Guarantee Facility for Loans to SMEs

Scheme Overview

The MDB Guarantee Facility for Loans to SMEs facilitates lending to smaller businesses that are viable but unable to obtain the required amount of finance from their commercial bank due to:

  • Insufficient or inadequate collateral to meet the bank’s normal security requirements,
  • The novelty or nature of the business venture that may fall outside the risk appetite and tolerance of commercial banks,
  • Other factors such as the required repayment period for which commercial banks may not be willing or able to provide the required financing in whole or part.

Consistent with MDB’s objective to improve access to finance and to diversify the financing options to SMEs, the MDB seeks to magnify the outreach of its promotional role by collaborating with commercial banks to stimulate more active SME lending in Malta by offering the opportunity for banks to act as MDB’s implementing partners for the MDB Guarantee Facility for Loans to SMEs. The facility enables lenders to be more responsive to the borrowing requirements of smaller businesses, which, in turn, allows smaller businesses to fulfil their investment plans and growth ambitions. This facility therefore helps generate a positive contribution to the Maltese economy in terms of new investment, employment opportunities, stronger competitiveness and higher economic activity. 

Information for SMEs

The purpose of the MDB Guarantee Facility is to assist SMEs, including start-ups, by enhancing their access to bank finance. Eligible SMEs benefit from:

  • enhanced access to credit as insufficient collateral and lack of credit history should not remain an obstacle when seeking finance from the banking sector,
  • better terms and conditions and a longer repayment period,
  • lower interest rates as a result of the credit risk protection from the MDB’s guarantee.

The facility is available through commercial banks that agree to act as implementing partners of the MDB.

Information for Potential Implementing Partners for SMEs

In accordance with its objectives of creating a more diverse and vibrant credit market with more options and choice of providers, MDB seeks to expand the range of implementing partners to generate additional lending for smaller businesses. This is in line with the MDB’s policy of offering its facilities in an open, transparent and non-discriminatory manner.

The facility is structured as follows:

a) The MDB provides a First-loss Guarantee covering 80% of the individual loans under the scheme, with a  cap rate of 25% at the portfolio level.

b) A guarantee fee of 0.5% is payable by the implementing partner to the MDB in respect of the credit risk protection. The guarantee fee is collected by the implementing partner as part of the final interest rate on the outstanding loan balance.

Implementing partners benefit from:

  • Lower credit risk exposure;
  • Enhanced opportunity to increase the size of the balance sheet and profitability;
  • Efficient use of capital and lower impairment charges to the profit and loss;
  • Greater flexibility in adhering to the risk appetite framework;
  • Higher client retention due to increased fulfilment of customers’ requests;
  • Enhanced customer relationship.

The implementing partner shall pass on the benefit from MDB’s guarantee to the SME in the form of a lower risk premium and lower collateral requirements.

To become an implementing partner of the MDB Guarantee Facility for Loans to SMEs, interested credit institutions need to fill in the Expression of Interest form which can be downloaded from this link. Applicants must be able to address all points to the satisfaction of the MDB in order to be considered for further negotiations. The negotiations with successful applicants are concluded by the signing of a Risk Sharing Agreement and a Service Level Agreement.

Accredited implementing partners of the MDB Guarantee Facility for Loans to SMEs


Bank of Valletta, in collaboration with the Malta Development Bank (MDB), has launched ‘BOV SME Invest’ a product aimed at SMEs planning new capital investment projects. BOV SME Invest provides easier access to finance to SMEs through reduced collateral requirements and finance costs.

Enterprises may seek bank financing up to a maximum of €750,000, at attractive interest rates and reduced collateral obligations. The new financing package was launched during a press conference presided over by The Hon Dr Joseph Muscat. The event was addressed by BOV Chairman Taddeo Scerri and Albert Frendo, the Bank’s Chief Credit Business Development Officer together with Prof Josef Bonnici the Chairman of the Malta Development Bank. BOV SME Invest will provide €50 million financing to local SMEs through a €10 million guarantee provided by the Malta Development Bank,’ said Albert Frendo. This Guarantee allows Bank of Valletta to reduce its collateral obligations together with a reduction in interest rate of 2% below market rate.’ ‘SMEs face a myriad of challenges to launch their business, bring their projects to fruition and expand their horizons,’ continued Mr Frendo. ‘BOV SME Invest eases the burden of seeking finance and complements other EU funded financial instruments such as the BOV JAIME scheme that is being well received by the market.’

BOV SME Launch

‘In line with its mission of addressing market failures and investment gaps, the Malta Development Bank will provide a €10 million guarantee against which Bank of Valletta will leverage €50 million to local SMEs,’ said Prof Bonnici. ‘Malta’s economic success depends largely on the growth of SMEs. With SMEs accounting for around two thirds of Malta’s workforce, this product will act as a catalyst to improve access to Bank financing for SMEs, spurring growth and innovation.’ The benefit of the guarantee will be passed on to the SME through a reduced level of collateral and a lower rate of interest. ‘The BOV SME Invest scheme is the product of extensive discussion between Bank of Valletta and the Malta Development Bank, leveraging on the expertise and experience of both parties in this area’ continued Prof Bonnici. ‘This is the first financial instrument of its kind and is a clear manifestation of the MDB’s objective to complement the commercial banks and to work in partnership with the banks to crowd in new investment. We are confident that SME Invest will act as a benchmark for similar programmes and initiatives in the future.’

‘BOV SME Invest provides a direct injection into Malta’s economy and through the €10 million guarantee by the Malta Development Bank, we are effectively creating €50 million of new business that will be injected into the Maltese economy that would result in a potential total investment of €90 million,’ said the Hon Dr Joseph Muscat. ‘This is in line with the MDBs aim of contributing towards sustainable economic development that benefits the Maltese community through economic growth and infrastructure development.’ “The decision to create the Malta Development Bank was taken over four years ago and this collaboration between Bank of Valletta, Malta’s largest Bank, justifies the MDB’s role and business model and bridges the credit market gaps existing in the SME market.” continued Dr Muscat. “The co-financing will stimulate more funding of infrastructural projects.’

For more information about this programme, visit a BOV Branch or Business Centre or send an email to All loans are subject to normal bank lending criteria and final approval from the Bank. Terms and conditions are available from  

More Information

For more information about this programme, visit a BOV Branch or Business Centre or send an email to  All loans are subject to normal bank lending criteria and final approval from the Bank. Terms and conditions are available from

Future implementing partners will be announced as soon as they are accredited.