In 2009, the DBJ pioneered the Credit Enhancement Facility (CEF), a partial loan guarantee that helps micro, small and medium-sized enterprises (MSME) without adequate collateral to access loans from financial institutions.

The CEF is a risk-sharing arrangement under which the DBJ provides partial guarantees to financial institutions and, in effect, increase lending to MSMEs. The primary objective of the CEF is to reduce the risk exposure normally associated with small business lending, thereby allowing eligible MSMEs with viable projects to access term loans.

The CEF:

• Acts as an incentive to financial institutions to increase MSME lending
• Enables qualified MSMEs with viable projects to get additional collateral support
• Facilitates the acceptance of non-traditional collateral by financial institutions

The DBJ has undertaken a substantial revamping of the CEF including a revision of the business model moving from an Individual Scheme in which each individual guarantee is processed by the DBJ, to a Portfolio Scheme in which processing of guarantees is delegated to each financial institution based on an annual portfolio allocation.

The most fundamental changes are the shift from an Individual Scheme in which each individual guarantee is processed by DBJ, to a Portfolio Scheme in which processing of guarantees is delegated to each financial institution based on an annual portfolio allocation. The new Portfolio Scheme will allow each lender a pre-approved annual portfolio limit.

In addition, a customized MIS system has been developed to fully automate the procedures and processes and which will significantly reduce the processing time. More importantly, are the increases in guarantee coverage ratio and the value of the guarantee per sub-borrower.