CGC’s NPL exposure to maintain at 2016 level

The NPL ratio for 1H17 is virtually the same as 1H16, says CEO Mohd Zamree

by MARK RAO / Pic by MUHD AMIN NAHARUL

CREDIT Guarantee Corp Malaysia Bhd’s (CGC) non-performing loan (NPL) ratio is predicted to be maintained at a manageable level this year with no significant spike expected from the small and medium-sized enterprise (SME) clients.

However, the Bank Negara Malaysia’s majority owned unit that has been tasked to assist SMEs by providing credit guarantees on their loans is still facing challenges within select sectors.

Its president and CEO Datuk Mohd Zamree Mohd Ishak (picture) said the NPL ratio for the first half of this year (1H17) is virtually the same as the corresponding period in 2016, which had remained higher than the banking industry level due to the bigger risk present in the SME space.

“CGC is a developmental financial institution, so NPL levels are not like commercial banks because we are into the riskier businesses.

“We have been able to manage the NPL level and expect to continue to manage it, especially given the higher risk we take on,” Mohd Zamree told members of the press in Kuala Lumpur yesterday.

He added that he does not foresee any prospects of a significant spike in NPL ratios, which is likely to be maintained at a similar level this year.

CGC, which has provided over RM63.7 billion in guarantees and financing since its inception in 1972, had however, observed strains in the retail, wholesale and services sectors in terms of NPLs.

“We do see signs of some sectors in the industry which are facing challenges in business operations.

“What we are doing is to reach out to our customers and ask them what the issues are, and see how we can help them pull out of these difficulties,” Mohd Zamree said.

At the national level, he said Malaysia in on track to reach a gross domestic product (GDP) contribution of 41% from SMEs by 2020, with CGC and other credit institutions confident in meeting their internal targets.

CGC has set a target of providing 9,500 guarantees for a value of RM4.7 billion this year, having already guaranteed 3,100 firms for RM1.5 billion in 1H17.

Presently, SMEs reportedly make up close to 36% of Malaysia’s GDP while accounting for 98% of businesses in the country.

Year 2017 was further announced as the year for SMEs, with government’s support expected to continue and be reflected in the 2018 budget allocation to be tabled next month.

“The government fully realises the importance of SMEs as an economic driver and I think their support will continue.

“I was also made to understand that next year will have a greater focus on women entrepreneurs, and we at CGC are ready for that,” Mohd Zamree said.

He was speaking ahead of the Asian Credit Supplementation Institution Confederation (ACSIC) Training Programme held at Royale Chulan Kuala Lumpur that commenced on Sept 24 this year.

The four-day event hosted 46 participants from 14 credit guarantee institutions in the Asian region, representing 10 ACSIC member countries namely Indonesia, Japan, Malaysia, Mongolia, Nepal, the Philippines, South Korea, Sri Lanka, Taiwan and Thailand.

“What we intend to do (via this platform) is to share our knowledge in regards to what we can provide beyond guarantees.

“We are moving into things such as advisory to give valueadded services to SMEs. This platform will enable us to share all the initiatives undertaken beyond guarantees,” Mohd Zamree said.

He added that Malaysia’s expertise and knowledge in this field are being sought after by other countries, including Timor Leste, Egypt, Tanzania and Zimbabwe.