abac malaysia -sme finance forum workshop on … kristine ng wei miem, credit... · workshop on...
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ABAC Malaysia - SME Finance Forum Workshop on Innovative Financing for SMMEs
InterContinental Hotel Kuala Lumpur 21st May 2015
9:30 am – 11.30 am
Ms. Kristine Ng Wei Miem(EVP, Business Development)
This proposal is the sole property of Credit Guarantee Corporation Malaysia Berhad. (12441-M) This intellectual property should not be
disseminated or otherwise conveyed to any third party without the prior written permission of the Corporation.
Session 1: Moving Into the Mainstream – Showcase of Alternative Funding Mechanisms for SMMEs
Corporate Information
PoweringMalaysian SMEs
• Authorised Capital: RM3.0 bil
• Paid Up Capital (Ordinary & Preference Shares: RM1,785. 6 mil
• Shareholders
ØNegara Malaysia – 78.65%
ØFinancial Institutions – 21.35%
To be an effective financial institution dedicated to
promoting the growth and development of competitive
and dynamic SMEs.
Vision
Mission
To enhance the viability of SMEs through the provision of products and services at
competitive terms and, with the highest degree of professionalism, efficiency
and effectiveness
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CGC’s Mandated Role
To assist SMEs avail financing from financial institutions
"The Credit Guarantee Corporation is a key institutional arrangement in facilitating greater access to financing forthe SMEs. By providing guarantee to loans obtained by SMEs, CGC addresses one of the main constraints of SMEs thatis, the lack of collateral.“
- Tan Sri Dr. Zeti Akhtar Aziz, Governor of Central Bank of Malaysia (BNM)
SMEs with
§ No collateral§ Insufficient collateral§ Do not have any track record
How?
• Bridge FIs and SMEs via guarantee mechanism
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Prai 25/06/2001
Main Branch 3/07/2000
Ipoh 9/10/2000
Kuala Lumpur 3/11/2003
Seremban 23/07/2001
Melaka 21/04/2001
Johor Bahru 6/11/2000
Batu Pahat 3/11/2003
Kuantan 28/05/2001
Kuala Terengganu 26/11/2001
Kota Bharu 18/06/2001
Kuching 21/01/2002
Miri 24/02/2004
Kota Kinabalu 21/01/2002 Sandakan
19/01/2004
16 Branches across MalaysiaAlor Setar 8/04/2002
Branch Network
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SME Outreach (cont’)
As at 2014, 46.2% or 142,832 SMEs have successfully graduated from CGC schemes
#Graduates : SMEs that no longer have CGC guarantee since 2 years from date of reporting* Starting Jan’14 the Graduated SMEs are inclusive of other cancellation status e.g. expiry of cover, fully recovered (after claim approved), fully settled after claims rejected/returned & fully settled after wound down. Prior to January 2014, the Graduated SMEs are only those Cancellation with Fully Paid status only.**Based on the same base for Dec’13 of 138,189 for like for like comparison. 10
Risk Sharing Approach
Shared Financing / Direct Financing
Direct Financing with CGC
Direct Financing with 100% risk taken by CGC.
Risk Sharing with FIs
For better control of unexpected risk and asset quality. It is proposed that risk to be shared with the participating Financial Institutions (FIs).
80% 20%
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Business Model
Pricing
Risk Management
SME Outreach
Advisory Services
Building Capacity to Guarantee
Business Model
• Pricing based on risk•“Blended rate” concept.
•Robust Internal Risk Rating Model •Pricing Model.•Risk sharing with FIs•Utilize CBM services (PD & CMS)•Early Care (ECM)• Smaller loan amount•Policy on high risk sectors.•Group exposure limits
•Focus on number of SMEs.•Customer exposure limit.•Branches playing greater role.•Products that meet FI needs
•Advisory services limited to financial only
• Investment viewed as an integral component of business model.
• Investment to subsidize development12
Product Segmentation
GUARANTEE PRODUCTS / DIRECT LENDINGGUARANTEE PRODUCTS / DIRECT LENDING
Commercial
• Attractive & flexible features
• Generate returns
• Credit Enhancer Scheme
• Enhancer Express Scheme
• Enhancer Excel
• Enhancer Bumi Scheme
• SmallBiz Express
• Flexi Guarantee Scheme
• Portfolio Guarantee (PG)
• BizMula-i
Government-backed Schemes
• High developmental content
(Programme Lending)
• Backed by Government via
Funding
• Risk sharing
• Green Technology Financing Scheme
• IP Financing Scheme
• Franchise Financing Scheme
• Bumiputera Entrepreneur Project Fund – i / Tabung Project Usahawan Bumiputera-i
General Product Features
� Loan amount: - Between RM20,000
to RM10 mil
� Guarantee cover:- Between 30% to 100%
� Guarantee fee : - Between 0.5% - 5.75%
(based on risk adjusted pricing)
� Interest / profit rate:- Depending on the scheme
or FIs may determine <= 50% guarantee
13
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Improving Access to Financing
CGC has embarked on the following intitiatives to Alternative Funding Mechanisms for SMMEs:
Funding the start ups with minimal
financial information required. Leverage more on the Know
Your Customer (KYC) approach.
1 Direct Financing
Overcoming high fee via by reward GOOD
customers with as high as 30% discount by
lowering SMEs guarantee cost.
4Rebates
Mechanism
Supporting Government initiatives for SMEs to
access funding via Government backed-Schemes. (i.e. Green Technology Financing
Scheme (GTFS), Intellectual Property
and Special Relief Fund.
3Government-
backed Schemes
Enhance relationship with the FIs –
introduced innovative products such as
Portfolio Guarantee where the approvals from CGC is within 3
days.
2Portfolio
Guarantee (PG)
Information on Associate / Subsidiary Companies
Bank Negara Malaysia
Financial Institutions
78.65% 21.35%
Governance Structure
Credit Bureau Malaysia Sdn. Bhd.
55%
Subsidiary
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Credit Bureau Malaysia Sdn. Bhd. [ formerly SME Credit Bureau (M) Sdn. Bhd.]
Objectives
Ø Promotes greater transparency, professionalismand sound credit culture among SMEs.
Ø Acts as a systemic risk management tool.
Ø Develop SME rating database to guide businessand make credit decisions.
Ø Broadens the role of CGC in SME sectordevelopment.
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Credit Bureau Malaysia Sdn. Bhd.
Bridging the Credibility Gap
LACK OF COLLATERAL INADEQUATE INFORMATION
SMEs & Micro- businesses need to build a Credit TRACK RECORD
Credit Reports
Financial Institutions can improve TIMELINESS & ACCESS TO FINANCING
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Client Service CentreLevel 2, Bangunan CGC, Kelana Business Centre, 97, Jalan SS 7/2, 47301, Petaling Jaya, Selangor Darul Ehsan
Tel : 03-788 000 88Fax : 03-7803 0077
Email : [email protected] Hours
8.30am -5.30pm (Monday- Friday)
BizMula-i
Eligibility Criteria
q Malaysian-controlled & Malaysia-owned businesses
q Comply as SME by BNM’s definition
q Good credit record
q Business in operations for less than 3 years
q Business is at least licensed by a local authority
Financing Limit RM50,000 – RM300,000
Financing Rate From BFR + 0.3% to BFR + 1.65% only
Facilities Term Loan
Tenure Max 7 years
Eligible age 21 to 58 (at point of application)
BizMula-i
BizMula-iKey benefits
• Help businesses with less than 3 years operation andlack of track record to access financing.
• It is collateral free. No security to be pledged.• Competitive financing rate and financing tenure up to 7
years.• Direct funding from CGC.
§ A project most recently with OCBC Bank valued at MYR 500 million in 2011. This product was alsopreviously available to RHB Bank and Standard Chartered Bank, with such great success that new trancheshave been added.
§ The objective of this PG arrangement will be to assist Malaysian SMEs who have viable businesses withstrong potential for growth, but lack sufficient collateral to obtain the required financing. The PortfolioGuarantee in essence provides a guarantee through a risk partnership basis.
§ Under the portfolio guarantee scheme, CGC guarantees 70% of the approved total principal amountundertaken by SMEs and assists to verify the credibility of the SME applicants in consultation with OCBCBank. The applicants are assessed on a special programme scorecard jointly agreed upon with CGC usingsimplified fulfillment criteria for loan eligibility. With this, banks can enjoy greater confidence whengranting loans to SMEs. Accordingly, a portfolio guarantee enables SMEs to enjoy quicker access tofinancing. CGC can advise on the status of the loan application within three business days as opposed totwo weeks under other schemes.
§ The minimum loan quantum under the guarantee scheme is RM100, 000 and the maximum RM1 million foreach tranche per SME customer at a fixed loan tenor of five years. The loans are fully unsecured and theguarantee fee and lending rate pre-determined by OCBC Bank in consultation with CGC.
§ This particular PG with OCBC has benefited 187 SMEs since launch on the 10 of March 2011. As at Dec2011, CGC’s PG has availed uncollateralized financing to 1,668 SMEs and NPL amount is at an impressivelevel of 2.4% with only 49 SMEs turning NPL within a year.
Portfolio Credit Guarantee (PG)
Green Technology is the development and application of products, equipment and systems, used to conserve the natural environment and resources and to minimise the negative impact of human activities.
What is Green Technology?
The awareness to protect the environment has opened the door for SMEs thatsupply and utilize Green Technology, which is envisaged to be one of theemerging drivers of economic growth for Malaysia. GTFS was established bythe Government through Ministry of Finance to promote and supportinvestments in Green Technology.
Green Technology Financing Scheme (GTFS)
Green Technology Financing Scheme (GTFS)
To promote investments in Green Technology which refers to products, equipments or system which satisfy the following criteria :
Minimizes the degradation of the environment
Has a zero or low green house gas (GHG) emission
Safe for use and promotes healthy and improved environment for
all forms of life
Promotes the use of renewable resources
Conserves the use of energy and natural resources
Objectives of the scheme
Green Technology Financing Scheme (GTFS)
Key FeaturesProducer User
Purpose To finance investment for the production of green products
To finance investment in the utilization of green technology
Financing Size Maximum: RM50 million per company
Maximum: RM10 million per company
Financing Tenure Up to 15 years Up to 10 yearsEligibility Company approved by the Malaysia Green Technology
CorporationLegally registered Malaysian companies that have at least 51% Malaysian shareholding
Legally registered Malaysian companies that have at least 70% Malaysian shareholding
Participating Financial Institutions (PFIs)
All commercial and Islamic banks, and DFIs (Bank Pembangunan, SME Bank, Agrobank, Bank Rakyat, EXIM Bank and Bank Simpanan Nasional)
Government Incentives Rebate of 2% per annum of interest/profit rate
Application DateThe Scheme will open until 31 December 2015 or upon approval of financing up to RM3.5 billion, whichever is earlier
Green Technology Financing Scheme (GTFS)
Green Technology USER ?The person/company who used or operates the business using the green technology produced items/components. i.e;
Green LaundryGT Component including:-• Water & energy efficiency washer (resulting in 50% of water
saving)• High capacity tumble dryer with energy recycling system• Energy efficiency flatwork ironer• Energy efficiency sheet folder
Green BuildingGT Component including:-• Climate Responsive Building Envelope
(e.g. eco-glass window, sun-shading and heat reflective paint)
• Energy Efficient Air-Conditioning System• Energy Efficient Lighting• Rain water harvesting
Green Technology Financing Scheme (GTFS)
Green Technology Producer ?
The company who involved in production of the green products /components i.e;
Solar energy producer
Energy saver lighting bulb producer
Energy Efficient Air-Conditioning System producer
Eco-glass window producer
Green Technology Financing Scheme (GTFS)
§ Financing will be provided by all commercial & Islamic banks andDevelopment Financial Institutions (DFIs)
§ 0.5% p.a. guarantee fee to the government§ Projects are to be located in Malaysia§ Refinancing is not allowed
PROJECT COMPANY Producer: Max RM50 mil for 15 years max User: Max. RM10 mil for 10 years max
PROJECT COMPANY Producer: Max RM50 mil for 15 years max User: Max. RM10 mil for 10 years max
GREENTECH MALAYSIA(Promotions, Green
Certification, Monitoring)
FINANCIAL INSTITUTIONS(Credit assessment,
financing)
FINANCIAL INSTITUTIONS(Credit assessment,
financing)CREDIT GUARANTEE CORPORATION
(Administer guarantee & rebate)
(1) Green Certificate
(2) Loan(3) 2% rebate & 60% guarantee
Coordinator, Regulator
How to apply?
Rebate Mechanism
Who Qualifies?Good conduct of accounts /credit behavior
No adverse record on the existing loan facility
Aged more than 1½ years with CGC
Rebate upon next LG issuance
Eligible schemes – BizMula-i, Enhancer/Enhancer-I, Enhancer Direct & Enhancer Excel.
Rebate Mechanism
Ø Reduce cost of borrowing – as part of the National Agenda toassist SMEs
• Ease cash flow of SMEs in early stages of growth• Good customers indirectly enjoy “discount” in total guarantee
fees charged.
Ø Encourage and motivate customers to consistently maintaintheir good conduct of account / credit behavior.
Benefits of Rebates
Special Relief Facility 2015
No. Features SRF
1. Source of Funds
BNM
2. Scheme Type Islamic & Conventional
3. Total Facility RM500 million allocation
4. Financing Tenure
Up to 5 years including 6 months of moratorium period on both principal and interest/profit payment.
5. Purpose of Financing
• Repairs and purchases of assets for commercial use to replace those damaged during the flood and working capital only.
• The Facility shall not be used to refinance the existing credit facility.
6. Type of Financing
Term Financing only
7. Eligibility Business
• SMEs affected by the floods located in the districts defined by Majlis Keselamatan Negara, Jabatan Perdana Menteri as flood disaster areas.
• Businesses must be a Malaysian-owned company and institutions registered under the Companies Act 1965, Societies Act 1966 or the Cooperative Societies Act 1993 with at least 51% Malaysian members, and entrepreneurs registered under the Registration of Businesses Act 1956.
• For self-employed individuals or micro enterprises, a valid business registration and/ or business license is sufficient.
Special Relief Facility 2015 (cont’)
No. Features SRF
8. Guarantee Cover
• BNM via CGC will provide 60% guarantee cover on the principal and normal interest, while the remaining 40% credit risk will be borne by the PFIs.
• No guarantee fee will be charged to customers.• PFIs should not require any collateral.
9. Funding Rate to PFIs
Fund to be provided by BNM to PFIs at concessionary rate of 0% p.a.
10. Financing rate • Up to 2.25% effective rate per annum (p.a.).• For Islamic financing, the profit rate for the Islamic contract is also up to 2.25% p.a.
11. Maximum financing amount
An aggregate of RM500,000 per group of companies.
12. Stamp duty Waived for all financing agreements under the Facility.
13. Application deadline
• Facility is open for applications received by the PFIs not later than 30 June 2015 or uponexhaustion of allocation, whichever is earlier.
14. Participating financial institutions
• All commercial banks• All Islamic banks• Small Medium Enterprise Development Bank Malaysia Berhad (SMEBank)• Bank Kerjasama Rakyat MalaysiaBerhad (Bank Rakyat)• Bank Pertanian Malaysia Berhad (Agrobank)• Bank Simpanan Nasional (BSN)