Banks revisit COVID-19 scheme terms
SMMES applications are turned down
High-level discussions are under way to loosen the stringent terms and conditions attached to government’s R200-billion loan scheme to SMMES (small, medium and micro enterprises) following a low uptake in the scheme to date.
Banking Association South Africa (Basa) said banks have approved just over R10.6-billion in concessionary loans for 7 496 qualifying small businesses in terms of the COVID-19 Loan Guarantee Scheme, which was launched in mid-may.
The association, which represents the country’s big banks, said 3 478 applications were rejected because they did not meet the eligibility criteria for the loans as set out by the National Treasury and the South African Reserve Bank (SARB), and that a further 9 182 were declined because they did not meet the risk criteria.
SMME bodies like the Black Businesses Council and Nafcoc (National African Federated Chamber of Commerce) have taken issue with the criteria used by the banks to accept or decline loans.
Basa MD Bongiwe Kunene said banks are currently working with the National Treasury and the SARB to review the criteria for the COVID-19 relief scheme to make loans more accessible to distressed businesses.
“Banks hold in trust the salaries and savings of South Africa’s workers, professionals and businesses. It is therefore essential that we continue to extend credit responsibly and avoid blanket debt write-offs or any other actions that might place depositors’ funds at risk or otherwise undermine the integrity of the financial sector,” said Kunene.
Many SMMES breathed a brief sigh of relief in April when President Cyril Ramaphosa announced a R200-billion government COVID-19 Loan Guarantee Scheme to support businesses with an annual turnover of less than R300-million as part of efforts to help keep the economy afloat.
However, only a fraction of the amount has been disbursed so far. CEO of the Southern African Private Equity and Venture Capital Association (Savca) Tanya van Lill said it is vital that a mechanism is put in place to ensure funding is still allocated to small businesses – those with a turnover of less than R300-million. “Savca found that although 43% of portfolio companies with revenues of less than R300-million needed the COVID-19 loan facility, only 28% of those that applied for funding were granted and drew down on a facility – and many did not apply at all, given the onerous eligibility criteria,” Lill said.