Market Gaps on Access to Finance - Bank of Valletta

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Malta Business Bureau – <strong>Market</strong> gaps in access to finance April 2013 2.4.3 Other assistance schemes in Malta Aside from the various schemes offered by ME, additional assistance is also available to SMEs in Malta through: Invex (Office of the Prime Minister) – this scheme targets cultural and creative enterprises and organisations, providing long-term strategic support to improve their products, services and internal organisational structures. It also supports organisations seeking to enhance their professional capacities and portfolio by way of organisational growth, research, business and audience development, technological investment and international partnerships. Selected organisations may benefit from a three year funding period, based on a 3-year business plan. MicroCredit scheme - launched in 2011 with a fund financed under the Joint European Resources for Micro to Medium Enterprises (JEREMIE) from EU Structural Funds, this is the first Loss Portfolio Guarantee vehicle set up in Malta to grant SMEs and self-employed loans of up to €500,000 at advantageous interest rates and considerably lower collateral requirements. 20% of the fund was earmarked for firms with fewer than 10 employees and a turnover of not less than €2 million. The financial institution awarded the tender, namely Bank of Valletta plc (BOV), is to provide €51 million in new loans over a period of 36 months to small businesses, through a guarantee agreement for €8.8 million with the European Investment Fund (EIF). This scheme was referred to as a “best practice” example in the EC’s SBA Fact Sheet for Malta covering the period 2012 37 . The MicroCredit/ JEREMIE scheme is explained in greater detail in Section Error! Reference source not found.. The Employment & Training Corporation (ETC) provides assistance through a number of schemes and initiatives to incentivise businesses to invest in their workforce. These include: Enhancing Employability through Training Programme – this programme, which is part financed by the European Social Fund (ESF), aims to reintegrate registered unemployed or inactive individuals into the labour market, as well as provide further training in the field of basic skills, office related subjects, IT, technical courses and care working courses amongst others. Traineeships - Traineeship is a dual system of occupational skill development programme comprising both on-the-job training and off-the-job training. It is targeted at new labour market entrants, unemployed clients or employees involved in restructuring exercises. This flexible training solution to address skill shortages is offered to employers willing to recruit as part of a traineeship. The content and occupational standards are set after consultation with the employer and lead to certification. During the traineeship programme, trainees are paid the equivalent of 80% of the minimum wage. Training Subsidy Scheme – this scheme is intended to encourage constant training and development amongst the self-employed, employees of micro enterprises which employ 10 persons or less, employees of NGO's and Local Councils, and jobseekers who are registering for work. It provides financial assistance for off-the-job training expenses. The financial assistance is a grant equivalent to 75% of the training costs, up to a maximum amount of €1,000 per individual. Training Aid Framework (TAF) - The TAF is intended to promote access to training of persons actively participating in the Maltese labour market. This programme also aims to increase and/or improve the skills of persons employed. The TAF provides financial assistance to employers in the form of part-refund of training costs incurred by private owned companies when they train their employees 38 . 37 European Commission (2012), SBA Fact Sheet – Malta 2012 38 This scheme is currently on hold Page | 18
Malta Business Bureau – <strong>Market</strong> gaps in access to finance April 2013 Apprenticeships – through this programme, apprentices learn through a combination of onthe-job and off-the-job training. Apprenticeships are available across a wide range of industries and allow for two levels, the Technician Apprenticeship Scheme and the Extended Skill Training Scheme. Other general national initiatives which have potential benefits for SMEs include: Public procurement (2011) – the e-procurement initiative, streamlined to cater for all types of procurement (supplies/services/works), significantly reduced the size and simplifying the requirements. In fact, thanks to electronic procurement, the complete purchasing cycle up to the e-evaluation stage is carried out electronically, resulting in considerable savings to economic operators and Government alike, making it even easier for smaller enterprises to participate in public procurement. GAPSE (2009) - adoption of General Accounting Principles for Small Entities (GAPSE) in order for small businesses to file abridged set of financial statements, thus removing the difficulties in preparing financial statements. National Enterprise Support Awards (2009) - scheme launched by the Ministry of Finance, the Economy and Investment (MFIN) to identify and reward initiatives that promote entrepreneurship or put in place measures that support businesses. Entrepreneurship through Education Scheme (2012) – scheme jointly co-ordinated between MFIN and the Ministry of Education, Employment and the Family (MEEF) to promote the growth and development of entrepreneurial spirit through the education system. This scheme is particularly relevant for the local community considering the results of a 2012 Eurobarometer survey on entrepreneurship showing that 61% of Maltese would rather be employees than self-employed (EU27 average: 58%) 39 . The reason behind this lack of willingness to be self-employed seems to be the underlying fear of bankruptcy (43% of respondents). 37% were discouraged by the risk of losing their property/ home, while 33% were discouraged by the risk of irregular income. 17% of respondents said they had started a business or are planning to start one (EU average: 23%; Malta figure in 2009: 8%). The 2013 Budget Speech also referred to the setting up of an action plan for the training on entrepreneurship from primary to tertiary educational level to prepare students for careers in business 40 . Malta Tourism Authority – the MTA is also responsible for implementing a number of sustainable tourism project schemes, such as the Grant Scheme for Tourism Projects by Enterprises 2007 – 2013. 2.4.4 Venture capital in Malta Although formal venture capital schemes are currently not available in Malta, a number of past initiatives aimed at filling this financing gap are outlined below 41 : Investment Finance Bank (1991-1993): the IFB administered a €4.7 million (i.e. MTL 2 million) loan facility which was provided by the EIB for venture capital initiatives in Malta. A couple of projects benefitted from this facility at the time. The financing mechanism was generally through preference shares, with the bank being granted representation on company’s Board of Directors. Technology Venture Fund (TVF; 2001-2003) – provided through the then Institute for the Promotion of Small Enterprises Limited (IPSE) and the Malta Development Corporation (MDC), the TVF was set up to support the development of technology and innovation within SMEs. The aim of the TVF was to part-finance the setting up of innovative enterprises and 39 European Commission (2012), Entrepreneurship in the EU and Beyond. This trend seems to be evident in 19 out of the 27 EU countries, who also said that they would prefer to be employees. This is the case particularly in Sweden (74%) and Finland (73%); European Commission (2012), Eurobarometer: Entrepreneurship – Malta country report 40 Ministry for Finance (2013), Budget Speech 2013 41 Interviews with stakeholders as well as desktop research have shown that these initiatives did not lead to any assistance being granted to SMEs through their envisaged mechanisms. Page | 19
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