Bank of Valletta will be getting €50 million out of the €61 million available for it to give as SME funding under a new EU programme, with another bank currently in discussion for the balance.
Parliamentary Secretary Ian Borg had announced over a year ago that Malta would be taking part in the SME Initiative, a new EU financial instrument taking over from the hugely successful Jeremie, a pilot risk-sharing programme which BOV had administered exclusively for Malta between 2011 and 2014.
He told The Business Observer that three banks applied for the new instrument through a competitive bid and that one was eliminated. Bank of Valletta put forward what he described as “the best offer” in the eyes of the European Investment Bank, which adjudicated the bids. It is the seventh bank in the EU to be approved, with the previous six all in Spain.
However, the government had already made it clear that it hoped that there would be more than one provider to ensure an element of competition. The remaining bank was now undergoing due diligence, Dr Borg said, without revealing who it was.
The European Commission has learned from the Jeremie experience – which put €62 million into the economy and helped 650 SMEs in Malta – and expanded on it.
This BOV programme, Jaime (Joint Assistance Initiative for Maltese Enterprises), will be backed up by a €37.5 million guarantee (covering 75 per cent of the total ) funded from ERDF funds, Horizon 2020 and European Investment Bank resources.
As with Jeremie, Jaime will use the guarantee to cut down on the interest rate resulting in a final interest rate of 3.5 per cent p.a., representing a discount of more than two per cent compared to normal business loan rates.
BOV chief executive officer Mario Mallia said the collateral that the bank would request on the whole portfolio would be reduced by 75 per cent – although all loans will be subject to the same due diligence and credit procedures.
The SME will be expected to put forward 20 per cent of the expenditure and the loans have to be repaid within a maximum of 10 years.
BOV anticipates that it will be able to help 715 of the 850 SMEs that the government hopes to fund from the total €61 million, offering an average of €70,000 to each.
The product is open to all sectors except agriculture and fisheries, gaming and pure real estate development, and should be used for capital expenditure aimed at growth.
Alfred Attard, BOV’s chief officer for SME finance, stressed that this product was unique in the way it blends three EU funding sources making up the guarantee.
Dr Borg confirmed that should all the funds be taken up, the government would – as with Jeremie – consider topping it up.
He also said that the government was considering different products specifically for business in the energy sector.