my guess is that the loans are not profitable for the banks - and the banks don't really want to manage these loans - many of which might be just a few thousand

my guess is that the loans are not profitable for the banks - and the banks don't really want to manage these loans - many of which might be just a few thousand dollars. Because it is a government program it is likely the banks don't want to be seen (by lenders or the government) as making a profit (even if they were just trying to cover costs). Program restrictions likely prevent banks from using fees to make a "profit" since 0% interest doesn't leave much room for banks to make money. I assume the government funds the loans and I assume the government doesn't underwrite the liability. I would guess the funding is limited and the government is very tight, restricting any potential profit for the bank. You'd need to look at the government documentation.