GXBank’s SME Loans Lose Share Before IFC Signs Loss-Cover Deal

GX Bank Berhad (GXBank), a Malaysian digital bank backed by the NASDAQ-listed MNC Grab, has agreed to share some potential losses on small-business loans with the International Finance Corporation (IFC), the World Bank Group’s private sector arm.

The agreement could support a loan portfolio of up to $110 Mn for micro, small and medium enterprises (MSMEs). This puts a cushion behind a business line that has grown in value but fallen as a share of the digital bank’s lending, according to IFC’s transaction disclosure.

A Small Slice of the Loan Book

GXBank reported RM24.6 Mn of gross MSME loans on June 30, up from RM16 Mn at the end of 2025. Over this period, its total gross loan book rose from RM668 Mn to RM1.21 Bn, reducing the MSME share from 2.4% to 2%.

Loans to individuals reached RM878 Mn, up from RM503 Mn. The figures in its June interim accounts predate the IFC deal, but show the size of the MSME business the bank is seeking to expand.

The wider balance sheet was also growing. Customer deposits increased from RM1.60 Bn to RM2.03 Bn in the six months to June, while net loans rose from RM635 Mn to RM1.13 Bn.

GXBank raised RM314.2 Mn through the issue of new ordinary shares and recorded a first-half loss of RM122.1 Mn. These are bank-wide figures, not a measure of the profitability of its MSME loans. Nevertheless, these put the proposed expansion in context. GXBank is building its lending operation while continuing to fund losses and add capital.

How the Loss-Sharing Works

Under the agreement, IFC’s downside protection is capped at a ringgit equivalent of $4.95 Mn. While GXBank remains responsible for originating and funding the debt, the $110 Mn facility represents the maximum loan portfolio the arrangement could support. It is not a direct capital injection into the digital bank.

Consequently, GXBank retains a portion of the initial first-loss risk and remains fully exposed to any defaults exceeding the covered tier. Although the structure gives the digital bank additional balance-sheet flexibility to target uncollateralised or credit-starved micro-enterprises, it does not change the bank’s underwriting criteria or pricing mechanisms.

IFC says the facility is intended to help GXBank reach underserved MSMEs, with a specific mandate to support female entrepreneurs and self-employed people borrowing for business purposes.

The partnership falls under IFC’s Catalytic First Loss Guarantee facility, an initiative designed to de-risk lending to underserved market segments while testing the long-term commercial viability of digital lending to MSMEs. However, public disclosures omit both a defined timeline for building out GXBank’s $110 Mn credit portfolio and any hard, quantified disbursement targets for these borrower sub-categories.

GXBank’s Small-Business Push

GXBank is also targeting small businesses digitally. Its commercial banking division offers sole proprietors an uncollateralised revolving credit line, marketed as the Biz FlexiLoan, providing facilities up to RM350,000 subject to credit approval.

Its product disclosure notes that where a third-party guarantee applies, the premium is baked into a borrower’s interest rate. While that setup involves credit enhancements on individual loans, the IFC agreement acts as a portfolio-level loss-sharing mechanism. But available disclosures do not clarify the selection criteria for loans qualifying for the IFC coverage, nor do they detail how the multilateral guarantee would impact borrowers’ interest rates.

In its September announcement, GXBank said 15,000 MSMEs had opened digital accounts and that it had recorded more than 5,000 loan drawdowns. It also said it had approved RM27 Mn in facilities backed by Malaysia’s Credit Guarantee Corporation (CGC) since March.

That growth, it said, led it to raise the Biz FlexiLoan’s maximum limit from RM150,000 to RM350,000. But those figures describe different stages of lending. An account holder is not necessarily a borrower. Again, several drawdowns can come from one credit line and an approved facility is not necessarily money outstanding. They cannot be added to the RM24.6 Mn on GXBank’s June balance sheet to measure progress towards the IFC portfolio ceiling.

Part of a Wider Guarantee Push

The agreement comes amid a wider Malaysian move towards guarantees. Bank Negara Malaysia, the country’s central bank, said in January that it planned to shift towards guarantee-based SME support, targeting RM10 Bn in guaranteed financing with CGC and participating financial institutions.

That domestic programme is separate from IFC’s transaction. But both shift some credit risk to a guarantor while lenders decide which businesses to finance.

Asset Quality under Pressure

Credit performance is a constraint on GXBank’s expansion. Its first-half charge for credit and other losses rose to RM61.9 Mn from RM18.6 Mn a year ago, while its gross impaired-loan ratio rose to 1.88% in June from 1.03% in December. Almost all impaired balances were household loans. Hence, those bank-wide figures cannot establish the quality of GXBank’s small MSME book or predict how loans covered by the IFC facility will perform.

For now, the agreement creates capacity to take more small-business credit risk. Whether it broadens access will depend on the amount GXBank lends, how many underserved firms receive financing, what borrowers pay and how the loans perform over time.

The signed guarantee establishes a possible portfolio size. Subsequent lending and repayment data will show how much of that possibility becomes a viable business.