MDB COVID-19 Guarantee Scheme not attractive at all, say GBC and GTA

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The Gozo Business Chamber (GBC)and the Gozo Tourism Association (GTA) in a joint statement said that the guarantee scheme launched by the Malta Development Bank is not attractive at all to business operators.

The Malta Development Bank (MDB) recently launched the MDB COVID-19 Guarantee Scheme (CGS), a key component of the wider package of Government’s COVID-19 Response Support Programme.

The Government has allocated a fund of €350 million for the MDB to develop the CGS, with the purpose of guaranteeing loans granted by commercial banks in Malta to meet new working capital requirements of businesses facing cashflow disruptions due to the effects of the COVID-19.

The MDB is responsible for the development, management and implementation of the scheme.

According to MDB, the CGS will enable the commercial banks accredited by the MDB to leverage the €350 million fund into €777.8 million in new working capital loans to support all types of businesses in Malta.

The GBC and GTA said they feel that the parameters in which MDB had to operate were too stringent and the outcome is a product that is not attractive at all to business operators and that the scheme offered is a non-starter due to the relatively high-interest rates businesses pay in Malta.

The Chamber and the Association said that they must create the right economic framework so that local and international funds are made available to local businesses unencumbered by additional interests and charges. They reiterated that time is of essence, that the scheme announced will only serve to discourage businesses and that government must recognize that in this crisis we are speaking about whether businesses will continue to exist or not.

The GBC and GTA emphasized that at this moment businesses need loans at zero interest and repayments moratoria.

In their joint statement, the Gozo Business Chamber and the Gozo Tourism Association have called upon the government to utilize local available funds which at the moment are available at local Banks.

They explained that local Banks are already paying out a 0.5% to deposit funds with the European Central Bank and instead these funds could be channelled to the local ailing economy in the form of loans to businesses with the Government paying a marginal interest to the banks.  The GBC and GTA proposed that if government pays 1% interest to the local banks, these would already be 1.5% better off.

The MDB COVID-19 Guarantee Scheme

Businesses of any size and type can apply for loan amounts that can go up to €5 million, depending on the size, wage bill and turnover of the applicant.

Eligible working capital costs under the CGS include salaries, rental costs, energy and water bills and fuel, unpaid invoices due to decrease in revenues, acquisition of material and stock for the continuation of business expenses directly related to contracts which were cancelled or postponed because of the present situation, and maintenance costs.

Under the CGS, businesses can also benefit from improved access to liquidity, at lower interest rates and with a repayment period of up to six years.

The CGS will provide a six-month moratorium on both the interest payments as well as on capital repayments. The moratorium period can be extended by the commercial banks to one year on a case by case basis.

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