Central bank response to COVID-19 continues to pay off

[11-07-2020 04:07 PM]

Ammon News - AMMONNEWS - Since the outbreak of the coronavirus pandemic in early March, the Central Bank of Jordan (CBJ) has embarked on a robust approach to cushion economic fallout and maintain monetary stability.

To help the economy weather the impact of the pandemic, which sent tremors across the global economy, the CBJ launched a JD500-million soft lending program targeting small- and medium-sized enterprises (SMEs). To date, a total of JD360 million of the tranche has been lent at an average of JD98,000 per loan, according to CBJ figures.

About 43 per cent, or JD156 million, of the amount lent was used to finance payrolls, helping pay the salaries of more than 75,000 private sector employees.

The fact that the average loan application was around JD98,000 indicates that much of the funding was utilized by SMEs, said Khaldoun Wishah, Director of the CBJ's Open Market and Public Debt Division, noting that only 4 per cent of the applicants requested amounts above JD250,000.

According to the bank, the interest rates on these loans do not exceed 2 per cent for a 42-month term and with a grace period of 12 months for sectors hard hit by the crisis.

Also, the bank has extended a total of JD130 million to 134 companies as part of its JD1.2 billion flagship "Soft Finance" program, which was launched in 2012. What is new is that the bank expanded access to this program by allowing the use of facilities provided under this program to be used to finance payrolls, operating expenses and working capital. Additionally, the interest rate on these loans was reduced and the funding cap was further increased.

The CBJ allowed banks to defer individual loan installments for the months of March and April, and May for corporate borrowers.

With regard to monetary stability, the bank slashed benchmark interest rates by 150 basis points and ordered banks to reflect this on existing loans as of May, benefitting more than 270,00 borrowers.

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