Jonathan Vassallo is the Director General of Malta's managing authority for the European Structural and Investment Funds and the SME Initiative. He notes how: "When one considers the success that the implementation of financial instruments had in the 2007-2013 period, there was a natural expectation by the market that Structural Funds would again be implemented to address the persisting market gaps. When we speak about persisting market gaps here reference is made specifically to the consistently higher interest rate as well as the higher collateral requirements requested by local financial intermediaries."
Such gaps in accessible finance for Maltese businesses are being addressed by new financial instrument support from the EU as explained by Mr Vassallo. "Malta was one of the first authorities to express its interest in participating in the SME initiative. The instrument was subsequently available in 2015 and the first loans were issued in 2016. Apart from the SME initiative we have also committed six percent of our European Regional Development Fund (ERDF) resources for additional financial instruments and in the coming months we will be launching additional financial instruments for the benefit of SMEs."
"The Maltese authority has sought to ensure that multiple financial intermediaries are participating in the implementation of financial instruments on the ground. Having multiple financial intermediaries has a direct benefit to SMEs. From a managing authority perspective, having multiple players has also its benefits, including quicker uptake of the portfolio, which has a direct impact on the investment on the ground - hence resulting in a stronger link between investments happening by SMEs and the operational programme's objectives of growth and jobs."
Banks and beneficiary perspectives
The Bank of Valletta (BOV) was the financial intermediary for a 2007-2013 Maltese financial instrument. BOV's Chief Credit Business Development Officer, Albert Frendo, believes a critical success factor for this scheme was the fact that it was "very attractive to a particular segment of SMEs. I am talking here about micro SMEs. In fact, we are proud to say that 80% of the applications roughly were taken up by micro SMEs and that has huge significance, because as you know, when we discuss the eligibility and the access to finance to SMEs, the most vulnerable are typically the micro SMEs. The fact that they managed to absorb the scheme in such a way obviously gives the clear indication that this product had characteristics and features which fit the market requirements."
BOV continues to be a financial intermediary for the Maltese managing authority's 2014-2020 SME initiative. This instrument's support has included the development of a new boutique hotel run by Mark Anthony Portelli who says that it "helped us in making this project much easier for us to achieve." Mr Portelli points out how the ERDF co-financed guarantees "were more helpful than traditional financial packages that banks normally would offer."
Banif Bank is also a financial intermediary for Malta's latest ERDF financial instrument and Melvin Pellicano, Head of Banif Bank's Business Strategy Unit notes that: “Through this instrument the Bank has the opportunity to grow its loan portfolio via a guaranteed, risk sharing mechanism. We are able to offer our clients attractive interest rates while leveraging on the technical support and expertise of the EIF (European Investment Fund) to the Bank’s benefit. Through this association, the Bank can further contribute to Malta’s investment success story and growing economy.”
An example of these contributions is illustrated by final recipient Mr Ruben Cuschieri, General Manager at Seifert Systems, who reports that the support from the ERDF financial instrument "helped us in establishing a new production line with our own plastic injection production, and this will definitely help us in increasing our turnover, increasing the number of employees, and gaining access to new markets and new product diversification."
Contact the Maltese ESI fund managing authority for further information about their experience with financial instruments.