The Malta Development Bank (MDB) has just released its first Annual Report which was tabled in Parliament on 17 April 2019 in line with the requirements of Article 33 of the Malta Development Bank Act, 2017 (Cap 574).
The Report reviews the Bank’s role, its business model and its activities since commencement of operations on 11 December 2017 till the end of 2018. It also includes detailed financial statements for the period ending 31 December 2018.
In his opening statement, the Chairman remarks that the establishment of the MDB introduces a new form of financial intermediation that promotes investment at the enterprise and infrastructural levels by targeting credit market gaps. The role of the MDB is to complement the commercial banks in stimulating investment where the banks are unwilling to accommodate the credit demand on their own. This demonstrates the complementarity between promotional and commercial banking, thus highlighting the MDB’s role to “crowd in” additional investment by the private and public sectors.
The Chairman’s statement is followed by a review of the background which led to the establishment of the MDB. This is followed by a description of the Bank’s business model and an overview of the Bank’s operations during the year. As for the business model, the MDB’s financing operations will be targeted at the two broad categories where credit market gaps are most prevalent, namely SMEs and infrastructure.
In the SME segment, the absence of a borrowing history and insufficient collateral are the two main sources of market failure. The MDB’s support to SME financing will take the form of indirect facilities mainly through loan guarantee schemes. In this respect, the MDB signed its first Risk Sharing Agreement in October 2018 with one of the local major credit institutions and the Family Business Office, designed to enhance access to credit in respect of family business transfers within the family. Under this Scheme, the MDB will provide a guarantee of 80% on each facility, capped at 50% of the portfolio of loans extended by the commercial bank. This should generate new loans for such family business transfers of €10 million over 3 years. Moreover, the MDB was engaged in negotiations with the banks in respect of the prospective launching of new SME loan guarantee schemes, whereby the MDB will provide a guarantee of 80% on each facility, capped at 25% of the portfolio of loans extended by the commercial banks. These should generate portfolios of around €100 million in new loans for SME investments over a period of 3 years.
In the area of infrastructure financing, the long repayment period required to make such projects bankable and the large size of such projects represent the main forms of market failure. The MDB’s facilities to address this investment gap can take the form of direct lending and co-financing with the commercial banks to stimulate more funding of infrastructural projects by public and private sector entities. The focus will be on projects with a strong social dimension – especially those related to education, health, elderly care, and affordable housing – as well as those that contribute to the green economy, including renewable energy and energy efficiency, sustainable transport and water resources, as well as other environment-friendly initiatives. Projects that enhance Malta’s competitiveness rank also highly within the MDB’s priorities.
Finally, the Annual Report is accompanied by a chapter relating to Risk and Capital Management followed by the audited financial statements of the MDB for its first year of operation.
The MDB’s Annual Report for 2018 is available here.
Il- Bank Malti ta’ Żvilupp jippubblika l-ewwel Rapport Annwali tiegħu
Il-Bank Malti ta’Żvilupp (MDB) ħareġ l-ewwel Rapport Annwali tiegħu li ġie mressaq fil-Parlament fl-17 ta’April 2019 b’konformità mal-Artiklu 33 ta’ l-Att tal-2017 dwar il-Bank Malti ta’ Żvilupp (Kap 574).
Ir-Rapport jagħti rendikont tal-irwol tal-Bank, il-‘business model’, u l-attivitajiet tal-Bank minn mindu beda jopera fil-11 ta’ Diċembru 2017 sal-aħħar tas-sena 2018. Ir-Rapport jinkludi ukoll id-dikjarazzjonijiet finanzjarji għall-perjodu sa 31 ta’ Diċembru 2018.
Fl-istqarrija tiegħu, iċ-Ċermen irrimarka li l-MDB jintroduċi forma ġdida ta’ intermedjazzjoni finanzjarja li tippromovi investiment fuq livell intraprenditorjali u fl-infrastruttura billi jindirizza nuqqasijiet fis-suq tal-kreditu. Ir-rwol tal-Bank hu li jikkumplimenta il-banek kummerċjali biex jixpruna l-investiment fejn il-banek mhumiex lesti li jakkomodaw domanda għal-kreditu weħidhom. Dan juri il- komplementarjetà li tezisti bejn bank promozzjonali u bank kummerċjali u jenfasiżża ir-rwol tal-MDB li jattira aktar investiment mis-settur privat u pubbliku.
Wara l-istqarrija taċ-Ċermen, ir-Rapport jagħti l-isfond ta’ x’wassal biex l-MDB jiġi stabbilit. Isegwi dan huwa kapitolu dwar il-mudell kif jopera l-Bank, rendikont tal-attivitajiet tal-Bank matul l-2018. Rigward il-‘business model’, il-faċilitajiet finanzjarji tal-MDB jindirizzaw żewġ kategoriji fejn in-nuqqasijiet fis-swieq tal-kreditu huma l-aktar prevalenti, jiġifieri intraprizi ta’ daqs żgħir u medju (SMEs) u l-infrastruttura.
Fil-qasam tal-SMEs, in-nuqqas ta’ esperjenza fil-kreditu u ta’ garanziji kollaterali hija r-raguni principali ta’ ‘market failure’, iġifieri meta is-suq ma jaħdimx b’mod effiċjenti. L-għan tal-MDB huwa li jippromovi il-finanzjament tal-SMEs permezz ta’ skemi ta’ garanzija fuq self mill-banek lil dawn l-intraprizi. F’dan ir-rigward, il-MDB iffirma l-ewwel ‘Risk Sharing Agreement’ f’Ottubru 2018 ma’ bank kummerċjali prinċipali u l- Uffiċċju tan-Negozju tal-Familja bl-oġġettiv li jtejjeb l-aċċess għal-kreditu fir-rigward ta’ trasferiment tan-negozju bejn membri tal-familja. Permezz ta’din l-iskema, l-MDB jiggarantixxi 80% ta’ kull self provdut mil-bank kummerċjali sa massimu ta’ nofs il-portafoll ta’ self illi ‘l-bank qed jalloka għal dan il-għan. Dan għandu jiġġenera €10 miljuni f’self ġdid fuq medda ta’ tliet snin. L-MDB wettaq ukoll proċess ta’ kosultazzjoni u negozjati mal-banek sabiex jiġu mnedija skemi ġodda ta’ self garantit lil SMEs fejn l-MDB jiggarantixxi 80% ta’ kull faċilita’ sa massimu ta’ 25% fuq il-portafoll ta’ self mil-banek kummerċjali. Dawn l-iskemi għandhom jiġġeneraw €100 miljun f’self ġdid lill-SMEs fuq medda ta’ tliet snin.
Fil-qasam tal-infrastruttura, il-medda itwal ta’ żmien meħtieg biex jitħallas lura is-self sabiex jagħmel il-proġett vijabbli kif ukoll id-daqs kbir ta’ dawn il-proġetti huma iż-żewġ raġunijiet prinċipali ta’ nuqqasijiet fis-suq. Sabiex jindirizza dan in-nuqqas, il-MDB lest li joffri faċilitajiet ta’ self dirett jew kofinanzjament mal-banek kummerċjali biex jistimula aktar kreditu għall-proġetti infrastrutturali kemm minn entitajiet pubbliċi kif ukoll dawk privati. Il-Bank jiffoka fuq proġetti b’dimensjoni soċjali – partikolarment dawk fil-qasam tal-edukazzjoni, saħħa, kura tal-anzjani, u akkomodazzjoni affordabbli – kif ukoll f’oqsma ta’ l-ekonomija ekoloġika bħall-enerġija rinnovabbli u effiċjenza tal-enerġija, trasport sostenibbli u riżorsi tal-ilma kif ukoll f’inizzjattivi oħra favur l-ambjent. Il-Bank jagħti ukoll priorita’ lil dawk il-proġetti li jtejbu il-kompetittivita’ ta’ Malta.
Finalment, ir-Rapport Annwali jinkludi kapitolu fuq l-immanigjar tar-riskju u l-kapital kif ukoll id-dikjarazzjonijiet finanzjarji tal-MDB għall-ewwel sena tal-operat.
Ir-Rapport Annwali tal-MDB għall-2018 huwa disponibbli hawn.