It was during the SME week – a series of events focusing on the role of small business in the EU’s economic performance, that European Commissioner Antonio Tajani announced the launch of an Action Plan for SME Access to Finance. The details available so far reveal a concerted focus on a number of credit-related obstacles preventing the freeing up of the long-term commercial growth of small businesses.

The action plan shall incept a mind-shift in the approach traditionally adopted by credit lending institutions in relation to SMEs. The core initiatives shall rotate on the need to instil a change in the way banks assess small businesses’ creditworthiness by placing the demonstrable growth potential of the concerned business at the forefront of the bank’s risk assessment.

Another key initiative will be the regulatory facilitation, easing the setting up and operation of cross-border venture capital funds. From the financing side, the Action Plan will capitalise on the use of existing SME lending facilities primarily available via the European Investment Fund but additional resources will be allocated for the development of new though smaller funds. It is the Commission’s intention to adopt the Action Plan by the end of this year.

This is certainly a welcome initiative and an extremely timely one given the increasing difficulties that business, especially the small and micro enterprises, are encountering as a direct result of the international credit crunch. The issue is compounded further by retail banks’ increasingly conservative and prudent attitude to lending, making it difficult for high-risk start-ups to access the necessary financial capital to overcome their initial growth phase.

The provision of micro-credit financing through the JEREMIE scheme has been a remarkable success story in Malta with lending of over €10 million already approved over the past recent months. From a Maltese business perspective, this success demonstrates the attractiveness of financing solutions based on alternative means to traditional bank lending.

Micro-credit schemes should therefore be a core element of the proposals to be adopted within the Commission’s Action Plan since such mechanisms are demonstrably realistic options providing effective lending solutions for small businesses on both a short and long-term basis.

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