How much money South African banks have given in coronavirus support – and why they won’t offer debt write-offs

South African banks have approved more than R30.6 billion in relief to individuals and businesses affected by the Covid-19 pandemic and national lockdown.

Separately, over R10.6 billion has been extended to distressed businesses under the Covid-19 Loan Guarantee Scheme, the Banking Association of South Africa (Basa) said in a statement on Tuesday (7 July).

“Cash flow relief for eligible individuals and businesses is critical to the preservation of jobs and businesses and to maintaining a functioning economy,” said Basa managing director Bongiwe Kunene.

“Banks hold in trust the salaries and savings of South Africa’s workers, professionals and businesses. It is therefore essential that we continue to extend credit responsibly and avoid blanket debt write-offs or any other actions that might place depositors’ funds at risk or otherwise undermine the integrity of the financial sector.”

Basa said that as at 27 June 2020, individual customers had received R18.26 billion in relief, with banks approving 2.4 million (82.7%) of 2.9 million applications for assistance.

Relief granted to commercial, small and medium enterprises amounted to R12.39 billion, with banks approving 132,508 (95.5%) of 138,675 applications for assistance.

To date, banks have also approved just over R10,6 billion in concessionary loans for 7,496 qualifying small businesses in terms of the Covid-19 Loan Guarantee Scheme, which was launched in mid-May.

Of the 33,965 applications received:

  • 3,478 were rejected because they did not meet the eligibility criteria for the loans, as set out by the National Treasury and the South Africa Reserve Bank (SARB);
  • 9,182 were declined because they did not meet bank risk criteria;
  • 13,809 applications are in the process of being assessed;
  • An additional 315 loans worth R104 million were approved but not taken up.

Not debt write-offs

Basa said that the Covid-19 Loan Guarantee Scheme is a commercial arrangement that gives borrowers access to business-critical funding at low interest rates and preferential repayment terms.

However, it noted is not meant to support small businesses with grants. Each loan is subject to a credit approval process during which banks must evaluate whether the business will be able to service its commitments as economic activity resumes, it said.

It added that the relief measures granted by banks are intended not as debt write-offs, but rather as a relaxation of repayment terms to assist otherwise viable businesses to remain solvent and continue to pay suppliers and employees during the current crisis.

“The period of relief initially extended to some companies and businesses will expire from end of June 2020.

“Customers who require an extension in terms of the relief already granted should contact their credit providers. A number of banks have already announced details of further relief on offer to their customers. The offering of each bank depends on their individual capacity and risk management policies.”

Basa said it is currently working with the National Treasury and the SARB to review the criteria for the Covid-19 Relief Scheme to make loans more accessible to distressed businesses.

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How much money South African banks have given in coronavirus support – and why they won’t offer debt write-offs