SMMES left out of P1 Billion Government loan guarantee scheme because banks lending requirements are already stringent

As part of Botswana’s response to the economic catastrophe occasioned by the COVID-19 pandemic, a loan guarantee scheme was set up worth P1 billion pula, to help qualifying businesses access funding from commercial banks. This was in addition to various government initiatives such as the Industry support fund which is administered by LEA, CEDA, NDB & CEDA.

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The Government Loan Guarantee for lending by commercial banks to entities adversely affected by the COVID-19 pandemic is administered by the Botswana Export Credit Insurance (BECI).The aim was primarily to assist private sector businesses mostly affected by the COVID-19 pandemic and its containment measures with working capital to sustain operations.

However there are concerns from the business community that the scheme requirements are restrictive, and that it did not cater for existing businesses to expand their scope to venture into new opportunities presented by COVID-19, especially on COVID-19 supplies facilitation; it also did not cover capital investments.

Bank of Botswana noted in its 2020 annual report that the business community also suggested that the scheme excluded many SMMEs due to the stringent bank lending requirements already in place and not relaxed to accommodate the extraordinary circumstances.

Through the scheme the Government guarantees 80 percent of commercial banks loans of up to P25 million to qualifying entities in eligible sectors, effective April 2020, with the scheme budgeted for P1 billion and initially envisaged to run for 24 months.

As at the end of February 2021, BECI had secured the signatures of at least 7 (out of 8) commercial banks and one eligible development finance institution.

Also, BECI had received 40 applications from agriculture, tourism and hospitality, manufacturing, construction, wholesale  and retail, financial services and education sectors, with the sum of guarantees issued amounting to P53.9 million (5.4 percent of total allocation for the scheme) and 1539 jobs protected from the negative impact of COVID-19.

The sum of guarantees is likely to have surpassed P100 million by now with more applications and more jobs projected from the adverse impacts of the pandemic which is showing no sign of slowing down anytime soon.

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