CGC introduces ENHANCER to facilitate SME financing
Kuala Lumpur, 28 Aug – Building on the success of its various schemes, Credit Guarantee Corporation Malaysia Berhad (CGC), today launched the ENHANCER, a new credit guarantee scheme aimed at making it relatively easier for the small and medium enterprise (SME) community to obtain financing by enhancing the credibility of their loan applications.
Speaking to reporters after the launching ceremony, CGCís Chief Executive Officer Datuk Wan Azhar Wan Ahmad said, ìThis is one of the most customer-centric products that we have introduced to date as we are committed to see a continuous and dynamic development of the SME sector in the country.î
ìEssentially, the ENHANCER helps SMEs to strengthen their credit standing and business viability by adding more value to their loan applications,î stressed Datuk Wan.
The ENHANCER is a credit guarantee scheme where the guarantee fee that is normally charged to the borrower would be calculated according to the risk profile of the borrower. Under the ENHANCER, a borrower with a low risk profile would pay a low guarantee fee as opposed to a high-risk borrower.
ìThe risk-adjusted guarantee fee pricing structure under ENHANCER is an initiative by CGC to enable a broader segment of the SME community to have greater access to financing their businessî, added Datuk Wan.
The ENHANCER makes SMEs more ëbankableí as the question of risk is now being reflected with a flexible fee structure that is based on the profile of the borrowers.
ìThe new fee structure which is risk-adjusted will be based on the rating of the borrower determined using a scoring methodology,î added Datuk Wan. ìThis may also serve as an incentive for SMEs to enhance their risk profile in order to avail themselves of a lower fee.î
He also explained that under the ENHANCER scheme, the financial institutions that provide loans, are no longer required to comply with stringent requirements such as notification of the Non-Performing Loan (NPL) and any claims arising can be submitted immediately upon NPL.
Datuk Wan also added that the ENHANCER will be initially targeted at small and medium-sized businesses, a segment that has traditionally been finding it difficult to have excess to business loans. Subsequently ENHANCER will also be made available to the bigger enterprises.
ìAs a premier credit guarantee institution, CGC will continue to not only support the growth of SMEs but also to facilitate and sustain their development by paving the way for greater access to the much-needed financial assistance,î explained Datuk Wan.
CGC experienced encouraging demands for the credit guarantee schemes introduced over the years. As at end of July 2006, CGC has cumulatively guaranteed over 363,055 loans valued at RM33.25 billion. In 2005, it guaranteed a total of 8,600 loans valued at RM3.3 billion, benefiting three broad economic sectors namely, general business, manufacturing and agriculture.
ìFor 2006, we aim to maintain the momentum on loan approvals and ENHANCER will be contributing to that effort,î he added.
For the first time ever through its own branch network, CGCís DIRECT ACCESS GUARANTEE SCHEME (DAGS) surpassed the billion-dollar mark in 2005, registering close to 2,400 loans, valued at RM1.4 billion. DAGS and NPGS, the two main schemes, contributed significantly towards the Corporationís growth in loan guarantees, representing about 42% (RM1.4 billion) and 32% (RM1.0 billion) of the total value of loans guaranteed in 2005, respectively. As at end of July 2006, DAGS has seen an increase in total loans guaranteed, registering 16.5% growth compared with the corresponding year.
ìWith attractive features that are beneficial to both the borrowers as well as the financial institutions, we look forward towards greater participation by the financial institutions in the ENHANCER scheme,î said Datuk Wan. îWe also anticipate an increased participation by the locally incorporated foreign banks. Currently participation from the foreign banks only accounts for two percent of the loan base.
As part of its product strategy, CGC is also in the midst of expanding its strategic partnership with Islamic financial institutions to have greater reach to the SME community through the provision of credit enhancements for Islamic financial products.
The ENHANCER was officially launched by the Deputy Governor of Bank Negara Malaysia Datuk Zamani Abdul Ghani at Nikko Hotel, Kuala Lumpur.
CGC was established with the main aim of assisting the SMEs gain accessibility to credit facilities from financial institutions. It is one of the leading institutions in Malaysia, which provides guarantee on loans to SMEs which have no or inadequate collateral or track record.