We at Bondster are doing maximum to ensure the safety of your investments and will continue doing so. Therefore, we bring you information about government measures and financial support in reaction to the current coronavirus crisis in the upcoming days.
Colombia (update 9th June 2020)
The government declared a state of emergency on March 17, and a quarantine has been in place since March 25. This is currently scheduled to last until at least July 1, with mandatory confinement to last until August 31 for those over 70 years old. Other measures to contain virus transmission have included travel bans, border closures, and a suspension of classes. On even days women can go out to buy basic necessities, on odd days just men.
The local economy has been reopening as the construction and manufacturing sectors were allowed to restart operations on April 27, and an expanded list of industrial and commercial services sectors restarted on May 11. Other services, including selected retail segments, were allowed to reopen on June 1, although local jurisdictions (including Bogota) have been slower to ease restrictions.
Colombia has not introduced any moratorium for banks or non-bank lenders. Still, banks are not allowed to increase interest rates on loans, charge interest on interest or report entities to credit registries for availing themselves of any forbearance measures.
To help the economy, the Central Bank has cut the policy rate by 150bp and has implemented several measures to boost liquidity. The government was allowed to suspend the fiscal rule in 2020 and 2021, which gave it the additional budgetary support to implement measures to counter the effect of the coronavirus outbreak. These include additional cash transfers for the most vulnerable, VAT rebates for the poorest, tax deferrals for companies, and financing support for SMEs.
Poland (update 23rd June 2020)
The Polish government declared a state of emergency on March 14th and due to the growing number of active coronavirus cases, it introduced strict measures to prevent the spread of COVID-19. After a month and a half, when the virus entered a stabilization phase, the government outlined a four-stage plan to reopen the economy. Shops, public parks, and forests were gradually reopened. The fourth stage of the lockdown easing plan started on June 1st, with the opening of cinemas, playgrounds, and gyms, all with stricter sanitary regimes than normal. To mitigate the impact of coronavirus, the local government introduced the so-called anti-crisis shield and financial shield, aiming mainly on helping small and medium-sized enterprises and micro-businesses. In the first phase, it was released around 10 % of GDP. Polish authorities implied interest caps on consumer loan interest rates of 9 % p.a. and non-interest costs were decreased from 100 % to 45 % of the total loan amount. Polish Association of Loan Institutions issued recommendations concerning how companies should act in this difficult time of COVID-19 pandemic. These include extensions of loans for a necessary period of time, according to the borrower’s situation, which will be individually evaluated on the basis of documents provided in the application for extension and updating of scoring models while taking into account the current situation. Most companies have already stopped issuing new loans. Local providers operating on Bondster Marketplace in response to these recommendations have started cutting costs and accumulating cash reserves. As a result of the adjustment of the scoring model, providers now focus on lending only to existing clients with sufficient income.
Russia (update 6th May 2020)
Russia has not implemented any credit holidays in mandatory form; however, people that were directly affected by COVID-19 can apply for it. The Central Bank of Russia has also sent a recommendation to all financial companies, that in case the borrower has a proven COVID-19 diagnosis, or in case the borrower’s proven income reduced by more than 30% to extend the loan for up to 6 months, these loans won’t be considered as outstanding. The customer has 90 days to provide the documents about the diagnosis or the certificate of income reduction. In case the documents will not be provided, the loan originator can apply fees and penalties for the whole loan term (but not more than x1,5 of the loan principal). As for now, paid holidays have not been given by the Russian government. The national currency is stabilizing after oil prices bounce-back. In response to these recommendations, local providers have taken measures such as a slight decrease in the issuance of new loans, cutting of costs, cash accumulation and adjustment of scoring models in order to approve only clients with positive credit history. Russian president Vladimir Putin has decided to end the period of mandatory non-working holidays in the country, effective May 12, applicable to all industries. However, restaurants and shopping centers remain closed. Health protection measure also remain in force, the mandatory wearing of masks and gloves in public places. The number of infected in the country exceed 240 thousand. The city most affected by pandemic is Moscow, where the number of people infected exceeds half of the total number of people infected in the country.
Philippines (update 23rd June 2020)
Philippines were under an ECQ "enhanced community quarantine" since 17th March, and the government implemented several mitigation measures, such as suspension of flights from high-risk economies, restrictions on mass gathering, and school closures. The coronavirus lockdowns are considered to be one of the strictest in the world. Despite having the third-highest number of coronavirus cases and the second-highest official death toll in Southeast Asia, the government gradually moved areas into a "modified enhanced community quarantine" or "general community quarantine, "depending on how risky those areas were. Most businesses reopened, and people can now leave home without government permits. In easing the measures, Philippine President Rodrigo Duterte had to balance between protecting the country's more than 107 million people from COVID-19 while reviving the economy facing its most significant contraction in more than three decades. "The virus is frightening, but it's either you die from the virus, or you die from hunger," a salesman said as he entered a train station where commuters had their temperatures checked. The government announced a PHP 27,1 billion (approx. EUR 0.5 billion) fiscal package to support the economy with financial assistance to affected SMEs and vulnerable households through specialized micro-financing loans and loan restructuring. The funds are also used to purchase relevant equipment to improve local health care. Eligible low-income households are expected to receive cash transfers under another PHP 200 billion (approx. EUR 3.6 billion) cash aid program. In addition, the government introduced unemployment benefits equivalent to 50 % of their average monthly salary. The help also comes from companies as some of them have committed to continue salary payments, while others are providing funds to help employees. The Central Bank cut interest rates thrice this year by a cumulative 125 bps to 2.75 % and approved the purchase of government securities to mitigate the impact of COVID-19. The Central Bank also announced a series of regulatory relief measures intended to encourage banks, in turn, to provide financial relief to their borrowers. The Bankers Association enforced a nationwide moratorium on loan payments, which ended at the end of May. During the grace period, it was not allowed to incur any interest on interest, penalties, fees, and other charges. The Philippine originator, Right Choice Finance, described that they are in regular contact with their customer base and have sufficient reserves to cover several months of operations even in a worst-case scenario of collections coming to a complete halt. The originator reduced issuing new loans, however starting from 1st June, the company's operations have been going back to normal.
South Africa (update 28th April 2020)
Many measures are now available to help South African businesses and individuals. During the coronavirus crisis, companies experience reduced revenue and consider cutting staff numbers. The Government has, therefore, introduced a range of tax breaks that could help reduce these job losses and support cashflow. The companies can also apply for money to help pay their workers as part of the special Temporary Employee/Employer Relief Scheme. Businesses are also able to start applying for particular government-backed Covid-19 loans from South Africa’s commercial banks. The big benefit to borrowers is in the timelines for repayment as no money has to be repaid for the first six months. Companies that can show they are incapable of making payment due to the crisis, can apply to defer tax payments without incurring penalties. Major banks in SA offer various options to assist consumers impacted by the COVID-19 disaster. Most of the assistance comes in the form of three-month debt holidays on loans ranging from mortgages to credit card balances. Despite all the incentives, many South Africans face retrenchments, short time, or compulsory unpaid leave as a result of COVID-19 and subsequent 21 days lockdown. The situation should improve as the country will start to ease virus lockdown in bid to revive the economy on May 1, allowing a maximum of one-third of workers to return to work. The current state of economy, however, worsens debtors’ willingness to pay and negatively affects the debt collection process. In reaction to these events, Lime SA, the only Bondster originator in this country, allocated more resources to its collection departments that introduced different payment plans and offered discounts to its clientele to ensure maximum recovery of outstanding loans. In addition, it has reduced loan amounts on new loans, requires higher credit rating, employment verification, and overall, it has stricter financial affordability criteria.
Kazakhstan (update 6th May 2020)
The state of emergency declared to combat the spread of COVID-19 was extended until May 11, 2020. However, in case the situation doesn’t worsen, the state of emergency will be lifted. In several large regions, including the cities of Nur-Sultan and Almaty, measures started to ease, aiming to revive the economy as a whole. In particular, from April 27, the activities of construction and manufacturing enterprises, as well as second-tier banks in compliance with sanitary and epidemiological standards, are permitted. From May 4, it is allowed to carry out activities of non-food stores, hairdressers, medical and dental centers, information and communication technology companies, as well as financial organizations - microfinance, insurance, exchange office, and pawnshops. Tez Lombard, the only loan originator from Kazakhstan that is on Bondster, operates as a pawnshop. All its loans are secured by high liquid assets, mostly gold, but also other precious metals. We were informed that their branches are gradually opening and will re-accept customers. The government announced that loan repayments would be deferred for citizens and SMEs affected by the crisis starting from March 23, 2020. The Office for Regulation and Surveillance together with the Association of Financiers of Kazakhstan, second-tier banks, and other subjects of the financial market have agreed on the following measures: The borrowers who ask for deferment of their installments during the emergency and prove their financial situation has aggravated due to the crisis-related measures will be granted a 3-month deferment of their loan installments. This applies to all loan agreements concluded before March 18, 2020. The installments will be deferred, but it will still be possible to accrue interest during the period.
Mexico (update 28th April 2020)
The Federal Government announced social distancing measures to begin on 23rd March. Mexican Foreign Affairs Secretary Marcelo Ebrard announced that businesses and employers that don’t pay their employees their wages in full, dismiss workers or continue to operate even though they don’t offer a service that is considered essential, will face administrative sanctions such as fines or closures. President López Obrador said that the Government would provide interest-free or low-interest loans to 1 million small businesses to cope with the situation around COVID-19. He also ruled out any possibility of waiving taxes for large companies and said that there wouldn’t be any rescues neither for banks nor corporations. On 22nd April, the Mexican Government announced the aid package of about $25.5 billion in order to help the economy. The rescue package will include 38 priority governmental projects mainly focused on the crude production sector, such as rehabilitation of 6 refineries, construction of a new refinery, and power generation. The day before, the Mexican central bank cut the benchmark interest rate by 50 bps to 6 %. It unveiled a $30.8 billion stimulus for the financial system with about one third determined to a financing facility for banks to boost lending. According to the Mexican central bank, this support should strengthen the financial system, credit channels, and provide the missing liquidity. The Government hasn’t approved any moratorium or credit holidays that would affect the local originator Lime MX. Lime MX reacted to the situation by having constant contact with clients and implemented a more selective approach when providing loans. It rejects to lend to those people who work in a risky sector where they are likely to lose a job, and their repayment capacity will get low in the future. The limit for new customers has also been decreased in order to minimize default. Among other things, the originator also offers flexible payments, promotions for early repayments with discounts, and penalty interest freeze to motivate clients for repayments.
Bulgaria (update 23rd June 2020)
The state of emergency issued in mid-March has been replaced with an extraordinary epidemic situation until June 30. The government initially implemented a range of containment measures, including social distancing and travel restrictions. The local economy is reopening and relaxation measures include the lifting of travel restrictions, relaxed requirements for mask wearing, increased accessibility to open spaces and reopening of open-air restaurants while securing minimum distance between tables, reopening of kindergartens and nurseries, and shopping malls, etc. The government plans to lift all anti-epidemic measures on June 30 but wearing masks in public will probably remain advisable. The government has announced various measures to help the economy, such as providing low-interest loans and direct financial supports to SMEs. The government has allocated BGN 4.5 billion to sustain economic development. Administrative deadlines have been postponed for all businesses, and the Corporate Tax deadlines have been postponed by two months. On April 10, 2020, the Bulgarian National Bank approved moratorium, which provides the opportunity to change the schedule for payment of the principal debt and/or the interest, without changing the general parameters of the credit contracts, e.g., the interest rate. It is possible to defer obligations until December 31, 2020, if the respective contract has been concluded before March 31, 2020. The terms of the moratorium apply for banks and financial institutions, which are subsidiaries of banks. Non-banking institutions are excluded; however, they are banned from accruing penalty interests on overdue payments for the duration of the extraordinary measures and limiting court proceedings against debtors. Local loan originator, Stik Credit, maintains positive cashflow position and has always met his debt obligations towards Bondster. The company also adjusted its risk policy and scoring models by focusing on existing customers and customers with a low-risk profile. In addition, it reduced its marketing and sales activities. The originator’s currency risk is minimal as the local currency, Bulgarian Lev, is pegged to the Euro.