The MD of the Banking Association SA (Basa) says final adjustments are being made to changes for the loan-guarantee scheme that should enable many more businesses to access funding by the government.
This follows the publication of figures on Tuesday relating to the take-up of the loan guarantee scheme that shows disappointing progress in the extension of loans to small and medium-sized businesses.
The scheme is a partnership of the government, banks and the Reserve Bank that enables SA’s commercial banks to extend new loans to businesses affected by the Covid-19 pandemic.
By July 6, the banks had approved just more than R10.6bn in loans for 7,496 qualifying businesses about two months after the scheme was launched in mid-May. This is a far cry from the ambitions of the R200bn programme announced by President Cyril Ramaphosa, which was to be a cornerstone of his R500bn economic relief package designed to help the economy survive the lockdown.
“There are a number of changes we expect to announce to the conditions of the loan-guarantee scheme which we think will resolve the constraints and get things moving more quickly,” said Bongiwe Kunene, MD of Basa.
Basa provided further detail that shows that less than a third of the applications, 9,182 of 33,965 in total, were rejected because “they did not meet bank risk criteria”, which was by far the single largest reason for declining applications. It said 13,809 applications were still being processed.
The loans, for businesses with turnover of R300m a year or less, are extended by the commercial banks that agreed to absorb the first 6% of losses.
But for any further losses to be absorbed by the state, the banks need to demonstrate they have extended the loans prudently, in the same way they would for any other loan. This has led to criticism from some quarters that the banks are being overly cautious in granting loans, as is evident in the numbers.
Kunene said that with benefit of the analysis of the data since the scheme was launched the stakeholders had agreed in principle to make changes.
“Businesses considered some of the terms too onerous, and some of these limits like the holding company structure and caps on the size of turnover will be adjusted. We also thoroughly considered the issue of whether qualifying businesses can repay shareholders loans and dividends, and once these changes have been made, companies will be able to come back and reapply,” said Kunene.
Final approvals from the National Treasury and the Bank were imminent, said Kunene.
Basa also disclosed that more than R30.6bn in relief for individuals and businesses had been extended during the pandemic.
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