What is the role of the MDB?
The Malta Development Bank (MDB) was established by the Government in 2017 to support the social and economic development of our country, by offering financial facilities that encourage investment in those areas where traditional financial markets are unable or unwilling to support on their own. The MDB is not a bank in its traditional meaning: it involves itself in specific sectors where credit institutons are reluctant to do so on their own, generally because the potential returns on a project do not fully compensate for the risks involved. The MDB collaborates with commercial banks by providing guarantee and co-lending facilities which act as a stimulus for additional investment financing. The MDB keeps itself in direct contact with the banks and the business community to identify investment gaps and challenges and to chart a way to address such market needs.
Which projects does the Bank finance?
The MDB’s activities focus on complementing and supplementing the operations of market players in the provision of finance, particularly to SMEs, infrastructure projects that contribute to national or regional development, and projects which are socially-oriented, energy efficient and environment friendly.
How can the MDB help a business during the Covid-19 pandemic?
The MDB provides credit risk mitigation and capital relief that supports commercial banks in unlocking credit to businesses for working capital purposes at favourable terms. Government allocated a guarantee fund of €350 million for MDB to develop, administer and implement the scheme through the intermediation of nine local commercial banks. The underlying guarantee of 90% on each working capital loan, with a cap at the portfolio level, provides capital relief to the banks, which enables them to leverage these funds at very favourable conditions. Government’s guarantee was thus leveraged to €780 million. Through the Covid-19 Guarantee Scheme, the MDB is providing easy access to otherwise-unavailable liquidity, reduced collateral requirements, and a moratorium on repayment of both capital and interest. This Guarantee Scheme is complemented by the MDB’s COVID-19 Interest Rate Subsidy Scheme through which all guaranteed loans benefit from an interest rate subsidy of 2.5% during the first two years of the loan. Through these MDB support schemes, which are currently being intermediated through nine commercial banks, businesses of all sizes can obtain the necessary liquidity to cover salaries, rental payments, utility bills and other payments of an immediate nature.
What assistance do you provide to SMEs?
Through SME Invest, a scheme specifically tailored for SMEs, the MDB supports investments made by smaller companies, particularly those involving innovation, digitalisation and, more broadly, the preservation and enhancement of competitiveness. This facility, which is intermediated through a commercial bank, targets those SMEs planning new capital investment projects and provides easier access to finance through reduced collateral requirements and finance costs. Enterprises may seek bank financing up to a maximum of €750,000, at attractive interest rates and reduced collateral obligations. The MDB provides a guarantee of 80% on loans approved under this scheme. This enables enhanced access to new investment financing, as these loans are both affordable and accessible, even for those SMEs that may have limited assets that can be collateralised.