Loan guarantee scheme demand falls despite enduring lockdown

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  • The loan guarantee scheme only approved 65 loans to the value worth R35.7 million in the past month.
  • While some businesses found assistance from the scheme, its status as a loan left a number of businesses apprehensive about taking on the assistance.
  • The Banking Association of South Africa said the scheme helped enterprises that qualified to stay in business and save jobs.


The Banking Association of South Africa said demand for assistance from the Covid-19 Loan Guarantee Scheme dropped after April of this year with R18.39 billion in bank-approved loans for small businesses by 19 June.

The loan guarantee scheme only approved 65 loans to the value worth R35.7 million in the past month, according to the association's statement issued on Saturday. National Treasury championed the scheme as an intervention to assist small business in the face of the Covid-19 pandemic.

However, while some businesses found assistance from the scheme, its status as a loan left a number of businesses apprehensive about taking the assistance on, as vulnerability and the state of the economy left them unsure of their ability to repay the loan after the pandemic.

The association's statement said while the loan guarantee scheme did not match some expectations, it at least succeeded in helping small, micro, and medium enterprises that qualified for assistance to stay in business and save jobs.

"The scheme will not be accepting new applications after 28 June 2021. Although the Covid-19 loan guarantee scheme will remain in operation until 11 July 2021, this is only to allow for those applications that are in process to be finalised," the statement said.

The statement said a number of business owners were "reluctant to take on more debt in an uncertain business environment". Business owners who did not utilise the scheme made other arrangements directly with their banks, the statement said.

"The Covid-19 loan guarantee scheme was only a small part of the ongoing relief that banks offer their clients and customers who are in financial distress.

"Figures reported to the South African Reserve Bank, indicate that as of February 2021, banks had provided R293 billion in financial relief to their customers and clients – corporate getting R165 billion and retail getting R128 billion – which accounted for 5.8% of the total corporate and retail credit exposure," the statement said.

The statement added that by Friday, the scheme received 50 717 applications for loans, of which 26% - or 13 324 - were approved by banks and were taken-up by the applicants.

"Fifty six percent of applications received were rejected because they did not meet the eligibility criteria for the scheme, as set out by the Treasury and the Reserve Bank, or because they did not meet banks' risk criteria," the statement said.

The association stressed that government never planned on the loan guarantee scheme providing grants and those businesses qualifying as recipients must be able to repay the loan.

President Cyril Ramaphosa is expected to address South Africa on Sunday evening, as Covid-19 cases surge. Many expect a tightening of lockdown restrictions that may have an impact on a number of business sectors.

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