BRIEFING SESSION ON WORKING CAPITAL GUARANTEE SCHEME (WCGS)

Transcription

1 28 th February 2011 REMINDER Circular No : KLSICCI / 23 / 2011 To : All Members BRIEFING SESSION ON WORKING CAPITAL GUARANTEE SCHEME (WCGS) The Special Implementation Taskforce on the Indian Community (Prime Minister's Department) is organizing a briefing on the above scheme as follows: Date : Friday, 4 th March 2011 Time : 2.30 p.m. Venue : Dewan Soma, Wisma Tun Sambanthan No. 2, Jalan Sultan Sulaiman, 50768, Kuala Lumpur Admission : FREE Under the 10 th MP, RM 3.0 billion is allocated in this guarantee scheme. Of this RM1.5 billion is reserved for Bumipura companies and the other RM1.5 billion for non Bumiputera companies The commencing period is from Jan 2, 2011 till Dec 31, 2011 or upon full subscription of the scheme limit which ever is earlier. The financing limit is from a minimum of RM 50k to a maximum of RM5 million The financing tenure is 5 years The guarantee cover is 70% of financing facility for financing between RM50K to less than RM2.0 million and 50% of financing for financing from RM2.0 million to RM5.0 million The loan is administered by participating financial institutions Indian Business Dialogue with Banks The Taskforce facilitated a dialogue on Working Capital Guarantee Scheme (WCGS) with three banks namely CIMB, Maybank, AM Bank and Indian Business Associations. This dialogue was held at PROKHAS office at Damanasara, KL. Also present were representatives from Ministry of Finance, Bank Negara, Taskforce and MIC. The first dialogue was held on Friday Jan 28, 2011 at 10am.

2 Participating Banks Y. Bhg. Dato Kamal Mohd Ali who is the GM of PROKHAS gave the opening welcome speech, followed by introductory speeches by Datuk Dr Denison Jayasooria and Dato Jaspal Singh (Treasurer of MIC). This was followed by a briefing by the bank representatives namely Puan Eliza Dato Abdul Aziz (CIMB) Ms Alice Wong (Maybank) Ms Kholilah Aziz (Maybank) Ms Karen Foo (AmBank) Key Points from Banks presentations There were a number of recurring themes based on the presentations by the three banks, which can be noted as common points emphasized by them. These are listed below:- First, contrary to popular perception, banks do not discriminate anyone on the basis of ethnicity or race background giving preference to one community as opposed to another. Second, all the three banks emphasized the following key indicators namely Viability of the business Audited accounts Sources of repayment of the loans Repayment track record financial management Third, the banks indicated that they are pro business and want to reduce their risk of default and therefore although in the WCGS the bank risk is only 30%, the banks still want the potential borrowers to be low risk or have the ability to share the risk Fourth, all three banks indicated that application process and requirements are pretty standard even in the case of WCGS using their check list of priority items. Some aspects emphasized by the banks during the dialogue are:- Legal registration as Sdn Bhd Statutory documents Audited accounts Business profile Trade credibility Collateral requirement - Not required in WCGS case as Government is guaranteeing 70% but cash asserts & deposit namely business needs to come up with the 30% portion)

3 Fifth, all three banks said they are happy to work with the Business Associations in financial product promotion and briefing of the scheme in order to ensure access and inclusion. In addition Maybank indicated that their small and micro business development centre would be available to assist in business training and development. Indian SMEs are requested to make use of this opportunity and participate in this briefing session. Loan facility ranging from RM50k RM5 million are available for Sdn. Bhd. companies. For details contact the Special Implementation Taskforce on the Indian Community office at Tel: Thank you. Yours sincerely, MADHU SUDAN NAIR Hon. Secretary General (This is a computer generated message and bears no signature) 10MP Working Capital Guarantee Scheme Facility (10MP WCGS) Objective Eligibility criteria Financing limits Purpose of financing To assist viable Small and Medium Enterprises (SMEs) to gain access to working capital financing and in turn, spur economic growth under the 10th Malaysian Plan (10MP). Companies from all economic sectors and incorporated under the Companies Act 1965 with at least fifty one per centum (51%) of its shares are being held by Malaysian and the Shareholder s Fund of the said companies is not more than Ringgit Malaysia Ten Million (RM10 million) only. Minimum: Ringgit Malaysia Fifty Thousand (RM50,000.00) only. Maximum: Aggregate financing of Ringgit Malaysia Five Million (RM5.0 Million) only per company. The Working Capital Guarantee Scheme granted shall be for the purpose of Working Capital financing and not for refinancing of existing financing facilities granted by the same or other Financial Institution. The Financial Institution will be responsible for determining the genuineness of the Customer based on their credit evaluation procedure.

4 Interest/financing rates Source of Funds Guarantee cover Loan tenure Guarantee Fee Cancellation Fee Application Dates To be determined by the respective Financial Institution. From the Financial Institution. 70% by the Government of Malaysia for Financing Facility from RM50,000 to less than RM2.0 Million granted by the Financial Institution. 50% by the Government of Malaysia for Financing Facility from RM2.0 Million to RM5.0 Million granted by the Financial Institution. Up to Five (5) years and not exceeding 31 December % p.a. payable upfront. RM100 is to be borne by borrower Application shall be open from 4 January 2011 to 31 December 2011 or upon approval of financing up to Ringgit Malaysia Three Billion (RM3.0 Billion) only, whichever is earlier General Information about 10MP WCGS Scheme What is the New 10MP WCGS Scheme all about? The Scheme is established by the Malaysian Government to enable small and medium businesses to continue gaining access to financing facilities from financial institutions ( FI ) to spur further economic growth for the country. What is 10MP WCGS Scheme? The WCGS is a scheme that provides working capital financing to companies with shareholders equity less than RM10 million wherein the FI will provide the financing facilities and the Malaysian Government will guarantee a portion of the said financing facilities.it is strictly for local operations only. Since the WCGS scheme had expired on 31 December 2010, the Government decided to extend the scheme via the New 10MP WCGS Scheme to enable companies to continue having access to financing from financial institutions. How does it work? Under the programme, the Malaysian Government will share the credit risk with FIs that provide loans to eligible companies, through a guarantee cover provided to the FI. This will encourage FIs to continue lending to small and medium businesses to ensure continued economic growth of the country. When will the New 10MP WCGS Scheme be made available? The New 10MP WCGS Scheme commence from 4 January 2011 until the allocated RM3.0 billion is fully subscribed, or 31 December 2011 whichever is earlier. What is the difference between the previous and the New 10MP WCGS Scheme? The previous WCGS Scheme amounting to RM7.0 billion was introduced in 2009 as part of the Second Stimulus Package whereas the new WCGS amounting to RM3.0 billion is under 10MP. The previous scheme expired on 31 December The new 10MP WCGS is to enable companies especially the small and medium businesses to continue having access to financing from financial institutions for continued economic growth. Of the new 10MP WCGS, RM1.5 billion is reserved for Bumiputera Status Companies.

5 What is the definition of Bumiputera Status Company? To comply for the Bumiputera Status Company under the new 10MP WCGS, a company must have 51% Bumiputeras shareholdings as at 31 December Who can apply for this Scheme? All companies with shareholders fund not exceeding RM10.0 million. Can those companies who have enjoyed the previous WCGS Scheme apply again for the new 10MP WCGS Scheme? Yes. Who are the participating Financial Institutions FIs for this 10MP WCGS Scheme? All commercial banks, Islamic banks and development financial institutions that have participated in the previous WCGS Scheme have been invited to participate in the 10MP WCGS Scheme. To-date almost 80% of the FIs agreed to participate in this 10MP WCGS Scheme. What is the definition of viable business? Viable business means a business with the ability to generate cashflow from its operations to pay off its financial obligations. Participating FIs have full discretion to evaluate and determine whether an applicant meets the eligibility criteria. What is the definition of Shareholder Equity? It means the Shareholders Fund as per the latest audited accounts, which is not more than 18 months from the date of application. Can companies which are part of a Group or Conglomerate apply for facilities under the Scheme? This financing facility is offered to deserving companies, and as such companies within a group which are able to provide funding or can financially support its subsidiaries, are advised to obtain funding from within the group or conglomerate. What is the definition of Group or Conglomerate? It means companies having the same holding company or ultimate holding company. Are the participating FIs allowed to grant Stand By Letter of Credit (SBLC) facility to borrowers who intend to expand their business operations overseas? The 10MP WCGS is for local operation use only. Is the guarantee binding on the Malaysian Government? Yes. Under Section 14 of the Financial Procedure Act 1957 (Act 61), a guarantee involving a financial liability on the Government shall be binding on the Government provided it is entered into with the written authority of the Treasury or in accordance with federal law. What if the Malaysian Government fails to pay? It is an unlikely situation because funds for the Guarantee Scheme have been allocated under the 10th Malaysian Plan announced by the Prime Minister. In fact, under the previous Stimulus Package WCGS Scheme, the Government of Malaysia had honoured claims by FIs amounting to RM20.95 million. What is the procedure to apply for financing facilities under the programme? If a customer is interested with this programme, please proceed with the following steps: 1. Ensure that their business qualifies for the financing facility by consulting their bankers or any participating FIs in this 10MP WCGS Scheme. 2. Apply for the financing facility at the participating FIs. 3. Provide the necessary documents required by the participating FIs. 4. After the financing facility is approved by participating FIs, copy of full loan paper will be submitted to SJPP for guarantee cover. About the Financing

6 What is the financing limit for the New 10MP WCGS Scheme? The maximum financing limit is reduced to RM5.0 million. What is the guarantee cover for the New 10MP WCGS Scheme? The guarantee cover is as follows: Up to 70% for financing from RM50,000 to less than RM2.0 million; and Up to 50% for financing from RM2.0 million to RM5.0 million. Is there any cost to be borne by the customer under this programme? Yes, a customer under this programme has to pay a guarantee fee chargeable at 0.75% p.a. The amount is payable annually to SJPP through the respective participating FI that is granting the financing facility. How long does it take for SJPP to issue the guarantee cover? SJPP will issue the guarantee cover within 10 business days from receipt of the guarantee application from the FI. Would SJPP re-evaluate the loan paper approved by the FIs before issuing the guarantee? No. SJPP would only scrutinize the approved loan papers submitted by the financial institutions. Financing Tenure What is the financing tenure of the New 10MP WCGS Scheme? Up to five (5) years and not exceeding 31 December General Information for the Financial Institutions Will SJPP re-evaluate the loan paper approved by the FIs before issuing the guarantee? No, SJPP will only scrutinize the approved loan papers submitted by the financial institutions and check on the global guarantee scheme limit as well as Bumiputera allocation prior to issue guarantee approval. After knowing of the scheme, can the customer request for their loan to be under the scheme? Yes, the customer may request for it, but it shall be the Financial Institution s decision whether to apply for it under the Scheme or otherwise. When can an FI put a claim on the guarantee? (Claim validity period). The claim period is within 6 months from the date the Notice of Termination is issued on the financing facility to the borrower. Where will the claim be submitted to? The FI will submit its claim to the SJPP, who will thereafter, forward the claim to the Malaysian Government for payment. What if the SJPP fails or refuses to pay the claim? There is no reason for the SJPP not to pay the claim because its specific purpose is purely to implement the Malaysian Government s decision. Who will pay the claim? The Malaysian Government via SJPP. When will the claim be paid? The claim will be paid on quarterly basis from the date of receipt of such Claim Notice by the SJPP. Must the FI proceed with legal proceedings and/or foreclosure proceedings before submitting Claims Notice to SJPP? No. The FI may submit Claim Notice to SJPP anytime within 6 months from the Notice of Termination date. Nevertheless, the FIs must continue with recovery action to recover from borrowers. Any proceeds received after claims notice has been made must be shared with SJPP in accordance with the percentage of guarantee cover. Can the FIs restructure the loan?

7 Yes, the FI is encouraged to restructure the loans in accordance with their internal policies. If restructuring is made after post claim period, all proceeds received must be shared with SJPP in accordance with the percentage of guarantee cover. What about all operational details? A Joint Action Committee comprising representative from SJPP, BNM and Association of Banks and the FIs have been formed to resolve any operational issues. Pursuant to any issues on operational matters, SJPP will from time to time issue operational guidelines after consultations with JAC to ensure smooth operations of the schemes. What happens to the FIs when the loan is subrogated to SJPP? Upon subrogation, SJPP will continue recovery actions against the borrower. Proceeds received by SJPP will be shared based on the guarantee coverage percentage. What happens to FIs rights on the borrower if other recovery manager is appointed? In the event another party is appointed as the recovery manager, any proceeds from recovery will still be distributed to the FIs in accordance with the percentage of guarantee cover. What happens when customer makes payment after claims has been paid? In the event the FIs receive any payment from the customer, the FIs are to distribute the amount received in accordance with the percentage of guarantee cover. What is a Delinquency Report? This is a report to be sent to SJPP regarding loans that are delinquent for more than 1 month. What is the treatment of NPL/NPF for this scheme whether FI should provide 20% or 100%? All treatment of NPL/NPF classification and provisioning is under the purview of Bank Negara Malaysia. Thus, their regulations pertaining to classification is to be adhered. Why is SJPP imposing RM for cancelled applications to FIs and who is to bear the cost? SJPP noted that for the previous WCGS Scheme, some borrowers tend to shop around for banking facilities and cancels earlier approval to enable them to apply for a fresh loan from another FI. The RM cancellation fee is to discourage such act. SJPP also intends to cancel guarantee approvals which loan have not been disbursed for more than 6 months and subsequently charge RM Why? Most loan approvals are partially secured by cash deposits and directors guarantee while only a few involved charge documentation. We do not envisage that the loans be disbursed more than 6 months after approval. The charges imposed are to defray administration cost as well as loss of guarantee fee income. Service charge of RM for replacement of Guarantee Certificate, is also imposed? Yes, it is to defray SJPP administration expenses.