ABOUT 66.4% of Export-Import Bank of Malaysia Berhad’s (Exim Bank) borrowers who defaulted on loan repayments in 2019 worth RM1.757  billion, were foreign companies, according to the Auditor-General’s Report (AG’s Report) 2019 Series 2.

“Borrowers from East Asian countries such as China, Mongolia, Cambodia and Laos contributed to the highest amount of unpaid loans amounting to RM 1.151 billion, followed by Kazakhstan and Pakistan,” the report said.

In terms of sectors, construction companies accounted for 29.3% of the total unpaid balances with RM775.48 million. This was followed by the transport, warehousing and communications sectors.

As of December 2020, Exim Bank had 182 financial facilities accounts for trade financing and non-trade-financing worth RM5.698 billion. Only 37 were active accounts with borrowers servicing their debts, while 72 failed to repay their loans, resulting in an impairment of RM2.342 billion.

The report also noted that the bank’s gross impaired ratio grew from 11.2% to 41.9% between 2017 and 2019, compared to the targeted 7.1% to 10.4% due to the increase in the number of defaulters owing to business and project failures.

The bank took an impairment of RM566.14 million in 2019 compared to RM 313.36 million in 2017, which resulted in a significant drop in earnings to RM399.15 million in 2019 from RM562.17 million in 2017.

Responding to this, Exim Bank said it has reduced the unpaid balances by RM774.06 million in 2019, however, the number of defaulting accounts have not receded.

The report also found that the bank had sanctioned loans to five foreign companies which were less than two years old.

Exim Bank said the loans sanctioned were for foreign companies that are wholly or partly owned by Malaysian entities.

The audit report also noted that the Credit Risk Policy, which stipulates loan approvals criteria for foreign companies, was still unclear despite being reviewed four times since 2007.

The bank has also used up 72.1% of its funds from bonds, sukuk and loans to redeem mature bonds, as it was hampered by lower operations income and collection of debts.

The high bond and sukuk cost have also affected Exim Bank’s finances.

The audit also found the actual amount of debt collection could not be gauged due to manual book keeping methods.

Exim Bank is a development financial institution under the Minister of Finance Incorporated.

The auditor-general has recommended that the bank re-evaluates its loan approval strategy, review the implication of loans to foreign entities, which have left the bank at a losing end, review the loan policy for foreign companies and recover unpaid loans. – September 28, 2021.