THE hard lessons from the aftermath of the Asian Financial Crisis in the late 1990s has undoubtedly shaped today’s financial world, which led to the development of the Asian Bond Markets Initiative’s Credit Guarantee and Investment Facility (CGIF).
Established in November 2010 by the Asean+3 governments as a trust fund of the Asian Development Bank (ADB), CGIF was created to reduce the ‘double mismatch’ of currency and maturity mismatches that caused the crisis, which will build resiliency into the region’s financial system and guard against the volatility of global capital flows and external shocks.
As a trust fund of ADB, CGIF’s sole mission is to develop the local currency (LCY) bond markets in the region, by providing credit enhancement on bond securities to companies in Asean+3 countries.
Its main function is to provide credit guarantees for LCY denominated bonds issued by companies in Asean+3 countries.
What this means is reducing the ‘double mismatch’ by helping companies - which would otherwise have difficulty tapping into local bond markets - to secure longer-term financing, as well as reducing their dependency on short-term foreign currency borrowing.
In doing so, CGIF promotes economic development, stability and resilience of financial markets in the region.
As CGIF is the result of regional cooperation among the Asean+3 countries, Malaysia is also a significant contributor in its activities. There are currently three Malaysians working in CGIF, contributing to its development and operations.
And as it celebrates its 10th anniversary this year, it has much to be proud of in fulfilling its mandate to enhance the regional bond market.
As of Aug 20, CGIF’s capitalisation stands at US$1.10bil (RM4.53bil) following its Capital Increase Plan.
By the end of 2020, it will have guaranteed more than 40 bonds and supported more than 30 corporate bond issuers from Cambodia, Indonesia, Malaysia, Philippines, Singapore, Hong Kong/China, Korea, Thailand, Laos, Myanmar, Japan and Vietnam.
Moreover, it has been at the forefront of several landmark transactions in the Asean region, such as guaranteeing the first-ever project bond in Vietnam, the first bond issuance by a Myanmar-based issuer, as well as the largest issuance in the Cambodian capital market among others.
The guarantee provided by CGIF enables companies to issue LCY bonds with longer maturities at attractive prices, alongside helping first-time bond-issuers gain access to the capital market in order to achieve diversification in sources of funding.
In turn, CGIF’s efforts will help reduce the double mismatches, promote stability and resilience of financial markets and facilitate economic development in the region.
Its accomplishments have been recognised with an international rating of AA (at) by Standard & Poor, regional and local AAA rating by RAM and MARC in Malaysia, TRIS in Thailand, Fitch (Indonesia) and Pefindo in Indonesia for consecutive years.
Due to the high rating and risk control capabilities of CGIF, bonds guaranteed by CGIF match the risk appetite of the investors in the market, especially insurance companies and pension funds, which look for stable and low-risk returns.
Among the key aspects that CGIF emphasises on is green and sustainable growth for the regional economy and support more companies in issuing bonds to take their businesses to a higher level. CGIF does this by adopting safeguards policies in screening its issuers and supporting them in establishing environmental and social management systems.
As such, it has supported various sectors over the years, including healthcare, education, telecommunications, microfinance institutions, renewable energy, real estate, manufacturing and so on - and will continue to promote the Green Bond, Social Bond and Sustainability Bond in the Asean region initialised by ABMI.