The issues and recommendations that follows refer
particularly to Bank Pembangunan Malaysia Bhd. (BPMB), Bank Industri Malaysia
Bhd. (BIMB), Malaysia Export Credit Insurance Bhd. (MECIB) and EXIM Bank Bhd.
These four institutions are used as reference as they are Government-owned with sizeable
portion of their funding requirements being sourced from the Government.
The non-performing loans of industrial development finance
institutions had increased in 1997 and are expected to increase further in 1998.
For BPMB, the increase in non-performing loans was mainly due to clients from the
manufacturing sector (55% of non-performing loans), particularly the small and medium
scale industries that are vendors to bigger companies. In the case of BIMB, the highest
non-performing loans were in the maritime sector where non-performing loans amounted
to RM32 million or 97% of the loans given out to that sector.
More than 90% of the NPL account holders of BPMB and BIMB are
Bumiputera entrepreneurs. Some of the measures proposed by these institutions to
rehabilitate the defaulting accounts include deferring repayments, rescheduling of
loans, and providing more loans.
Based on the projected cash flow statement for the period 1998-2000,
BPMB will be short of RM163 million in 1998 to fulfil its loan obligations
(principal and interest payments) and extend new loans. The loan fund for 1998 is
estimated to be RM480 million.
BIMB requires an additional RM540.2 million in 1998 to repay
loans, invest and to provide new loans. Its loan disbursement is estimated to be
RM299 million for 1998 and RM305 million for 1999.
EXIM Bank requires funds totalling RM3,340.3 million and USD473 million for
its various facilities for the period 1998-99. After taking into account of its existing
funds of RM180 million and USD17.6 million as at 28 February 1998, EXIM Bank will
be short of funds amounting to RM3,160 million and USD455 million.
In line with the development of its insurance coverage business,
MECIBís contingent liabilities rose substantially to RM603 million in 1997,
of which RM160 million was for short-term financing and RM443 million for medium
to long-term financing. Compared with its paid-up capital of RM75 million, the gearing
ratio was 8 times.
Based on the good response to facilities provided by MECIB,
it is estimated that the contingent liabilities are expected to be much higher. For
the next four years, contingent liabilities of medium and long-term businesses are
estimated to increase from RM1,000 million in 1998, RM1,500million (1999), RM2,250
million (2000), and to RM3,375 million in 2001. The increasing contingent liabilities
however, are not balanced with its paid-up capital of only RM75 million.
Bank Negara tags a risk weightage of 50% to credit guarantees
given by MECIB. This translates into a higher cost of funds for the borrowers which
make MECIB credit guarantees unattractive.
The following recommendations are proposed to overcome
the operational problems faced by the industrial development finance institutions
as well as to ensure that adequate loan facilities are provided to fulfil the needs
of the clients who are mostly SMIs.
- To rehabilitate projects having financial problems, especially
those with high potential. Among the measures include deferring repayment of loans,
rescheduling of loans and providing bridging loans.
- To facilitate rehabilitation of entrepreneurs through either
topping up the Tabung Pemulihan Usahawan or channelling part of the RM1.5
billion Small and Medium-Scale Fund to the industrial development finance institutions.
- To review all development allocations to Government agencies
for small and medium-scale enterprise development with a view to rechannelling funds
to industrial development finance institutions.
- EXIM Bank to slowdown its financing and guarantees for reverse
investment, while increasing export credit financing to developed countries.
- Increase the paid-up capital as well as raise the liquidity
of industrial development finance institutions through the following:
a. capitalise the loans that have been given by the Government
b. Defer repayment of principal
c. Issuance of private debt securities
- Place development finance institutions under the supervision
of Bank Negara Malaysia. A special unit would be set up for this purpose as the operations
of the development finance institutions are different from that of commercial banks.
- To further strengthen EXIM Bank and MECIB as agencies for
export credit financing and insurance guarantees.
- To establish the National Interest Account (NIA), with Government
financing, for financing contingent export credit insurance liabilities. The account
can be managed by MECIB.
- To reduce the weighted risk rating of MECIB to 20%, which
is in line with that given to EXIM Bank and BIMB.