The country’s credit situation appears to be deteriorating faster than previously thought as the international credit crisis continues to bite and the effects continue to be felt more rapidly, our sister business newspaper, The Malta Business Weekly, reported on Thursday.

Speaking to the newspaper, Creditinfo Malta general manager John Paris said the company’s database is being inundated with companies put on the “blacklist” due to defaulting on their credit terms.

“Unfortunately, the situation regarding credit has deteriorated considerably since the start of the year due to the fact that we started feeling the recession later than other countries, but now it is really hitting us. I actually believe that the worst is yet to come, as there are a lot of businesses that are registering late payments; this has increased tremendously according to the information we have. It is obvious that several companies are suffering and there is also less money around in terms of cash flow, which is creating a ripple effect. Some sectors perform worse than others and we are advising clients to stick to their credit agreements and their terms notwithstanding the situation.”

Mr Paris admits that some companies are taking protective action when providing extended credit terms and are being much more cautious with whom they enter into credit agreements. He says that the cash flow problem has become much more acute and this is obviously having a detrimental effect on the whole economy.

“The cash flow problem is very acute and this is obviously affecting everyone. Tourism figures are falling and this is having an effect on the disposable income of people who are spending less; this means that there is far less cash around. Companies are also laying off more people than they are employing and that is definitely creating a negative ripple effect. The government is not helping either, especially by delaying the payment of VAT refunds and eco-tax, which makes companies hold back from putting more money into the economy.”

The international economic situation is also affecting the local situation, although some analysts are reporting that an end to the recession appears to be in sight.

“That is the general feeling although we still need to actually experience the results. I heard recently that manufacturing orders from abroad have started trickling in although it is still early days. We have to get used to the fact that things will never be what they were with the excessive ‘buy now pay later’ syndrome that effectively toppled the economy. Companies are also forced to offer good deals to customers. One sector that has been particularly hit hard is the mobile phone sector, as several customers are defaulting on their payments and creating huge problems, which are getting significantly worse.”

Creditinfo advises its clients and acts as mediator to facilitate credit arrangements between companies, Mr Paris explains.

“We provide a fully fledged service for credit agreements between companies and also provide means to report those companies that do not pay on time. We send relevant notification letters to the debtor, which eventually leads to the publication of such information and which is made available to banks and other financial institutions. Unfortunately, our database has continued to build up with dishonoured credit contracts at a substantial rate as the economic situation continues to toughen up. Some companies have even decided not to sell on credit although that has its disadvantages as well. We are trying to change the local culture regarding credit and our systems have become quite important when dealing with credit affairs.”

Last February, the Creditinfo Group entered into a joint venture with the top German credit rating company called Schufa, which has given it access to over 1.2 million German companies. This has been beneficial for both companies as it has enabled the sharing of databases and technologies and also includes positive information on companies. On its part, Schufa has gained access to the 14 markets in which Creditinfo operates and this has enabled them to diversify their operations substantially.

The joint venture brings together the competencies of both credit risk specialist organisations under one umbrella, enabling them to offer customers a wider range of risk management products, services and software and increase the reach of our consulting and analytical services. Creditinfo Malta also has an arrangement with the well-established American firm D&B (formerly Dun & Bradstreet), a leading provider of global business information for over 160 years. Its products and services are drawn from the world’s largest database of its kind, with information on more that 160 million companies worldwide.

The latest report issued for July by D&B and seen by the newspaper confirms that economic predictions for Malta are far from rosy. In the June report, it was stated that “the outlook continues to worsen as the economy faces a sharp slowdown”. For July, D&B state that “credit risk is increasing for small and medium-sized businesses amid a slump in manufacturing and tourism”, an indicator that further reinforces the dire credit situation that most local businesses find themselves in at the moment.