Malta Enterprise, Malta Development Bank sign agreement for better funding of high-risk projects

The Malta Development Bank has signed a memorandum of understanding with Malta Enterprise that will provide better access to funding in previously-overlooked sectors of the economy. 

Addressing the press before the signing, Economy minister Chris Cardona said the agreement would allow the country to address market failures arising from Malta’s continued economic growth. 

He said that accessing finance from standard commercial banks was not always possible, especially in some industries. Cardona pointed out that while Small and Medium Enterprises were one of the main drivers of Malta’s economy, lending to these companies was not a priority for banks. 

"A lack of access to finance reduces the prospect of economic growth,” he said, adding that the agreement would be targeted at industries such as the life sciences, film, tourism and other similar industries which are often categorised as high-risk by banks. 

The collaboration, he said, would help the government in its strategy for economic diversification.   

Also present for the signing were Finance Minister Edward Scicluna, Malta Industrial Parks CEO Karl Azzopardi, Malta Development Bank chairman Josef Bonnici and Malta Enterprise CEO Mario Galea. 

Galea noted that although ME had been funding industrial projects since the 1970s, the need for a new system had arisen in recent years. He said that while in the past a company would go to the bank if it needed to buy property, and to Malta Enterprise for equipment, there was now more diversity in the types of sectors needing funding. 

He said that with the country shifting to more high-value industries, certain companies’ biggest asset was no longer their equipment, but knowledge. “This means there is more risk when funding because there is no tangible asset.”

The said the agreement between the MDA and ME would go a long way in addressing such market failures in order to allow the economy to continue developing.

Bonnici said that after having been established last December, the MDB was now growing and working to address “financial gaps in the economy”. 

The gaps, he said, were due to factors like banks being uncomfortable financing long-term projects, or projects that were very innovative. The MDB, he said, had held meeting with all banks in order to determine “what type of relationship they want”. He added that there had so far been a good response from all sectors.  

Finally, Scicluna said he was happy that the MDB was finally “showing its face”. Setting up the bank, he said, had been a challenging process but he added that he was satisfied with the fact that the MDB had been given the green-light by the European Commission, and that it had approved the MDB in accordance with its experience with similar banks across the EU. 

“The Malta Development Bank is like a national airline,” said Scicluna. “We can depend on others, but it is always better to have your own especially when dealing with areas where others might not be interested in helping.”