- Banks say they didn't lend much under the old Covid-19 Guarantee Scheme because it was complex and restrictive.
- They say the new Bounce Back Scheme has removed many of those deficiencies.
- While FNB is already lending, many of its peers are yet to decide whether they'll opt in to distribute the Bounce Back loans.
Following the dismal failure of the Covid-19 Loan Guarantee Scheme - and with former finance minister Tito Mboweni laying the blame squarely at their door - banks say everyone was "still learning" with those initial loans. But they've since learnt enough to make sure the new Bounce Back Scheme delivers on its promises.
On Wednesday, Mboweni said banks refused to "come to the party" to make the old scheme a success.
But FNB Commercial CEO Gordon Little says it's more complicated than Mboweni suggested.
The old scheme was complex and restrictive
"Yes, we did not write nearly as much as we would have liked to," said Little. "But the last scheme had a lot of complexity. It actually directed us as to what that money could be spent on."
Little said these rules of the Loan Guarantee Scheme affected the approval rates of applications banks received.
"Also remember that the previous scheme was designed in a time of enormous uncertainty," said Little.
Absa and Standard Bank also said that they sought various ways to support their business customers and other small and medium enterprises (SMEs) during the period of the Loan Guarantee Scheme. They launched several payment relief initiatives even before the announcement of the R200 billion scheme, which came when many clients had already received help.
"The overall demand for a scheme of this nature is impacted by numerous factors, including the economic conditions prevalent at the time, the credit appetite of the SME to incur further debt in a difficult market and the alternative options available in the market," said Absa.
But the banks have a more positive outlook about the new scheme. FNB's Little believes that the new Bounce Back Scheme will overcome many of the deficiencies seen in the Loan Guarantee Scheme. He thinks that the design of the Bounce Back Scheme gave it the makings of something that will take off.
"It's easier to understand. It's easier to distribute. And the conditionality that we had to apply, all of that's gone," said Little.
"And [it] removes the first-loss buffer previously faced by participating banks," added Absa.
Already lending under Bounce Back
Little said FNB "wasted no time" to reaffirm its commitment to work with the government when it first contemplated another Treasury-backed loan scheme.
The bank was among industry players that Intellidex, which helped design the scheme on a pro-bono basis, consulted in the latter part of 2021.
Its participation in the early talks about how the scheme could be different to the old one meant that FNB could prepare itself and its systems ahead of time, and make the necessary tweaks when it knew what the final product looked like.
So, last week it disbursed the first loan under the Bounce Back Scheme.
But banks are not forced to offer Bounce Back loans. National Treasury said they have to "opt in", And there will be a limit to what each bank will get from the R15 billion on offer.
FNB doesn't have a communicated cap from Treasury yet. But it is hoping to disburse the lion's share of those loans.
"I'd love nothing more than [for] FNB to be recognised as the preeminent writer of business against this loan product," said Little.
Who else among the Big Four has opted in?
Absa said its discussions with National Treasury and industry partners are still ongoing. But the bank is considering participating in the new scheme, pending the outcome of those engagements.
"With this in mind, it is too early to make any predictions at this stage," said the bank.
Standard Bank did not indicate whether it has opted in or not. But it said it will continue to explore new avenues and engage with different parties to support businesses.
"Ultimately, we serve our clients and their individual needs and will provide them with the best and most relevant support based on their individual circumstance," it said.
Nedbank said it has yet to sign up for the scheme. But it will continually review its participation based on client demand.