CGC and OCBC Bank break the RM2bil mark on wholesale guarantees



KUALA LUMPUR: Credit Guarantee Corporation Malaysia Bhd (CGC) and OCBC Malaysia have exceeded the RM2bil mark in wholesale guarantees (WG) for unsecured financing of small and medium-sized enterprises (SMEs).

In a joint statement on Monday, they said these were RM2bil after several new tranches totaling RM610mil for this year.

OCBC Malaysia comprises OCBC Bank (Malaysia) Bhd (OCBC Bank) and its unit OCBC Al-Amin Bank Berhad (OCBC Al-Amin).

The efforts of the working group, which began in 2014, have now distributed a total of RM 2.05 billion to 8,211 SME accounts.

Prior to the latest RM610mil WG tranche, OCBC Malaysia had already disbursed RM 1.44 billion in unsecured funding under the program in partnership with CGC to 4,509 SMEs in sectors from retail and wholesale to manufacturing.

Of this year’s tranche of RM 610 million, RM 495 million related to OCBC Bank and RM 115 million from OCBC Al-Amin.

A wholesale guarantee (WG) is intended to promote the participation of a financial institution through capital relief under Basel II.

At the same time, you receive additional collateral for your unsecured or partially secured SME financing / loans.

WG gives the banking sector a new edge by reducing risk on their books and freeing up their capital, allowing greater capacity for more SME finance / loans.

At CGC, the strength of WG lies in the simple implementation method of providing a blanket guarantee on financing / loans already underwritten by OCBC Malaysia through a thorough understanding of the underwriting standards and performance of such loans.

Since the portfolio would have matured over a period of time, the credit quality becomes more predictive, so only a minimal credit check is required when filing.

OCBC Malaysia will submit the qualifying accounts according to the agreed terms. CGC’s flat share also offers more security in terms of coverage and fee income, as these come from a pool of existing OCBC Malaysia customers.

CGC President and CEO Datuk Mohd Zamree Mohd Ishak said OCBC and CGC’s successes in unsecured wholesale guarantees reinforce their joint commitment to promoting better access to finance for SMEs.

“Over the seven-year period, CGC and OCBC have provided an average of RM300 million in unsecured funding annually through our award-winning wholesale guarantee programs.

“This milestone fits well with the government’s call on financial institutions to provide more support for SMEs to recover and continue doing business as the economic and social sectors reopen,” he said.

This is in line with the government’s 6R (Resolve, Resilient, Restart, Recovery, Revitalize and Reform) approach that is being implemented to mitigate the effects of the Covid-19 pandemic.

Mohd Zamree emphasized that CGC remains firm in its countercyclical role, with various initiatives to boost the Malaysian economy’s recovery momentum from the pandemic, particularly in the SME sector.

CGC is also fully committed to supporting the implementation of the twelfth Malaysia Plan, especially in topic 1 “Resetting the Economy”, which includes a special focus on the transformation of MSMEs as a new growth driver (Game Changer III). “

OCBC Malaysia first became a key driver of the unsecured funding initiative through OCBC Al-Amin when it launched OCBC Al-Amin Business Cash-i (BC-i) in 2012.

The bank became the country’s first SME corporation in response to the alarming results of a study by the Ministry of Statistics in which the majority of SMEs surveyed cited the lack of collateral as the main obstacle to raising finance.

Datuk Ong Eng Bin, CEO of OCBC Bank, the latest tranche of flat shares bodes well for the future of SMEs, given the ongoing impact of the pandemic.

“The timing is right, and the amount substantial enough to make a real difference to the long-term development of SMEs in Malaysia.

“Although the SME client is taking advantage of our agreement with CGC without knowing it, what matters most to them is that such an agreement enables the bank to provide more to SMEs in the long term, as the risks of Bank can be reduced by reducing the risks of the bank arrangement.

“In addition to the WG, OCBC Malaysia is also working with CGC on a portfolio guarantee (PG) in which CGC offers a guarantee coverage of 70%. The PG aims to give worthy companies better access to short to medium-term financing.

“As a medium-sized bank, we recognize unsecured financing as necessary. Given the impact Covid-19 is having on businesses, especially SMEs, we are confident that this will pave the way for the steady advancement of SME finance in the country, ”Ong said.



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