Page 38 - EXIM-BANK-AR20

36 EXIM BANK MALAYSIA
Annual Report 2020

MANAGEMENT DISCUSSION AND ANALYSIS

Guarantees In addition, the Bank provides bank letter of credit takaful
policies covering Malaysian banks against the risk of non-
This facility is made available by the Bank to facilitate payment of irrevocable letters of credit issued by overseas
the issuance of advance payment bonds, performance banks in respect to Malaysian exports.
bonds and standby letters of credit required by overseas
contracts undertaken by Malaysian contractors. Such As at 31 December 2020, the Bank’s total exposure
guarantees may also be offered to Malaysian investors under short-term trade credit takaful shipment
seeking to raise funds overseas. amounted to RM454.73 million.

The import of strategic goods is facilitated by the Bank, being Medium- to long-term trade credit takaful facilities
goods that will enhance the manufacturing capability of
Malaysian companies, or which are unavailable in Malaysia, Medium- to long-term trade credit takaful that has
through the issuance of letters of credit. It also offers a policy term of more than one year is offered by
forward foreign exchange facilities that allow customers the Bank to enable Malaysian companies to venture
to hedge against adverse fluctuations in the exchange rate. into new and unfamiliar markets. The Bank provides
specific takaful policies to cover the export of capital
As at 31 December 2020, the Bank’s total guarantees goods or services with lengthy manufacturing and/or
outstanding amounted to RM124.03 million. payment periods and high contract values.
Overseas investment takaful is provided to protect
CREDIT TAKAFUL FACILITIES PERFORMANCE IN 2020 overseas investments against certain political risks, such
as losses arising from restrictions on the conversion or
EXIM Bank offers Islamic takaful facilities for short-term trade
credit insurance and medium- to long-term trade credit. transfer of local currency, expropriation, wars and civil
disturbances and breaches of contract by counterparties.
Short-term trade credit takaful facilities
Specific takaful facilities are offered to provide
Short-term trade credit takaful covers export, domestic medium- to long-term Shariah-compliant coverage to
and import trade transactions with a policy term of less Malaysian contractors and manufacturers undertaking
than one year. The facilities provide “umbrella” cover one-off contracts for export of capital goods, turnkey
for exporters/importers who make regular exports to projects, construction works or rendering services
overseas importers and import to domestic buyers abroad against commercial, economic and political
on credit for up to 180 days. The facilities also provide risks and losses occurring outside Malaysia due to
cover for exports directly from third country suppliers events that are beyond the control of the contractor,
to their destination overseas, without passing through manufacturer or its buyer.
Malaysia. As part of the type of takaful facilities available
to cover short-term commercial credit risk, the Bank also As at 31 December 2020, the Bank’s total exposure
provides Shariah-compliant bankers trade credit takaful under medium- to long-term trade credit takaful
facilities to protect financial institutions against the risk facilities amounted to RM366.64 million.
of non-payment by exporters arising from the default by
their customers overseas.