MDB launches two favourable financing schemes to facilitate €180 investment in economy

BUSINESS REVIEW

The Malta Development Bank (MDB) has launched two new schemes offering favourable financing to businesses which will facilitate investment of up to €180 million in the Maltese economy. The new schemes were announced by Prime Minister Dr Robert Abela during the inauguration of the new building of the Malta Development Bank on the occasion of the fifth anniversary from the establishment of the same Bank.

These schemes will offer advantageous financing rates to Maltese businesses, backing economic regeneration at a time of unprecedented challenges. These schemes will be operated through commercial banks with the support of the Pan-European Guarantee Fund (EGF) of the European Investment Fund.

TWO SCHEMES FOR THE DIFFERENT NEEDS OF MALTESE BUSINESS

The first scheme, the SME Guarantee Scheme (SGS) will facilitate SME access to bank loans so that these are able to continue to invest in their business. The companies will be able to secure loans of up to €750,000 with the MDB providing a guarantee reaching 80% of this financing. In total, the scheme carries a total of €80 million. Moreover, in collaboration with MCST through the Go-to-Market scheme, part of the SGS portfolio will be specifically allocated to start-ups willing to commercialise their technological and innovative ideas.

The second scheme is the Guaranteed CoLending Scheme (GCLS). In this scheme, the MDB will provide directly half of the requested loan, with the commercial banks covering the other half. At the same time, the MDB will cover 60% of the risk carried by the commercial bank. This scheme is targeted to support larger projects exceeding €750,000. This scheme carries a total allocation of €100 million, half by the MDB and the rest by the commercial banks. Dr Abela said that the objective of Government is to continuously support industry, businesses and jobs. He recalled how during the pandemic the MDB was instrumental in strengthening market confidence through guarantees issued by Government. “As a Government, we put entrepreneurs’ mind at rest that should liquidity be required to cover wages, bills and other expenses, the Malta Development Bank would be there to assist and facilitate”. MDB Chairman Prof Josef Bonnici explained how the MDB introduced a new form of financial intermediation by addressing gaps in the credit market. “The main objective of this institution is to be of support to the economic and social development of the country by working hand in hand with commercial banks and with other strategic entities to address the main obstacles faced by SMEs when seeking to secure financing”.

He expressed his gratitude and appreciation towards all those persons who throughout the past five years worked to transform the idea of a development bank into a reality and to elevate the MDB as the highly-reputable institution it is today.

MDB CEO Paul V. Azzopardi said that in a relatively short period of five years, the MDB reached over 700 businesses which employ some 40,000 persons, and almost 400 students, providing guarantees exceeding €600 million.

Mr Azzopardi added how the financing supported by the MDB currently contributes to around 13% of all outstanding loans towards Maltese businesses. The most visible impact was during the pandemic where business loans increased by 9%, while the lack of MDB support would have resulted in loans to decrease by 2.5%.