not followed by most banks
Circulars issued by the Central Bank (BDL) to help private sector employers finance operating expenses and payroll as well as accessing foreign currency funding for imports have largely been ignored by local banks.
In a poll conducted by Infopro Research, banks have rejected more than 90 percent of applications from companies wishing to benefit from BDL circulars (552 and 547) that allow zero-interest loans to cover salaries and operating expenses during the Covid-19 lockdown. BDL had first issued ‘Circular 547’ allowing banks to borrow from the Central Bank at zero percent interest (in either lira or dollar) and relend the money to their clients at no interest. Banks had complained that the circular was not clear enough. BDL then issued ‘Circular 552’ to clarify the provisions of the preceding circular but to no avail.
Jocelyne Chahwan, Deputy General Manager at BLOM Bank, said that there was a large demand for rescheduling loans at zero-percent interest rate over the four-month period (March-June 2020) as required by BDL and most of the banks have met this demand. She said that the banks were not enthusiastic about providing new loans under this program, such as lending for payroll purposes, because of rising risks. The rescheduled loans included corporate and retail loans such as housing and car loans. The borrowers who could benefit from this scheme are those have defaulted on their payments because of the current circumstances.
According to the InfoPro survey, companies have also complained that they are not able to immediately withdraw all the ‘fresh funds’ they have in their accounts, either received from abroad, or deposited in cash after October 17. Only 40 percent of businesses have created ‘fresh funds’ accounts. Around 20 percent said that their bank has not allowed immediate full withdrawal when needed. The funds were withdrawn gradually at rates that range from ten to 80 percent of the total amount or 40 percent on average.
Chahwan said that most banks encourage their clients to withdraw ‘fresh money’ transferred from abroad in small amounts. They often don’t ask the customer to pay shipping charges for amounts withdrawn at the rate of less than $1,000 per day, she said.
According to Chahwan, it is in a bank’s interest to ease conditions of ‘fresh money’ withdrawals because of competition among banks. Moreover, this encourages transfers from abroad and helps restore confidence in the banking sector, she said. Foreign NGOs are cashing payroll transfers from abroad in full, Chahwan said.
The Association of Industrialists (ALI) has sounded the alarm concerning the difficulties they are encountering to finance their raw material imports. ALI said that industrialists are prevented from accessing their money in banks. They cannot buy dollars from licensed money changers, and therefore they have fallen prey to the black market. It warned that the failure to provide a stable and sustainable platform for securing liquidity in dollars for raw material imports will inevitably lead to a decline in production and thus threatens Lebanon’s consumer and food security.
ALI regretted the delay in starting the Oxygen Fund platform, which the BDL is working to launch. The fund aims to provide the hard currencies industrialists need to import raw materials.
InfoPro Research has polled companies to gauge their awareness of the recent decisions and circulars issued by BDL, and to which extent they were able to benefit from them. The survey targeted potential beneficiaries for each category. The sample size was 500 companies, weighted according to region, size, and sector.