A number of public and private entities have already approached the Malta Development Bank to enquire about investment initiatives, with the bank stressing that its preferred model would be one that includes commercial banks.
The entities proposed a variety of infrastructural projects, in the green economy, housing, education, health, sustainable industrial investment and SMEs.
“Most consultations are still at an exploratory stage. The MDB’s preference is that such investments would be financed in conjunction with the commercial banks … to foster the promotion of a syndicated loan market in Malta, which has so far played a somewhat subdued role,” the bank said in its annual report for 2018.
The bank was set up with €30 million in capital from the government with a further €10 million pledged for this year.
The MDB, chaired by Josef Bonnici, explained that most of that year was spent in preparing the groundwork, from capacity-building and research, to consultations with stakeholders.
As a result, the MDB is now able to formulate its approach, having identified those areas which slip through the net, particularly when it comes to bank finance.
The annual report explains that one way the MDB will help is by setting up guarantee schemes for SME loans – particularly suited for riskier ventures – which will be launched this year, in collaboration with the main banks.
MDB to provide guarantee of each project
The intention is for the MDB to provide a guarantee of 80 per cent of each project, capped at 25 per cent of the portfolio of loans extended by the commercial banks. These should generate portfolios of around €100 million in new loans for SME investments over a period of three years.
The MDB will also tap into EU structural funds, using them to be able to develop funding which would be part grant and part guarantees to back up financing.
One specific area mentioned in the report was the setting up of a fund which could be used to help students cover the cost of their tertiary education, “offering enhanced access to banking finance, enjoying longer moratorium periods, better collateral relief and more affordable repayment terms”.
In line with its determination to complement – rather than compete with – commercial banks, the MDB said it would also be looking at another hybrid scheme for SMEs, which would combine co-financing with participating banks, along with its own partial guarantee. The intention is to “support viable operations where the financial market is unable or unwilling to provide the needed funding on its own”, the report explained.
The MDB is not only looking at SMEs but also at major infrastructural projects – mainly due to the long repayment period required to make them feasible – where there could be significant market failures and investment gaps.
The focus will be on projects with a strong social dimension – especially those related to education, health, elderly care, and affordable housing – as well as those that contribute to the green economy, including renewable energy and energy efficiency, sustainable transport and water resources, as well as other environment-friendly initiatives.
The MDB’s annual report for 2018 is available on its website www.mdb.org.mt.