New market players could unblock banking problems faced by tech companies

With tech companies facing difficulties to open bank accounts, Joseph Muscat says new entrants in the sector could provide solutions • BOV and development bank launch SME loan scheme

Bank of Valletta will be offering €50 million in loan facilities for SMEs in a scheme supported by the Malta Development Bank
Bank of Valletta will be offering €50 million in loan facilities for SMEs in a scheme supported by the Malta Development Bank

New players in the banking and credit market will help unblock problems faced by tech companies to open bank accounts in Malta, Joseph Muscat said.

The Prime Minister was reacting to comments given by the founder of the Malta Blockchain Summit Eman Pulis last week on the difficulties being faced by new technology companies.

Pulis sounded the warning that Malta’s regulatory advantage in the sector risked being lost to Switzerland and Estonia since companies trying to set up shop here were finding it hard to open bank accounts.

Muscat was speaking at the end of a signing ceremony between Bank of Valletta and the Malta Development Bank covering a new loan facility for small and medium enterprises. 

Asked about Pulis’s warning, the Prime Minister said government understood both sides of the coin as banks were caught up in stringent Europe-wide rules on risk.

“We cannot ask local banks to break European rules and a bank like BOV is caught up in this complex situation of being very big for Malta but small on a European level. An important aspect is the attraction of new banks and financial institutions to the market, which established banks like BOV should not frown upon because they will provide a natural method of de-risking,” Muscat said.

He noted that the Malta Financial and Services Authority had a number of licence applications in the pipeline from banks and financial institutions.

However, Muscat urged banks to “grow their appetite for new challenges” while still carrying out the necessary due diligence.

“A risk management strategy does not mean not accepting anyone as your client but carrying out the necessary checks… avoiding risk does not mean it will go away,” Muscat said.

The answer prompted BOV chairman Deo Scerri to point out that in 2018, BOV grew its new business by 4%, while issuing billions of euros in loans to sustain the economic operators.

BOV SME scheme supported by development bank

The new facility launched on Monday is a €50 million kitty being made available to small and medium enterprises at advantageous rates of interest.

The scheme is supported by the Malta Development Bank that will provide a guarantee of up to €10 million.

The scheme will be available for loans taken out by SMEs for capital projects at a minimum of €200,000 and a maximum of €750,000, with an interest rate of 3.5%.

Maturity of loans issued under the scheme will be at a maximum of 10 years and the bank will be asking for little collateral.

BOV said a previous scheme – Jeremie – supported by European funds saw BOV dish out 756 loans to eligible SMEs, to the tune of €61.4 million. Micro enterprises were the ones that benefitted most from Jeremie.

The agreement between BOV and MDB was signed on Monday morning.

MDB chairman Josef Bonnici said this was the first home-grown product targeting SMEs supported by the development bank.

The Prime Minister said the event was significant not just because a new scheme was launched but because it showcased the country’s institutional growth.

“Part of the trajectory of this country’s development was to think of the future by ensuring it has an institutional setup that catered for growth… the MDB addresses the Achilles Heel of the banking system by supporting investments that banks may shy away because of the higher risk component,” Muscat said.

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