BOV first bank to sign up to MDB’s Small Loans Guarantee Scheme

Bank of Valletta is the first bank to sign up to the Malta Development Bank’s Small Loans Guarantee Scheme (SLGS), with a number of other commercial banks expected to follow suit.

This scheme provides an important additional impetus to SMEs as they seek to pull through the challenges of the present times and push forward the country’s recovery in the months ahead.

Principally, the SLGS is a facility designed to support smaller businesses to access credit facilities up to €250,000 for working capital purposes. The scheme has been purposely designed with the understanding that one of the main barriers to finance, especially for start-ups and SMEs, relates to difficulties associated with high collateral requirements.

The scheme addresses this constraint by allowing smaller businesses to source loans under the MDB COVID-19 Guarantee Scheme (CGS) without the need to provide high levels of soft collateral (personal guarantees).

Through the SLGS, the MDB provides additional protection to intermediary banks and, in turn, banks reduce soft collateral requirements to a maximum of 20% of the loan value.

Since banks have valid reasons for asking for additional collateral in certain cases, the SLGS is also mindful of the intermediary banks’ interest, offering them protection on their credit risks.

Additionally, in order to ensure the maximum take-up of this scheme, guaranteeing that as many businesses share the benefits being made available, the MDB has announced that the SLGS will apply retroactively: if a business has already concluded loans with participating intermediary commercial banks under the MDB COVID-19 Guarantee Scheme, it can now apply to renegotiate the previously submitted security under the terms of the SLGS.

Since the launch of the wider Covid-19 Guarantee Scheme, in April, the MDB has now supported over 400 businesses, with loan facilities reaching more than €285 million, thus helping in safeguarding the jobs of more than 15,000 persons.

Commenting on these latest developments, Prof Josef Bonnici, MDB Chairman, said: “We are very pleased with the take-up of Covid-19 related assistance so far; through the additional incentives being provided to the smallest businesses and the self-employed we are making sure that the Bank can truly reach out and support every entrepreneur, whatever the size of the business, to play a role in Malta’s economic regeneration.”

Prof Bonnici recalled that despite the significant take-up, the MDB’s fund available for the Guarantee Scheme is far from exhausted: “We must strive to continue reaching out and supporting local businesses. To this end, we encourage local entrepreneurs to approach their preferred commercial banks, to seek help and learn more about these attractive schemes.”