AVAIL E200M FOR MSMES LOANS - FESBC

 MBABANE - National Treasury and the Central Bank of Eswatini (CBE) should be working with commercial banks in the kingdom to provide government-guaranteed loans for MSMEs.

These are micro, small and medium-sized businesses (MSMEs) that may not be able to meet their financial obligations during the lockdown and when the economy eventually reopens. 

This is a call that has been made by a group of the Federation of Eswatini Business Community (FESBC) experts ahead of the Finance Minister Neal Rijkenberg’s budget speech tentatively set for tomorrow.

FESBC says the country’s loan guarantee arrangement should make a projected E1 billion in new loans available to existing MSMEs customers in the posts pandemic era, of which E200 million should be made available in the second phase of 2021. 

Eligible

When it comes to the key features, FESBC said Eswatini MSMEs and businesses with an annual turnover of less than E100 million, which are in good standing with their commercial banks, should be eligible for the bank loans in the post-pandemic era.

“Funds borrowed by MSMEs can be used for operational expenses including salaries, rent and lease agreements, and supplier contracts. Loans should cover up to three months of operational costs and will be drawn down monthly through 2021 to 2022.

“Banks should not be obliged to extend COVID-19 loans, and those that do should use their normal risk-evaluation and credit-application processes. MSME business owners may be required to sign surety for the loan,” suggested FESBC.

Each MSME and business, according to the federation, may  accept  only one COVID-19 loan.

“Loans should be offered at a single agreed lending rate, which tracks the repo rate, by all participating banks,” said FESBC.

FESBC further recommended a six-month repayment holiday commencing from the first draw down, although interest will accumulate from the date on which the first draw down occurs.

Repayments

“Interest and capital repayments should start after six months, and businesses should have a maximum of 60 months to repay the loans,” stressed FESBC.

Due to the second wave of COVID-19, an ongoing FESBC survey has established that approximately 60 per cent of MSMEs and companies expect to report at least a 10 per cent decrease in revenue and earnings this year.

“Eswatini’s phased approach to resuming normal economic activity is informed by international experience. The country has high levels of poverty and comorbidity, and living conditions make social and physical distancing highly challenging.

“The longer that our economic growth remains weak, however, the greater the risk that there will be permanent destruction of supply-side capacity with profoundly negative implications for household incomes and welfare this year,” said FESBC.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: