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R200b Covid-19 loan scheme's paid out only R13b. Can a makeover get it to work?

11 August 2020 8:48 PM
Tags:
SA Economy
The Money Show
Bruce Whitfield
Stuart Theobald
Lockdown
COVID-19
business relief
Small business relief
COVID-19 loan guarantee scheme

Since it launched in May, the scheme's helped only 6.6% of businesses it targets. Will recent changes lead to improvement?

Since the R200 billion loan guarantee scheme was launched in May, only R13 billion has been paid over to business owners - that's a paltry 6.6%.

Meanwhile many desperate businesses have shut down while others are hanging on by the skin of their teeth in the wake of the Covid-19 lockdown.

Bruce Whitfield interviews Stuart Theobald, financial analyst and chairman of Intellidex.

Theobald has also been a consultant to government on the project.

He says one of the main reasons the scheme hasn't been working is that the relief came too late in the lockdown.

We went into lockdown in late March and the scheme only became active in mid-May.

Stuart Theobald, Financial analyst and chairman - Intellidex

Theobald also cites problematic "design features".

[they] discourage applications, such as the requirement for personal surety from the owners of businesses, the limited eligibility of which businesses can apply, what they can use the proceeds for...

Stuart Theobald, Financial analyst and chairman - Intellidex

These constraints have really limited the appetite from businesses to use the scheme.

Stuart Theobald, Financial analyst and chairman - Intellidex

At the same time banks have faced more or less the same credit risk requirements that they apply for any other business they do, so banks haven't really been able to increase their risk appetite to lend more aggressively in terms of the scheme.

Stuart Theobald, Financial analyst and chairman - Intellidex

These loans need to bridge finance companies through this crisis to keep their doors open and ensure that much of the economy survives...

Stuart Theobald, Financial analyst and chairman - Intellidex

From the beginning of August some changes have been made, he says, to make the process easier for borrowers and also for banks to increase lending volumes.

Hopefully the more recent numbers will show a change in the trend that we've seen so far.

Stuart Theobald, Financial analyst and chairman - Intellidex

Hear more from Theobald in the audio below:


11 August 2020 8:48 PM
Tags:
SA Economy
The Money Show
Bruce Whitfield
Stuart Theobald
Lockdown
COVID-19
business relief
Small business relief
COVID-19 loan guarantee scheme

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