One year since the introduction of the Covid-19 Guarantee Scheme (CGS), the Malta Development Bank has provided a lifeline to more than 560 businesses, collectively employing over 40,000 persons. The supported businesses, which received a total of more than €440 million in working capital loans through nine partnering commercial banks, range from hotels to large retail outlets but also to smaller firms across all economic sectors.
In addition, the MDB has recently obtained the European Commission’s approval to prolong the applicability period of the Scheme by a further three months to 30 September 2021. Moreover, the Commission also approved that the maximum moratorium period that commercial banks can provide under the CGS, which now can be extended by a further six months up to 18 months, on a case-by-case basis.
The scheme, introduced in April 2020, has facilitated access to finance to businesses whose liquidity was seriously affected by the pandemic. The CGS greatly enhances access to bank financing to cover working capital costs, at lower interest rates and lower collateral requirements. Firms in the tourism-related sectors (particularly accommodation & food services activities, and wholesale & retail activities), which were the most adversely impacted by the pandemic, have collectively been granted close to €200 million, or over 45%, of total loans sanctioned under the CGS.
During the first twelve months of the CGS operations, the average loan per facility of the 560 beneficiaries stood at around €785,000. Out of these beneficiaries, 500 firms, almost 90% of the total, were SMEs. The average loan size of SMEs amounted to around €470,000, as opposed to an average of €3.1 million granted to larger entities.
The CGS and other initiatives managed by the MDB have contributed significantly to improving liquidity and access to finance on a national level. As at end of the first quarter of 2021, loans covered by MDB guarantee schemes accounted for more than 10% of the over €4 billion outstanding loans extended to non-financial corporations (NFCs). Official data also show that during the same timeframe, lending to NFCs expanded by an annual rate of close 8.0% in March 2021. Without this MDB’s intervention, such lending would instead have contracted by 4.0%.
In reaction to these figures, MDB Chairman Prof Josef Bonnici said: “The available data provides clear demonstration that the support extended by the MDB was intensive and propitious. By maintaining liquidity at pre-Covid levels, the economy was in a stronger position to withstand the impact of the pandemic and is in a stronger position for the upcoming recovery phase.
Over the coming months, the Covid-19 Guarantee Scheme will remain a strong pillar of our activity, while gradually complementing it with other incentives intended to support the economy not only in coming out of the current challenges but to deliver renewed, sustainable and longer-term growth”.