CGC and OCBC Bank cross the RM2bil brand in wholesale guarantees
KUALA LUMPUR: Credit Guarantee Corporation Malaysia Bhd (CGC) and OCBC Malaysia have crossed the RM2bil bar in Wholesale Guarantees (WG) for unsecured financing of small and medium enterprises (SMEs).
In a joint statement on Monday, they said this RM2bil was after several new installments totaling RM610mil for this year.
OCBC Malaysia comprises OCBC Bank (Malaysia) Bhd (OCBC Bank) and its OCBC Al-Amin Bank Berhad (OCBC Al-Amin) unit.
The WG effort, started in 2014, has now seen a total of RM2.05 billion spread across 8,211 SME accounts.
Prior to the last tranche of the RM 610 million GT, OCBC Malaysia had already disbursed RM 1.44 billion in unsecured financing through the CGC partnered program to 4,509 SMEs in sectors ranging from retail and wholesale. to manufacturing.
Of this year’s RM 610 million, they said RM 495 million was for OCBC Bank and RM 115 million for OCBC Al-Amin.
A wholesale guarantee (WG) aims to encourage the participation of a financial institution by providing capital relief in accordance with Basel II.
At the same time, it allows them to obtain additional security for their unsecured or partially guaranteed SME finance / loans.
WG offers a new advantage to the banking industry by reducing the risks on their books and freeing up their capital, which allows increased capacity for more financing / loans to SMEs.
As for CGC, WG’s strength lies in its straightforward implementation method of providing a comprehensive guarantee on the financings / loans already underwritten by OCBC Malaysia through a thorough understanding of underwriting standards and the performance of these loans.
As the portfolio would have been seasoned for some time, loan quality is made more predictive, so minimal credit scoring is required when submitting.
OCBC Malaysia submits eligible accounts according to the agreed terms. CGC’s working group also allows for greater certainty in awareness and revenue as they come from a group of existing clients of OCBC Malaysia.
CGC President and CEO Datuk Mohd Zamree Mohd Ishak said OCBC and CGC’s achievements in unsecured wholesale guarantees reaffirm their shared commitment to promoting better access to finance for SMEs.
“Over a seven-year period, CGC and OCBC have provided an average of RM 300 million in unsecured financing per year through our award-winning wholesale guarantee programs.
“This step corresponds well to the government’s call for financial institutions to provide more assistance to SMEs, allowing them to recover and continue their operations with the reopening of the economic and social sectors,” he said.
This is in line with the government’s 6R approach (Resolve, Resilient, Restart, Relaunch, Revitalize and Reform) implemented to mitigate the impact of the Covid-19 pandemic.
Mohd Zamree stressed that the CGC remains steadfast in its countercyclical role, with various initiatives to boost the recovery momentum of the Malaysian economy after the pandemic, especially in the SME sector.
CGC is also fully committed to supporting the implementation of Malaysia’s twelfth plan, particularly in Theme 1 Resetting the Economy which includes a special focus on transforming MSMEs as a new engine of growth (Game Changer III) “.
OCBC Malaysia, initially through OCBC Al-Amin, became a major driver of the initiative to make unsecured finance available when it introduced OCBC Al-Amin Business Cash-i (BC -i) in 2012.
The bank became the country’s leading SME task force in response to the alarming results of a Statistics Department study where the majority of SMEs surveyed cited lack of collateral as the biggest constraint in obtaining financing. .
OCBC Bank CEO Datuk Ong Eng Bin, the latest tranche of the GT bodes well for the future of SMEs with the continuing impact of the pandemic.
“The timing is right and the amount large enough to make a tangible difference in the long-term development of SMEs in Malaysia.
“Although the SME client benefits from our agreement with CGC without even knowing it, what is most relevant to him is that such an arrangement allows the bank to make more available to SMEs in the long term because the risks of the bank are mitigated through the arrangement.
“In addition to the WG, OCBC Malaysia is also working with CGC on a portfolio guarantee (PG) where CGC provides 70% guarantee coverage. The GP is designed to allow deserving companies to have better access to short and medium term financing.
“As a bank rooted in the SME business landscape, we recognize that unsecured financing is necessary. With the impact that Covid-19 has had on businesses, especially SMEs, we are confident that this will pave the way for the steady progression of SME financing in the country, ”Ong said.