700 businesses, 400 students benefiting from €580 million in favourable financing schemes from MDB
The Malta Development Bank has reached over 700 businesses which employ some 40,000 persons, and more than 400 students, who have benefited from over half a billion in favourable financing schemes.
During a business breakfast hosted by the Malta Development Bank, a promotional bank aiming to bridge financing gaps in the country’s economy by offering favourable financing solutions to support productive and viable operation, Chairperson of the MDB, Josef Bonnici, presented the first MDB Annual Report for 2022, after five years of operations.
The Malta Development Bank acts as an institution which stabilizes the economy in certain crisis situations, while having been set up to enable the economy to be supported in times of stress.
The bank was crucial in implementing schemes such as the Covid19 guarantee scheme, as well as schemes providing aid due to the impact of the Ukrainian crisis, along with aid in loans to SMEs and students.
The bank collaborates with government and commercial banks to take on potential risks, as well as providing loans with low interest to attract businesses and students alike, intended for the purposes of supporting capital.
Bonnici said that studies have found that Maltese SMEs are the most reliant on financing as related to working capital, while showing also that the Covid-19 guarantee scheme was predominant.
He said that €160 million in loans have already been paid, and that exports and tourism have recovered, with consumption remaining high.
Bonnici said that to address the crisis stemming from Russia’s war in Ukraine, the MDB had to move quickly to introduce a number of schemes so as to soften the blow of rising costs.
He said that direct loans were given to grain importers so they could stock up on grain just in time before supply was heavily threatened, the loans of which were supported by partial guarantees and interest subsidies by the government.
Bonnici said that last year, two additional schemes were launched - the flagship schemes - which also includes a co-lending scheme, where half of the requested loan is provided directly by the MDB, with commercial banks covering the other half. The MDB would cover 60% of the risk carried by the commercial bank.
The Further Studies Made Abroad and the FSMA+ schemes accesses European Social Funds (ESF), which serves as a guarantee for the creation of a loan portfolio of up to €15 million being available as financing to students who wish to further their studies.
Bonnici said that the scheme encourages students to study overseas, as well as helping to finance accommodation, living and travelling expenses in addition to the tuition fees on favourable terms. The loan can be repaid over 10 years with guarantee from the ESF, as well as low interest.
Bonnici also announced that the MDB’s financial performance has led to a profit, which was not the prime objective, however was still a positive. The profit for the year has reached €1,180,414. Bonnici said that that the MDB is autonomous from government, and that the loans do not make part of the national debt.
The MDB’s capital support from government has also increased from an initial €30 million to €80 million, despite the financial constraints which were faced over the years.
CEO Paul Azzopardi continued that the MDB’s role in leveraging public resources had started in 2017, after an Act was passed in Parliament, and was allocated €30 million in capital.
He said that with the increase, the MDB enables government to achieve the benefits of financial leverage by magnifying the impact of its equity capital. The MDB is managing €551.5 million in off balance sheet assets.
Azzopardi said that the MDB represents 13% of total loans, whilst explaining that in 2020, without the promotional bank and government guarantees, the country’s credit would have declined. Instead, it rose to 9%.
He said that going forward, the MDB will continue acting as a catalyst for loan syndications, fostering relationships with international and local banks, helping to pool in diverse suppliers of credit so as to accommodate the financing needs of larger projects and embracing Environment, Social and Governance criteria (ESG) both internally and externally, whilst emphasising on the importance of more companies who are seeking finance from the EU to meet certain ESG requirements
Azzopardi also said that the MDB will continue to collaborate with public entities, such as the Malta Enterprise and others, in order to combine incentives and grants with loans.
Chief Business Development Officer, Joseph Darmanin, said that a promotional bank’s mission is to identify market failures in Malta, and to support socio-economic development.
Darmanin said that the MDB will be setting up an ESG strategy by the end of this year, together with reviewing policies and eligibility criteria so as to comply with ESG requirements.
He said that over the years, the amount of SMEs benefiting from schemes had amounted to 426, with 61 large enterprises. He said that when the GDP of the country starts declining the MDB support increases, and vice versa, thus taking on a counter-cyclical approach.
Darmanin said that it was important for the MDB to serve as a financial body and instrument to mobilize EU funds in a smart manner, given that it is a local based institution which understands the needs of the country’s economy.
He emphasized that the scheme favouring students provides no collateral, and that students pay nothing while they are studying, with low interest.
He mentioned the SME Guarantee Scheme (SGS), which facilitates SME access to bank loans so that they are able to continue to invest in their business. Companies can secure loans of up to €750,000, with the MDB providing a guarantee reaching 80% of this financing.
Finance Minister, Clyde Caruana, also addressed the conference, commending the MDB for what it has managed to achieve over a short period of time, whilst urging it to keep on track so that it can become more self-sufficient.
Caruana spoke about the Covid-19 scheme, where government and the MDB were convincing reluctant banks to take up the Covid-19 scheme, so as to continue to provide support for businesses in order to keep them afloat.
Caruana added that while it is good to look at the past, we must be ambitious on the future. He said that future challenges will look into one of the areas where the bank looks forward to invest in, which is the theme of going green.
He said that going green is the top most priority in the European
Union, as due to circumstances happening around the world. Caruana said that due to the Ukraine crisis, Europe must diversify its energy mix, while becoming more independent on energy production and sources originating within the EU, rather than through imports.
Caruana said that the Finance and the Energy Ministries are working on reinvestment in renewables, as well as adding that before Parliament adjourns for the summer, Caruana will be in a position to present an Act leading to the improvement of exclusive economic zones, thus enabling the government to use a vast area at sea.
He said that there has been significant interest from major players of the world, including more than 15 proposals, as for investment in offshore floating wind farms.
Caruana said that the amount of investment that the government is looking at will contribute to as much as 40% of the country’s electricity, coming from wind, in addition to 12% of solar energy, thereby putting Malta above the threshold.
“Hopefully, within five or less years, we will have the materialisation of this investment, and we would be more than happy to see the MDB become a part of this, giving it an opportunity to grow. When this project materializes, it would see the biggest investment this island would experience, which could reach up to €4 or €5 billion”, Caruana said.
He continued that the government would carry a revenue stream to whoever invests in such wind farms, thus exploiting the exclusive economic zone and contributing positively in terms of growth.
“I firmly believe the time has come for the country to use our sea. Within the 25th nautical zone, we have more than 9,000 square metres of land to use for offshore floating windfarms, and the depth increases”, Caruana further said.
Caruana emphasized that the government and companies must look at things which made more sense in line with the needs of the community, as well as looking beyond to what we have done so far.