THE Credit Guarantee Corporation Malaysia Bhd (CGC) has embarked on strategic alliances with foreign companies to help provide small- and medium-sized enterprises (SMEs) with more access to financing.

The tie-ups, with KfW Bankengruppe, Aureos Capital Ltd and Korea Enterprise Data, will be firmed up this year, managing director Datuk Wan Azhar Wan Ahmad said.

He said the move will bolster CGC's ability to tap funds from the capital market and make more products available to SMEs.

"Building competency will take some time so we try to shortcut the process by identifying these strategic partners who have already obtained these competencies," he told Business Times in Petaling Jaya yesterday.

CGC, which is a 79.3 per cent unit of Bank Negara Malaysia, is the only institution providing the credit guarantee facility to SMEs in all business sectors.

Already into the first year of the three-phase transformation that would reposition CGC as a financial institution and to support SME development, CGC now focuses on capacity building and reorientation.

"Under our product range, credit guarantee is still our core product so we don't have difficulties coming up with guarantee products. But new products such as ability to tap the capital market and channell these funds to the SMEs (through the issuance of bonds etc) require huge amounts of capital which involves equity participation.

"Although we have the basics (in competency) and need time to develop, by identifying specific organisations which are premier in this area and having strategic alliances, we can shorten the process."

Frankfurt-based KfW Bankengruppe of Germany is well known for its ability to tap funds from the capital market and risk management.

"They have got comprehensive risk-adjusted pricing policies which interest us. Basically their products are priced according to the risks and the way they manage every product will be profitable," Wan Azhar said.

A signing ceremony will be witnessed by Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz on May 31.

On a proposed launch of a RM250 million private equity fund for SMEs by Aureos Capital Ltd, an international manager of private equity funds, Wan Azhar said talks are underway to set up a joint venture company.

CGC, he said, will hold a majority stake in this alliance which addresses equity and co-financing.

The London-based fund manages funds totalling US$500 million (RM1.82 billion) worldwide with South-East Asia (excluding Malaysia) having US$95 million (RM346.7 million) worth of the funds.

With Korea Enterprise Data, CGC will be seeking management of information services for credit rating and an SME report on the credibility and bankability of SMEs.

"This will enable us to avail information to banks for easier decision making and keep track of SMEs' performance, similar in many ways like a rating agency," he said.