Bank of Valletta and the European Investment Fund (EIF) recently signed a new collaboration agreement to support local small- and medium-sized enterprises (SMEs). Mark Scicluna Bartoli, BOV’s head of product development, explains how the experience developed by BOV over the years allows the bank to play a key role in the development of risk-sharing instruments in the Maltese market. 

Q. Can you tell us in what ways BOV intends to support local SMEs with this new funding agreement signed with the EIF?

A. The €30 million EU-funded guarantee under the InvestEU programme has allowed the bank to leverage a €42 million portfolio of private bank financing to provide improved access to finance to Maltese and Gozitan SMEs. As the first local commercial bank to benefit from an EU-funded guarantee under the InvestEU Fund’s Malta Member State Compartment, BOV has developed two products: 

1. BOV SME Grow, which focuses on traditional SME financing, more specifically tangible and intangible investment costs; and

2. BOV SME Grow Green, which is targeting green investment costs contributing towards a reduction in CO2 emissions. Investment costs could include renewable energy solutions and energy efficiency investments.

Mark Scicluna Bartoli

Q. What are the benefits of the risk-sharing mechanisms that result from such collaborations between the bank and the EIF?

A. The intent of such collaborations between the bank and EIF is to improve local SMEs’ access to finance. The EU guarantee provides the bank with capital relief, allowing the bank to transfer this benefit to the SME via a reduction in interest rate, collateral requirements and contribution.

The two products, BOV SME Grow and BOV SME Grow Green, both request a minor upfront contribution of 5% together with lower extendible collateral requirements capped at 30% of the loan value.

From an interest rate perspective, the BOV SME Grow is priced at a variable interest rate of 3.8%, while the BOV SME Grow Green is priced at a variable interest rate of 2.8%. The latter is in line with the bank’s ESG strategy to encourage the business community to move towards greener investments.

The fund is targeted to finance the main economic sector

Q. From an economic perspective, how does such financial support benefit the economy, and from your experience, how much do the new funds contribute back into the economy in terms of investments undertaken by the local businesses?

A. From an economic perspective, the EU guarantee allows the bank to increase the level of investment generated in the economy through the provision of €42 million of bank financing. The fund is targeted to finance the main economic sector in the local economy with the exclusion of gaming, real estate development and specific investments which may have a negative impact on the environment. 

From a public policy perspective, once the bank runs the portfolio in line with best banking practice, a significant portion of the guarantee can be reutilised to build a new portfolio of SME loans in the future.

This reuse of EU-funded guarantees under previous risk-sharing instruments has been successfully implemented in Malta to provide once again improved access to finance to additional Maltese and Gozitan SMEs.

Q. This is not the first time that BOV has collaborated with the EIF. Can you share the success story behind similar collaborations, and how many businesses were supported already?

A. Bank of Valletta has been involved in developing risk-sharing instruments with the EIF since 2011. The first product launched was a European pilot initiative called BOV JEREMIE (Joint European Resources for Micro to Medium Enterprises), which was successfully implemented providing improved access to finance for Maltese and Gozitan SMEs with a total portfolio of just over €60 million.

The second BOV EIF joint product was the BOV Start Plus product launched in 2013. This was a niche product focused on assisting just under 100 start-ups over its lifetime.

The third product was the JAIME (Joint Assistance Instrument for Small Enterprises), launched in 2016, which was a follow-up product to the JEREMIE product and built up a lending portfolio of just over €100 million for SMEs.

The fourth product, the BOV Energy Loans, launched in 2021 was another European pilot initiative which blended a guarantee instrument with an interest rate subsidy to ease access to finance to individuals and enterprises keen on investing in green investments.

Over the past 13 years, through the use of EIF guarantees, a portfolio of over €215 million in BOV loans has been built up, assisting over 1,300 individuals and 1,700 businesses with improved access to finance. The recently launched BOV SME Grow products will continue building on the strong working relationship developed with the EIF together with continuing to improve the bank’s SME lending products.

Business customers willing to benefit from the BOV SME Grow or the BOV SME Grow Green are invited to get in touch with the BOV Business Development and Customer Value Unit by calling 2275 1122 or by emailing businessdevelopment@bov.com. Further information can be obtained through the Bank’s website at www.bov.com/bov-sme-grow and www.bov.com/bov-sme-grow-green.

The BOV SME Grow and the BOV SME Grow Green are funded by the European Union through the European Regional Development Fund with the financial backing of the Republic of Malta under the InvestEU Member State Compartment for Malta. All loans are subject to normal bank lending criteria and final approval from the Bank.