Malta Development Bank to target digital and green investments as it readies post-Covid business support

Josef Bonnici
Prof Josef Bonnici, Chairman of Malta Development Bank

Last Updated on Thursday, 3 February, 2022 at 9:16 am by Andre Camilleri

Bank planning to launch two new schemes in coming weeks, on top of Covid-19 guarantee extension

An existing bank guarantee scheme to help businesses get through the Covid-19 pandemic has been extended until June, the Malta Development Bank said on Tuesday. Speaking to this newsroom Prof Josef Bonnici, Malta Development Bank (MDB) Chairman, also revealed further support measures are in the pipeline.

The Covid-19 bank guarantee scheme extension to June 30 has been approved by the European Commission, which also gave the MBD permission to modify scheme provisions, allowing commercial banks to extend loan periods in “exceptional cases and at the discretion of the commercial banks”. As a result, the loan term can be extended from 72 months to a maximum of 96 months (including the moratorium period). In the event of such an extension of the maturity, there will also be a change in the guarantee fees, which would be applied retrospectively and subject to other terms and conditions.

Speaking to the Malta Business Weekly, Prof Josef Bonnici said, “Although the local economy is showing encouraging signs of recovery, we are aware that not all economic sectors are recovering at the same pace. The extension of the Covid-19 Guarantee Scheme (CGS) will re-assure those entrepreneurs who may still be suffering the latent effects of the pandemic that they are adequately covered in case of liquidity needs in the months ahead.

I am hopeful that by mid-2022, the CGS will have served its purpose of being an instrument shielding businesses against the pandemic. We are proud to say that by the end of 2021, the CGS has covered close to 12% of all outstanding loans extended by the banking system to non-financial corporations in Malta.

At this juncture, the MDB is developing the financing tools to push Malta’s economic regeneration and renewal. In this context, the Bank plans to launch two new schemes supported by the EIF’s Pan-European Guarantee Fund (EGF) in the coming weeks. These instruments will make more than 100 million euros available for businesses and will be intermediated through commercial banks. These schemes will support businesses in their drive to grow and innovate. Whilst these schemes will be available to all economic sectors, the MDB will be prioritising those investment projects that aim to build a greener, more digital, modern, innovative and resilient Maltese economy. We strongly believe that this is the way forward to propel Malta into the next level of growth – we are aware that many local entrepreneurs have the right ideas to make this happen, and we will be there to support them to get their projects off the ground.”

MDB’s intervention through the CGS was crucial in ensuring that Maltese businesses survived the severe liquidity constraints they were facing due to restrictions brought forward by the pandemic spread

Extensions are also applicable to MDB’s Covid-19 Interest Rate Subsidy Scheme, whereby applicants can still benefit from a grant of up to 2.5 percentage points on the interest payable on scheme loans for the first two years of the term.

Launched in April 2020, the Covid-19 guarantee scheme leverages a €350 million government guarantee to provide commercial banks with liquidity to fuel credit into the local economy. The scheme was originally due to lapse in December 2021. Through the CGS, the MDB is providing a guarantee of 90% on new working capital loans granted by commercial banks. This capital relief enables the creation of a portfolio of up to €777.8 million in new working capital loans for all businesses, regardless of size or sector. Eligible working capital costs under the CGS include wages, rental costs and utility bills, among others.

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