KUALA LUMPUR, Sept 28 — Export-Import Bank of Malaysia Bhd (Exim Bank) has generally achieved its established objectives through the achievement of the mandated targets set but they should be balanced with stable financial performance.
Exim Bank is mandated by the government to provide credit facilities to finance and support export and import activities of overseas goods, services and projects as well as guarantee facilities.
According to the Auditor General’s Report 2019 Series 2 released today, the audit was conducted to assess the achievement of the objectives of the establishment of Exim Bank through efficient and effective management of financing activities, good corporate governance of the bank as well as strong financial position.
In 2017, Exim Bank achieved 90 per cent to 100 per cent for each of the targeted Key Performance Indicator (KPI) perspectives.
However, the KPI in 2018 only reached 85.5 per cent due to differences in the measurement methods adopted by Exim Bank after the new Corporate KPI performance monitoring system was introduced by the Minister of Finance Incorporated in 2018, the report explained.
In the perspective of the Financial KPI for the year, it has reached 78.4 per cent due to the loss before tax and zakat which increased compared to the previous year.
In 2017 and 2018, Exim Bank suffered a loss before tax and zakat of RM88.08 million and RM263.52 million compared to the profit target of RM47 million and RM11.91 million respectively, it said.
According to the report, the audit analysis of financial trends found that Exim Bank has experienced an increase in losses before tax and zakat amounting to RM390.17 million (443 per cent) for the years 2017 to 2019.
This situation was due to the decline in income as a result of the number of borrowers and the declining value of financing, which was 26 borrowers (RM1.676 billion) in 2019 compared to 44 borrowers (RM3.913 billion) in 2017, it said.
“The main cause of this loss is contributed by the impairment of financing which shows the unsatisfactory quality of borrowers.
“Although Exim Bank recorded a profit before tax and zakat in 2020, the accumulated losses recorded was still high, at RM1.348 billion,” it added.
In addition, increased expenditure, especially impairment and interest expense on bond/sukuk issuance, also affected the achievement of KPIs from the Financial perspective.
The increase in expenditure from year to year compared to the decrease in total income also caused Exim Bank to experience an increase in losses before tax and zakat for the years 2017 to 2019, it said.
According to the report, weaknesses were also found where 72.1 per cent of bond/sukuk fund sources and loans were used to redeem matured bonds/sukuk due to insufficient sources of operating income and financing recovery.
The issuance of bonds/sukuk and loans also involved high finance costs and affected the financial position of Exim Bank which recorded losses before tax and zakat for three consecutive years, it said.
While the report mentioned that a relaxation of the Credit Risk Policy in approving financing had resulted in Exim Bank incurring high non-performing loans especially involving loans to foreign companies and unrealisable collateral.
The Credit Risk Policy which did not clarify the eligibility criteria of borrowers, especially from the aspect of citizenship, was one of the factors in the failure to recover non-performing loans from foreign companies, it said.
Also, according to the report, the actual loan repayment collection performance could not be assessed because the records were maintained manually, resulting in the monitoring of the borrower’s repayment not being done comprehensively.
Going forward, to further enhance the achievement of the objectives of the establishment of Exim Bank as well as to balance the financial performance, the Auditor General advised the management and board of Exim Bank to take proactive and effective measures to address the weaknesses raised in this report.
In this regard, the parties involved need to give consideration to the following recommendations, including evaluating better strategies to finance loan facilities that are not burdensome and can improve the financial performance of the bank, it said.
“Exim Bank should review the implications of providing financing to foreign companies that have harmed the bank and the appropriate form of collateral that can guarantee the interests of the bank and the government.
The bank should also re-evaluate its financing policy to foreign companies in carrying out its mandate to support the development of the country’s export and import industry which focuses on financing to Malaysian companies,” it said.
It added that Exim Bank should also intensify its efforts to recover non-performing loan accounts in order to achieve the total recovery target to increase internal cash flow. — Bernama