BOV first to implement new SME financing initiative

The European Investment Fund, part of the European Investment Bank Group, and Bank of Valletta have signed the first SME Initiative transaction in Malta. The agreement was signed today in Valletta by EIF Deputy Chief Executive Roger Havenith and BOV Chairman John Cassar White.

The agreement with Bank of Valletta aims to facilitate access to finance for over 800 Maltese SMEs by enabling the Bank to offering financing at even lower interest rates and less collateral requirements. It is expected that SMEs, including start-ups, in need of financing will benefit from €60 million of finance in Malta.

The SME Initiative Malta is a joint financial instrument of the European Commission, EIB Group and the Government of Malta, which aims at stimulating SME financing by providing partial risk cover for SME loan portfolios originated by financial institutions.

Alongside EU Structural and Investment Funds resources contributed by the Government of Malta, the SME Initiative is co-funded by the European Union through Horizon 2020 resources as well as EIB Group resources.

Commenting on the transaction, Chairman of the EIF Board and Vice-President of the EIB, Dario Scannapieco said, “The EIB Group is fully committed to rolling out the SME Initiative and we are pleased together with the Maltese authorities to be announcing the first financial intermediary selected in Malta to start providing finance for SMEs.

“Bank of Valletta is a leading SME lender in Malta and via the SME Initiative will be a vital partner in providing support for entrepreneurs wishing to start-up, grow and develop their business. We are confident that this agreement will deliver lasting benefits to Maltese businesses.”

Speaking at the signing event, EIF Deputy Chief Executive, Roger Havenith said, “I am delighted to be signing the first agreement in Malta under the SME Initiative, the new EU financial instrument in Malta that will generate more than EUR 60 million of SME financing over the coming years.

“The combination of European Structural and Investment Funds, EU Horizon 2020 and EIB Group resources allows EIF to provide risk-sharing and capital relief to financial intermediaries for the ultimate benefit of SMEs.”

During the signing ceremony, Deputy Prime Minister Louis Grech said that the Government is cognisant of the fact that some SMEs in Malta face the problem of limited access to finance.  He said that various studies have shown that commercial banks apply rules that are too rigid with respect to collateral, payback time, and the interest rate.  On the other hand, many SMEs do not have the relevant know-how to access finance.  

Grech added  that, when finance has been made available on acceptable terms, Maltese SMEs have responded with enthusiasm. He said that “I am certain that the SME Initiative in Malta will be a success. This Initiative underlines our commitment to assist local industry and business to be more competitive.”

Commenting on the signature, Elena Grech, Head of the European Commission Representation Office in Malta said: “The launch of the operational phase of the SME Initiative in Malta, the second Member State after Spain to benefit from this innovative funding instrument for small and medium enterprises, is the result of a successful collaboration between National Authorities, European Institutions and Maltese financial institutions (Bank of Valletta).

“I would like therefore to compliment all parties involved, and particularly the Bank of Valletta and the European Investment Fund, for their commitment and efforts to take this challenge, for the benefit of Maltese enterprises, to boost entrepreneurial activity, create more and better jobs and generate wealth for the wider benefit of the Maltese people.”

Bank of Valletta Chairman John Cassar White outlined the most important milestones in the Bank’s journey to position itself as the Maltese Bank for SMEs: “Start-ups, micro-enterprises and SMEs are the backbone of the Maltese economy. At Bank of Valletta, we have always recognised this and strove to provide the necessary platforms and tools to ensure these entrepreneurs are able to expand their horizons.”

Speaking about the new SME initiative, he explained, “The experience gained over the years will serve us well in the execution of this instrument, and we look forward to this being another success story to share with our counterparts in the EU.”

Malta is contributing an amount of €15 million from its European Structural and Investment Funds (ESIF) to this new EU initiative. The €15 million contributed by the Government of Malta will be leveraged with commercial lending through a risk-sharing mechanism.

This will result in more SMEs benefiting from European resources on advantageous terms, such as reduced interest rates and improved collateral requirements. It is expected that more than €60 million of new SME financing will be supported under this programme. This financial instrument will act as a catalyst for private investment and foster job creation.

The SME Initiative entails an innovative change in the use of ESIF, combining the latter with EU central budget (resources from the Horizon 2020 programme) and EIB group funds.