
training programme for its high-potential local
personnel. The programme includes intensive
technical training and also exposes participants
to a very multicultural learning environment and
to subjects such as anthropology and the human-
ities. The programme provides an opportunity for
our future leaders to develop their views of the
world, as well as their communication and staff
management skills. The continued success of
ProCredit relies on a self-confident team of people The international group
who share a personal commitment to the target of ProCredit institutions;
group and to the neighbourhood way of doing see also
things. www.procredit-holding.com
ProCredit Bank Serbia ProCredit Bank Ukraine
ProCredit Bank ProCredit Moldova
Bosnia and Herzegovina
ProCredit Bank Romania
ProCredit Bank Kosovo
ProCredit Bank Kyrgyzstan
ProCredit Bank Albania (planned)
ProCredit Bank Macedonia ProCredit Bank Georgia
ProCredit Bank Armenia
(planned)
ProCredit Bank Bulgaria
ProCredit Bank
Sierra Leone
ProCredit Savings and Loans
Ghana
ProCredit Bank Democratic
Republic of Congo
NovoBanco Angola
Banco ProCredit Mozambique
10 Annual Repor t 2006

ProCredit in Africa
After gaining years of experience in establishing
target group-oriented banks in Latin America and
South-Eastern Europe, ProCredit Holding decided mercial credit facilities for small and very
to establish a third area of operations in Sub- small enterprises in Africa are short-sighted
Saharan Africa. We began operating in Mozam-
bique in 2000, and in Ghana in 2002. In 2004/05,
we established institutions in Angola and Congo
(DRC), and we plan to open a ProCredit Bank in
Sierra Leone – our fifth in Africa – in 2007.
It is already clear that it will be possible in Africa,
as it has been elsewhere, to set up stable, target
group-oriented financial institutions which have
extensive branch networks and are largely able
to mobilise their own funds from local savings
deposits. However, it is equally clear that doing
so will require longer periods of time than were
needed in Latin America or Eastern Europe. Some
of the reasons for this are obvious, others are
more subtle.
Undoubtedly, the lower average loan amount at
some of our African banks is responsible for the
slower growth of the loan portfolio in this region.
There is no lack of deposit customers, but deposit
amounts are small as well. Both sides of the bal-
ance sheet are affected by the combination of
labour-intensive processes and small individual
amounts which characterises our banks’ opera-
tions.
Infrastructure is weak and suitable premises are
scarce in Africa, particularly in the post-conflict
countries on which we focus – making branch net-
work expansion a slow and expensive process.
Transport and communication costs are high.
Political and economic instability also take their
toll. Plainly, in many African countries there is
also a shortage of qualified individuals. Our staff
are the key to our success in Africa as elsewhere
in the ProCredit group. We have a great need for
loan officers and client advisers, co-ordinators,
branch managers, and qualified head office staff,
but it is hard to find suitable personnel. Further-
more, companies compete strongly for the few
skilled members of the local workforce, often
driving up the “price” of such individuals to unaf-
fordable levels. This means that we have to de-
velop and train our professional staff ourselves.
We are proud of the results, but we have to invest
a great deal of time in the training process.
ProCredit in Afric a 11
Among the more subtle factors which are less
than conducive to the rapid spread of com-
behaviour on the part of some donors and the
policies of many African governments, which do
little to promote small business. In Africa, the
formal sector in general, and the formal small
business sector in particular, tends to be very
small and underdeveloped. It has had to struggle
under all the burdens resulting from these coun-
tries’ colonial past, burdens which are all too
often reinforced, albeit unwittingly, by the stand-
ards demanded by international organisations
today. Local authorities also like to set stringent
formal requirements for small and medium-sized
enterprises, leading businesses to somehow find
ways, sometimes informal, to get around these
requirements.
All of these factors serve to perpetuate infor-
mal structures, in many countries even within
the financial sector itself. We would like to ex-
pand the ProCredit business model to other
African countries more rapidly, but it is not al-
ways easy. Numerous African countries have
interest-rate ceilings, especially those in the
CFA zone. Microfinance, which is necessarily
cost-intensive and expensive, must then be car-
ried out de facto on a subsidised, informal or
illegal basis. This is one of the reasons why there
are a large number of NGOs issuing small loans
in Africa. Many donors subsidise these NGOs and
their lending operations so heavily that the local
savings deposits which would be available are
never even mobilised or used, and they are thus
running the risk of damaging or even destroy-
ing serious commercial providers of financial
services.
12 Annual Repor t 2006
Tunisia
Morocco

Algeria
Libya Egypt
Western
Sahara

Mauritania Mali Niger

Senegal Chad Sudan

Guinea-Bissau Burkina Faso

Guinea
Sierra Cote Togo Nigeria Ethiopia
Leone d’Ivoire Ghana
Benin
Central Africa
Liberia Cameroon

Equatorial Uganda Kenya

Guinea Congo
Gabon Democratic Rwanda
Republic Burundi
of Congo
Tanzania

Angola Malawi Mozambique

Zambia

Madagascar

Namibia Botswana

Swaziland

Lesotho
South Africa

But we should not only talk about the “problems” demand for this type of credit in the post-conflict
in Africa. We are firmly committed to the continent. economies in which our banks typically operate
The opportunities are great, given that there is a in Africa.
thriving informal business sector in many African
countries. The demand for credit is strong and at With 788 dedicated staff members at the end of
present almost none of this demand is being met 2006 managing some 165,000 deposit accounts
by the formal financial systems; at the same time and disbursing 3,800 loans per month, we already
there is a great willingness on the part of ordinary have a good team in Africa and a strong platform
people to entrust their savings to a sound and on which we can build. In view of the experience
professional financial institution. Our potential we have gained to date and our growing capac-
development impact is very significant: in many ity to train new employees in our existing banks,
countries we are unique in providing modern, and given that a regional training academy will
transparent and reliable banking services for be set up in Africa in 2007, our next steps in the
everyone, i.e. we have no minimum deposit bal- region will be more ambitious. We look forward
ance and we provide loans to very small busi- to steadily expanding the branch network in the
nesses. Moreover, we plan to offer both housing countries in which we already work and to estab-
improvement loans and agricultural loans on lishing new ProCredit banks in several additional
an expanded scale in order to better meet the African countries.
 ProCredit in Afric a 13

Name Highlights Contact

NovoBanco Founded in February 2004 Rua N’Dunduma 253

Angola (open to the public since August 2004) Luanda
3 branches Tel.: +244 222 430040
2,307 loans / USD 7.6 million in loans Fax: +244 222 430074
23,661 deposit accounts / USD 7.4 million secretariado@novobanco.ao
115 employees

ProCredit Bank Founded in 2004 Avenue des Aviateurs 4B

Congo S.A.R.L. (open to the public since August 2005) Kinshasa/Gombe
2 branches Tel.: + Tel.: +243 89 8996600
2,782 loans / USD 7.4 million in loans Fax: +49 69 25577042
16,512 deposit accounts / USD 14.8 million info@procreditbank.cd
105 employees www.procreditbank.cd

ProCredit Founded in July 2002 (initially named “Sikaman P.O. Box NT 328, New Town
Savings and Loans Company Ltd. Savings and Loans Company Ltd.”) Accra
Ghana 7 branches and 1 savings mobilisation unit Tel.: +233 21 246860/62
10,133 loans / USD 14.0 million in loans Fax: +233 21 236244
68,533 deposit accounts / USD 12.9 million info@procredit.com.gh
326 employees www.procredit.com.gh

Banco ProCredit Founded in December 2000 Av. Zedequias Manganhela Nr. 267
Mozambique 9 branches Jat IV, 6o andar D
21,293 loans / USD 13.3 million in loans Tel. +258 21 313344
64,347 deposits / USD 8.1 million Fax. + 258 21 313345
297 employees Sede@bancoprocredit.co.mz
14 Annual Repor t 2006

The Year in Review

January

• Western Union inbound services are

launched.
• A loan officer training course begins with 30
participants.

February

• After almost three years of service, Barbara

Sajet and Koen Wasmus are replaced by
Stefan Wolff, General Manager and Simon
Herrmann, Chief Operational Officer/Deputy
General Manager.
• The Central Bank conducts its first inspection
of NovoBanco.

March

• NovoBanco opens a branch in Benguela, its

first outside Luanda, the capital.

April

• A revised salary structure is approved by the

Board.
• A branch manager visits ProCredit Bank
Kosovo.

May

• The legal department is established.

• 18 new loan officers are hired.

June

• Middle management staff members are hired

and begin training.
• Branch staff in Benguela and Luanda begin
English courses.
 The Ye a r in R e v ie w 15

July

• To coincide with the 2006 Football World

Cup, NovoBanco organised a football cup
for schools from the branch neighbourhoods.
15 schools from Luanda and Benguela partici-
pated in the tournament.

August

• Western Union outbound services are

launched.
• The bank celebrates its second anniversary.
• The bank achieves its best monthly results
in lending: it disburses more than 300 loans,
amounting to more than USD 1.6 million.

September

• In cooperation with IFC, the bank starts an

educational programme against HIV/AIDS.

October

• The bank launches a children’s savings cam-

paign, “MeuPorquinho 2006”, with a press
conference broadcast countrywide.
• The 100th employee joins NovoBanco.
• The first group of NovoBanco employees take
English courses at the Regional Academy of
the ProCredit group in Ghana.

November

• Two staff members are selected to partici-

pate in the “ProCredit Banker” programme at
the ProCredit Academy in Fürth, Germany.
• Two internal auditors begin an exchange with
NovoBanco Mozambique.

December

• The “MeuPorquinho 2006” children’s savings

campaign concludes with big celebrations in
Benguela und Luanda.
16 Annual Repor t 2006

Management Business Review

Management Board
from left to right:

Stefan Wolff
General Manager

Simon Herrmann
Deputy General Manager

Political and Economic Environment
2006 was characterised by continued macro- to rely heavily on imports, and a limited number
economic stability, a trend that began in 2004.
GDP grew by more than 15%, and inflation was
kept under control at 17%. The local currency, the
kwanza, remained stable in relation to the US dol-
lar. The Central Bank reduced inflation through
foreign-exchange intervention that lowered the
cost of imports, rather than through greater fiscal
discipline. This policy is effective while oil export
earnings remain high, but is not sustainable over
the long run. The overvalued exchange rate has a
negative impact on local non-oil productive acti- the age of 5. In 2006 illnesses such as cholera
vities, such as manufacturing and agriculture.
During the first ten months of 2006, interest rates
on loans, deposits and treasury bills decreased
significantly. This trend did not have an impact
on banks’ earnings.
The political environment remained stable. Since
the 2002 peace accord, power has been shared
between the ruling MPLA and its former adver-
sary UNITA. In a landmark initiative, the govern-
ment began online voter registration in Novem-
ber 2006. This process will take at least one
year to complete, however, and presidential and
parliamentary elections will not take place until
2008 or 2009. International experts expect the
MPLA to win, and the current president, José Edu-
ardo dos Santos – in power since 1979 – to retain
power.
Mineral resources, mainly oil and diamonds, trated in the trade and service sectors; few small
remain Angola’s main export products. Oil out-
put stands at 1.6 million barrels per day and is turing and low-scale industrial sectors.
expected to reach 2 million barrels per day by
2008, confirming that Angola will remain one of
Africa’s major oil producers. In 2005, the govern-
ment began drawing on a USD 2 billion line of
credit from China to rebuild Angola’s public infra-
structure, and several large-scale projects were
completed in 2006.
The construction boom continued in Luanda,
fuelled by large firms such as banks, insurance
companies and oil companies. The real estate
market was overheated, and apartment rents
were among the highest in the world.
1
Sources: Country Reports from The Economist Intelligence Unit, Unicef and the CIA World Factbook.
M anagement Business Re vie w 17
Little was achieved in rebuilding post-war agricul-
tural and industrial production. Angola continued
of large businesses kept prices artificially high.
A negligible percentage of the population bene-
fits from Angola’s substantial oil revenue. Per
capita income is USD 1,350 (2005), but An-
gola still ranks among the bottom ten on many
social and developmental indicators. Only a third
of the population has access to clean water and
adequate sanitation, life expectancy stands at 39
years, and 25% of babies die before they reach
and Marburg fever re-emerged. Angola has an
extremely high fertility rate (2006: 6.35 children
born/woman), and more than 50% of the popu-
lation is under 20 years of age.
Angola’s enormous agricultural potential remains
largely untapped, even though small-scale farm-
ers are returning to the country’s interior, and the
country no longer receives large-scale food aid.
Pervasive landmines and a lack of land titles and
infrastructure slow the pace of agricultural devel-
opment.1
Informal and small businesses have received
inadequate support from the government,
which has done little to promote their integra-
tion into the formal economy or to ease regula-
tions and laws posing an obstacle to their devel-
opment. The small business sector continued to
grow, however, especially in Luanda. It is concen-
businesses succeed in the agricultural, manufac-
Barriers to small business development include:
• Lack of information on the number of enter-
prises and their characteristics
• Lack of co-ordination among institutions
• Excessive regulation
• A limited supply of financial services
As a result, many small businesses remain infor-
mal and are marginalised from the authorities,
large competitors and the legal system. Tradition-
al banks largely ignore this market in their lend-
18 Annual Repor t 2006

ing business and establish restrictive account
opening requirements. Small entrepreneurs thus
continue to lack access to formal financial servic-
es, something that NovoBanco aims to change.
Financial Sector Developments
A national development bank and four new pri-
vate banks began operations in 2006, bringing
the total number of commercial banks to 16. None
of the new banks is dedicated to serving small
entrepreneurs. Total assets in the banking sector
increased by 61% to USD 10.4 billion.
Although the combined loan portfolio of all
banks grew by 40%, loans still accounted for
a relatively low 40% share of their total as-
sets. More than 80% (2005: 56%) of loans are
channelled to the private sector. Most of these
loans are allocated to trade finance and con-
sumer lending. Consumer loans and housing
loans are aggressively marketed, especially by
Banco Fomento Angola and Banco BIC.

Banks Branches Loans Deposits

as at Outstanding credit volume as at Deposits as at
Amounts in million USD 30 Sept 2006 30 Nov 2006 30 Nov 2005 30 Nov 2006 30 Nov 2005
Banco Africano de Investimentos 31 585 433 2,048 951
Banco Comercial Angolano 5 54 92 188 167
Banco de Comercio e Industria 26 199 145 356 266
Banco Fomento Angola 37 966 770 1,863 1,269
Banco Millenium Angola 3 80 54 114 56
Banco de Poupança e Credito 58 1,138 693 1,887 1,249
Banco Totta Angola 8 151 124 279 240
Banco Sol 30 57 47 188 126
Banco Espirito Santo Angola 10 360 338 635 339
Banco Regional do Keve 8 67 60 108 71
NovoBanco 3 8 5 7 2
Banco BIC 40 475 107 1,084 185
Banco Privado Atlântico
Banco de Negócios Internacional*
Banco VTB África*
Banco de Desenvolvimento de Angola*
Total 259 4,140 2,868 8,757 4,921

* Not yet operational

Loan Portfolio Development Number of Loans Outstanding – Breakdown by Loan Size*

Volume (in USD million) Number (in ’000)

10 3.000
9 2.700 6.3%
8 2.400
7 2.100
6 1.800
5 1.500
4 1.200 31.4%
3 900 62.3%
2 600
1 300
0 0
Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
04 05 06

< USD 10,000 Total number outstanding < USD 1,000 USD 10,001 – USD 50,000
USD 10,001 – USD 50,000 USD 1,001 – USD 10,000 * 31 Dec 2006
 M anagement Business Re vie w 19

Angola’s microfinance sector is undeveloped. A assessment procedures so that a loan decision

dedicated unit within the Central Bank was closed
in October 2006, and a draft microfinance regu- takes place on the following day.
lation has not been published yet. One NGO serves
very small businesses and wants to transform its
microfinance programme into a formal institution.
In 2006 NovoBanco Angola continued to be the only
commercial bank serving the microfinance sector. sought to increase the number and productiv-
Lending Performance
NovoBanco’s loan products are tailored to small
entrepreneurs, taking into account the environ-
ment in which they operate. Formal requirements
are kept to an absolute minimum, and proce-
dures are straightforward. NovoBanco Angola
issues loans to entrepreneurs with at least one
year of business experience in trade, services, or
small-scale production. Loans are available from
USD 100 to 15,000 (and up to USD 40,000 for re-
peat clients with a good credit history) to finance 2006; the year ended with a portfolio at risk
increases in working capital or investments in
fixed assets. Most loans are repayable in equal
monthly instalments, and maturities vary from
six months to two years.
In November 2006 NovoBanco launched the
“Instant Loan”, which offers between USD 100
and 2,000 to very small entrepreneurs at vari-
ous open markets in the Benguela region. This
product uses simple and straightforward credit
can be made immediately. Disbursement usually
Demand for loans was strong in 2006; the out-
standing loan portfolio increased by over 70%
from USD 4.4 million to USD 7.6 million. The bank
ity of credit department staff. These efforts are
an ongoing challenge due to the tight Angolan
labour market and logistical and infrastructural
barriers in Luanda.
NovoBanco lends to a wide range of businesses,
from private hospitals to market vendors, and
from fishermen to mini-markets. It thereby
spreads credit risk over different sectors and seg-
ments of the economy. Loan sizes vary, with the
majority falling between USD 1,000 and 10,000.
Loan portfolio quality was unsatisfactory in
over 30 days of 5.66%. NovoBanco consistently
adjusted its credit methodology to manage the
risk associated with lending to small businesses.
We established a loan recovery team to manage
arrears, introduced additional credit analysis
training for loan officers, reduced the geographic
area in which we recruit new clients, and rewarded
good repayment performance by offering simpli-
fied loan renewal procedures. We expect PAR to
decrease in 2007 as a result of these measures.

Business Loan Portfolio – Breakdown by Maturity Loan Portfolio Quality (arrears >30 days)

in % in % of loan portfolio
100 8
90 7
80
6
70
60 5
50 4
40
3
30
2
20
10 1
0 0
Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
04 05 06 04 05 06

< 12 months 12 – 24 months

20 Annual Repor t 2006

Other Banking Services NovoBanco attracted many small savers who

NovoBanco Angola offers a wide range of simple,
low cost banking products. We minimise docu-
mentation requirements as much as possible
to ensure that every Angolan can open a formal
bank account.
In 2006 total deposits increased by 170% from
USD 2.7 million to USD 7.40 million, of which 58%
was held in local currency. The share of deposits
held in time deposit accounts (maturities from
1-12 months) increased from 15% in 2005 to 27%
in 2006. More than 90% of term deposits were
held in kwanza, which demonstrates the increas-
ing public confidence in Angola’s local currency.
NovoBanco promotes its services to a wide
range of clients, many of whom are considered
un-bankable by other commercial banks. Our
three branches undertake extensive promotions
in their respective neighbourhoods. Traditional
advertising, such as billboards, radio spots and
newspaper ads, are not effective for communicat-
ing with lower-income Angolans, many of whom
have no prior experience of doing business with
a bank. The branches use direct communication
and informational activities to familiarise people
with the bank and its services. In 2006 they pro-
vided financial education in local schools and
organised a football championship and savings
campaign for children (see the special feature in
this report).
had never entered a bank before; 2,000 savings
accounts were opened in 2006 with an average
balance of USD 75.
As a member of the national clearing house,
NovoBanco offered domestic payments as a
means for small enterprises to pay local suppli-
ers. These clients continued to consider cheques
a more attractive payment method, however;
NovoBanco issued over 4,000 cheques in 2006.
NovoBanco processed USD 5.6 million in inter-
national transfers, not including Western Union
services. Outgoing payment services were used
by loan clients and small traders who import
goods from Dubai, Korea, China, Brazil and Por-
tugal, and by Angolans sending remittances
abroad. Western Union services were introduced
in early 2006 for inbound transfers. In August,
the service also offered outbound transfers. The
demand was enormous; by year-end NovoBanco
had processed 2,100 inbound transfers and 2,700
outbound transfers with a combined volume of
USD 2.5 million.

Customer Deposits Number of Customer Deposits – Breakdown by Size

Volume (in USD million) Number (in ’000)

8 32 2.9% 0.2%

7 28
6 24 12.6%

5 20
4 16
3 12
2 8 84.1%

1 4
0 0
Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
04 05 06

Term Savings Sight Total number < USD 100 USD 1,001 – USD 10,000
USD 101 – USD 1,000 USD 10,001 – USD 50,000
 M anagement Business Re vie w 21

Domestic Money Transfers International Money Transfers

Volume (in USD million) Number (in ’000) Volume (in USD million) Number (in ’000)
2,0 200 5,0 1.000
1,8 180 4,5 900
1,6 160 4,0 800
1,4 140 3,5 700
1,2 120 3,0 600
1,0 100 2,5 500
0,8 80 2,0 400
0,6 60 1,5 300
0,4 40 1,0 200
0,2 20 0,5 100
0 0 0 0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
04 05 06 04 05 06

Incoming Outgoing Number Incoming Outgoing Number

22 M anagement Business Re vie w
Financial Results
NovoBanco’s balance sheet experienced strong
growth, reaching a total of USD 14.1 million by
year-end. The balance sheet composition re-
mained straightforward: liabilities were largely
customer deposits, while assets consisted of the
loan portfolio, financial investments and fixed
assets.
In 2006 interest income from loans replaced inter-
est income from treasury bills and foreign place-
ments as NovoBanco’s main source of income.
Western Union and international money transfer
fees were an increasingly significant source of in-
come. Costs were mainly operational expenses,
loan loss provisions and interest expenses. The
low share of interest-earning deposits kept the
latter at a modest level. Operational expenses
were relatively high, albeit typical in the Angolan
context.
NovoBanco invested nearly USD 100,000 in inter-
national training and exchange, an amount that
will increase in the future.
In 2006 NovoBanco Angola made a modest profit
of USD 43,012 after conservative loan loss pro-
visioning.
Outlook
The relative economic and political stability is
expected to continue in 2007, hopefully result-
ing in the first general elections in over a decade.
Forecasts project strong economic growth (above
15%) and high-volume oil production. The great-
est challenge facing Angola will be to achieve a
more even distribution of wealth across its popu-
lation, one of the poorest in the world.
In 2006 NovoBanco reinforced its reputation as a
reliable partner for businesses and private indi-
viduals. Rapid growth in the loan portfolio and
deposit base confirmed the strong demand for
our products and services. The bank opened its
first branch outside the capital and prepared
to open three more branches in 2007 – two in
Luanda and one in Benguela province.
To retain its position as the market leader in small
business lending, NovoBanco must expand its
internal capacity. In 2007 we will steadily in-
crease the number of loan officers and introduce
housing improvement loans for salary earners.
The outstanding loan portfolio is projected to be
USD 16 million by year-end.
Our branches will continue to conduct informa-
tional and educational events through close part-
nerships with local schools and other civil soci-
ety institutions.
With its attractive product portfolio and loyal
customer base, NovoBanco is in an excellent
position to expand access to financial services in
Luanda and Angola’s provinces.

Special Feature
Children’s savings campaign “MeuPorquinho 2006”
NovoBanco Angola launched its first large-scale
savings campaign in 2006. The campaign targeted bank cooperated with state education authori-
children between the ages of six and ten and was
organised in cooperation with the Angola Part-
nership Initiative, a public-private partnership
between the UNDP and Chevron.
In Angola, which only recently emerged from
years of civil war, the desire for immediate con-
sumption is palpable. Saving for retirement or life
insurance is a foreign concept, particularly given
the extreme poverty in which many people live.
A lower middle class is emerging among people
with a fixed income from an independent busi-
ness or a salaried job. But many of these indi-
viduals do not set aside sufficient savings to pro-
tect themselves and their families against major
risks, such as death or disability.
To draw nationwide attention to the importance of
saving, NovoBanco launched a two-month cam-
paign with a press conference in October 2007.
The campaign met with unexpectedly strong and festive atmosphere. Based on this response,
public interest. It received regular coverage on
television, on the radio and in print media.
M a n a g e m e n t BSupseicnieaslsF R
eae tv u
i erwe 23
As a central component of the campaign, the
ties to teach financial education in local primary
schools. NovoBanco employees visited 21 state
schools, where they taught more than 4,000 chil-
dren about the importance of saving. The cam-
paign’s educational materials were very popular;
children received colourful piggy banks, exercise
and comic books, and savings passbooks, which
bank cashiers update by hand upon each deposit.
The branches complemented these activities
with Saturday opening hours for children, draw-
ing competitions and theatre performances. Two
big parties were held in Luanda and Benguela to
mark the end of the campaign.
NovoBanco was the first bank in Angola to publicly
address the issue of savings. Over 700 savings ac-
counts were opened during the campaign, a major
success considering Angolans’ prevailing lack of
trust in banks. We received extremely positive feed-
back, particularly regarding the campaign’s fun
we will launch a similar savings initiative in
2007, but probably with a different target group.
24 Annual Repor t 2006
Risk Management
Risk management is an integral part of NovoBanco sified. NovoBanco does not engage in trading or
Angola’s business procedures and processes.
The bank’s management is responsible for devel-
oping risk management policies and procedures,
and for establishing an effective organisational
structure to implement those policies. It ensures
that risk management is embedded in the culture
of the institution’s day-to-day operations.
NovoBanco Angola’s core business is lending to
very small, small and medium-sized enterprises
that operate in various economic sectors and
locations. Simply by virtue of the bank’s target
group, its assets and liabilities are highly diver-
other speculative activities. All other businesses
are reduced to a minimum and are undertaken
only to support lending operations.
The bank clearly communicates the importance
of internal and external transparency to all staff
members. Compliance with operational proce-
dures and the Code of Conduct is monitored regu-
larly.
NovoBanco’s Internal Audit Department checks
compliance with the bank’s policies and proce-
dures and reviews processes to detect potential

risks. Its independent status allows it to identify
problems and report its findings without any hin-
drance.
In 2006 the bank’s senior management per-
formed many of the duties associated with risk
management. A new Risk Management Unit will
be established in 2007. The Unit will prepare about the client, his/her household and his/her
periodic reports and will serve as a risk consul-
tant to management. The bank will create two risk
committees within the Risk Management Unit to
identify and manage risks in a more efficient and
transparent manner.
Risk M anagement 25
Credit Risk
Lending to very small, small and medium-sized
enterprises exposes the bank to credit risk.
NovoBanco takes various measures to address
risks in this area. The bank employs an advanced
credit technology to assess detailed information
business activities. Credit committees make all
lending decisions, and the composition of credit
committees varies according to the size and risk
profile of the loan. Close monitoring of clients’
repayment performance allows the bank to de-
tect potential problems as soon as they arise. The
diversification of the loan portfolio across many
small borrowers reduces the effects of a down-
turn in any given business sector.
NovoBanco’s management aims to reduce its
portfolio at risk (>30 days) from the high level
of 5.66% at year-end 2006 to less than 4.00%
at year-end 2007. To improve its credit risk con-
trol, NovoBanco Angola will establish a Credit
Risk Unit in early 2007. A sound risk management
approach will be crucial to achieve the bank’s
ambitious growth targets.
Liquidity Risk
Liquidity risk was managed by the Operations
Manager for most of 2006. The bank transferred
responsibility for liquidity risk to a new Finance
Manager in late 2006. By removing liquidity
management from the Operations Department,
NovoBanco clearly separated operational from
financial decision-making. In the first half of
2007, the bank will establish an Asset and Liabil-
ity Committee (ALCO). The committee will meet
monthly to examine and manage liquidity risk.
Operational Risk
Management closely monitors the bank’s opera-
tional risk. Staff strictly apply the “four-eyes”
principle to all transactions, and document all
major processes. Every new employee receives
extensive training on NovoBanco’s principles and
procedures and his or her specific responsibilities.
To ensure continued compliance, the bank offers
refresher courses at all levels on a regular basis.
26 Annual Repor t 2006
Branch Network
Finding the right locations for our branches is
the key to serving our target group efficiently.
We must be close to open markets and trade cen-
tres and offer attractive and convenient branches
to our retail clients. Opening branches is difficult
in Angola, due to a lack of ownership documents,
bureaucratic obstacles and extremely high rent.
At the end of March, NovoBanco Angola opened
its third branch. Located in the city of Benguela,
it is our first branch outside the capital. Benguela
city is the capital of Benguela province, about there: heavy traffic and long distances are a bur-
430 km south of Luanda. The province has
750,000 inhabitants, and the city has a popula-
tion of 200,000.
Like many Angolan cities, Benguela is small. Lit-
tle remains of its historic role as a trade centre
Congo
for fish, coffee, sugar cane, bananas, salt and
Democratic Republic of Congo
Luanda (2)
Atlantic Ocean Angola
Benguela
vegetables. Today Benguela is dependent on im-
ports shipped from abroad and transported from
Luanda. Public initiatives to rebuild infrastruc-
ture, agriculture and the private sector are
expected to stimulate greater economic activity.
In 2007 the bank will strengthen its presence in
Luanda and the Benguela region. There is strong
demand for our products among the 4 million in-
habitants of Luanda. This untapped market poten-
tial is not the only reason to open more branches
den on our clients and loan officers. To be closer
to our clients, many more branches are necessary.
In 2007 we will open a branch in Lobito, a second
city in Benguela province. We expect to open one
or two additional branches in Luanda, bringing
the total number to five or six by the end of 2007.
Zambia
Br anch Ne t work 27
28 O rg a nis at ion, Sta f f a nd Sta f f D e v el opmen t
Organisation, Staff and Staff Development
NovoBanco is a young, fast-growing organisa-
tion. Due to high demand for its services, the
bank faces continuous pressure to increase inter-
nal capacity without compromising sound insti- the supervision of experienced colleagues. At the
tutional development. Our target group-orien- department management level, we recruit expe-
tation demands a sound institutional structure,
good governance, and effective branch manage-
ment.
The bank significantly increased its staff in 2006
to open a third branch and to increase capacity
at the head office. The bank expanded the audit and competition for NovoBanco’s trained staff is
department, established legal and HR depart-
ments, added two specialists each to the logis-
tics, payments, and IT departments, and restruc-
tured the financial department. This expansion
phase will conclude in 2007 when we will set up
an operations department (credit, retail), expand
the HR and marketing departments, hire a secu-
rity expert and create a department to oversee
branch network expansion.
In the branches, a “credit coordinator” position
was created to support the branch manager and
to offer high-performing loan officers the oppor-
tunity to advance. Supervisory roles were estab-
lished in retail operations to manage business
growth.
To prepare for three branch openings in 2007,
the bank hired additional personnel. Over 2,000
applications were screened. Staff grew from 49
at the end of 2005 to 115 at the end of 2006. For
its branch operations, NovoBanco recruits young
people who have finished middle or high school
and have little work experience. They prepare for
their positions through intensive in-house train-
ing courses followed by on-the-job training under
rienced candidates with relevant education and
knowledge of the local context. Competition for
skilled personnel is extremely high, dominated
by a small number of companies, mainly in the
oil industry, that pay high salaries. It is still ex-
tremely difficult to recruit qualified personnel,
leading to above-average staff turnover.
NovoBanco recognises the importance of staff
training and development to underpin insti-
tutional growth and development. A strong and
committed team is essential for the bank to reach
its ambitious goals. We hold regular in-house
seminars on specific topics and institution-wide
information or discussion sessions in an informal
setting. NovoBanco benefits greatly from train-
ing opportunities offered by the wider ProCredit
network. Several staff participated in group-wide
training seminars in Frankfurt. Internal auditors
spent three weeks in the bank’s partner institu-
tion in Mozambique, and a branch manager vis-
ited ProCredit Bank Kosovo to exchange expe-
riences. Two employees from the Rocha Pinto
branch attended the new ProCredit Regional
Academy in Accra, Ghana, to participate in an
intensive eight-week English and banking course.
In 2007 three managers will attend a three-year
programme at the ProCredit Academy. They will
spend 12 weeks a year in Germany.
 Busine ss Et hic s a nd En v ironmen ta l Sta nda r ds 29

Business Ethics and Environmental Standards

Part of the overall mission of the ProCredit group These ProCredit values represent the backbone
is to set standards in the financial sectors in of our corporate culture and are discussed and
which we operate. We want to make a difference actively applied in our day-to-day operations.
not only in terms of the target groups we serve Moreover, they are reflected in the Code of Con-
and the quality of the financial services we pro- duct, which translates the ProCredit group’s
vide, but also with regard to business ethics. Our ethical principles into practical guidelines for all
strong corporate values play a key role in this ProCredit staff. In order to ensure that staff fully
respect. We have established six essential princi- understand all of the principles that have been
ples which guide the operations of ProCredit defined, several training sessions were conducted
institutions: during the year under review at which case stud-
ies were presented and grey areas discussed. We
• Transparency: We adhere to the principle of will continue to conduct such training sessions
providing transparent information both to our and increase their frequency in the future.
customers and the general public and to our
employees, and our conduct is straight- Another aspect of ensuring that our institution
forward and open; adheres to the highest ethical standards is our
consistent application of international best-
• A culture of open communication: We are practice methods and procedures to protect our-
open, fair and constructive in our communi- selves from being used as a vehicle for money
cation with each other, and deal with conflicts laundering or other illegal activities such as the
at work in a professional manner, working financing of terrorist activities. The important fo-
together to find solutions; cus here is to “know your customer”, and, in line
with this principle, to carry out sound reporting
• Social responsibility and tolerance: We give and comply with the applicable regulations.
our clients sound advice; their economic and
financial situation, their potential and their We also set standards regarding the impact
capacities are assessed and are translated of our lending operations on the environment.
into appropriate “products”; promoting a cul- NovoBanco Angola has implement-
ture of savings is important to us; we are com- ed an environmental management
mitted to treating all customers and em- system based on continuous as-
ployees respectfully and fairly, irrespective sessment of the loan portfolio
of their origin, colour, language, gender or according to environmental cri-
religious or political beliefs; teria, an in-depth analysis of all
economic activities which po-
• Service orientation: Every client is served in tentially involve environmental
a friendly, competent and courteous manner. risks, and the rejection of loan
Our employees are committed to providing applications from enterprises
excellent service to all customers, regardless engaged in activities which are
of their background or the size of their busi- deemed environmentally haz-
ness; ardous and appear on our
institution’s exclusion list. By
• High professional standards: Every employee incorporating environmental
takes responsibility for the quality of his/her issues into the loan approval
work and strives to do his/her job even better; process, NovoBanco Angola is also
able to raise its clients’ overall level of environ-
• A high degree of personal commitment: This mental awareness. We ensure that when loan
goes hand-in-hand with personal integrity applications are evaluated, compliance with ethi-
and honesty – traits which are required of all cal business practices is a key consideration. No
employees in all ProCredit institutions. loans are issued to enterprises or individuals if it
is suspected that they are making use of unsafe
or morally objectionable forms of labour, in parti-
cular child labour.
30 Annual Repor t 2006

Our Clients

Ricardo Wambembe,
Natural Herbs Consultant

Ricardo Wambembe, a 29-year-old entrepre-

neur, has been a NovoBanco client for two
years. He submitted his first loan application in
January 2005. Before obtaining his first loan for
USD 2,000, Mr. Wambembe ran “Ervanária Na-
tura”, a shop for natural supplements and herbal
consulting, from his home. He started the busi-
ness in 1995.

Mr. Wambembe recently obtained a third loan

for USD 6,500. He has used the loans to increase
his inventory and buy new equipment for his con-
sulting services. He opened another sales out-
let in Kikolo, an area of northern Luanda where
demand for his services is high. Mr. Wambembe
also bought a car to help procure merchandise.
Having grown his business, Mr. Wambembe was
able to build his own house.
Prior to approaching NovoBanco, Mr. Wambembe
had no experience with banks. He was attracted
by NovoBanco’s focus on small entrepreneurs. He
now uses NovoBanco’s payment services, such
as cheques and international money transfers,
to reimburse his suppliers in Brazil, Spain and
Portugal.
Mr. Wambembe has many plans for his business.
He hopes to establish a clinic for natural therapies,
setting up a laboratory to produce his own natural
medicines. He also hopes to plant a botanical
garden for research purposes. Mr. Wambembe is
confident that, with his entrepreneurial spirit and
NovoBanco’s help, he will achieve his goals.

In a small shop in Bairro Mabor, Pedro Rosário
manufactures beautiful leather sandals, bags
and belts, all of which he makes by hand. He
learned his profession in a training course
offered by a local NGO that helps to reintegrate
the physically handicapped into society. After
completing his training, Mr. Rosário started his
business in 2003.
In 2005 António Domingos joined the business.
The two men met each other at the training cen-
tre. Their roles in the business are clearly defined;
Mr. Rosário is responsible for the creative side,
and Mr. Domingos manages financial matters and
purchases materials.
At first, the business developed slowly since it
lacked working capital. They could only manufac-
ture customers’ orders after receiving an advance
payment of 50% to acquire the necessary materi-
als. With a NovoBanco loan for USD 200, Rosário
Our Clients 31
Pedro Rosário and
António Domingos,
Manufacturers of
Leather Sandals
and Domingos acquired more leather and could
manufacture different models to attract new cli-
ents. Most of their customers are from the local
neighbourhood, but some come from more re-
mote areas to purchase the handmade products.
Both businessmen dream of a well-located and
spacious shop where they can manufacture and
sell their products on a larger scale. With the help
of employees and more modern equipment, they
hope to increase production so that clients do not
have to wait several days for their purchases. The
two men count on a long-lasting relationship with
NovoBanco to help them fulfil their plans.
32 Annual Repor t 2006
Gabriel António Chinanga,
Salt Trader
Gabriel António Chinanga started a small trading
business, buying articles in Luanda and selling
them in Benguela at the Caponte markets. With
savings from this business, he opened a small
shop, which he was forced to close when the
armed conflict escalated.
In 2003 he began selling salt. He purchased the
product from salt works and sold it at the Baia
Farta market. His clients were mainly women
who produce dried fish for provinces in Angola’s salt in greater quantities.
interior.
By reinvesting his profits, Mr. Chinanga grew his
working capital to more than USD 5,000. Since he
had earned a reputation as a reliable client at the
salt works, Mr. Chinanga had access to a steady
supply of salt, This was an important advantage
since salt is not always produced in the quanti-
ties desired.
Prior to banking with NovoBanco, Mr. Chinanga
received four loans from Banco de Poupança
e Crédito. During a visit to Luanda, he learned
about NovoBanco through the bank’s marketing
campaigns. When NovoBanco opened a branch
in Benguela, he was one of the first clients. He
obtained a loan in April 2006, the Benguela
branch’s first month of operations. He has since
taken a second loan from NovoBanco to purchase
With his growing income he was able to reno-
vate his home and build a small snack bar in his
backyard. The snack bar is almost finished; after
Mr. Chinanga buys equipment and merchandise,
it will begin operations.
 Our Clients 33

Manuel Andrade,
Mini-Market Owner

loan for a higher amount and longer maturity.

With this financing, he has increased his busi-
ness volume substantially.

Mr. Andrade works at a meat trading enter-

prise and cannot always be present at the mini-
market. But he can count on the support of his
family members to run the business. His wife is
responsible for weekly purchases from different
wholesalers throughout the city.
In 1999 Manuel Andrade opened a small market
stall in Bairro Samba. He now runs a mini-market Mr. Andrade aims to enlarge the mini-market and
with the help of his wife, three daughters, son to become a wholesaler. To realise these ambi-
and niece. tious goals, he will count on the help of his family
and NovoBanco.
When Mr. Andrade wanted to increase his inven-
tory, he approached NovoBanco. He had heard
about the bank’s fast and simple credit pro-
cedures. Having no previous experience with
banks, Mr. Andrade took out his first “Micro
Express” loan in April 2006. The loan was for
USD 1,000, and he repaid it in only four instal-
ments. Mr. Andrade has since taken a second
34 Annual Repor t 2006

Financial Statements
For the year ended 31 December 2006
Fin a nci a l Stat e men t s 35
36 Annual Repor t 2006
 Fin a nci a l Stat e men t s 37

Balance Sheet
As at 31 December 2006

Notes 2006 2005

in AKZ
Assets
Cash and cash equivalents with the Central Bank 5 290,533,554 104,514,5143
Deposits with foreign banks 6 43,462,508 39,333,994
Loans and advances to customers 7 569,514,524 336,258,117
Placements and securities 8 52,500,000 16,000,000
Intangible assets App A 17,519,156 20,513,287
Tangible assets App A 93,504,733 84,553,850
Accrued income and deferred costs 9 51,081,605 25,877,632
Other assets 10 10,264,070 –
Total assets 1,128,380,150 627,051,394

Equity and liabilities
Deposits 11 594,486,440 219,596,363
Other deposits 1,668,438 1,747,280
Other liabilities 18,381,124 1,320,943
Accrued costs and deferred income 12 33,470,951 7,470,335
Provision for general banking risk 22,931,872 13,799,945
Debt to banks 13 80,000,000 –
Total liabilities 750,938,825 243,934,866

Capital 14 391,058,220 391,058,220

Capital maintenance reserve 15 28,589,050 28,589,050
Accumulated losses (22,730,797) (2,248,826)
Profit / Loss for the year 3,456,724 (20,481,971)
Total equity 400,373,197 396,916,473

Total equity and liabilities 1,151,312,022 640,851,339

38 Annual Repor t 2006

Income Statement
For the year ended 31 December 2006

Notes 2006 2005

in AKZ
Interest and similar income 227,212,679 106,753,134
Interest and similar costs (26,371,368) (3,585,096)
Interest margin 200,841,311 103,168,038

Fees and commissions received 16 53,357,289 25,031,670

Results from financial operations 17 (13,548,374) (16,104,159)
Other income and interest 10,652,780 –
Fees and commissions paid (1,443,807) (677,270)
Operating banking revenue 249,859,200 111,418,279

Staff costs 18 (91,927,216) (45,136,449)

Administrative costs 19 (104,005,091) (56,492,607)
Fees, bonuses and other costs (1,925,692) (1,367,864)
Taxes and other related costs (5,481,573) (3,403,398)
Depreciation App A (19,379,975) (11,909,774)
Provisions 20 (23,682,929) (13,590,158)
Operating profit/(loss) 3,456,724 (20,481,971)

Tax – –
Profit/(loss) after tax 3,456,724 (20,481,971)

Notes to the Financial Statements
For the period ended 31 December 2006
All amounts in AKZ unless otherwise stated
1. Constitution and activity
NovoBanco, S.A.R.L, is a Bank situated in Luanda and its share-
holding is made up of private shareholders, some of which are
international financial institutions. The Bank was constituted
on 19 February 2004 and commenced its commercial activity on e) Intangible and tangible assets
20 August 2004.
2. Basis of presentation
The financial statements were prepared in accordance with the depreciation rates established for fiscal purposes. These ascribe
accounting principles established in the Accounting Rules applica-
ble to Financial Institutions in Angola and other regulations estab-
lished and issued by the Central Bank of Angola (Central Bank).
3. Reporting currency
The Bank applies the accounting principles and policies established
by the regulations applicable to Angolan Financial Institutions.
These regulations require the preparation of financial statements
in local currency (AKZ), within a multi-currency reporting system.
4. Accounting policies
The following are the principal accounting policies that have been
applied in the preparation of the Bank’s financial statements and,
unless specifically stated, have been consistently applied.
a) Recognition of costs and expenses
Costs and income are accounted for on the accruals basis, irrespec-
tive of when it is actually received or paid.
b) Provision for general banking risks and overdue loans and
interest
Provisions for general banking risks were determined in conformity
with Directive 09/98, issued by the Central Bank on 16 November,
1998. The respective amount recorded under Liabilities - Provisions
for general banking risks corresponds to 4% of the loans and ad-
vances granted by the Bank, including amounts under guarantees
issued and other receivables. In 2005, NovoBanco had provided for
3% of the loans and advances to customers. This change has led to
an increase of AKZ 5,732,968 in general banking risks provisions.
c) Foreign currency transactions
Monetary assets and liabilities in other currencies are translated
to US dollars at the exchange rate ruling at the balance sheet date.
Income and expenses are translated at the average exchange rate
during the year. The AKZ/USD exchange rates used in the prepara-
tion of the financial statements are as follows:
Year ended at Average exchange Closing exchange
rate rate
31.12.06 80.36 80.28
31.12.05 87.16 80.78
Fin a nci a l Stat e men t s 39
d) Fixed-income securities
Central Bank Securities (CBSs) and Treasury Bills (TBs) are issued
by the Central Bank and are tradable on the Angolan money market.
These securities are carried at nominal value in the financial state-
ments.
The discount, which is the difference between the nominal value and
the amount paid, is recorded as deferred revenue and then recog-
nized as income on a monthly basis until maturity of the instrument
in accordance with the Central Bank’s requirements.
In accordance with Angolan accounting requirements, intangible
assets mainly comprise preliminary expenses and software.
Tangible assets are accounted for at their historical cost. During the
year no assets were revalued.
Depreciation is calculated on the straight-line method using the
useful lives of between 3 and 12 years to NovoBanco’s fixed assets
and these are not considered to differ materially from the actual
useful lives of these assets.
f) Capital maintenance provision and reserve
Capital maintenance reserves are calculated according to Directive
01/2003 issued by the Central Bank in order to maintain the value
of the original capital at the Kwanza equivalent of its historical
US Dollar value (See Note 13).
g) Income tax
The bank is subject to taxation as provided for in the corporate
taxation code.
5. Cash and cash equivalents with the Central Bank
2006 2005
Cash 187,864,850 54,626,603
Demand deposits with the
Central Bank 102,668,704 49,887,911
290,533,554 104,514,514
Demand deposits with Central Bank, at 31 December 2006, include
an amount of AKZ 44,114,657 (USD 549,487), which constitutes
the statutory reserve as required by the Central Bank.
According to Directive 10/2003, the coefficient of the statutory
reserves in local currency must correspond to 15% of the base of
assessment (customer deposit accounts) and 100% of the central
and local government deposits registered in accounts 330000 and
330100, respectively, of which 7.5% may be maintained in treasury
bills with a remaining maturity of at least 63 days. The Bank may
deduct from the above-mentioned reserves 20% of the average bal-
ances of cash in local currency. The statutory reserve is calculated
on a weekly basis as required by the Central Bank.
6. Deposits with foreign banks
2006 2005
ProCredit Bank Georgia 32,079,544 33,064,054
Deutsche Bank Trust Company
Americas 8,258,707 5,680,759
Deutsche Bank AG Frankfurt 3,124,257 589,181
43,462,508 39,333,994
NovoBanco deposits surplus US Dollars with ProCredit Bank
Georgia (CIS), which is related to the majority shareholder, when-
ever it has surplus liquidity.
40 Annual Repor t 2006

7. Loans and advances to customers
2006 2005
Total loans 608,783,867 352,961,760
Provision for non-performing
loans (16,337,471) (2,903,698)
592,446,396 350,058,062
Loans in arrears (35,487,067) (7,963,125)
556,559,329 342,094,937
At 31 December 2006 the maturity of loans and advances was as
follows:
2006 2005
In local currency
Not indexed
Up to 3 months 4,993,403 512,788
From 3 to 6 months 6,217,274 2,440,429
From 6 months to 1 year 5,571,207 3,255,737
More than 1 year – –
16,781,884 6,208,954
Indexed
Up to 3 months 70,976,359 40,100,075
From 3 to 6 months 153,071,121 92,057,934
From 6 months to 1 year 289,319,385 202,731,261
More than 1 year 78,635,118 11,863,520
592,001,983 346,752,790

Total not indexed and indexed 608,783,867 352,961,760

Loans in arrears (35,487,067) (7,963,125)
573,296,800 344,998,635

Indexed loans and advances are loans granted in Kwanza but

whose value, repayments and interest are indexed to the USD
exchange rate.

Loans and advances overdue for more than 30 days at 31 Decem-

ber 2006 amounted to AKZ 35,487,067 and were distributed as
follows:

2006 2005
From 31 to 60 days 6,553,154 4,801,218
From 61 to 90 days 7,458,044 352,744
From 91 to 180 days 16,572,653 2,228,650
From 181 to 360 days 4,903,216 580,513
35,487,067 7,963,125

8. Placements and securities

2006 2005
Treasury bills 52,500,000 16,000 000

Treasury bills on hand at 31 December 2006 mature as follows:

Nominal value in AKZ Purchase price in AKZ Interest rate Purchase date Maturity date
21,500,000 20,904,020 5.70% 09-08-2006 07-02-2007
11,000,000 10,664,170 6.26% 04-10-2006 05-04-2007
20,000,000 19,327,600 6.96% 13-12-2006 13-06-2007
52,500,000 50,895,790

9. Accrued income and deferred costs

2006 2005
Income receivable 32,107,793 6,685,273
Deferred costs 18,973,812 19,192,359
Cash shortfalls – –
51,081,605 25,877,632

Deferred costs include an amount of AKZ 16,082,596 (USD 200,323)

of rent paid in advance.

10. Other Assets
Other assets include a security deposit with Western Union,
a requirement of Western Union of its agents, of an amount of lent of AKZ 391,058,220 (USD 4,900,000), represented by 490,000
AKZ 6,021,255 (equivalent to USD 75,000).
11. Deposits
2006 2005
Demand deposits International Finance
In local currency 189,508,044 71,992,730
In foreign currency 242,445,333 113,857,637
431,953,377 185,850,367
Time deposits Belgian Investment
In local currency 152,566,597 25,598,515
In foreign currency 9,966,466 8,147,481
162,533,063 33,745,996
Total 594,486,440 219,596,363
At 31 December 2006 the maturity analysis of time deposits in-
cluded in liabilities under the above heading was as follows:
2006 2005
In local currency 2006 2005
Up to 3 months 20,136,687 4,140,235
From 3 months to 6 months 132,429,910 21,458,280
From 6 months to 1 year – –
152,566,597 25,598,515
In foreign currency order to maintain the value of capital at the Kwanza equivalent of
Up to 3 months 8,166,673 –
From 3 months to 6 months 1,799,793 8,058,624
From 6 months to 1 year – 88,857
9,966,466 8,147,481
162,533,063 33,745,996
12. Accrued expenses and deferred income
2006 2005
Accrued expenses 32,566,278 2,444,655
Deferred income 904,673 5,025,682
Cash surplus – –
33,470,951 7,470,337
Deferred income includes AKZ 904,673 (USD 11,268) of deferred
discounts on treasury bills (Note 8).
Accrued expenses include AKZ 27,293,542 of pending Western
Union and SWIFT money transfers
13. Debt to banks
As at December 31, 2006 the debt to banks amounted to
AKZ 80,000,000, a one year loan contracted from the local market,
monthly renewable for up to one year, and at a yearly interest rate
of 8% payable on a monthly basis.
Fin a nci a l Stat e men t s 41
14. Capital
As at 31 December 2006, the Bank’s share capital was the equiva-
shares with a nominal amount of AKZ 798.078 each. The capital
was fully issued and paid up before commencement of operations.
Number of Value Capital
shares in AKZ in %
ProCredit Holding 210,000 167,596,380 42,858
Corporation (IFC) 70,000 55,865,460 14,286
Stichting DOEN –
Postcodelotterij/
Sponsorlotterij 70,000 55,865,460 14,286
Company for Developing
Countries (B.I.O.) 70,000 55,865,460 14,286
ChevronTexaco
Sustainable Development
Ltd. 70,000 55,865,460 14,286
490,000 391,058,220 100
15. Capital maintenance reserve
Accumulated
capital maintenance reserve 28,589,050 28,589,050
28,589,050 28,589,050
The reserve for capital maintenance was established in 2004 in
USD 4,900,000. The Central Bank has ruled that when, as at the
end of 2006 and 2005, the value of the US Dollar to the Angolan
Kwanza has fallen from its value at the previous year end, this
reserve has to be maintained at its historical Kwanza amount.
16. Fees and commissions received
The breakdown of fees and commissions received is as follows:
2006 2005
From exchange operations 18,143,345 8,711,386
From loan disbursement fees 26,591,806 11,146,054
Other fees and commissions
received 8,622,138 5,174,231
53,357,289 25,031,671
Included in loan disbursement fees are commissions totalling
AKZ 4,090,000 that were treated as deferred income in 2005 and
were to be written back to income over the life of the related loan. At
the request of the Banco Nacional de Angola, the central bank, this
deferred practice ceased and the amount deferred at 31 December
2005 released to income in full in 2006.
17. Results from financial operations
2006 2005
Revaluation
of spot exchange position
Gains 18,593,361 29,425,643
Losses (32,141,735) (45,529,802)
(13,548,374) (16,104,159)
42 Fin a nci a l Stat e men t s

18. Staff costs 21. Tax

2006 2005
Salaries and wages 71,051,746 39,461,856
Social security and
other related costs 7,219,212 3,859,694
Other staff costs 13,656,258 1,814,899
91,927,216 45,136,449
The number of employees as of 31 December 2006 was 115 (2005:
49).
19. Administrative costs
2006 2005
Rents and leasing costs 19,511,286 13,971,912
Supplies from third parties 15,336,381 13,302,517
Communications 15,258,071 10,215,985
Security services fees 12,311,902 6,794,082
Travel and entertainment expenses 7,345,127 1,049,763
Advertising 6,187,286 1,674,519
Repairs and maintenance 3,520,113 4,038,813
Insurance 3,145,277 3,105,451
Notary expenses 503,642 1,113,929
Retainer fees 42,920 522,151
Other services from third parties 20,843,086 703,485
104,005,091 56,492,607
20. Provisions
There is no tax to pay on the profit for the year as prior year losses
exceed 2006 profits. According to fiscal law in effect in Angola
(Artigo 46º of “Legislação Fiscal: Tributação do Rendimento), prior
years’ losses can be carried forward for up to three (3) years.
22. Other regulations
According to an exceptional authorization of the Central Bank,
NovoBanco can maintain an open exchange position of up to 50% of
the bank’s equity for a period not longer than 3 years. The amount
in foreign currency above the limit must be sold to the Central Bank.
The spot position at 31 December 2005 was:
in USD 2006 2005
Assets
Cash and cash equivalents
at Central Bank 1,731,044 322,350
Current account
in credit institutions 541,364 486,930
Total Assets 2,272,408 809,280
Equity & Liabilities
Deposits (3,144,006) (1,424,590)
Accruals and deferrals (375,478) (1,367)
Total Liabilities (3,519,484) (1,425,957)
Spot exchange position (1,247,077) (616,677)
Global exchange position (1,247,077) (616,677)

2006 2005
General credit risks 23,682,929 13,590,158
Credit risks 23,682,929 13,590,158

Appendix A
Fixed assets schedules – AKZ

Fixed assets Accumulated Fixed assets

(gross) depreciation (net)
Balance Acquisitions Balance Balance Charge for Balance
as at as at as at the year as at
31 Dec 2005 31 Dec 2006 31 Dec 2005 31 Dec 2006
Preliminary expenses 5,444,408 – 5,444,408 2,570,970 1,814,803 4,385,773 1,058,635
Software 18,471,372 803,842 19,275,214 947,486 1,867,207 2,814,693 16,460,521
Intangible assets in course 115,963 -115,963 – – – – –
Total Intangible assets 24,031,743 687,879 24,719,622 3,518,456 3,682,010 7,200,466 17,519,156

Renovation of rented premises 27,969,256 13,504,712 41,473,969 2,743,314 3,733,696 6,477,010 34,996,959
Furniture and materials 16,151,711 7,019,723 23,171,434 1,748,278 2,982,056 4,730,334 18,441,100
Equipment 37,917,220 17,865,749 55,782,968 6,734,081 8,982,213 15,716,294 40,066,674
Tangible assets in course 13,741,336 -13,741,336 – – – – –
Total tangible assets 95,779,523 24,648,848 120,428,371 11,225,673 15,697,965 26,923,638 93,504,733

Total fixed assets 119,811,266 25,336,727 145,147,993 14,744,129 19,379,975 34,124,104 111,023,889

Exchange rate as of December 31, 2006: 1 USD = 80.28 AKZ

 Con tac t A ddr e sse s 43

Contact Addresses

Head Office

Luanda
Rua N’Dunduma 253
Miramar
Tel.: (+244) 222 – 430040
Fax: (+244) 222 – 430074

Branches

N’Dunduma Branch
Luanda
Rua N’Dunduma 253
Miramar
Tel.: (+244) 222 – 430105
Fax: (+244) 222 – 430074

Rocha Pinto Branch

Luanda
Rua da Paviterra / Rua do Parque s/n
Bairro Rocha Pinto
Tel.: (+244) 222 – 357420

Benguela Branch
Benguela
Largo 1º de Maio s/n
 ProCredit Bank Serbia ProCredit Bank Ukraine

ProCredit Bank ProCredit Moldova

Bosnia and Herzegovina
ProCredit Bank Romania
ProCredit Bank Kosovo
ProCredit Bank Kyrgyzstan
ProCredit Bank Albania (planned)
ProCredit
Mexico ProCredit Bank Macedonia ProCredit Bank Georgia
(planned)
ProCredit Bank Armenia
Banco ProCredit (planned)
Honduras
(planned) ProCredit Bank Bulgaria
ProCredit Bank
Banco ProCredit Sierra Leone
El Salvador
ProCredit Savings and Loans
Banco ProCredit Ghana
Nicaragua
ProCredit Bank Democratic
Banco ProCredit Republic of Congo
Colombia
(planned) NovoBanco Angola

Banco ProCredit Banco ProCredit Mozambique

Ecuador

Banco Los Andes

ProCredit Bolivia