SARB Publishes Update on COVID-19 Loan Guarantee Scheme
SARB updated its COVID-19 loan guarantee scheme, along with the associated frequently asked questions (FAQs). The COVID-19 loan guarantee scheme is an initiative to provide loans, substantially guaranteed by government, to businesses to meet some of their operational expenses. Commercial banks and the National Treasury share the risks of these loans, which is administered by SARB. One of the key changes to the scheme is a relaxed test for good standing, which has now moved back to December 31, 2019, from February 29, 2020, to accommodate firms that were already experiencing cash-flow problems in February.
The loans are granted at a preferential rate (prime) and repayment may be deferred for a maximum of one year after taking out the loan. Businesses will then be required to repay the loan over five years. Government and commercial banks are sharing the risk of non-repayment of these loans. Government is engaging with non-bank lenders to possibly extend the scheme. Following a review of the scheme, the following changes are announced:
- Business restart loans will now be available, to assist businesses that are able to begin operating as the economy opens up.
- Bank credit assessments and loan approvals will be more discretionary and less restrictive, in line with the objectives of the scheme. Banks may use their discretion on financial information required—for example, bank or financial statements, where audited statements are not available. Suretyships or guarantees may also be required. The provisions of the National Credit Act and Financial Intelligence Center Act remain applicable
- Clients can now access the loan over a longer period. The draw down period has been extended from three months to a maximum of six months. For example, a ZAR 6 million loan can be drawn down over six months, at ZAR 1 million a month if the business qualifies.
- The interest and capital repayment holiday has been extended from three months to a maximum of six months after the final draw down. For example, in the case of the same ZAR 6 million loan, drawn down at ZAR 1 million a month for six months, with repayments only being required from month 13.
- The turnover cap has been replaced with a maximum loan amount of ZAR 100 million. Banks may also provide syndicated loans for loans larger than ZAR 50 million.
- Sole proprietorships are now explicitly included. For sole proprietorships and small companies, salary-like payments to the owners are included in the use of proceeds. Security, suretyships, or guarantees are not explicitly required,
The National Treasury, SARB and commercial banks, represented by The Banking Association South Africa, have agreed on the relevant legal framework and financial and operational requirements. SARB will provide the finances for these loans to banks and will keep a record of the amounts owing by each bank as well as the default rates. SARB will publish an annual report setting out how much each bank has used from the scheme and the performance (default rate) of each bank’s COVID-19 loan portfolio. All commercial banks can access the guarantee scheme, though SARB reserves the right to limit the amount that can be accessed by an individual bank. Participating banks at the moment include Absa, Bidvest Bank, First National Bank (FirstRand), Grindrod Bank, Investec, Mercantile Bank, Nedbank, SASFIN Bank, and Standard Bank.
Related Link: Press Release and FAQs
Keywords: Middle East and Africa, South Africa, Banking, COVID-19, Credit Risk, Loan Guarantee, FAQ, Payment Deferrals, SARB
Featured Experts

Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
HKMA Launches Survey on Regtech Adoption in Banking SectorRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.