The Malta Development Bank is “shifting gears” to become an EU funding partner, allowing it to better serve Malta’s economic transformation over the coming years, says Bank Chairman Professor Josef Bonnici.
In an article posted to the Malta Financial Services Authority (MFSA), Prof. Bonnici said that during the pandemic the MDB, a relatively new institution on the island, quickly adapted to become a key channel for the delivery of anti-crisis measures.
“Among the support initiatives to address the pandemic repercussions,” he said, “the most impactful was the MDB COVID-19 Guarantee Scheme, which has provided a lifeline to more than 570 businesses employing more than 40,000 employees.”
The MDB has already facilitated more than €440 million in working capital loans through nine local commercial banks, with an additional €340 million worth of loans still available.
This scheme is aimed at helping businesses with their salaries, rental payments, utility bills, loan repayments and other payments of an immediate nature.
Now, as “a much-sought after normality approaches”, the MDB is shifting gears in order to be able to support Malta’s economic transformation by providing the right tools for sustainable, longer-run growth, in line with the wider national and European objectives.
It will be facilitating investment in green infrastructure projects, innovation and digitalisation, as well as projects with a social dimension.
“In this context,” Prof. Bonnici said, “the Bank’s policies and incentives are being re-aligned to priorities being pushed by both the national Government and the European Union as key elements of the recovery.”
In particular, the MDB is working on a new co-lending scheme through which the Bank will enhance its risk absorbing capacity and ensure a more intensive benefit to the ultimate beneficiaries.
This initiative will consist of a financial product where the MDB would be making available a portfolio of €100 million through co-lending with commercial banks on a 50-50 basis, as well as providing a partial guarantee on the commercial bank’s share of the loan.
Prof. Bonnici stressed that the MDB sees commercial banks as “essential partners in our efforts to provide development finance”.
Additionally, as Malta’s promotional bank, the MDB is also seeking to mobilise EU guarantees in order to strengthen the Bank’s role as an enabler of growth.
“The available support at the EU level can enable the MDB to take on additional risks and provide even more attractive financial instruments that reflect the market needs post-pandemic,” explained Prof. Bonnici.
Through the InvestEU Programme, the EU is expected to enable the mobilisation of an unprecedented €400 billion to be invested across Member States from 2021 to 2027.
Unlike similar schemes implemented in the past, promotional banks such as the MDB, can apply to become direct implementing partners of the EU Budget.
Prof. Bonnici added that the MDB is therefore undergoing the necessary procedures to fulfil this role.
These schemes will complement the existent SME Invest scheme through which the Bank facilitates easier access to finance through reduced collateral requirements and costs.
Through this scheme, enterprises may seek bank financing for new investment up to a maximum of €750,000, at attractive interest rates and reduced collateral obligations due to the 80% guarantee provided by the MDB under the Scheme.
“As has been the case throughout the past months,” Prof. Bonnici concluded, “the MDB will be strengthening its proposition, and role, to encourage and facilitate Malta’s rapid resurgence as a vibrant and fast-growing economy in the months ahead.”
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