Banks say the bulk of loans from South Africa’s COVID crisis program will remain untapped
JOHANNESBURG, February 3 (Reuters) – A credit program at the heart of South Africa’s efforts to counter the economic impact of the coronavirus is on track to repay less than a tenth of the loans it offers, the country’s banking association said on Wednesday.
President Cyril Ramaphosa announced the program, worth up to 200 billion rand ($ 13.4 billion) in partly government-guaranteed bank loans, in April.
It aims to encourage banks to lend more, on more favorable terms, to companies whose operations have been affected by the pandemic, which has hit South Africa much harder than any other African country.
But so far it has only paid out R17.84 billion, the Banking Association South Africa (BASA) said, admitting that a program “designed and implemented at high speed in times of crisis does not did not achieve everything he had set for himself “.
With banks approving just over a quarter of loan applications under the program, Ramaphosa admitted last month that it needed to be “fundamentally restructured to improve accessibility.”
BASA and other financial industry experts cited flawed design features, reluctance to take on debt by insecure companies and a preference for others relief as reasons for the low rate of use by potential borrowers.
BASA said it expected total payments for the program, which was changed in July in an attempt to generate more interest, to reach only R18.9 billion in total.
Lenders turned down 46% of the 48,366 applications received because they did not meet the eligibility criteria set by the Treasury and the central bank or the bank’s risk criteria, BASA said.
Only 27% of requests were approved while 5% are still under evaluation. In some cases, customers have turned down offers.
($ 1 = Rand 14.9491)
(Reporting by Emma Rumney; editing by John Stonestreet)
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