Most businesses continue to face tough times as they attempt to overcome obstacles, both old and new, in their drive to provide goods and services to the community.
The post-COVID business bounceback is being made all the more challenging by rapidly rising inflation, accelerated changes in consumer behaviour and persistent problems in dealing with banks.
A survey conducted by the Chamber of SMEs has highlighted various gripes of the business community which it has raised consistently in recent years. Access to finance and adequate banking services are a top, pressing worry. Small enterprises claim that bank charges and bureaucracy remain major hurdles to conducting their business.
Opening a bank account is no longer an easy process that can be completed within a few weeks. It is a misconception, though, that this is only a local phenomenon, although locally the situation may have been made worse by years-long, self-inflicted reputational damage.
The country’s reputation as a high-risk geographic location engaged in economic activities shunned by many western countries has led to an increase in scrutiny from anti-money laundering institutions like the FATF as well as from international banks, especially those in the US.
Maltese banks depend on correspondent banking clearance arrangements with US banks to continue to offer local businesses the payment services they require. In practice, this means that local banks have to be aware of the strict and complex banking requirements of the USA Patriot Act enacted in 2001 to combat money laundering.
Unfortunately, most banks today adopt an ultra-prudent approach when assessing the eligibility of potential account holders. And this primarily penalises small businesses, although it is a false perception that a local business can open a bank account abroad in “around two weeks”. Other complaints include the difficulties that local SMEs face in obtaining finance from banks.
This must have come as a surprise to government policymakers. In the last few years, the government has partnered with European institutions like the European Investment Bank and local banks to offer SMEs subsidised loans at low-interest rates.
The Malta Development Bank has often communicated how it has been helping SMEs through various support schemes, both before and after the onset of COVID.
Bureaucracy is often the bane of small businesses worldwide. SMEs, of course, do not have the resources that bigger companies have to deal with this bureaucracy. But there is a risk of groupthink in the business community when identifying the difficulties they face in growing their business.
Rising bank charges are a reality that many rightly complain about. The context of this rising cost of doing business is some banks’ self-inflicted management fiascos over the past few years. Who can blame customers when they feel that banks are trying to compensate for their mismanagement by charging them more for their services?
It will take time for Maltese banks to convince international regulators and correspondent banks that the days when they adopted a laissez-faire approach to anti-money laundering best practices are over. The government needs to work with the banks, rather than against them, to restore Malta’s reputation as a respectable financial services jurisdiction. The European Central Bank and not the government regulates Malta’s major banks.
It is time, however, for the business community, banks and local regulators to engage in meaningful discussions to re-engineer the processes causing excessive delays in the provision of bank services. At the end of the day, it is consumers who suffer the most from the increasing cost of doing business.