The Cooperative Central Bank launched on Friday a €34 million financing scheme from Small and Medium Sized Enterprises (SMEs).
The scheme is financed by European Investment Bank (EIB) which granted €25 million and €9 million by the CCB. A second phase of SME worth €34 will launched at a later stage.
As part of the €10 billion financial assistance package Cyprus received from the EU and the IMF in March 2013, the Coops` capital needs amounting to €1.5 billion have been paid by the state. Under the bailout terms, the 93 Coops operating in Cyprus have been merged into 18 units under the supervision of the Central Bank of Cyprus.
“This day has a symbolic but also a substantive meaning as the transitional stage is over and as of today we enter the operational stage,” CCB President Nicolas Hadjiyiannis told a press conference, adding “we feel we are on the right track and we are cautiously optimistic.”
Both Hadjiyiannis made clear that these loans will be granted to viable businesses which have prospects of repaying their loans.
“We are not endorsing loose policies, we feel that by doing our job we assist a borrower to make better programming, to be able to respond to his obligations and to make good use of the money he acquires,” he said.
On his part, CCB CEO Marios Clerides said the Coops will not grant loans which cannot be repaid adding that the loans will be granted under the new and more strict loan origination directive issued by the Central Bank which focuses on the borrower's ability to repay his loan rather than the collateral.
“We implement more strict criteria to protect the client from receiving a loan he cannot repay,” he said.
The scheme provides for loans from €30,000 to €500,000 with a 12-year maturity, including a two-year maturity, provided that the borrower makes a 20% own contribution. The interest will be fixed 5.25% while when a loan lies in the “Jobs for Youth” scheme the interest rate declines to 4.75%.
SMES should be employing up to 250 persons and medium sized companies employing 250 to 3,000 persons qualify to apply.
Furthermore, both Hadjiyiannis and Clerides said a large portion of the Non-Performing Loans observed in the Coops will be recovered. According to CBC data NPLs in the Coop sector reached 6.36 billion in April.
Clerides said the Coops so far did not notify borrowers of their loans in arrears. “Therefore we believe there are many borrowers wishing to service their loans but we have never told them to do so,” he said.
On his part, Hadjiyiannis said the Cooperative Sector the NPLs can be attributed to some “structural problems” of the Coop sector. He noted that Coops had a policy under which borrowers could avoid paying installments in specific periods, adding that when the NPL directive changed some loans were considered as Non performing.
There are some which strategically are not paying but viable restructuring can be made for the remaining cases, he concluded.
