‘Take-up low’ for R200bn Covid-19 loan scheme

BANKS have only approved loans worth just more than R7 billion in just over a month since the R200 billion Covid-19 Loan Guarantee Scheme to help small and medium-sized businesses was launched, according to figures from the SA Banking Association (Basa) yesterday.

The scheme, managed by the banks on behalf of National Treasury and the SA Reserve Bank (SARB), allows qualifying companies to apply for loans from their primary bank to fund three months operating costs, such as salaries, rent and supplier payments.

Economic commentators have criticised the scheme, arguing in particular that banks have applied normal risk vetting procedures for the loans, which were too stringent considering the plight that many small businesses found themselves in and the uncertain trading environment in the future.

For instance, financial intelligence and research firm Intellidex noted on Wednesday: “The R200 billion guaranteed loan scheme is a crucial centrepiece of ‘phase two’ of the economic response to the Covid-19 crisis and is now one month old. Take-up, however, has been low.”

Basa said yesterday that the banks had approved just more than R7 billion in loans for 4 800 small businesses since the scheme was launched mid-may.

Basa said, however, they expect the approval amount to grow as the number of applications for loans continues to increase. As at June 6, banks had received 29 700 applications for the loans.

The banks had rejected some 5 200 applications as they did not meet the eligibility criteria, as set out by National Treasury and the SARB.

Five thousand two hundred applications were also declined because they did not meet bank risk criteria.

However, about 14 100 applications were still being assessed, while 200 loans were approved, but not taken up by the applicants, Basa said.

Basa pointed out that the Covid-19 loan scheme was a commercial arrangement and required a credit approval process, to ensure that banks did not lend recklessly and to protect the fiscus.

“Business owners may be required to sign surety, based on individual bank credit processes.”

In addition to the Covid-19 Loan Guarantee Scheme, in the two weeks to June 6, Basa members approved another R2 billion in voluntary debt relief to individual customers experiencing financial distress due to the pandemic.

This brought the cumulative relief offered by banks since they started assisting individuals with targeted relief to R16.5 billion.

In the two weeks to June 6, the banks also provided additional cash flow relief, including payment breaks, to commercial and small and medium enterprises worth R1.4 billion. This brought the cumulative assistance offered by banks to commercial and small and medium enterprises to R11.7 billion.

Of the 131 600 applications received for relief from commercial and small and medium enterprises, more than 124 400 had already received assistance, Basa said

The cumulative assistance offered to individuals and commercial and small and medium enterprises businesses amounted to R28.2 billion.