South Africa is in talks with non-banking lenders to join its 200 billion rand ($12 billion) loan-guarantee measures as it seeks to improve access to finance for businesses hit by the coronavirus pandemic.
The government-backed program will have less stringent approval processes and extend repayment periods, the National Treasury, the South African Reserve Bank and the Banking Association of South Africa said in a joint statement on Sunday. Businesses will also have access to so-called “restart loans” as the country gradually relaxes restrictions introduced late March to curb the spread of the virus.
South Africa Reviewing Loan-Guarantee Program After Slow Start
The revisions come as banks prepare to report financial results next month. Industry earnings could drop by at least 20% this year, according to the Banking Association.
Other changes to the program include:
- An extension of interest and capital repayment holidays to a maximum of six months from three months.
- Scrapping a revenue cap and replacing it with a maximum loan amount of 100 million rand. Banks may also provide syndicated loans of more than than 50 million rand.
- Easing the so-called “test for good standing” for the period between Feb. 29 and Dec. 31 to allow businesses with cash-flow problems during that time to take loans.
- The inclusion of sole proprietorships in the program, which can now use loan proceeds to pay salaries. Security is no longer explicitly required for these businesses.
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