Guaranteed Investment Note (GN) is part of Funding Societies’ initiatives to offer a wider variety of products to cater for different investors’ preference. At present, there are three products under the Guaranteed series (both 100% principal & return guaranteed investment):
MBBG - Guaranteed Investment Notes (Term Financing)
MBIBG - Guaranteed Islamic Investment Note GN-i (Term Financing)
MBSG - Guaranteed Investment Notes (Bullet Financing)
1. How does it work?
As per existing products, Funding Societies will provide financing to Micro, Small & Medium Enterprises (MSMEs) via investment notes, which is funded from investors. MSMEs will make payments (principal and returns) to investors as per agreed schedule.
However, investment notes issued under the Guaranteed series will be guaranteed by an appointed entity (Guaranteeing Entity). In the event of non payment by the Issuer (≥ 15 days past due (DPD)), the Guaranteeing Entity will repay the principal and returns due to Investors. The rights to claim of debt from the Issuer will then be transferred to the Guaranteeing Entity.
2. Who is providing the guarantee?
The investment notes will be guaranteed by an appointed entity (Guaranteeing Entity). The Guaranteeing Entity maintains capital and cash reserve buffers to ensure investors are repaid in a timely manner when issuers are delinquent / default on payments.
3. Why is the returns rate lower than other products?
In exchange for the Guaranteeing Entity bearing the non-payment risk, a fee will be paid to the Guaranteeing Entity. In other words, investors are giving up some of the potential upside (potential returns earned) in exchange for more stable and consistent returns.
4. What happens in the event of delinquency/default?
When an Issuer misses a payment (≥ 15 days past due (DPD)), the Guaranteeing Entity will step in and repay the principal and returns due to Investors. The rights to claim of debt from the Issuer will then be transferred to the Guaranteeing Entity. Please note that the Grace period for Guaranteed Investment notes is 15 days from the payment date.
5. What are the risks involved?
There may be a possibility that the Guaranteeing Entity is not able to fulfill its financial obligations in a timely manner.
However, there are several mechanisms in place to ensure that the Guaranteeing Entity has the capabilities to meet its financial obligations. For instance, the Guaranteeing Entity is required to maintain capital and cash reserve buffers to ensure investors are repaid in a timely manner when Issuers default on payments.
6. Any terms and conditions to participate in Guaranteed Investment Note (GN)?
No. GN is open to all Investors.
7. How do I invest in Guaranteed Investment Note (GN)?
Guaranteed Investment Note will be made available to investors via Auto-Invest as well as Manual Investment.