Bridging the Investment Gap

The Malta Development Bank (MDB) was established on 24 November 2017 when the Malta Development Bank Act, 2017 came into force (Act No XXI of 2017 – CAP 574).

It commenced operations on 11 December 2017 when the Board of Directors was appointed and held its first meeting. The MDB is fully owned by the Government of Malta.

Mission of the MDB

The MDB shall contribute towards sustainable economic development that benefits the Maltese people in line with public policy objectives by:

  • promoting inclusive and environmentally sustainable economic growth
  • supporting infrastructure development
  • linking entrepreneurship, investment and economic growth to improved living conditions, a higher quality of life, and better social inclusion.

Strategic Objective

The MDB’s strategic objective is to offer financing facilities that support productive and viable operations where the market is unable or unwilling to accommodate such activities on its own in whole or part.

The MDB’s activities focus on complementing and supplementing the operations of market players in the provision of financing facilities, particularly to SMEs, infrastructure projects that contribute to national or regional development, and projects which are socially-oriented, energy efficient and environment friendly.


Remit of Activities

The MDB performs a promotional role in line with public policy. The MDB’s remit of activities covers a wide range of possible operations where there is evidence of market failure. In general terms, the MDB is engaged in the following priority areas:

  • Private Sector Development, in particular financing the private sector through innovative financing, credit enhancement, venture capital, advisory function;
  • Skills and Technology, in particular sustaining competitiveness by investment in innovation, skills, knowledge-generation and technology;
  • Infrastructure development of regional or national importance;
  • Green Economy, in particular supporting clean energy and energy efficiency projects, sustainable transport, and water resources;
  • Community Services, in particular supporting social enterprises operating community services in such sectors as education, health and housing.

Establishing the Malta Development Bank

The launch of the MDB marks an important event in the development of financial intermediation in Malta. During the height of the sovereign debt crisis, it became clear that Malta lacked an important institution that acts counter-cyclically to mitigate the adverse impacts of the prevailing economic cycle. In the period after the sovereign debt crisis, notwithstanding the excess liquidity characterising local banks the volume of bank lending to corporate borrowers in Malta remained subdued, and lending rates remained relatively elevated. This market gap was more evident in respect of SME access to finance. As a result, the prevalent financial conditions at that stage marked a strong case for a promotional institution to promote entrepreneurship and investment.

The need to create a promotional bank to address such an institutional gap originated a few years earlier when the Central Bank of Malta discussed the benefits associated with the establishment of such an institution with Government authorities. After obtaining better insight into the institutional and organisational aspects of promotional banks and their business model, in 2013, the Central Bank of Malta presented a proposal to the Government recommending the setting up of a national promotional bank.

A Working Group with wide representation was set up, mandated to prepare recommendations for the setting up of the new institution and the related legislative and operational framework. At the request of the Commission, the Ministry for European Affairs in 2015 commissioned two studies.

The first was a Market Study on Potential Existence of Market Failures in Malta. This study concluded that taking into account both SME finance and infrastructure financing, the total funding gap was estimated at between 29% and 39% of GDP over a period of five years, equivalent to between €2.3 billion and €3.1 billion. The second report provided a Blueprint describing the role of the Bank, its business model, products and financial projections. These market studies also entailed extensive consultations with a wide range of domestic stakeholders.

On 19 April 2016, Eurostat determined that the Malta Development Bank should be classified outside the general government sector for the purposes of classification by sector under ESA 2010. On 24 August 2016, the EU Commission published its decision that the legislation, business plan and proposed measures pertaining to the Malta Development Bank are in line with State Aid rules and in conformity with the rules on the internal market.

The Bill on the Malta Development Bank Act was published on 24 June 2016. On 5 May 2017, the Malta Development Bank Act, 2017 (Act XXI of 2017 CAP 574) was passed and came into force on 24 November 2017 through Legal Notice No 340 of 2017.

On 11 December 2017, the Minister for Finance appointed the members of the Board of Directors and the Supervisory Board of the Malta Development Bank. On the same day, the Board of Directors held its first meeting and the Bank officially commenced operations.

Financing Facilities

MDB provides financing for bankable projects, that is, viable projects that have satisfactory revenue-generating potential. All proposals are assessed according to sound banking principles.


MDB addresses market failures that ensue from externalities and difficulty in risk assessment. In certain cases, such failures limit the access of certain beneficiaries to the optimal set of financial resources. MDB facilities cater for SMEs which otherwise would not be accommodated by private sector intermediaries despite the underlying viability or social desirability of their activities.

Facilities are extended through intermediaries, mainly commercial banks, that conduct the due diligence process and project appraisal. These intermediaries assess and approve loan applications of end-customers under promotional schemes pre-agreed with the MDB.

This process ensures the non-competitive nature of the relationship between the MDB and the intermediaries. It also enables the MDB to assume a leaner structure, thereby fulfilling its public policy role in a cost-effective manner.

Facilities intermediated through commercial banks can take the form of portfolio guarantees, co-financing or a combination of both.

The MDB offers promotional schemes to support:

  • SMEs particularly those involving innovation, digitalisation and, more broadly, the preservation and enhancement of competitiveness;
  • Socially-oriented initiatives, particularly those involving knowledge generation, education, health and social inclusion;
  • Investment that addresses environmental issues such as water usage, water treatment, waste treatment, reduction and reuse;
  • Investment aimed to achieve a high level of sustainability or promote the circular economy.

Private and Public Sector Projects

The MDB engages in direct lending, including co-financing, or as guarantor for commercial banks or other intermediaries. Such operations are typically directed at:

  • Physical infrastructure projects carried out by the private sector, public entities and/or public-private partnerships;
  • Social infrastructure projects including those associated with health sector, long term care, education, affordable housing and similar initiatives. In such instances, social returns may not be fully internalised by the private investor;
  • Syndicated lending which crowds in a group of banks and other funding sources to enable large scale investment projects.

Nature of Financing Operations

The MDB’s financing operations, which can be either on state aided terms or on market terms, include the provision of:

  • Aided finance authorised under:
    1. The General Block Exemption Regulation (GBER);
    2. Approved aid schemes;
    3. Approved aid under specific Guidelines issued by the European Commission, or;
    4. EU financial instruments, where the MDB channels and manages such funds, or where the MDB is a co-investor.
  • Aided finance that meets – at the level of the final beneficiaries – the conditions of the de minimis regulation
  • Finance offered on market terms to eligible final beneficiaries and compliant with the GBER except for aid intensities or maximum aid amounts. In the case of infrastructure projects participation by private investors shall be at least 50% pari passu with the Bank;
  • Participation in EU financial instruments with market terms financing; or other forms of financing subject to prior approval by the European Commission.
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The MDB’s operations have been partly funded by the paid-up capital provided by the Government in terms of article 10 of the MDB Act. After being launched in 2017 with an initial paid-up equity of €30 million, the Bank’s paid-up capital was increased in line with its business plan by €10 million annually in 2019, 2020 and 2021 and by €20 million in 2022 to reach €80 million.

Together with its paid-up capital, the MDB’s funding model also includes bilateral borrowing as a result of agreements entered into with international development institutions. Such funds are earmarked for on-lending to local operators, both in the SME segment as well as for economic operators and public sector entities engaged in infrastructural projects, particularly those that exhibit a social or environmental dimension. To this effect, the MDB is party to a loan agreement of €45 million with the KfW Group and another loan agreement of €50 million with the European Investment Bank under the Multiple Beneficiary Intermediated Loan (MBIL) programme. These funds are utilised by the MDB to finance the facilities to support SMEs, mid-caps and infrastructure projects by private and public-sector entities.

MBIL Climate Action

On 14 November 2023 the Bank signed a loan agreement with the EIB for an MBIL Climate Action Loan of €30 million to be directed to SMEs, mid-caps and local authorities, willing to invest in projects that contribute to the fight against adverse climate change. Investments eligible under this programme include a wide range of green initiatives such as electric vehicle charging infrastructures, solar photovoltaic installations, energy efficiency in both public and private buildings, as well as waste recycling projects.

Government Guarantee

Article 5 of the MDB Act provides that the Government shall guarantee up to 100% of all the obligations of the Bank and up to 100% of the loans, facilities or guarantees issued by the Bank. In line with the indicative targets specified in the MOU signed between the MDB and the Ministry for Finance on 16 February 2018 in terms of Article 5(2) of the MDB Act, the Government Guarantee in favour of the Bank has been increased gradually in line with the Bank’s business growth. At the end of 2022, it stood at €150 million. Some 60% of these guarantees have been earmarked to cover the two main international borrowing operations with the EIB and KfW, while the balance is intended for other prospective operations which the MDB shall be carrying out on its own account.

In addition to the above guarantees, in April 2020 the Government had issued another guarantee of €350 million specifically for the COVID-19 response facilities which the MDB is managing as agent on behalf of the Government. This same guarantee also served to back the Ukraine crisis response measures launched in 2022.

Environmental, Social and Governance (ESG)

The MDB’s corporate culture is committed to support economic growth through strong governance and sustainable processes.

Environmental, social and governance (ESG) dimensions are a significant area of focus for MDB’s Board of Directors and management team.

While the MDB itself endeavours to follow ESG principles, a special focus is to deliver schemes that support the business community to contribute to Malta’s target of reducing greenhouse gas emissions by 2030 and reach net zero emissions by 2050.

The vision of the MDB is to deliver direct benefits in all ESG domains. The approach will focus externally on a review of the Bank’s guidelines covering credit and risk assessments of promotional schemes which shall be finetuned to give more accent to ESG considerations and on internal measures aiming to integrate ESG principles at all levels of our operations.