Perodua and CIMB Group signed a Memorandum of Understanding (MOU) hours ago that will enable the carmaker’s vendors to enjoy “end-to-end supply chain financing” that will increase their liquidity and help their working capital management. This financing program is the first of its kind in Malaysia.
How does this “end-to-end” financing scheme benefit the vendors? Supply chain financing is divided into 2 parts – pre-delivery financing and post-delivery financing. The former is when the vendor needs financing for raw materials to make the parts, while the latter is when the parts are already delivered to Perodua, but without payment coming in yet. “This scheme will finance the gap,” said Dato’ Charon Wardini, Deputy CEO, Corporate & Investment Banking, CIMB Group.
In pre-delivery stage, vendors obtain financing based on monthly order value to pay for raw materials while post-delivery financing is obtained upon submission of invoices and documents to Perodua. Upon maturity of the invoices, Perodua will pay CIMB to settle the vendors’ financing. Which means instant cash to them, which is not the case normally.
The financing will provide vendors with cashflow to buy raw materials, produce the parts and focus on next month’s order. “Better cashflow can lead to better productivity,” said Aminar Rashid Salleh, Perodua’s MD. SMEs can find it hard to find financing, and this scheme, which comes with “competitive and reasonable rates”, makes it easy for approved Perodua vendors, the panel explained.
Perodua has a total of 141 vendors which it helped develop with tech training and tech transfer. Aminar points out that local content in Perodua’s cars has increased through the years, from 47% in the Kancil to 80% with the Myvi. The Viva had 85% local content when it rolled out in 2007 while the latest Alza has 90%. The Rawang based carmaker is estimated to purchase RM3.8 billion worth of parts from local vendors this year.