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Credit Guarantee Corporation (M) Berhad (CGC)

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  1. Credit Guarantee Corporation (M) Berhad (CGC) Credit Guarantee Management under the Economic Crisis and Measures to Boost Economy 19th ACSIC Training Program 9th – 14th August 2009 Bangkok, Thailand

  2. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Table of Contents 1

  3. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy CORPORATE INFORMATION • Incorporated – July 5, 1972 • Authorised Capital - US$909 million (RM3 billion) • Paid Up Capital • US$435 million of Ordinary Shares (RM1,435.6 million) • US$60 million of Preference Shares (RM200 million) • Shareholders • BNM 76.4% • Commercial Banks 23.6% Note : US$1 = RM3.30 2

  4. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy OBJECTIVE & PRIMARY ROLE OBJECTIVE : • To assist SMEs gain assess to financing at reasonable cost, especially those with: • No collateral • Insufficient collateral • Do not have track record • PRIMARY ROLE : • To develop & manage guarantee schemes • Bridging Financial Institutions & entrepreneurs, via a guarantee mechanism 3

  5. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy IMPACT OF GLOBAL CRISIS TO MALAYSIA • GDP contraction • – declined between to 4.6% in 2008 from 5.8% forecast • – projected between -1% to 1% in 2009 (2008 : 4.6%). • – consumer & business confidence low • (< 100 point mark). • – inflation peaked to 8.5% in Aug’08 (2007 : 3.8%). • – unemployment to rise to 4.8% from 3.7% (2008). 4

  6. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy 3 MAIN IMPACT OF GLOBAL CRISIS TO MALAYSIA • Export declined 15.9% y-o-y and by 25% (Jan & Feb 2009) • Change in Monetary Policies • - OPR reduced from 3.5% to 2.0% • - SRR reduced from 4.0% to 1.0% 5

  7. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy IMPACT OF CRISIS TO CGC • Overall decline in loan approvals by FIs 6

  8. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy IMPACT OF CRISIS TO CGC Overall decline in loan applications • The impact was notable as CGC’s loan approval dropped by 33% 7

  9. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy IMPACT OF CRISIS TO CGC • Deteriorating loan quality • NPL for the banking sector is forecast at 9% by the end of 2009 (2008 : 4.1%) • CGC will be impacted – expected gross NPL of 13% • Decline in income • Interest rates reduction, impacting investment income which is one of the core source of income • Put on hold capital market activities, i.e. issuance of issue bond / sukuk for SMEs 8

  10. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy IMPACT OF CRISIS TO SMEs • Access to Financing Hindered • FIs more selective in extending loans • Requirement to provide collateral/security • Subject to more thorough credit evaluation • Industries Affected • Some industries were adversely affected , i.e. export oriented, E&E, construction, etc • Competitiveness of SMEs • Negative impact on SMEs that were less equipped in terms of human, capital & IT resources. 9

  11. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government Advisory Services Loan Monitoring, Rehab & Restructure Pre-emptive Actions Government Aided Funds Enhance Delivery Channel Risk Management 10

  12. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government Action by CGC • Advisory Services • According greater focus on hand-holding and advisory services as well as briefing sessions in collaboration with other government agencies – i.e. SMIDEC and other SME-related agencies, to help SMEs better manage their business and finances. • Provide consultation via CGC appointed Business Advisory Service Entity to SMEs on managing their loan effectively. 11

  13. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government • Loan Monitoring, Rehab & Restructure • Reach out to the affected SMEs by extending credit facilities and helping to restructure loan facilities of those SMEs who are unable to meet their obligations during this difficult period. • Early restructuring of problematic loans by extending repayment period, reducing monthly commitment, etc. • Early care monitoring mechanism in order to closely monitor SMEs loan performance and to provide immediate rehabilitation if needs arises. 12

  14. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government • 3) Enhance Customer Service • Partnership with selected financial institutions to provide speedier loan guarantee. • Review of internal processes to improve turnaround time. • Managing Government funded special guarantee schemes for SMEs under economic stimulus package. 13

  15. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government • Risk Management • Establishment of SME Credit Bureau – a credible and reliable source providing credit information that serves the needs of both SMEs and potential financiers. • Close monitoring of borrowers from high risk sectors. • In the midst of developing a robust credit risk model that will enable the Corporation to make a more informative credit decision. 14

  16. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Pre-emptive actions by CGC & Government • 5) Government Aided Funds – via Stimulus Package • The government had introduce two stimulus packages: • - first is valued at USD2.12 billion (RM7.0 billion) • - second is valued at USD18.18 billion (RM60.0 billion). • - Both packages are expected to contribute towards mitigating • global contraction on domestic economy. • Included in the stimulus package are 3 government added funding guarantee by CGC. • - SME Assistance Facility & SME Modernization Facility totaling • USD364 mil (RM1.2 billion) introduce in August 2008. • - SME Assistant Guarantee Scheme totaling USD606 mil (RM2.0 • billion) introduce in March 2009. 15

  17. SMEs are enablers of Government aspiration SME SUCCESS CGCs are of strategic importance to SMEs Focus driven Policies & key thrust areas Conclusion 16

  18. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Conclusion • SMEs cater for about 99.2% of business in Malaysia and about • 32% to GDP. Since SMEs are the enablers of the Government’s • Vision for the country, CGC would play more critical and effective • role in providing assistance to SMEs amongst them are: • Enhancing SMEs access to financing and to ensure that financing is always available for viable businesses. • Enhancing financing incentive such as providing government aided funding. • Disseminating comprehensive information to SMEs via publications, websites, etc. to actively engage with SMEs. 17

  19. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy Conclusion • Promoting efficiency and competitiveness amongst SMEs by providing handholding services that lead building stronger branch name • Assisting SMEs to strengthen their capacity and capability building by coordinating training, marketing effort, financial advisory services etc. • Assisting SMEs to keep abreast with current global trend e.g. modernizing their operations and machinery that will lead to cost effectiveness. • Encouraging the usage of SME Credit Bureau and utilize the reports to avail financing. The bureau may be use to provide credit information service to counter the negative perception of SMEs. 18

  20. Credit Guarantee Management under the Economic Crisis and Measure to Boost Economy THANK YOU 19