Banking sector to amplify efforts to facilitate access to Private Sector Relief Scheme |06 March 2021
Governor Abel (Photo: Jude Morel)
The Private Sector Relief Scheme, administered by the Central Bank of Seychelles (CBS) with banking and financial institutions as a support measure for micro, small and medium enterprises (MSMEs), as well as large enterprises hardest hit by the Covid-19 pandemic, could soon be amended to allow businesses more flexibility during the economic crisis.
The relief scheme, which was implemented by CBS in 2020 as a measure to support eligible MSMEs and large business enterprises through the Covid-19 pandemic, comprises two credit line facilities administered by commercial banks and the Development Bank of Seychelles (DBS) and guaranteed by the government. It serves to provide such business organisations with finance for their day-to-day operating expenditures, including payment of rent, utilities, salaries, taxes, goods and services contracts, to the extent not covered under other measures announced by government.
In a press conference held yesterday morning, Governor of CBS Caroline Abel noted that there has not been much movement in the scheme over recent weeks, although more businesses have shown an interest in the credit facilities, especially now that government-financed schemes such as the Financial Assistance for Job Retention (FA4JR) comes to an end.
“During the past weeks, there have been engagements, intensive discussions between CBS, the banking community, the private sector as well as with government and what we have done during the past two weeks, we took two days, whereby CBS, the banking sector and the private sector came together to discuss the challenges that everyone is facing, that we all understand each other, and the additional measures we can bring. These things were also discussed with government through the Ministry of Finance […] towards ensuring that we all understand each other, and what constraints which are stopping us from stepping forward, and how we can collaborate to ensure that we continue to bring the support. The economy needs some level of support, as some businesses will this year not be assisted as is evident in the national budget,” Governor Abel noted.
Among the various proposals recommended to better cater to the needs of business organisations, and which are to be presented to the CBS board on March 15, are to increase the moratorium from 12 to 18 months (as a ceiling) for businesses who had already opted for a loan under the said schemes, as the 12-month timeframe comes to an end in coming weeks. Businesses considering a loan under the credit line facilities will be granted a 12-month moratorium at first instance, but may also benefit from an extension after discussions with their respective banking institutions if necessary.
As the economic uncertainty keeps looming over the world, it has also been suggested that the tenor be increased from 3 years to vary for any period up to 8 years (as a ceiling), through an amendment to CBS legislation. Presently, the maturity period is set at three years, although CBS did propose to government that it be increased to five years towards the end of 2020, but this did not fall through as the National Assembly was not sitting at the time.
“Now that we are having this discussion, and with the uncertainty in the global economy as a result of the pandemic, and we are observing that the private sector needs support for a while longer, we discussed whether it wouldn’t make more sense, rather than always having to when making revisions to the scheme based on the economic reality, that we have to change the law. To keep changing the law is not in CBS’ advantage,” she stated.
“When we evaluated, we made the recommendation that we should push the limit to give CBS more flexibility in the decision it needs to take as to increasing the maturity on the loan. So we proposed that the maturity be set at 8 years and the CBS has between 0 and 8 years to choose, based on the economic situation, how long it will set the maturity on a loan if faced with a difficult economic situation,” Governor Abel said.
Taking into account all of the current state of affairs, the economic situation and recent decisions that could place businesses across different sectors at a further disadvantage, a third proposition is that the scheme be extended until December 2021.
“One of the points which we debated strongly on was the timeframe that institutions take to approve a loan. When the two schemes were put in place last year, we said the institutions have 5-10 days to give a response. Businesses need money and they need to be afforded this service in a relatively short timeframe. We have come to know that there have been delays, and in some instances, the lengthy delays, which does not help a business,” the governor said.
“So in our discussion, we accepted that 0-10 days is appropriate despite the challenges the institutions and businesses faced, but that the Seychelles Chamber of Commerce and Industry (SCCI) come in to ensure that the documentation submitted by the businesses to their respective banks are in order, for the banks to be able to provide an answer within the 5 to 10-day period. Because the challenges that the institutions have faced, as well as the businesses, is preparation for the banks to receive the documentation that they need, and the challenges that businesses faced in ensuring that the package they are bringing before the bank is complete, and that they understand all of the information that they are bringing to the bank,” she added.
Lastly, a proposition to expand the scope of the relief scheme to include two categories of expenses that were not previously accounted for, including expenses related to re-skilling and training programmes and debt servicing, will also be tabled before the CBS board within the next 10 days for consideration. Any amendments and changes to the scheme will be communicated by CBS.
Along with the proposals for the private sector relief schemes, Governor Abel also noted recommendations stemming from the consultations regarding the moratorium on loans and debt restructuring. Moratoriums and debt restructuring are options for individuals and businesses who feel that they cannot meet their loan repayments for the present time, and opt either for loan repayments to stop for a stipulated timeframe, or for the debt to be restructured, perhaps pushing the repayment period forward. Clients in such positions and facing financial difficulties are advised to approach their respective banking and financial institutions for such services, to be considered on a case to case basis.
In a bid to facilitate access to such services and alleviate confusion with regard to the schemes and eligibility, commercial banks and institutions including the Development Bank of Seychelles (DBS) and the Seychelles Credit Union (SCU) have also been advised by CBS to engage more with the public and clients to provide more information about the schemes and internal procedures.
“With the different announcements, we continue to analyse how the private sector is affected by the different changes that have been announced. We have not seen a lot of movement for the time being, but we expect that there will be more applications in the coming weeks,” Governor Abel stated.
According to statistics held by CBS, up until February 18, 331 MSMEs lodged applications through their respective banks, of which 208 were approved to a sum of R80.1 million of the R500 million available to MSMEs. By the same date 18 requests were pending to a sum of R21.2 million while 67 applications had been rejected to a sum of R25.2 million.
As for large enterprises, for which the R750 million credit line facility applies, 23 applications have been lodged through commercial banks to a sum of R247.8 million. However, 15 of the requests were approved at a total cost of R102.8 million, while four were still pending at a sum of R135.5 million.
Laura Pillay