A large number of South Africans have asked their banks for payment holidays and cash flow relief during the COVID-19 pandemic.
In response to this, local banks launched a variety of products to help their customers weather the effects of the lockdown.
These included payment holidays as well as cash flow relief plans, the latter of which FNB said has a lower cost for the consumer in the long run.
“In the long-term, the total cost of credit for a payment holiday with a term extension is significantly higher than a cash flow relief plan,” FNB said.
Many banks offer a cash flow relief plan which gives customers a payment holiday from their monthly instalments and premiums for three months.
These packages also often allow for a flexible repayment period and do not charge any fees during this payment break.
Some relief programmes also provide preferential interest rates, and many banks now offer the SARB COVID-19 loan guarantee scheme.
MyBroadband asked major South African banks how many of their customers had accepted payment holidays or cash flow relief packages.
We also spoke to the Banking Association of South Africa regarding the countrywide adoption of these offerings.
Absa RBB deputy chief executive Bongiwe Gangeni told MyBroadband that Absa has launched a payment relief programme which has seen significant adoption among customers.
“Our Payment Relief Programme, which allows customers to defer payments on credit products for a period of three months, has been well received,” Gangeni said.
“Since the launch of the programme, almost 570,000 account holders have benefited from the relief, which amounts to R7.8 billion cash flow relief over the three-month period across our Retail and Business Bank.”
“We also recently launched the SARB COVID-19 loan guarantee scheme, a welcome addition to our pre-existing relief efforts,” Gangeni said.
Absa’s business clients have preferred to negotiate bespoke relief packages with banks to best suit their situations, and Absa said it expects this trend to continue.
The bank has also experienced a drop in credit demand and many of its clients are focused on reducing costs to survive rather than incurring additional debt due to uncertainty around the duration of the lockdown.
Nedbank RBB chief client officer Anton De Wet told MyBroadband that Nedbank has offered several options to clients based on individual characteristics.
Relief measures include payment arrangements which allow consumers to repay their arrears over time and the restructuring of debts with possible term extensions and reduced instalments.
“On overdraft facilities, the bank is offering customers that have an overdraft facility a temporary rebate up until June 2020,” De Wet said.
“This rebate will be equivalent to a 1% interest rate reduction on the utilisation of their overdraft facility.”
“To date, Nedbank has assisted more than 225,000 clients – out of a total credit active client base of approximately 2.5 million – with debt relief across our product range, including home loans, vehicle and asset finance, personal loans, loans to SMEs, and credit cards,” De Wet said.
“Nedbank understands that we have a responsibility to do all we can to play our part in reducing the impact of COVID-19 on our customers, our economy and our country.”
Capitec said that its credit insurance covers a temporary loss of, or reduction in, income as a result of the impact of the lockdown and state of national disaster.
Capitec requires clients to have credit insurance for credit terms of seven months or more.
“We’re doing everything we can to help our clients during this time,” Capitec marketing and communications executive Francois Viviers said.
“Wherever possible we offer cash flow relief with the relevant treatments which include payment breaks, or the rescheduling of loans to give clients time to recover from financial setbacks.”
Capitec did not provide any information regarding the number of customers who had adopted its financial relief packages for COVID-19.
Standard Bank said it has granted instalment relief to nearly 150,000 clients in the wake of the national lockdown, amounting to over R1 billion in instalment relief per month on the R44 billion of total loans affected.
“We continue to support our business banking clients. Furthermore, we fully support initiatives from the government to help stimulate economic activity and to protect businesses and jobs,” Standard Bank said.
“It will take a collaborative effort between the government, business, and society at large to navigate the impact of COVID-19 and place South Africa on a path to economic recovery.”
Standard Bank also allows business customers with an annual turnover of less than R300 million to apply for a COVID-19 Term Loan.
Funds borrowed through the scheme can be used for a business’s operating expenses such as salaries, rent, lease agreements, and contracts with suppliers.
FNB said it has offered almost R6 billion in relief to customers since 1 April 2020.
“Since 1 April, we have offered individuals and businesses close to R6 billion worth of relief in nearly 700,000 agreements,” FNB said.
“As the government moves into a risk-adjusted lockdown, we are also encouraged to see certain sectors beginning to regain some economic activity while more consumers are engaging in ecommerce.”
FNB said that it has received an overwhelming number of applications for SAFT funding support from business clients who were impacted by COVID-19.
“To date, approximately 2,300 businesses have been signed up for the funding scheme via FNB,” the bank said.
“These funds will enable 17,367 employees to receive income for the next three months.”
Banking Association of South Africa
The Banking Association of South Africa (BASA) recently stated that between 25 April and 9 May 2020, its members extended an additional R3.84 billion of debt relief to individual customers.
This brings the cumulative amount of relief offered by BASA members since they started assisting individuals to R11.58 billion.
“This amount will continue to grow as banks process applications for COVID-19 debt relief,” the BASA said.
“As at 9 May, applications for relief have been received from individuals with more than 2 million credit agreements. So far, over 1.7 million have been granted.”
The total cumulative assistance offered by BASA members to commercial and small and medium enterprises is R9 billion.
BASA members include Standard Bank, Absa, Nedbank, Capitec, and FNB.