Lebanon’s finance minister, Fouad Siniora, has announced that the government will extend a subsidy program which would reduce the cost of borrowing for small- and medium-sized businesses.
According to the Daily Star, the plan essentially involves expanding a plan that began in 1997 for loans up to LL3 billion ($2 million), on which the government paid 5 percentage points of the interest rates on five-to-seven-year loans that banks made to companies in the tourism, agricultural, and industrial sectors. From now on, Siniora said, Beirut government would cover 7 percentage points of the interest rate on loans worth up to LL5 billion.
The measure is part of the government’s efforts at bolstering economic growth through productive industries, the finance minister said.
Speaking to the Daily Star, Fadi Abboud, head of the North Metn Industrialists’ Association, said the new measure should be coupled with a ceiling on the rates charged by local banks. The government has left banks free to impose the interest rate they want on customers, he stressed, noting that small businesses sometimes end up paying 9 percent interest rates after the government’s subsidy. A bank’s spread should not be allowed to exceed 10 percent, he suggested.
At present, loans in Lebanese pounds typically are extended with interest rates between 14 and 20 percent, while dollar-denominated loans have rates of at least 12 percent.
Siniora said the subsidy would also apply to bank loans that are partly guaranteed by Kafalat, the state-subsidized guarantee program for smaller loans. – (Albawaba-MEBG)