Economic experts applaud CBJ soft financing programme for SMEs

AMMAN — Economic experts on Thursday applauded a recent decision by the Central Bank of Jordan (CBJ) to launch a JD500 million soft financing programme for small- and medium-sized enterprises (SMEs) but said more measures need to be adopted to salvage the economic sector that will be negatively affected by the COVID-19 crisis.

On Wednesday, the CBJ decided to launch the soft financing programme with the Jordan Loan Guarantee Corporation acting as guarantor on the loans with the aim of addressing the COVID-19 crisis and providing financing to professionals and craftspeople, as well as SMEs, to cover their operational working capital and fixed assets.

This programme, according to the CBJ, is “unique” due to the low interest rate of loans, which is less than 3.5 per cent, and the loan guarantee level, which is 85 per cent, compared to 70 per cent for regular programmes. It also offers a one-year grace period.

This is an important step by the CBJ economy columnist and expert Musa Saket told The Jordan Times adding that “it will inject liquidity in these hard times especially that more than 75 per cent of all sectors are not working because of the situation”.

“This business hold resulted in a lack of liquidity for SMEs and the CBJ step will help these sectors down the line in accessing the cash they need for operations. Be it salaries or to continue resuming their work,” Saket said.

However, Ahmad Awad, director of Phenix Centre for Economic Studies said the CBJ step is good but not enough and needs more measures to salvage the economic sector that will be affected by the COVID-19 crisis the most.

“Some of the economic procedures adopted by the government in recent days, including the CBJ step to offer soft loans is good, but not enough to face the deep crisis that will result because hundreds of companies announced that they are incapable of paying salaries to their employees,” Awad said.

This, Awad told The Jordan Times, will result in the firing of thousands of labourers by these companies because they cannot pay them their salaries.

Former Minister of Planning and International Cooperation Mary Kawar told The Jordan Times that the CBJ support programme is a very positive and most welcome measure, especially as it targets SMEs that account for the vast majority of Jordanian enterprises.

“From international and country analyses so far, it is already clear that the impact of the pandemic will be felt across the whole economy but will be especially severe on SMEs because small size increases vulnerability and lowers resilience,” Kawar told The Jordan Times.

In fact, Kawar maintained, the European Central Bank has announced similar schemes for SMEs as have Britain, the USA and others.

“Jordan’s economic response, like the current one by the CBJ, should be part of a longer term strategy. Ideally, the spread of the virus will be contained in the next few weeks, but will come back, hopefully in smaller numbers, at some time later – epidemiologists say before the end of the year,” added Kawar.

Saket said that other future solution entails offering individuals and SMEs short period loans (12 to 18 months) at an extremely low interest rate.

Saket added that the government could adopt more measures such as the interference of the Social Security Corporation to support employees who will be affected by this crisis on the long run.

Awad proposed that the government should take more concrete and strong measures such as paying half the salaries for the SMEs employees under the condition that they do not fire their workers and or offer tax cuts for companies that abide by the government’s conditions.