MDB launches €150m emergency liquidity support scheme

The war in Ukraine, so soon after the COVID-19 crisis, had many businesses scrambling to maintain sufficient workflow capital, necessitating the introduction of a second emergency liquidity support scheme, BusinessToday has learned.

The Liquidity Support Guarantee Scheme (LSGS), launched by the  Malta Development Bank (MDB), is the second emergency liquidity support measure as part of an aid package in response to the Ukraine crisis.

The first measure was in support of grain imports.

The LSGS consists of two measures; one open to all businesses affected by the crisis (LSGS-A) and the other specific to the fuel and oil importers (LSGS-B).

MDB chairman Prof Josef Bonnici told BusinessToday that various commodities, like grain and fuel, had been very negatively impacted by the  Ukraine war.

Bonnici said the scheme was deemed necessary to help maintain the slow recovery under way following the COVID-19 pandemic.

“Many businesses were still struggling following the pandemic,” he said. “The Ukraine war nullified that progress and many businesses were left floundering under the added pressure.”

The Russian invasion of Ukraine led to the prices of grain, fuel and their many derivatives skyrocketing.

In Malta, many importers had to absorb the price hikes for many weeks, but the price increases still filtered down to the consumers the longer the crisis stretched.

New measures

LSGS-A is aimed at all sectors of the economy and all types of businesses irrespective of size. It will enhance access to bank financing to support undertakings whose cashflow was adversely impacted by the disruptions in supply chains and other pressures brought about by the Ukraine crisis.

LSGS-B is directed towards fuel and oil importers. The objective is that of supporting firms operating in this sector to ensure security of strategic supply in view of developments related to war in Ukraine which have had a significant impact on the energy industry.

Both measures are guaranteed by the MDB and backed by a Government Guarantee covering 90% of each working capital loan under LSGS-A and 80% under LSGS-B. Facilities under both measures benefit from an interest rate subsidy of up to 2.5 percentage points on the outstanding amount of the working capital loan, subject to a minimum interest payment by the borrower of 0.1%. The interest rate subsidy is applicable during the first two years of the loan starting from the date of first disbursement of the loan.

The MDB is making available a total portfolio of €100 million in working capital loans under LSGS-A and a portfolio of €50 million under LSGS-B. The maximum term of loans is up to 6 years and the maximum loan amount is determined on a case-by-case basis based on turnover, energy costs and liquidity needs. Both measures are available until the end of the year.

With the combination of the guarantee and the interest rate subsidy, these measures will be facilitating the availability, accessibility and affordability of cashflow into the real economy during such challenging times.

In order to qualify for these subsidized loans firms are required to demonstrate in a clear manner that their cash flow has been adversely and directly affected by the aggression against Ukraine.

Businesses will be able to apply for the loans with the credit institutions that will soon be accredited by the MDB.

The list of credit institutions will soon be made available on the MDB website, along with more details on both measures.