MDB creates tailored solutions to support investment
The Malta Development Bank is mandated with a broad remit of activities that focus on inclusive and sustainable economic growth. Through the close links the bank has with the business community it strives to maintain constant dialogue with stakeholders to ensure that the schemes address the needs of local businesses, particularly in such fluid economic conditions.
In this regard, the bank’s most recent indicators show that under the COVID-19 Guarantee Scheme (CGS) 436 businesses, the majority being SMEs, have already been supported with a total amount of €344m in working capital loans. The scheme has cumulatively safeguarded around 30,000 jobs.
The MDB is determined to further instil entrepreneurial spirit by maintaining these favourable working capital facilities accessible to all businesses in all economic sectors.
While cashflow is by far the most pressing issue during this period, the bank has other schemes that support new investments. The road to economic recovery will be long, but one with many opportunities to reframe a future economy that delivers sustainable growth. The MDB’s objective is to provide risk absorbing instruments that support businesses and help them realise these opportunities. The bank notes that there are instances of market failures relating to businesses that are considering a relatively large investment that may require a longer payback period than that normally offered by commercial banks or a project that may have a lower average rate of return, and the investor has little or no collateral to offer. While commercial banks can be understandably prudent and such projects may fall outside their normal risk appetite, the MDB believes that such investors should not be discouraged at inception stage.
The solution – the Tailored Facility for SMEs – targets beneficiaries with business ventures, in economic sectors or technologies which fall outside the risk appetite and tolerance of commercial banks due to reasons such as lower rates of return or insufficient collateral to satisfy the usual requirements of commercial banks or perhaps due to the novelty of the project. To be clear, the MDB is not targeting unfeasible propositions – the project must make commercial sense and be bankable. The project would also gain priority if it targets environmental, social, education, health or related dimensions. In this regard, the tailored facility can also be granted to public institutions and large private entities that promote sustainable and environmentally-friendly growth.
This initiative is intended to target ad-hoc projects, presented in a very flexible and innovative instrument. The MDB is offering financing of between €750,000 to €5m that will be equally granted by the MDB and one of the enabling commercial banks. Moreover, in specific circumstances and on a caseby-case basis, the MDB is willing to offer a partial guarantee to commercial banks on part of their lending. The MDB is determined not to allow potential bankable projects to slip through the financing net because they do not fit within the parameters of a particular scheme. Through the tailored facility the MDB offers a bespoke solution for SMEs with investment plans that exceed the €750,000 mark and are prepared to negotiate the parameters on an individual basis.
This scheme has already successfully supported one innovative project in the area of sustainable mobility. By supporting investment in clean energy and sustainable transport, the MDB performs a promotional role in line with public policy. MDB’s support to innovative projects in these sectors is an example of how the bank can act as a catalyst, by boosting private financing and narrow investment gaps. To this effect, the MDB keeps on encouraging local entrepreneurs to approach their preferred commercial banks and learn more about this attractive facility and other schemes.