This article first appeared in The Edge Financial Daily on January 25, 2019 - January 31, 2019

KUALA LUMPUR: Malaysia Debt Ventures Bhd (MDV) aims to cut its net non-performing financing (NPF) rate to 4% for the financial year ending Dec 31, 2019 (FY19) — from 9% last year — as the technology financier undertakes a transformation plan under its five-year business strategy.

As for the gross NPF rate, which stood at 24% last year, MDV wants to lower it to 14% this year as it further improves lending processes, said its newly-appointed non-executive chairman Datuk Seri Lee Kah Choon.

While the company’s NPF rate may be higher than traditional banks, Lee said this is because MDV provides financing to new technology firms, which come with an elevated level of risk.

“We are funding new technology, so invariably the risk is higher and the default rate is always a concern. In response, we are strengthening our capacity in project analysis and ensuring that the project gets implemented on the ground,” Lee told a media briefing yesterday.

Lee assumed the chairmanship on Dec 13 last year, replacing Tan Sri Zarinah Anwar, whose tenure ended last July.

While the default rate may be relatively high, MDV chief executive officer Nizam Mohamed Nadzri said the company also has a “quite high” recovery rate of about 80%. “This has enabled MDV to repay all its loans, sukuk or govt loans that we have received to the last ringgit. We kept up all the payments and are able to meet all our commitments,” he said.

Nizam said the company grants financing based on the cash flows of a customer’s projects.

“As long as the project or contract in hand is still intact, we’ll work with our customers to ensure they are able to repay. If they have another project in hand – which is true for most of our customers – the cash flows from the concurrent projects can help repay. That is why we have a high recovery rate,” he said.

In 2018, MDV disbursed a total financing of RM1.31 billion in various technological sectors, with renewable energy (RE) accounting for the biggest chunk of lending at RM448.69 million or 36.19%, followed by information technology (13.54%) and e-commerce (11.72%).

Of the total 500mw of RE capacity available in Malaysia currently, MDV has financed 150mw or 30% of the total capacity. The firm was also the first to finance the development of a RE plant in the country.

Looking ahead, Lee said the company will focus on delivering its five-year business strategy through three thrusts, namely transformation, strengthening and regionalisation.

Transformation is key to ensuring the company can continue to support technology start-ups, he said, adding that the company is exploring alternate funding avenues.

“The next two years will witness the strengthening of our business and continued growth of our financing assets.