- The Banking Association of SA (BASA) says banks have approved 27% of the Covid-19 Loan Guarantee Scheme and another 13% is still being processed.
- The prime reason for the high rejection rate is that many businesses who applied were already in financial distress before the pandemic.
- BASA says at this rate, banks expect that only R24.4 billion of the R200 billion would be given to needy SMEs by the end of January next year.
Banks have only approved 27% of applications they received from businesses under the Covid-19 Loan Guarantee Scheme, said the Banking Association of SA (BASA) on Monday. The banking lobby group said another percent of applications were still being assessed by 21 November, while 43% were rejected because they did not meet the criteria set out by National Treasury.
BASA said banks received just over 47 000 applications from small and medium enterprises who needed financial relief under the scheme, which has received a lot of criticism for the low amount approved for businesses in need. As at 21 November 2020, banks had approved R17.5 billion in loans under this scheme.
BASA has in the past said that the slow uptake was partly due to banks giving their customers the relief they needed to deal with the initial lockdown blow months before the loan guarantee scheme took off. The scheme kicked in in May, when banks had already voluntarily begun restructuring their loans to SMEs.
Another qualifying criterion that has seen many businesses' applications rejected is that the scheme does not bail out businesses who were in financial difficulties before the pandemic hit. Applying SMEs must have been in good standing at 31 December 2019.
"The main reasons for the rejections are that the businesses were not in good standing before the pandemic and did not have a good record of paying their debts, or the requested loan value was too high making the repayments unaffordable for the business," said BASA in a statement.
The group said its members, along with the Reserve Bank and National Treasury, continue to monitor the reasons for this high rejection rate, with a view to make the scheme more accessible, while ensuring that taxpayers’ funds are not exposed to undue risk.
BASA said based on present trends, banks expect to extend R24.41 billion of these loans to by January 2021.