Market Gaps on Access to Finance - Bank of Valletta

Malta Business Bureau – <strong>Market</strong> gaps in access to finance
April 2013
Additionally, although Maltese data for a number of indicators is not available, the 2012 EC SBA
fact sheet for Malta (based on 2011 data and forming part of the EC’s annual Member State SBA
fact sheets 11 ), shows an improvement in the available “access to finance” indicators from the
2010/2011 edition, with Malta scoring above the EU average in all the indicators below, namely:
Access to public financial support including guarantees (% of respondents that indicated a
deterioration): Malta: 15%; EU-average: 22%
Willingness of banks to provide a loan (% of respondents that indicated a deterioration)
Malta: 19%; EU-average: 27%
Relative difference in interest rate levels between loans up to EUR 1 million and loans
above Eur 1 million: Malta: +11%; EU-average: +19%
This data shows that far fewer SMEs in Malta are reporting deterioration in access to public
financial support or in the banks’ willingness to provide loans. Also, the differential between small
loans of less than EUR 1 million and larger ones above that threshold is smaller in Malta (11%) than
in the EU on average (19%). According to the SME fact sheet, this latter indicator suggests that the
mark-up which the SMEs have to pay for bank loans is smaller in Malta than in most other EU
Member States, but this is probably a reflection of the small absolute size of Maltese firms.
2.3 SME policy in the European Union
The EC aims to promote successful entrepreneurship and improve the business environment for
SMEs, to allow them to realise their full potential in today's global economy. The EC works on broad
policy issues affecting entrepreneurship and SMEs across Europe, and assists SMEs through
networks and business support measures. It also helps existing and potential entrepreneurs to grow
their businesses, giving special attention to women entrepreneurs, crafts and social economy
enterprises.
The EC’s Small Business Act for Europe (EC SBA), launched in 2008, embodies the EU's
commitment to SMEs and entrepreneurship. Member States have committed to implementing the
SBA alongside the EC in an effort to make the EU a better place to do business. The EC SBA
encompasses a host of policy areas targeted at SMEs which could be undertaken at an EU-wide level
as well as Member State level. It aims to improve the overall approach to entrepreneurship,
permanently adopting the ‘Think Small First’ principle in policy making, from regulation to public
service, and to promote SMEs’ growth by helping them tackle the remaining problems which hinder
their development. The ‘Think Small First’ principle requires that legislators take SMEs’ interests
into account at the very early stages of policy making in order to make legislation more SME
friendly 12 .
Since SMEs have to be supported at the local level, the EC also helps Member States and the
regions to develop policies aimed at promoting entrepreneurship, assisting SMEs at all stages of
development, and helping them to access global markets. The identification and exchange of good
practices are key elements of this policy.
One of the key priorities set out in Europe 2020, as well as in the Commission's Single <strong>Market</strong> Act
and the SBA, is to facilitate access to finance for SMEs. The EC acknowledges that SMEs are to a
very large extent dependent on bank loans for their external financing 13 , and therefore suitable
alternatives should be put at their disposal. The EC aims to counteract this reality by putting into
place a number of “access to finance” initiatives, including financial instruments to benefit
enterprises 14 . The EC acknowledges that challenges remain in this regard, particularly given that
11 European Commission (2011), Review of the “Small Business Act” for Europe
12
European Commission (2008), “Think Small First” – A “Small Business Act” for Europe
13
European Commission (2011), An action plan to improve access to finance for SMEs
14
European Commission (2011), Review of the “Small Business Act” for Europe. Other initiatives relate to the Temporary
State Aid Framework (in place until 2011), which helped in unblocking bank lending to companies and encouraging
companies to continue investing in the future, in the wake of the financial and economic crisis; and the SME Finance Forum,
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