Banks have approved R7bn to support small firms under the Covid-19 loan guarantee scheme, the Banking Association SA (Basa) said on Thursday.
However, discussions are under way to revise some of the terms and conditions of the scheme, which has struggled with low take-up, Basa MD Bongiwe Kunene said.
The R7bn amounts to 7% of the initial target for the scheme, and though 29,700 applications have been received only 4,800 applications have been approved.
A further 14,100 applications are still in the process of being assessed, according to Basa.
The update follows concerns that the scheme, a pivotal part of the state’s R500bn economic support package, needs reworking a month after it launched.
Though R200bn has been announced for the scheme, the Treasury has provided an initial R100bn guarantee, which will increase if the scheme is successful and there is demand.
The loan scheme is directed at businesses with annual turnover of under R300m a year, with the money intended to cover three months of overheads such as rent, salaries, debt repayments and utilities.
About 10,600 applications have been refused either because they did not meet the eligibility criteria set out by the Treasury and SA Reserve Bank, or they failed to meet the individual banks’ risk criteria.
On Wednesday, financial services research firm Intellidex called for changes to the scheme to improve banks’ appetite for lending under it and to remove obstacles for companies, including reducing the interest rates on the loans and extending the repayment holiday from six to 12 months.
“We’ve seen a lot of challenges in growing this book in the first month,” said Kunene.
The reasons included the request from banks for business owners to provide personal surety, limits on what the loans could be used for and restrictions preventing businesses from using the proceeds to pay dividends or shareholder loans.
Banks had found, for instance, that some businesses, faced with the “existential threat of Covid-19”, needed money to change their operating models such as investing in e-commerce platforms.
“That is a legitimate ask by the client, but then you find they cannot be assisted because they are not saying ‘we want to pay our workers or we want to cover our operating costs’,” she said.
The banks, the Treasury and Reserve Bank were in negotiations to review the scheme.
“We are honestly looking at everything,” Kunene said. Technical discussions were being held on how to introduce more flexibility into the scheme, and the variables being considered included a new term sheet for the loans.
She could not, however, give a timeline as to when the review would be complete and how changes would be made to the scheme.
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