By George Psyllides
The Co-operative Central Bank (CCB) on Friday unveiled a €34 million scheme to support small and medium businesses (SME).
Officials said a second phase will follow with an additional €34 million earmarked for SMEs.
“This day is symbolic and significant because it closes the transitional stage we are in,” said CCB chairman Nicolas Hadjiyiannis said.
The co-operative movement has undergone the biggest overhaul in its history, as it came under state ownership.
As part of the island’s €10 billion international bailout, co-ops will receive €1.5 billion in taxpayers’ money to recapitalise.
The sector has been reduced in size through mergers – 93 co-ops were reduced to 18 — which were concluded last month.
“The co-operative sector’s transitional stage has been completed and from today we are entering the operational stage, a stage in which we ought to show substantial and actual work in financial issues,” Hadjiyiannis said.
Hadjiyiannis and CCB general manager Marios Clerides stressed that the loans will only be afforded to healthy, reliable companies, which can pay them back.
Clerides said they will not be giving out loans that cannot be repaid at the end of the day.
A lot of conditions would have to be met but this is not because they want to make it difficult for people, but to protect them from taking a loan they cannot repay and get into trouble, he added.
“This is the way we see it. If we are going to enforce strict loan criteria it is to protect my customer in the future,” Clerides said. “It is not my role to sell land and homes. My role is to grant the loan if it is viable and not grant it if I believe there will be problems.”
The scheme provides for loans between €30,000 and €500,000 with a repayment period of up to 12 years, including a two-year grace period.
The rate will be fixed at 5.25 per cent or 4.75 per cent if the loan falls under the Jobs for Youth scheme.
The scheme is partly funded by the European Investment Bank – €25 million.
As with commercial banks, co-ops are also struggling with non performing loans, which reached 47.7 per cent or €6.36 billion.
Clerides said many NPLs can be serviced, adding that a lot are considered as such due to the way the sector operated.
He acknowledged that co-ops did not send letters to borrowers who were late “so we believe there are many who can service their loans and we simply did not ever tell them to work with us in sorting them out.”
Hadjiyiannis said that in the past there was a practice of not paying instalments during certain periods, something that caused loans to be classified as non performing when the definition changed.