Following on the acknowledgement of the severe difficulties businesses are encountering in securing the required capital to sustain their operations and potential commercial expansion, the European Commission adopted an action plan on access to finance, laying down the EU’s general strategy on easing access to credit by SMEs. There are several measures envisaged in this action plan, some of which completely novel, others re-tabled for more urgent political and practical follow-up at implementation phase in the member-states.

The most important initiatives announced in the action plan concern the facilitation of the provision of loan guarantees directly through the forthcoming EU budget post-2013, the review of state aid guidelines to better enable support for small business, simplification measures in reporting requirements for listed SMEs and reinforced monitoring of the implementation of the Late Payments Directive. Along with these measures, the European Commission also adopted a separate regulation on venture capital funds, with the intent to foster a true integration of the European venture capital markets, thereby strengthening the supply of venture capital to entrepreneurs.

The action plan is certainly a most welcome initiative, though a long-awaited initiative given the credit crunch unleashed by the international financial and economic crisis. Lending for business has become more difficult in the wake of the crisis, though in Malta, the situation never reached exacerbating levels, due in part to the timely launch of the JEREMIE scheme. Nonetheless, there exists some market gaps in the provision of business lending that remain inadequately addressed.

From the announced initiatives, clearly, some measures will enjoy better chance of success with the local business community than others. For instance, despite the critical need for a robust venture capital fund, it is highly unlikely that the creation of a single European venture capital market will ultimately benefit Maltese small business given the inherent structural deficiency in economies of scale of the Maltese credit lending market.

Conversely, on a positive note, the proposed extension of the EU’s loan guarantees to the growing creative industries sector as well as the enhanced financial envelope for microfinance will prove to be beneficial for the Maltese economic landscape. The creative industries are an example of a niche industry enjoying the growth curve and the easing of credit lending for companies in this line of business would certainly come at a very timely juncture in order to further support the sector’s recent growth trend.

For more information on EU affairs related to business one may contact the MBB on 2125 1719 or email info@mbb.org.mt or visit www.mbb.org.mt