MDB Guarantee Facility for Loans to SMEs
Guarantee Facility for Loans for SMEs
The MDB Guarantee Facility for Loans to SMEs facilitates lending to smaller businesses that are viable but unable to obtain the required amount of finance from their commercial bank due to:
- Insufficient or inadequate collateral to meet the bank’s normal security requirements,
- The novelty or nature of the business venture that may fall outside the risk appetite and tolerance of commercial banks,
- Other factors such as the required repayment period for which commercial banks may not be willing or able to provide the required financing in whole or part.
Consistent with MDB’s objective to improve access to finance and to diversify the financing options to SMEs, the MDB seeks to magnify the outreach of its promotional role by collaborating with commercial banks to stimulate more active SME lending in Malta by offering the opportunity for banks to act as MDB’s implementing partners for the MDB Guarantee Facility for Loans to SMEs. The facility enables lenders to be more responsive to the borrowing requirements of smaller businesses, which, in turn, allows smaller businesses to fulfil their investment plans and growth ambitions. This facility therefore helps generate a positive contribution to the Maltese economy in terms of new investment, employment opportunities, stronger competitiveness and higher economic activity.
Information for SMEs
The purpose of the MDB Guarantee Facility is to assist SMEs, including start-ups, by enhancing their access to bank finance. Eligible SMEs benefit from:
- enhanced access to credit as insufficient collateral and lack of credit history should not remain an obstacle when seeking finance from the banking sector,
- better terms and conditions and a longer repayment period,
- lower interest rates as a result of the credit risk protection from the MDB’s guarantee.
The facility is available through commercial banks that agree to act as implementing partners of the MDB.
Download MDB Guarantee Facility for SMEs Incentive Guidelines
Information for Potential Implementing Partners for SMEs
In accordance with its objectives of creating a more diverse and vibrant credit market with more options and choice of providers, MDB seeks to expand the range of implementing partners to generate additional lending for smaller businesses. This is in line with the MDB’s policy of offering its facilities in an open, transparent and non-discriminatory manner.
The facility is structured as follows:
a) The MDB provides a First-loss Guarantee covering 80% of the individual loans under the scheme, with a cap rate of 25% at the portfolio level.
b) A guarantee fee of 0.5% is payable by the implementing partner to the MDB in respect of the credit risk protection. The guarantee fee is collected by the implementing partner as part of the final interest rate on the outstanding loan balance.
Implementing partners benefit from:
- Lower credit risk exposure;
- Enhanced opportunity to increase the size of the balance sheet and profitability;
- Efficient use of capital and lower impairment charges to the profit and loss;
- Greater flexibility in adhering to the risk appetite framework;
- Higher client retention due to increased fulfilment of customers’ requests;
- Enhanced customer relationship.
The implementing partner shall pass on the benefit from MDB’s guarantee to the SME in the form of a lower risk premium and lower collateral requirements.
To become an implementing partner of the MDB Guarantee Facility for Loans to SMEs, interested credit institutions need to fill in the Expression of Interest form which can be downloaded from this link. Applicants must be able to address all points to the satisfaction of the MDB in order to be considered for further negotiations. The negotiations with successful applicants are concluded by the signing of a Risk Sharing Agreement and a Service Level Agreement.
Download Information for potential implementing partners
Download Expression of Interest form
Accredited implementing partners of the MDB Guarantee Facility for Loans to SMEs
1. BANK OF VALLETTA – SME INVEST
For more information about this programme, visit a BOV Branch or Business Centre or send an email to [email protected]. All loans are subject to normal bank lending criteria and final approval from the Bank. Terms and conditions are available from www.bov.com.
Future implementing partners will be announced as soon as they are accredited.