The Malta Development Bank has been given the go-ahead to introduce two new lines of credit that will make it easier for commercial banks to lend money to small and medium-size businesses. 

The two new schemes – the Guaranteed Co-Lending Scheme (GCLS) and SME Guarantee Scheme (SGS) – will be available to businesses in all sectors, though the MDB has said it will be encouraging investments in a green and more digitally oriented economy.

Brussels had already approved the GCLS under EU-wide temporary rules intended to allow governments to help businesses recover from the COVID-19 pandemic. The scheme has now been green-lit by the State Aid Monitoring Board.

Commercial banks will soon be given the opportunity to answer a call for service to be issued by the MDB, inviting them to submit a proposal to serve as a financial intermediary for the two schemes. 

Under the GCLS, the MDB and commercial banks will split lending 50:50, with the MDB guaranteeing the banks’ part of the loan. The targeted GCLS global loan portfolio is €100 million, half funded by MDB and the other half by the participating commercial banks. Loans will be capped at a maximum of €10 million, with the scheme will be available until December 2024. 

The MDB has now received the go-ahead to expand the scheme to allow it to offer larger loans and also guarantee 60% of the commercial bank’s financing, with the upper limit uncapped. 

“This will reduce substantially the banks’ exposure to credit risks and should therefore contribute to enhance significantly access to bank financing to SMEs for new investments,” the MDB said in a statement. 

The second scheme, the SGS, will offer an uncapped portfolio guarantee of 80%. It is intended to enhance business access to bank credit for new investment as well as other purposes, such as working capital related to new investment and business transfers. 

“The facility enables commercial banks to be more responsive to the borrowing requirements of smaller businesses, which, in turn, allows these businesses to fulfil their growth ambitions,” the MDB said. 

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