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What is the loan guarantee scheme (R200bn out of the R500bn)?
It is an initiative to provide loans, substantially guaranteed by government, to businesses in order to meet some of their operational expenses. Government and commercial banks are sharing the risks of these loans. https://twitter.com/MaanoMadima/status/1349072615781126147
It is an initiative to provide loans, substantially guaranteed by government, to businesses in order to meet some of their operational expenses. Government and commercial banks are sharing the risks of these loans. https://twitter.com/MaanoMadima/status/1349072615781126147
This is how the loan guarantee scheme is structured
The National Treasury has provided a guarantee to the SARB. This guarantee is recorded as a contingent liability on the governmentâs account.
The National Treasury has provided a guarantee to the SARB. This guarantee is recorded as a contingent liability on the governmentâs account.
The Reserve Bank will lend money to commercial banks at the repo rate (currently 3.5%) plus a 0.5% credit premium.
Banks will lend this money to small and medium-sized businesses at the repo rate plus a fixed spread of 3.5% (currently 7.75%, equal to the prime lending rate).
Banks will lend this money to small and medium-sized businesses at the repo rate plus a fixed spread of 3.5% (currently 7.75%, equal to the prime lending rate).
The banks are still prohibited from making profit from the scheme and the 3.5% margin will be used to provide funding for losses, before the banks incur losses and before the Treasury incurs losses.
Participating banks are; Absa, Bidvest Bank, FNB,Grindrod , Investec, Mercantile Bank,Nedbank, SASFIN Bank and Standard Bank.
According to Banking Association South Africa , as at 21 November 2020, banks had approved R17,49 billion in loans to small businesses under the Loan Guarantee Scheme of R200bn.
This scheme is under subscribed
This scheme is under subscribed
