SMEs report strong growth, less reliance on bank loans

SMEs in Malta are doing well and facing less financing burdens than those in the EU.

Through an article by one of its senior economists, Sandra Zerafa, the Central Bank of Malta has reported extensively on the results of the latest Survey on Access to Finance (SAFE), a survey on the financial situation and the expectations of firms which was conducted in Malta by the European Commission in cooperation with the European Central Bank last year.

The survey indicates that, on balance, 24% of respondents assessed turnover to have increased over the six months preceding the survey. In the EU, less than half of SMEs reported this situation (11%). Similarly, on balance, 28% of SMEs in Malta increased employment, compared with 4% of SMEs in the EU. The pace of hiring also seems to have accelerated when compared to 2019, when 22% of SMEs in Malta had reported a net increase in the number of employees.

On balance, 29% of SMEs in Malta reported an increase in investment in plant, machinery, or equipment. This is significantly higher than the 8% of SMEs in the EU.

At 43%, the share of SMEs that used bank loans in the past or that expected to use them in the future fell to its lowest rate recorded over the years. This was because firms reported that they had enough internal funds to finance their operations. Malta, along with Croatia, had the highest share of firms assessing internal funds as relevant among all EU countries. The share of firms that used bank loans in the six months preceding the survey fell to just 9% in Malta, from 17% a year earlier. This marks the lowest share observed in the preceding decade.

The proportion of SMEs that applied for bank overdraft, credit lines, or credit card overdrafts was 18% in 2023 and remained below the shares reported in 2019 and 2020. During the same period, 43% did not apply because of sufficient internal funds. Meanwhile, the proportion of SMEs that applied for bank loans fell to 12% from 15% a year earlier. This was also the lowest share recorded over the past 5 years and short of the 20% reported for the EU.

As a result, the Central Bank of Malta concluded that “with regard to the availability of financing, this is generally better than in the EU and is expected to remain as such in the near future”. At the same time, while across Europe the burden of interest rates rose significantly, in Malta it remained contained.

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