CGC to provide RM400 million business financing for SMEs

The Credit Guarantee Corp (M) Bhd (CGC) is expected to provide about RM400 million to small and medium enterprises (SMEs) this year under a wholesale guarantee for unsecured business financing.

The guarantee will help mitigate risks, improve lending capacity and augur well for the development of unsecured SMEs financing business in the country.

President and Chief Executive Officer Datuk Wan Azhar Wan Ahmad was confident that more banks would venture into unsecured financing as it provided a new edge for the banking industry.

Credit Guarantee Corporation Malaysia Bhd and OCBC Al-Amin Bank Bhd on Thursday inked the country's first SME wholesale guarantee, marking a milestone in the development of Malaysia's unsecured business financing efforts.

The guarantee, involving an initial tranche of RM250 million of OCBC Al-Amin's existing unsecured SME portfolio, will see the ratio of risk involved in the financing business being shared equally between CGC and OCBC Al-Amin for a guarantee period of five years.

"We are still in talks with other banks to venture into unsecured financing but it takes time, as we need to deliberate on the features of the product as it differed from one bank to another in terms of pricing.

"However, I'm not allowed to disclose which banks are actually discussing with us right now.

"But, we do have few banks lined up for this product," he told reporters after the signing ceremony of the SME wholesale guarantee agreement witnessed by Bank Negara Malaysia Assistant Governor Bakaruddin Ishak.

The agreement involves CGC and OCBC Al-Amin sharing the risks equally for five years.

Wan Azhar said the product was the first of its kind as previously the entire risk centred on banks alone.

"Leveraging on OCBC Al-Amin's existing unsecured SME portfolio, we are confident that we will be able to meet the target," he said.

Through this new product, the financial institution will be able to free up capital while mitigating risk, he added.

Wan Azhar also said the company received many enquiries from the Middle-East on setting up a similar guarantee system in their country.

"They are interested in the possibility of a collaboration between Malaysia and countries in the Middle-East. So we are looking at exploring the possibility of doing that right now," he added.