Al-Qadi: Banks’ measures taken reduce the burdens of individuals and sectors affected by “Corona”

Amman – Al-Ghad – Chairman of the ABJ Hani Al-Qadi said, “Banks have cooperated in a participatory approach with many of the measures and initiatives launched by the Central Bank of Jordan, which contributed to alleviating the affected citizens and economic sectors through many tools.”

Al-Qadi indicated, in an interview with “Al-Ghad” that took place at the end of last week, that the banks’ initiative to postpone loan installments for those affected by the repercussions of “Corona” and without commissions and interest delays for the past three months (March, April and May) or until the end of the year, and for retail customers and companies affected by the crisis.” Corona”, included more than 1.2 billion Dinars and benefited more than 400,000 customers, pointing out that banks’ postponement of the current June installments will be at the request of the customer to assess if the bank income has been affected by repercussions of “Corona”.

Regarding some of the objections and the rumors about the facilitation program for small and medium-sized companies between banks and the loan financing company, which amounts to 500 million Dinars, Al-Qadi said, “In reality, the progress of this program is as planned, and the numbers speak for themselves.”

Al-Qadi pointed out that the facilitation program is not for defaulters or to repay existing loans.

Al-Qadi continued his speech, saying: “So far, the number of requests received by banks to benefit from the aforementioned program has reached more than 4,000. More than 2,300 requests have been approved with a total value of more than 233 million Dinars.”

He pointed out that more than 73% of the loans value within this program was less than 250 thousand Dinars, noting that the percentage of what was granted for salary purposes was 50%; That is, approximately 116 million Dinars of the value of the applications submitted, and it served about 52,043 workers on the job, as it was spent directly on the employees’ accounts.”

He pointed out that banks have taken the initiative to reduce the interest rate by up to 1.5% since last May, for all customers, regardless of the periodic re-pricing of those facilities stipulated in the credit contracts.

Al-Qadi stressed that the work of banks is “not limited” to borrowers only, and that “there are rights and costs for depositors who employ their savings, and there is competition to attract deposits locally and regionally.”

The following is the text of the interview:

• Let’s start by asking about your expectations for the performance of the Jordanian economy in light of the repercussions of the “Corona” pandemic? How do you see the ability of the banking system to overcome this challenge?

beginning; The government has made distinguished efforts in the necessary measures to ensure the safety of citizens, as it has made many achievements at various levels in this regard. He also praised the government’s performance during the Corona crisis.

There is no doubt that “Corona” repercussions imposed on the whole world great economic challenges, as a result of the closure, and affected the incomes of some directly affected sectors, including – for example – the tourism sector, aviation and others. Governments in Jordan and all around the world suffered a decrease in revenue, so the government has been forced to spend more on the health sector and social safety nets, which generated an additional deficit, therefore, the banks, along with balancing financing for the private sector, provide liquidity for government issuances of bonds. Hence, since the beginning of the crisis and during it, ABJ has entered into continuous meetings with the Central Bank of Jordan, the government and various economic sectors to coordinate in the interest of the national economy.

International institutions expectations for the national economy indicate that the rate of economic growth will shrink as a result of the damage Corona caused to some sectors and weak exports.

What is new now is that there are developments with which things seem to be better in the coming period; There are a number of indicators that show this; Currently, there is a return of the sectors to work, and of course this return does not mean a skyrocketing growth, but it is better than before. For example, the average price of a barrel of oil in the first quarter of this year fell below $20 a barrel and is currently hovering around $40 as a result of the return of work and production in the world, and many countries have begun to open their airports and tourist facilities, so we expect that the second half of this year will be better if there are no surprises.

As for the Jordanian banking system, it has always proven its ability to withstand shocks, especially external ones, and history proves this.

• What are the most important measures implemented by banks in dealing with the crisis?

Since the beginning of the crisis, banks have been working on all axes with the aim of alleviating citizens, as individuals and companies, from the repercussions of the “Corona” crisis, and these measures have reinforced the Central Bank instructions.

Since the beginning of the “Corona” crisis, banks have started working to postpone loan installments for three months (March, April and May), so it was done without commissions and delay interests, after allowing this by the Central Bank. Some banks have the same policy of requesting the client to postpone the payment of the borrowing customers; individuals and companies.

As for the companies affected by the “Corona” crisis, the Central Bank allowed the postponement or restructuring of their installments until the end of 2020, in agreement with the bank, knowing that the total installments that were postponed amounted to more than 1.2 billion Dinars, benefiting more than 400 thousand clients.

• What about postponing June loan installments for individuals and companies? And other programs in which banks cooperate within the initiatives of the Central Bank?

In this context, loan installments postponement for the current month of June, as announced by the Governor of the Central Bank, Dr. Ziad Fariz, will be through the application of those who cannot pay their installments to the bank to review it and take the appropriate decision. Here, I would like to point out that some of those who have postponed installments and benefited were not originally from those affected by their income, so part accepted the postponement and another part referred to the bank and paid the installment based on personal desire, as bank installment is an obligation in the end, whether it is a real estate, housing or personal loan or others.

Banks also implemented the Central Bank’s program to finance and support the economic sectors, which includes more than 10 sectors that contribute to GDP, namely: (industry, tourism, agriculture, renewable energy, information technology, transportation, health, technical and vocational education and engineering consultancy, in addition to the export sector). Sectors were granted to longer grace periods and tenures of up to 10 years, and higher credit ceilings were also adopted.

• Can you describe to us the partial ban period scene and your dealings with it as a result of the “Corona” pandemic?

Banks have adopted many measures after the partial closure period and the return to practicing their business to provide the best health safety practices for their clients and employees in order to prevent the spread of “Corona” by reducing the number of workers in their branches and providing the necessary health supplies for such as sterilizers and masks knowing that banks have a technological infrastructure that is the best regionally, as electronic banking services are available and the visits to branches are limited to some operations. We must appreciate the role of the security services and the armed forces for their contributions to help the entire banking system meet the needs of its clients.

We do not forget that even during the period of the total ban, the process of supplying ATMs was going perfectly, and the ATMs remained operating around the clock and provided with the necessary cash, as their number exceeded 2000 ATMs. The process of supplying cash through automated teller machines (ATMs) has been successful as a plan for this has been developed since the beginning of the “Corona” crisis by bank departments and in partnership with the Central Bank in order to meet the needs of their clients who wish to obtain cash.

The banking system worked reliably to support all national effort with an effective social contribution through all the funds announced by the government within its national duty and with the aim of helping people overcome the economic effects of the “Corona” crisis which were distributed on the “Hemmat Watan”. “Hesab Al-Saha” and the “Hesab Al-Kheir” programs. Banks contributed to these funds with a total value of more than 30 million Dinars.

The Central Bank, in cooperation with banks and the Loan Guarantee Corporation, has launched a program to support small and medium-sized companies affected by the “Corona” crisis with a value of 500 million Dinars. Can you tell us about this program and the extent to which companies benefit from it and who are the targets?

Yes, in parallel with the postponement of loan installments, the soft financing program for small and medium-sized companies launched by the Central Bank, with a size of 500 million Dinars, to confront the “Corona” crisis, was implemented with a guarantee from the Jordanian Loan Guarantee Company. It is being implemented as planned according to the objectives and controls specified in the programme. ABJ published a guide on this regard that including questions and answers. Anyone interested in learning about the program can use this guide available on the Association’s website.

The mentioned financing program has clear instructions from the Central Bank and aims, in essence, to facilitate financing for professionals, craftsmen, owners of individual institutions and small and medium-sized companies with less than 200 workers. The financing mechanism is guaranteed by 85% of the Jordanian Loan Guarantee Company, and 15% are borne by the banks.

Until the end of last May, the number of requests received by banks to benefit from the program amounted to more than 4,000 requests. Up to that date, 2,341 requests had been approved, with a total value of about 233 million Dinars, and the average value of the approved loans was 99.5 thousand Dinars. . Here, I must point out that more than 73% of the value of the loans within this program were less than 250 thousand Dinars, bearing in mind that the percentage of what was granted for salary purposes from these loans is 50%; That is, approximately 116 million Dinars of the value of the applications submitted, and it served about 52,043 workers on the job, and it is paid directly to the employees’ accounts; The government’s decision to bear the interest portion of the loan for payroll purposes encouraged companies to pay salaries and retain their employees.

With regard to the mechanism of implementing the program, I wonder: What is required of the bank when someone applies to benefit from the program and does not have any details about the facility such as sufficient records or social security numbers for its employees? Certainly, the credit decision will be impossible, because it does not meet the simplest objectives for which the program was established.

The mechanism for granting the soft financing program to small and medium-sized companies is based on the basis that the banks initially study the credit request and its consistency with the instructions of the financing program then conduct analysis and credit study according to the professional bases and powers applicable to each bank. The program prevents the refinancing of previous loans, and it is closely followed up by the Central Bank to ensure that banks comply with the speed of implementation and with all the instructions and conditions of the program.

Banks work in this field calls for evaluating the solvency of clients, reviewing their credit history and ensuring their ability to meet future obligations arranged by the loan. There were several cases of companies suffering from credit problems, such as the multiplicity of existing finances, the presence of delays on several previously granted loans or the presence of many unpaid financial cases or claims before the “Corona” virus. Honesty and professional responsibility require that money not be wasted and provided to these companies with the banks ascertaining that the client is unable to pay.

When we look at the implementation of the soft financing program for small and medium-sized companies, the distribution of the value of loans according to their size took place on four segments; The first: the percentage of loans less than 25 thousand Dinars, its share amounted to 2.5%, the second, the percentage of loans from 25 thousand to 100 thousand Dinars, 25.4%, and the third loans from 100 thousand Dinars to 250 thousand, and its share of the total loans reached 43.8%, and the fourth loans are higher than 250 thousand Dinars, and its share of the total facilities amounted to 27.2

The facilities granted through the Small and Medium Enterprises Support Program were sectorally distributed to: the retail sector with 34.6% of the total approved loans amounting to 233 million Dinars until the end of May of the total program of 500 million Dinars, followed by the manufacturing sector by 20.5%, then the education sector, with 7.7%.

• What is the suitability of the interest rate cut announced by ABJ to market expectations?

Banking sector in Jordan operates in a competitive framework, and during the beginnings of the “Corona” crisis, specifically on April 13, the operating banks reduced interest rates on monetary policy tools by 1.5%, and many individuals and companies felt the impact of this. It took place at that time, regardless of the periodic pricing of those facilities stipulated in the credit contracts, in accordance with the policies followed by the banks.

Today the matter is somewhat different, and I will explain to you in detail, the banks’ initiative to contain the repercussions of the “Corona” virus crisis, in which the reduction rate reached 1.5% at once, from which more than 270 thousand customers benefited. Banks started the initiative, therefore, they placed a commitment on themselves that this reduction will take place at the beginning of last May, meaning that the interest on loans and facilities will be reduced by that percentage according to the periodic pricing of these facilities stipulated in the credit contracts. This will be directly as a gesture by banks to complement the various initiatives implemented by them to support national efforts and many economic sectors affected by the “Corona” virus. After the launch of this initiative by ABJ, banks began announcing their intention to reduce interest rates since May, without waiting to review the contract between the client and the bank. So, I think that the reduction rates are appropriate and contribute to alleviating the burdens of borrowers in this period of “Corona” crises.

• What are the most important sectors benefitting from lowering interest rates?

Banks’ initiative to reduce interest rates included all sectors and borrowing categories, divided into three categories, which are for individuals and retail customers, with a total of 1.5%, and to reduce interest rates on facilities for small and medium-sized companies. Here I would like to repeat that this will be at the beginning of May, regardless of the date of periodic re-pricing of those facilities stipulated in the credit contracts. Individuals, retail customers and small and medium-sized companies will directly touch the effect of the reduction.

The other part that was included bank’s initiative with a percentage of 1%, are those who used to be called best clients. Here we must make it clear that this designation stems from banking concepts that classify clients according to the degree of risk, in a different sense, “they are those with low risks,” not for other reasons.

 

This way the reduction would have included retail clients, small and medium-sized companies and lower risks clients. This is a summary of the banks’ initiative to contain the repercussions of the “Corona”.

• Some believe that interest rates are still high in Jordan. Are you thinking of new measures by banks to mitigate the effects of the “Corona” crisis on the national economy?

Interest rates are determined by international economic cycles; the interest decreases if it is deflationary and rises if it is expansionary. Today, what is being done is to move towards the reduction in order to contain the “Corona” crisis, as well as according to the pricing equation based on the risks of the borrower, therefore, interest rates are low if compared to last year. If we monitor the development of matters, we find that there has been a consecutive reduction in order to contain the crisis and preserve the integrity of the national economy through the policies pursued by the Central Bank. Banks also take the initiative to reduce interest in a participatory approach that supports national efforts in preparation for accelerating the containment of the crisis and recovery, if God wills, after Corona.

In sum, there are several main factors that can affect interest rates in Jordan, which are represented in the regional competition to attract deposits, the internal competition on the basis of which interest rates are determined and the monetary policy of the Central Bank.

For more clarification, there is competition to attract deposits globally by banks as banking is not only limited to borrowers. Clients’ deposits must be preserved and used optimally and employed within acceptable returns and proportionate risks, and this is the second party in banks’ work. Moreover, a bank shareholder expects to achieve cash dividends or free shares in return for his/her investment in this sector which is the backbone of the Amman financial market.

Therefore, we find that the managements of banks operating in Jordan and working under the supervision of the regulatory authorities in the Kingdom have gained their reputation and strength as a result of prudence, adherence to instructions and keeping pace with international best practices in all standards to maintain their international reputation.

This leads us to be proud that at the time of the comprehensive ban during the “Corona” pandemic, the operations of opening commercial credits to import foodstuffs, fuels and other basic materials to sustain the flow of goods and merchandise necessary for the country were continuing. Banks in Jordan were efficiently undertaking this task as part of their main role by addressing the banks Correspondence, and all these operations were completed in an optimal manner. On the other hand, there were problems faced by banks in the region, until the correspondent banks were unable, or rather, refused to accept these credits to some countries in the region, and their citizens suffered from a lack of flow of supplies, which we did not witness in the Kingdom at all, given the excellent reputation of the Jordanian banking system in the region and the world. This is a gain that must be preserved by keeping the sector immune because in the end it is in the interest of the national economy and all economic sectors in the country.