When the Government founded the Malta Development Bank in 2017, it did so with a clear purpose: to bridge the financing gaps that traditional banks have long left unaddressed. In an economy where SMEs form the backbone of job creation and innovation, the bank has become an essential tool for safeguarding stability, and supporting growth.

The Malta Development Bank (MDB) was established in 2017 by the Government, with its prime objective being to support the sustainability of the Maltese economy, by addressing market gaps, better known as ‘market failures’ especially financing to Small and Medium Enterprises (SME). Such market failure in SME financing occurs because the Maltese banks fail to provide adequate access to capital even when a need exists.

SMEs are often perceived as too risky due to a lack of collateral, or because the costs of lending small amounts are too high for banks to generate a profit. This can result in viable businesses not receiving the funding they need. SMEs are the backbone of the Maltese economy especially for job and wealth creation. Hence, for the Government such an economic challenge is key to be constantly addressed.

One might ask why MDB has no branches to offer its services. The reason is that MDB is not a commercial bank offering full banking services; it is a specialised institution established to support economic development in line with its public policy objectives.

MDB played a key role during the COVID-19 pandemic in supporting the economy. Through the COVID-19 Guarantee Scheme (CGS), MDB provided financial guarantees to local commercial banks to support access by Maltese businesses which faced significant liquidity pressures due to the pandemic to bank financing for working capital requirements. Under the COVID-19 Interest Rate Subsidy Scheme, interest rate subsidy applied automatically on all working capital loans approved by accredited commercial banks under the CGS. Moreover, under COVID-19 Small Loans Guarantee Scheme supported smaller businesses in taking out loans under the CGS without the need to provide significant personal guarantees. All the three support schemes were approved by the European Commission during 2020.

Currently, the MDB has several financial schemes in operation. Recently, the MDB announced StudentAssist in collaboration with the Ministry for European Funds and the Implementation of the Electoral Programme and several local banks to provide students with easier access to financing for higher education while reducing financial burden on the students during the period of study. Another important instrument is the SME Guarantee Scheme, which is intended for businesses, including startups to obtain the necessary bank financing to expand their operations. MDB guarantees 80% of the loan amount to commercial banks, thus enabling SMEs to benefit from lower interest rates and collateral requirements.

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