9 Guarantee n
while loans to large entities can reach €25m. During the first 12 months of this scheme (April 2020 – March), the average loan per facility stood at around €785,000. Almost 90% of the beneficiaries are classified as SMEs, whereas 60 are large entities (see Chart 2). As larger firms require a higher level of working capital, the requested loans of these enterprises were as expected higher (averaging €3.1m) than those requested by smaller firms (averaging €470,000).
Cashflow shortages may result in significant financial difficulties and a possible loss of productive capacity for the economy. The MDB is proud that by strengthening the working capital positions of local enterprises such adverse scenarios were largely neutralised.
As at end March, the bank’s total financing volumes, including all guarantees and loans, stood at close to €490m, predominantly spurred by the CGS, and to a lesser extent by the SME Invest facility. The impact of these schemes is notable on a national level. Data published by the CBM show that outstanding loans to nonfinancial corporations (NFCs) residing in Malta exceeded €4bn, with loans covered by MDB guarantee schemes accounting for more than 10% of this sum. Moreover, when looking at the bigger picture, over the same period, MDB’s support to local businesses has reached close to 4% of total lending in Malta (see Chart 3).
As can be seen in Chart 4, lending to NFCs (including loans supported by MDB) expanded by an annual rate of close to 8% as at end of March. Without MDB’s intervention, such lending would instead have contracted by 4%. This marked role is also noticeable when looking at the headline total lending in the country, with MDB-guaranteed loans contributing 4.1 percentage points or 60% of the overall credit growth of 6.7%, recorded during the year to March.
More recent data shows that more beneficiaries continued to apply for the CGS. Till the end of the scheme’s applicability period on 30 September, over €330m of additional guaranteed facilities remain available through intermediating commercial banks. The MDB encourages economic operators and their representative bodies to continue engaging with commercial banks and take advantage of the favourable terms of this scheme.
Prof Josef Bonnici, Chairman at Malta Development Bank
Chart 4