GRTU calls for launch of guarantee scheme and lower interest rates

GRTU President Paul Abela called for action at this morning's MCESD meeting dedicated to Access to Finance.

Abela stated that though GRTU places regular pressure on banks in order to better support enterprises, GRTU also supports local banks and is very pleased with the strong banks we have.

"Bank interests on credit lines to micro and small businesses however are still too high and it is difficult for them to spread bank costs due to their small size. To cover up the excessive charges they have either to increase processes and boost inflation or suffer decreased profits," Abela said.

Abela said that Access to Finance remains one of the biggest hurdles businesses face on a daily basis and while we have been speaking at length on the topic implementation has been much slower than desired.

The approved Credit Guarantee Scheme has been stalled since June 2012 due to lengthy discussions with banks which we hear has left some 700 applications pending and not a single loan has been approved. Malta Enterprise however said that they are working hard to have the scheme launched in the very near future.

The JEREMIE Scheme that worked so well has now come to an end and we do not have another scheme ready in place because an application has not yet been submitted. In order to avoid the gap we are currently experiencing preparations should have been done beforehand as we know how long the process takes, we should have learned this from the first experience we had with JEREMIE.

Access to Finance cannot be time barred, we do not afford to have project held up because the schemes that should facilitate finance are experiencing bureaucratic delays.

These schemes are most important to SMEs and impinge heavily on their competitiveness. Compared to other EU firms micro and small Maltese enterprises have lower sale volumes and therefore banking costs are not only too high in absolute terms but also at cost per unit sold.

The GRTU President once again mentioned the immediate requirement to have the interest rates for businesses revised as the rates were still too high and prohibitive. The Governor of the Central Bank Josef Bonnici proposed the establishment of a development bank as another institution that would complement the banks.

MFSA Chairman Professor Joe Bannister agreed with the establishment of a development bank and gave some experiences he met with while chairman of the Malta Development Corporation.

This MCESD meeting was instigated after the strong comments on excessive bank charges and bank interests on advance imposed by banks on micro and small enterprises. GRTU had already demanded former Minister Tonio Fenech for a report on the issue but the report produced by MFSA was never published and we have no idea of what action MFSA had taken.

GRTU is asking for a detailed analysis and comparative study with competing economies and a plan of action to remedy the situation.

It is ironic that as Banks increase their profits, while their clients - enterprises - have to cut back from expanding their business and use more bank credit and curtail employment at a time when unemployment is increasing and will continue to increase if the promised support to micro and small firms keeps not coming.The Minister of Finance must instigate the regulators to act.

In order to ensure action the Minister for Finance Edward Scicluna gave assurance that he is ready to form a restricted MCESD committee specifically on Access to Finance to implement the proposals that have for so long been discussed. The Minister also confirmed that the establishment of a Development Bank was in the Labour Party's Electoral programme and therefore must be implemented.