FINANCIAL INSTITUTIONS REMINDED OF PROCEDURES FOR GOVT GUARANTEED LOANS

PUTRAJAYA, April 15 (Bernama) -- The country's financial institutions were
Tuesday reminded not to take the Working Capital Guarantee Scheme and
Restructuring Guarantee Fund Scheme for granted and provide loans to just about
anybody as they pleased.

The two schemes with a total guarantee value of RM10 billion were created by
the government under the second economic stimulus package to enable the
qualifying companies to obtain loans from the financial institutions to ensure
the continuity of their business.

Prime Minister Najib Razak said the institutions must follow the proper
procedures and be prudent and careful in ensuring that the companies receiving
the loans really were in need of them, besides being well managed and having a
business capable of achieving progress.

He said through the two schemes, the financial institutions were really
sharing the risk with the government as the guarantees provided are up to only
80 percent of the financing under the capital guarantee scheme and between 50
and 80 percent for the restructuring guarantee scheme, subjected to the set
conditions.

"The remaining risk is borne by the relevant financial institutions. This
will ensure that the involved financial institutions are careful before
approving any loans," he said here Tuesday.

Najib said the financial institutions were also not allowed to get the
guarantee for refinancing loans under the schemes as it would be a form of
transfer of risk from the financial institutions to the government.

"The financial institutions must understand the government's intention in
creating these schemes. Companies that are not capable of growth and do not meet
the criteria of borrowers set by the financial institutions should not be
getting the guaranteed loans," he stressed.

At the same time, companies that qualify for normal loans without any
guarantee also do not qualify under the schemes, he said.

Najib also called on the financial institutions monitor the guaranteed loans
to ensure that the financing facilities are not misused.

He also reminded the financial institutions to provide financing to all
sectors and not only to sectors guaranteed by the government or those with 100
percent collateral.

He told them to be ready to take calculated risks and not be too
conservative and provide financing only when there is guarantee or collateral.

"Financing can be given based on the cash flow statement of the company or
when the business model indicates high potential for growth but with high risk.
Or they could be knowledge based companies like those in the green technology,
ICT, creative media, animation advanced materials and engineering," he said.
-- BERNAMA