d2 10mp working capital guarantee scheme

8/6/2019 D2 10MP Working Capital Guarantee Scheme

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10MP WCGSGUARANTEE SCHEME TO SPUR

GROWTH OF VIABLE SMEs20 April 2011

Private and Confidential


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Sulit & Persendirian (2)Hakcipta Terpelihara 2010

What is Credit Guarantee Scheme ?

It is a financial instrument to spur lending activities.

Set up with specific Policy Objectives:

- Private Sector Growth / Developments

- Economic Recovery- Development of Specific Target Groups e.g.

Women Entrepreneur, Youth Development,Small Entrepreneur, Franchise Development

Involves at least three parties; Borrower, Lender and Guarantor

CREDIT GUARANTEE SCHEME


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Widely used in various countries both in developed and developing countries.

It was reported that over 2,000 guarantee schemes exist in various forms in

more than 100 countries.

The first Credit Guarantee Scheme was introduced by the JapaneseGovernment after the World War II.

In Malaysia, the first guarantee provider was Credit Guarantee Corporation(CGC). It was established in 1972 with the objective of facilitating SMEsaccess to financing from Financial Institutions. CGC is owned by Bank

Negara Malaysia and local Financial Institutions.

Since its establishment, CGC has cumulatively guaranteed 402,891 loansvalued at RM44.9 Billion via 27 guarantee schemes. (Source :CGC 2009 annual report)

CREDIT GUARANTEE SCHEME


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SJPP is a company wholly owned by the Minister of Finance Inc.

SJPPs role is to manage and administer the two guarantee schemes namely

Working Capital Guarantee Scheme (WCGS) and Industry RestructuringFinancing Guarantee Scheme (IRFGS).

Rationale of Government of Malaysia setting up SJPP:-

To stimulate Malaysia Economy at that point of economic crisis in2008 as the Banks were reluctant to lend due to economicuncertainties.

To stimulate the economy, Government of Malaysia introduced

Working Capital Guarantee Scheme (WCGS) worth RM5.0 billionand Industry Restructuring Financing Guarantee Scheme(IRFGS) worth RM5.0 billion. The schemes were announced byPrime Minister at the Dewan Rakyat under the Second Stimulus

Package totaling RM60.0 billion on 10 March 2009.

SJPP BACKGROUND


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Both schemes were introduced by SJPP in the financial market on 16 April2009, 1 month after it was announced in Dewan Rakyat and 44 FinancialInstitutions participated in the schemes.

The WCGS scheme received overwhelming response with the initial RM5.0billion limit was fully exhausted on 7 September 2009, 5 months after it wasintroduced.

Additional RM2.0 billion was then allocated from IRFGS to WCGS scheme,making total WCGS limit was RM7.0 billion.

The additional RM2.0 billion to WCGS was fully exhausted within 1 monthand was closed on 26 October 2009.

IRFGS scheme was closed on 31 December 2010 with RM1.05 billion

approval against scheme fund of RM3.0 billion.

SJPP BACKGROUND


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Prior to the launching of the Stimulus Package, the economy contractedmarkedly by 6.2% in Q1 2009. The swift implementation of the fiscal stimulusmeasures in Q2 2009 has allowed continued access to financing, as depicted

in the graph below:

With the quick implementation of the measures, the Malaysian economyregain to growth of 4.5% in Q4 2009 and 10.1% in Q1 2010 (source: BNM

2009 Annual Report).

SJPP BACKGROUND

0

1020

30

Q1'08

Q2'08

Q3'08

Q4'08

Q1'09

Q2'09

Q3'09

Q4'09

Q1'10

Quarterly change (RM Billion)

Quarterly change (RM Billion)


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WCGS IRFGS TOTAL

Financial Institution No Financing(RMmil) Guarantee(RMmil) No Financing(RMmil) Guarantee(RMmil) No Financing(RMmil) Guarantee(RMmil)

Domestic CommercialBank

3,647 4,135 3,309 156 446 324 3,803 4,581 3,633

Foreign CommercialBank

1,256 1,933 1,546 47 202 144 1,303 2,135 1,690

Islamic Bank 355 748 598 41 258 173 396 1,006 771

Development Bank 71 184 147 24 151 116 95 335 263

TOTAL 5,329 7,000 5,600 268 1,057 757 5,597 8,057 6,357

SJPP STATUS AS AT 31 DECEMBER 2010

Loans approved by FIs :


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Under the 10th Malaysia Plan (10MP) announced by Prime Minister in theDewan Rakyat on 10 June 2010 , the Government allocates additional RM3.0billion to the WCGS scheme.

The additional allocation to the WCGS scheme is one of Governmentsmeasures to enhance access to financing for SMEs companies.

The 10MP WCGS limit of RM3.0 billion is divided as follows :-

Bumiputera Companies RM1.5 billion.

Non Bumiputera Companies RM1.5 billion.

The 10MP WCGS is opened from 2nd January 2011 until 31 December 2011or until the RM3.0 billion limit is fully exhausted, whichever is earlier.

10th MALAYSIA PLAN (10MP) WCGS


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HIGHLIGHT OF 10MP WCGS

Scheme Limit RM3.0 Billion

Distribution Non Bumiputera Companies RM1.5 billionBumiputera Companies - RM1.5 billion

Eligibility Criteria Non Bumiputera Limit

For viable companies from all economic sectors and incorporatedunder Companies Act 1965 with at least 51% shares held byMalaysian and the Shareholders Fund is not more than RM10.0 mil

Bumiputera Limit

For viable companies from all economic sectors and incorporatedunder Companies Act 1965 with at least 51% shares held byBumiputera as at 31 December 2010, and the Shareholders Fund isnot more than RM10.0 mil

Financing Limit Minimum RM50K

Maximum RM5.0 milFinancing Tenure 5 years, not exceeding 31 December 2015

Guarantee Cover 70% of financing facility for financing between RM50K to less thanRM2.0 mil

50% of financing for financing from RM2.0 mil to RM5.0 mil


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HIGHLIGHT OF 10MP WCGS

Guarantee Fee 0.75% per annum payable upfront

Cancellation Fee RM100.00 per cancellation

Interest / financing rates To be determined by the respective participating Financial

Institution

Source of Funds From the participating Financial Institution

For FAQs and more information on 10MP WCGS, visit www.sjpp.com.my


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MANAGING PORTFOLIO

SJPP Portfolio:-

SchemeNo Financing

(RM mil)

WCGS 5,329 7,000IRFGS 268 1,057

10MP WCGS** 1,426 941

TOTAL 5,974 8,998

EXPECTED TOTAL 10,000 11,057

Due to higher guarantee cover of 70% for loans < RM2.0 mil, loan approvals under

10MP WCGS are of lower quantum.

Total number of expected borrowers under 10MP WCGS targeted at 4,400, makingtotal of expected SJPP portfolio to be 10,000 borrowers.

* * Figures as at 16 April 2011


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It is estimated that total default for the scheme at between 20% to 25% of totalportfolio, considering the high risk profile of the borrowers.

Based on total financing of RM10 billion and guarantee ratio of 80%, it is estimatedthat the scheme may cost Government up to RM2 billion, or approximately 0.3% ofGDP (based on 2009 GDP of RM528 billion).

The cost is considered reasonable considering the crisis contracted the economicgrowth by 6.5% and a prolonged crisis can cost government billions more in term ofloss revenue.

Not withstanding, SJPP strives to reduce potential claims under the guarantee to not

more than RM1 billion with the followings measures put in place:-1. Monitoring FI for prudence lending;

2. Ensuring proper monitoring and supervision by the FI; and

3. SJPP cluster programs.

MANAGING PORTFOLIO


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Many SMEs are facing some typical problems among others:

Working in silos

Insufficient fund/ capital

No proper business plans

High level of competition among the industry players

Knowledge gaps in different areas

Lack of marketing skills

SMEs PROBLEMS AND WAYS TO MOVE FORWARD


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In Malaysia, SMEs constitute an important component of the Malaysian economywhere it represents 99.2% of all businesses in Malaysia ands contributing 56.4% oftotal employment in the country.

In unlocking the growth and innovation potential of SMEs, the following initiatives havebeen taken by the Government:

Reducing the regulatory costs borne by SMEs

Exemption of some of the more costly business regulations for companiesemploying five of fewer people until it expands beyond five employees

Building capacity and capabilities of SMEs

Special programmes to address the lack of skilled labour that includeMNC/large company training, skill training programmes, medium-termtraining maps and leveraging training resources abroad

Developing SMEs as an Engine of Growth and Innovation10th Malaysia Plan 2011 2015


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Supporting the creation of an entrepreneurial culture

Enhancing the SME-University Internship Programme where students withspecific skills will be assigned to a business for 2-3 months to gain workexperience. Government will also sponsor business plan competition,

introduce business curricula and fund public campaigns that showcasesuccessful Malaysian entrepreneurs

Strengthening support systems for SMEs

Promote National Mark quality certification, develop SMEs branding,introduction of 1-InnoCERT to certify SMEs on the basis of innovation andcommercialisation achievement and expansion of SME Corp Malaysias fieldoffices with business centres to all states to improve outreach

Enhancing access to financing for SMEs The programmes that are put in place to enhance access to financing for

SMEs include venture capital and private equity, financing and guarantees,preferential loans and hybrids, working Capital Guarantee Scheme (WCGS)and financial help desks

Developing SMEs as an Engine of Growth and Innovation10th Malaysia Plan 2011 2015


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QUESTION AND ANSWERQUESTION AND ANSWERQUESTION AND ANSWERQUESTION AND ANSWER


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Thank You

d2 10mp working capital guarantee scheme

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