Market Gaps on Access to Finance - Bank of Valletta

More documents

Recommendations

Info

6.3.5.1 Risk capital instruments such as mezzanine financing - Mezzanine finance should receive more attention in the overall Commission SME financing strategy. This could represent an important financing source because: • it is relevant for many SME owners for whom it is not attractive in the given situation to give up their ownership (whether in full or in part). • it is relevant for companies unable to obtain debt financing due to their low equity ratio. • companies with mezzanine capital are often able to obtain additional and more attractive bank loans, since the mezzanine finance is subordinated to all other types of loans. Bulgaria has already implemented a mezzanine capital fund through the JEREMIE initiative. Bulgaria Mezzanine Capital is a joint venture between Growth Capital Partners AG and Rosslyn Capital Partners. This mezzanine fund provides mezzanine financing for growth expansion, external growth and capital restructurings in the Bulgarian lower midmarket, across a wide range of sectors. 6.3.5.2 Other funding schemes – funding through Venture Capital Funds, Start-up Funds, Business Angel Networks and Crowd funding, as well as sector-specific funding. Examples include: - Baltic Innovation Fund – equity Co-investment alongside business angels, family offices and institutional investors into early to growth phase SMEs in Latvia, Lithuania and Estonia. - ERP-EIF Dachfonds, European Angels Fund and LfA-EIF Facility – German funds targeting high-tech early and growth-stage enterprises, and start-ups, through equity injections - NEOTEC and European Angels Fund – Spanish funds for start-ups and high-tech early stage enterprises - Portugal Venture Capital initiative (PVCi) – fund aimed at early and development stage enterprises - Istanbul Venture Capital Initiative (iVCi) – fund targeted at early and growth-stage enterprises - UK FTF L.P. – fund for early and growth-stage technology enterprises in the ICT, life sciences and advanced manufacturing sectors - Venture Fund for Creative Industries - EIF’s fund addressed to the creative industries in Finland These funding mechanisms might not necessarily be through Malta-based funds. Alternatively, any Malta-based fund might also provide investment for non-Maltese companies, so as to ensure the attainment of the critical mass required to balance the portfolio’s risk. BOX 6.3.6 Other good practice examples The applicability/relevance of other sources of finance to the local market can be considered. For instance, win-win loans, the role of credit mediation and co-operative banking, and the increasing importance of PPP structures could provide relief to local SMEs’ access to finance issues. Page | 78
6.3.6.1 Win-win loans - in Belgium it is possible for friends and family members of starter entrepreneurs to receive a tax benefit if they extend a loan to the business for a period of eight years. Initially it only applied to start-ups, but it has been extended to all SMEs, who can gain access to a maximum of €100,000. This loan has worked extremely well in Flanders, helping small businesses who need risk capital but cannot get a bank loan. Since 2006 this measure has assisted about 3,000 SMEs with a total of €98 million 134 . This scheme is in principle similar to the Maltese Micro Invest scheme, but the tax credits would be available not only for the businesses themselves, but also for the providers of finance. The 2013 Budget Speech also announced the B.START initiative, giving a reduction in tax up to a maximum of €30,000 on capital investment in new enterprise approved by ME 135 . 6.3.6.2 Credit mediation: Given SMEs find it hard to obtain the necessary funding from traditional sources, Belgium and France appointed a “credit mediator” to intervene to ease difficulties and help enterprises obtain bank funding. 136 This mediator acts as a “final referee” by reviewing loan requests by SMEs and indicating how the request should be treated. In the case of France, between November 2008 and February 2009, the rate of successful mediation within 15 days was 66 %, while the main cause of referral to the mediator was the need for short-term credit (69% of referrals) 137 . 6.3.6.3 Setting up a framework for PPPs: a number of Member States have utilised PPPs in which special purpose vehicles are funded through both Structural Funds and commercial banks. Such frameworks for PPPs need to be developed to attract this potential private lending into a wider range of sectors eligible for EU funds 138 . 6.3.6.4 Development of a co-operative bank: In 2010, the European Parliament said the European economy needed a sound network of regional and local banks like cooperative banks, since they had a positive impact on GDP growth in most countries, and their internal deposit guarantee schemes could withstand the shocks of a crisis. The latter is mainly due to very tight bottom-up control mechanisms, leading to highly conservative investment decisionmaking. Co-operative banks are a popular concept in Italy which mitigate credit-rationing to certain market segments, particularly SMEs 139 . Some banks are consumer co-operatives, others are worker co-operatives. In Malta, this concept was discussed in local fora, addressing the possibility of developing such a bank locally, either through groups like cooperatives setting up a bank, or a local institution converting to this model, or a local institution establishing such a subsidiary 140 . 134 Lannoo (2013), Presentation to the Sectoral Sub-Committee on Growth and Competitiveness, 28 January 2013; Flanders Today (2013), EU seals fate of win-win loan; European Economic and Social Committee (2012), Opinion – An action plan to improve access to finance for SMEs, pg. 5, The EC is currently considering scrapping this measure on the basis of discrimination and violation of the principles of freedom of movement and residence given that both the starter and supplier of these loans must live in Flanders 135 Ministry for Finance (2013), Budget Speech 2013 136 OECD (2009), The impact of the global crisis on SME and entrepreneurship financing and policy responses centre 137 Ibid, pg. 35 138 Ibid, pg. 17 139 International Monetary Fund (2008), The reform of Italian co-operative banks: discussion of proposals. Apart from the positive impact of co-operative banks, this paper also discusses potential issues related to the governance framework of such institutions. 140 Times of Malta (2012), Co-operative bank could be ‘tonic’ for SMEs – minister; European Economic and Social Committee (2012), Opinion – An action plan to improve access to finance for SMEs, pg. 7 Page | 79
Page 2 and 3:
Page | 2 Ernst & Young Limited Regi
Page 4 and 5:
Malta Business Bureau - Mar
Page 6 and 7:
Page 8 and 9:
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29: Malta Business Bureau - Mar
Page 58 and 59: Economic sectors Current financing
Page 60 and 61: Economic sectors Current financing
Page 62 and 63: Table 7: Mapping of financial instr
Page 64 and 65: Lifecycle stage Current financing n
Page 66 and 67: Few financial instruments were co-f
Page 68 and 69: 6.2.2 Agri-food processing firms De
Page 70 and 71: 6.2.3 Fisheries and aquaculture The
Page 72 and 73: 6.3 Best practice examples Followin
Page 74 and 75: Structural Funds. Specifically, the
Page 76 and 77: consideration the importance of “
Page 80 and 81: 6.3.6.5 Credit guarantees: In many
Page 82 and 83: European Economic and Social Commit
Page 84 and 85: D5 - How would you classify the cur
Page 86 and 87: Please provide your comments for Qu
Page 88 and 89: 9. Appendix B: Survey (Maltese) Dan
Page 90 and 91: B Normal day to day operations -ext
Page 92 and 93: - Oħrajn (Speċifika) ____________
Page 94 and 95: Q1 - Who are the owners of your fir
Page 96 and 97: B: EU funds- Economic Sector Manufa
Page 98 and 99: E: Trade Credit- Firm Size 1 - 9: M
Page 100 and 101: G: Leasing/ hire-purchase/ factorin
Page 102 and 103: A: National Grants/Pu blic aid C: B
show all

Market Gaps on Access to Finance - Bank of Valletta

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?