Local banks are not fully passing on the benefits of quantitative easing to SMEs, according to the Central Bank of Malta.
Ten per cent of Maltese SMEs still believe that interest rates were too high in 2015.
Having said that, this was the first time that the regular survey carried out by the European Central Bank on SME access to finance found fewer respondents saying that interest rates were higher.
Twenty-one per cent of domestic SMEs reported that interest rates had gone up, 16 per cent reported that they had gone down and 63 per cent said that they had not changed.
These contrast with the EU, where almost half said that they had remained unchanged and only 14 per cent reported an increase.
These measures seem to have impacted SMEs across the EU much more significantly than domestic firms, supporting evidence of incomplete pass-through in Malta
The Central Bank of Malta, in its analysis of the survey, blamed this on the local lenders: “[EU figures] reflect stepped up efforts by the European Central Bank to stimulate the eurozone economy through quantitative easing incentives and negative interest rates.
“…These measures seem to have impacted SMEs across the European Union much more significantly than domestic firms, supporting evidence of incomplete pass-through in Malta.”
The CBM also noted that while 11 per cent of firms in the EU reported that additional costs – such as charges and commissions – had gone down, none of the Maltese did. In fact, 22 per cent reported an increase while 74 per cent reported that they had not changed.
The ECB report found that the amount of SMEs that opted for trade credit trebled between 2014 and 2015, increasing from 15 per cent to 45 per cent. This rate is more than double the EU average of 20 per cent although the rates vary greatly between member states.
The demand for bank loans, however, was not affected by this trend, and almost two-thirds of SMEs in Malta still opted for this method of financing. Most SMEs required some form of financing with only 17 per cent relying on retained earnings.
The survey also looked at actual access to financing and found that only 10 per cent found it to be a pressing problem. Only eight per cent of firms that applied for bank financing were rejected.