MDB supporting SMEs through new schemes

Following the European Commission’s announcement of the approval of MDB’s Guaranteed Co-Lending Scheme (GCLS) under the COVID-19 Temporary Framework for State Aid, the MDB has also received a positive opinion by the State Aid Monitoring Board on the GCLS under the De Minimis and GBER state aid regimes. Multiple state aid regimes allow additional flexibility in terms of the range and size of investments that can be supported by the scheme.

The GCLS a risk-sharing facility involving co-lending between the MDB and accredited commercial banks on a 50:50 basis, plus an additional uncapped MDB guarantee on the commercial banks’ part of the loan. The targeted GCLS global loan portfolio is €100 million, half funded by MDB and the other half by the participating commercial banks. Following the MDB’s agreement with the European Investment Fund under the Pan-European Guarantee Fund (EGF), the Bank will be able to offer larger loans under this scheme, as well as an uncapped guarantee rate of 60% on the commercial bank’s financing. This will reduce substantially the banks’ exposure to credit risks and should therefore contribute to enhance significantly access to bank financing to SMEs for new investments. The maximum loan amount under the GCLS is €10 million and the scheme will be available until December 2024.

In addition, a positive state aid opinion was also received on a second product, the SME Guarantee Scheme (SGS), which is also partly backed by the EGF. The SGS will be intermediated by accredited commercial banks and will offer an uncapped portfolio guarantee of 80%. The SGS will enhance enterprises’ access to bank credit for new investment as well as other purposes; including for working capital related to new investment and business transfers. The facility enables commercial banks to be more responsive to the borrowing requirements of smaller businesses, which, in turn, allows these businesses to fulfil their growth ambitions.

A new call for service will shortly be issued by the MDB, inviting commercial banks to submit a proposal as financial intermediaries of the GCLS and SGS.

Whilst these schemes will be available to all economic sectors, the MDB will be encouraging those investments that aim to build a greener and more digitally oriented economy. The Bank is committed and strongly believes that this is the way forward to truly propel Malta into the next level of growth.