KUCHING: SME Bank yesterday signed a Portfolio Guarantee (PG) agreement with Credit Guarantee Corporation Malaysia Bhd (CGC) to offer RM30 million of financing to viable small and medium enterprises (SMEs).
Wan Azhar (left) and Radzif posing with the agreement yesterday.
This is the first ever PG between CGC and a development financing institution in the country designed to ease the burden on viable SMEs as they are expected to benefit from the lower cost of financing and a faster turnaround time in terms of approvals and disbursement offered under this agreement.
The initial portfolio of RM30 million will benefit approximately 200 SMEs within the next one year through financing between RM100,000 to RM500,000.
The purpose of this financing facility is to provide the SMEs with the working capital required to manage their business cash flow and for business expansion at a fixed rate of between five to seven per cent per annum.
CGC president and chief executive officer Datuk Wan Azhar Wan Ahmad said the PG, launched in 2009, has proven to be effective in addressing the financing needs of the SMEs and improve on its SME outreach.
“Under the PG approval for financing, the eligibility criteria are upfront, making it easier to better manage the asset quality of the portfolio.
“Such pre-determined arrangement will also enable lower costs of financing to the borrowers as PG has lower transaction cost.”
“With the PG in place, the SMEs are now able to benefit from the speed at which financing applications are processed and approved as it allows them to gain quicker access to the much-needed financing.
Currently, CGC’s PG system provides approvals within three calendar days to speed up the approval and disbursement process of the banks.
“We are looking at the probability of reducing this process further to just one day,” he said adding that at present, the approval rate for applications under PG is almost 100 per cent.
SME Bank Group managing director, Datuk Mohd Radzif Mohd Yunus said the collaboration will facilitate access to credit by helping SMEs to develop their creditworthiness and good track record and assist new customers to obtain the much needed funding for their business expansion plans.
“The collaboration with CGC will also allow SME Bank to enhance its credit risk management via risk-sharing and have a holistic view of a prospective customer’s readiness in servicing the financing,” he said.
This PG agreement reinforces both parties’ commitment and support towards SME development in the country not just in terms of enhancing access but also in terms of costs of
financing.
To date, CGC has availed close to RM1.5 billion of financing that had benefited over 4,000 SMEs.
It is targeting to avail new guarantee of at least RM700 million under various PG arrangements in 2014.
SME Bank is the eighth financial institution on board after Maybank, Standard Chartered Bank, OCBC, RHB, Public Bank Berhad, Alliance Bank and SC Saadiq.