As the economy indicates more uncertainty rather than stability, MDV may need to explore on financing of government contracts to ensure our portfolios are more diversified with better risk profile. Nevertheless, there are challenges need to be addressed, which are as follows:-
a) Commercial Banks
Commercial Banks pose biggest challenge to MDV as they have better resources to finance contract from governments. The Banks have strong networking with the suppliers/vendors/contractors through their years of relationship. In addition, they have better access to customers through banking relationship with them e.g. current account, retail and consumer financing, branches networking etc. Banks also have several financing programs to cater several types contract financing.
b) Operation/Backroom support
Financial institutions that offers government contract financing have strong backroom operation to ensure their customer services meet the customers’ expectation. The disbursement process could be done within 48 hours with experience staff to handle the customer’s enquiries, to provide advisory services and solutions.
c) Competitive rates
Financial Institutions will offer competitive rates for government contract financing. With low counter party risk (government department and its related agency), the bank will offer very competitive rates with flexibility in their financings.
d) Better Risk Framework
Commercial Banks have developed programs to cater for government contract financing. The program has taken consideration of risks related to financing of government contract.
e) Continuous development of financing program
Financial Institutions have continuously review their contract financing program to ensure its competitiveness in the market. With comprehensive products, they have managed to ensure strong market share with balance diversification of portfolio. The market for financing of government contract is still huge and MDV should take the opportunity to finance contract from government (contract that falls within our mandate). We shall gradually build-up our strength to compete in this market. MDV has the biggest advantage i.e. we are government owned company. Thus, we must leverage on this strength of which, eventually, we will be able to support SMEs that secure contract from government departments and its related agencies.
– Mohd Nazarul Haizan Bin Md Dom | Vice President, Business Division