Promotional banks and guarantee institutions play a key role in supporting SMEs across Europe, particularly as they face a major digital transition in the years ahead. At the heart of this effort is the European Association of Guarantee Institutions (AECM), which represents similar institutions, including the Malta Development Bank (MDB).
“Amongst the organisation’s priorities is a keen emphasis on improving the framework conditions for SME financing, and how promotional banks can enhance competitiveness and innovation,” explain AECM president Guy Selbherr and Secretary General Katrin Sturm.
“Our primary goals are better regulation and simplification, securing more funding for financial instruments in the next Multiannual Financial Framework (MFF), and promoting the effective use of guaranteed instruments,” says Selbherr adding that the most pressing issue currently is securing more funding and flexibility for financial instruments within the next MFF.
“The ability to efficiently deploy guarantees can significantly impact SME financing, fostering growth and resilience in uncertain economic conditions,” he adds.
With Europe placing a renewed emphasis on economic competitiveness, particularly in light of the recent Draghi report, promotional banks are increasingly viewed as key players in fostering a dynamic business environment.
“Promotional banks and guarantee institutions play a pivotal role in addressing market failures that hinder SME access to finance. By assuming and sharing financial risk, promotional banks like the MDB make funding more accessible and affordable for businesses, thus supporting economic growth,” adds Sturm.
She points to the significant impact of AECM members during the COVID-19 crisis. “From the end of 2019 to the end of 2020, the outstanding guarantee volumes of AECM members tripled. Collectively, they reached 24.2 per cent of the total SME population in the covered countries.”
Promotional banks also provide several advantages to the wider financial ecosystem. They help mitigate risk for commercial banks, making them more willing to lend to SMEs, particularly those considered high-risk. They also act as a stabilising force in times of economic uncertainty.
“By supporting lending even during downturns, promotional institutions help sustain economic activity,” she adds.
Additionally, she emphasises the budget efficiency of guarantees.
“Given limited budgetary resources, guarantees offer a high-leverage solution, allowing funds to be used multiple times rather than being permanently spent.” This ensures that SMEs continue to have access to the financial support they need at crucial growth stages.
Supporting digital innovation
As businesses across the continent face up to the inevitable reality of digital transformation, the Association is ensuring that its members are well-positioned to support innovation.
“To facilitate financial support for digital innovation, AECM has established a dedicated working group on digitalisation,” Sturm says. This platform allows members and partners to exchange experiences and strategies to enhance SME digital transformation.
Knowledge-sharing is a cornerstone of the Association’s approach. A notable example is an extensive training and best practice sharing seminar hosted by the Malta Development Bank in Valletta from on February 27-28, 2025, where members will showcase initiatives that support SME digitalisation through financial instruments.
Beyond funding, advisory and consultancy services are playing an increasing role in helping businesses navigate the digital transition. “These initiatives ensure that SMEs can successfully adopt digital solutions and maintain their competitive edge in a rapidly evolving economy.”
Selbherr further stresses that collaboration between promotional institutions, national governments, and the private sector is critical to closing market gaps.
“Effective cooperation ensures that financing mechanisms are well-funded, efficient, and widely accessible,” he notes. Tailoring funding to specific regional needs, particularly through partnerships, ensures maximum efficiency and impact.
One of the key advantages of such collaboration is risk-sharing. “The more often the risk is shared, the higher the leverage effect becomes, making public money more budget-efficient.”
This approach creates a sustainable and inclusive financial ecosystem, ensuring that SMEs have consistent access to resources. This case is even more relevant in Malta, where the MDB is the only promotional bank locally. Ms Sturm acknowledges that institutions in smaller or peripheral EU member states face unique challenges but also have access to the collective expertise of AECM members.
“AECM represents 47 members from 32 countries and six partners, covering institutions of varying sizes, structures, and operational scopes. Despite their differences, all members share a common mission: to support SMEs through effective financial instruments.”
She highlights the importance of knowledge exchange, particularly for younger institutions like the MDB.
“MDB benefits from a collaborative environment where it can learn from other guarantee institutions and leverage AECM’s network to enhance its impact.”
While institutions like MDB may operate on a smaller scale than some of their European counterparts, they remain crucial players in fostering sustainable economic growth.
“Like its counterparts, the MDB plays a decisive role on the ground, ensuring SMEs have the financial backing needed to thrive,” concluded Sturm.
This article was first published in The Corporate Times