CAPE TOWN - South African banks are working with the National Treasury and the South African Reserve Bank to review the R100 billion Covid-19 Loan Guarantee Scheme, to make loans more accessible to distressed businesses.
That was according to Banking Association South Africa managing director Bongiwe Kunene, who said yesterday that to date, banks had approved over R10.6bn in loans for 7 496 small businesses in terms of the scheme, which was launched mid-May.
The review of the scheme criteria follows widespread criticism from various commentators that the banks were applying credit risk criteria that was too stringent, hence the low uptake of the scheme. The Covid-19 Loan Guarantee Scheme is a commercial arrangement that gives borrowers access to business-critical funding at low interest rates and preferential repayment terms.
Kunene said however that banks held in trust the salaries and savings of workers, professionals and businesses, and “it is essential we extend credit responsibly and avoid blanket debt write-offs or any other actions that might place depositors’ funds at risk or undermine the integrity of the financial sector.”
Of 33 965 applications received by the banks for the scheme benefits, 3 478 were rejected because they did not meet the eligibility criteria set by National Treasury and the South Africa Reserve Bank.
Kunene said some 9 182 applications were declined because they did not meet bank risk criteria, while 13 809 applications were being assessed.
Kunene said the scheme was not meant to support small businesses with grants.
Each loan was subject to a credit approval process during which banks had to evaluate whether the business would be able to service its commitments as economic activity resumed, she said.
Similarly, the relief measures granted by banks were intended not as debt write-offs, but rather as a relaxation of repayment terms to assist otherwise viable businesses to remain solvent and continue to pay suppliers and employees during the crisis.
Customers who required an extension in terms of the relief already granted should contact their credit providers, said Kunene.
She said the banks, in total, had so far approved more than R30.6bn in relief to individuals and businesses affected by the pandemic.
As at June 27, individual customers received R18.26bn in relief, with banks approving 2.4 million (82.7 percent) of 2,9 million applications for assistance.
She said also relief granted to commercial, small and medium enterprises by the banks amounted to R12,39bn, with banks approving 132 508 (95.5 percent) out of 138 675 applications for assistance.