Since its inception eight years ago, over 90% of the approximately 750 firms assisted by the Malta Development Bank (MDB) are small and medium-sized enterprises (SMEs), MDB CEO Alison Micallef said.
In an interview with The Malta Independent on Sunday, Micallef said that the MDB intervenes in situations where financial constraints are encountered. She noted that the MDB's strong focus on SMEs highlights the fact that, although small businesses are vital to the economy, they often encounter more challenges when trying to secure financing.
Citing NSO data, Micallef said that 99.6% of all non-financial corporations in Malta are classified as SMEs; however, SMEs generate less than half of the Maltese economy's total net turnover.
The MDB chief executive told this newsroom that in this context, SMEs "need to be helped more".
"While SMEs are the backbone of the economy in terms of numbers and activity, revenue remains concentrated among a relatively small number of large enterprises," she said.
Founded in 2017, the MDB gets involved where market failures are present or "when there is a gap in the market to help the economy survive, continue to flourish, and build on in the long-term". The MDB works alongside and through commercial banks to fulfil its role; after identifying market gaps through its own assessments, it coordinates with partner banks so they can approach it when needed.
As a development bank, the MDB is prohibited from financing speculative construction and real estate.
After becoming the smallest bank in Europe to pass the European Commission's pillar assessment in the opening weeks of 2026, following a comprehensive external audit, the MDB can now assist Maltese businesses seeking financing by tapping directly into the InvestEU budget. Through this funding stream, the MDB can "make deals or coordinate or start making deals with InvestEU to get guarantees directly from the EU budget to help Maltese firms".
Micallef explained that a "market failure" refers to a situation where a good project has issues getting financed - this includes trouble to acquire loans from commercial banks. Reasons behind such situations can vary from groups being unable to put up the collateral being requested by banks or from banks' conservative risk appetites. In case scenarios listed by the MDB, banks may contact the MDB to get involved with it and help finance a genuine project that needs its extra push to kick off.
One example of a market failure where the MDB intervenes to provide financial support is to help aspiring students take out a student loan for their higher education in Malta or abroad. She noted that one requires a lot of money to specialise in a particular area, especially when such a programme does not exist in the Maltese islands.
The MDB's StudentAssist scheme has helped around 900 students pursue their studies with around €38 million overall. Under this scheme, each student is eligible to an interest-free loan of up to €100,000 to cover tuition costs, accommodation, and education fees. It has two partnering commercial banks for this scheme: BOV and APS Bank.
"By removing financial barriers, we are helping to develop a skilled workforce in Malta that will materialise in the future. So, if we invest now in a skilled workforce, later we will have the talent to help our economy grow," Micallef said.
The MDB's projects typically have long repayment plans, which are monitored once a year. All co-financing done is reviewed together with the partnering commercial banks. Through this monitoring, the MDB analyses the impact of their investment and whether growth or market traction has since been experienced by the debtors.
"During the course of a loan, we do continuous monitoring of the credit we have issued. Our job is to step in where the market is constrained, but to do so in a responsible and professional way," she said.
Micallef told this newsroom that long projects with long repayments and "significant financial needs" in a small market like Malta's "can sometimes exceed the risk appetite of banks" - this is where the MDB and its risk-sharing agreements with banks comes in.
"Our role is to help and structure these projects properly, improve their bankability and mobilise their finance - not only do we jump in, but the entrepreneur is putting up finance in that project as well. We do not want to displace private lenders, we want to work alongside them and help them make a project," she noted.
The MDB estimates that during the Covid-19 pandemic, it helped safeguard around 40,000 jobs across the country. Its contribution amounted to 13% of gross value-added, which equates to some €1.7 billion, Micallef said.
Micallef said that the areas of productivity, innovation, and energy resilience "will shape Malta's long-term competitiveness" and are exactly the areas where the Maltese market "is sometimes reluctant" to take on the risk independently.
"Our role is to bridge the gap, in a disciplined way, and to support sustainable growth, resilience, and competitiveness in Malta in the years ahead," Micallef said.
She stated that this is how the MDB perceived energy resilience even before war broke out in the Persian Gulf, causing renewed energy concerns. She said that this war has accentuated these factors, for energy resilience in this regard.
Regarding innovation, Micallef said that the MDB is working on a blended finance instrument with Xjenza Malta, designed to help firms who want to enter the market after completing R&D. Rather than just a grant, this will be a loan instrument "so that it would be longer term and help the economy grow", she said.
"When an idea is ripe, it needs to go to the market but not every bank is willing to take this risk. We see this more in innovation where banks are maybe a bit more reluctant to take that risk," Micallef said, noting that this situation is improving.
Micallef added that times of uncertainty make the MDB more important, as uncertain times cause "good projects" to be held back simply out of market caution. She commented that commercial banks, as a general rule of thumb, do not lend more than 25% of their capital to any single counterparty.
"Market failure arises during times of crisis," she said.
The MDB is aligned with national and EU priorities such as the Malta Vision 2050 and the green and digital transitions. When asked how it balances policy alignment with maintaining financial discipline and managing risk, the MDB CEO told this newsroom that "policy alignment never comes at the expense of financial discipline".
"Our decisions are banking decisions, not political decisions," Micallef said. "Every project we support must be financially viable and we apply rigorous credit assessment and disciplined risk management."
Micallef stated that the MDB operates independently in all its functions.
Infrastructure is one of the MDB's core pillars. When it comes to infrastructural projects, the MDB focuses on "bankable projects that deliver long-term economic, social value, and address clear market gaps". Micallef noted that since infrastructural projects often come with long repayment, they can sometimes exceed local banks' risk appetites. Hence, at times, it is necessary for even four banks to get roped into a single project.
Micallef said that the MDB supports sustainable infrastructural projects. For example, as Malta's only implementing partner for the Alternative Fuels Infrastructure Facility (AFIF), the MDB can help "strengthen Malta's long-term resilience and competitiveness in this area".
Micallef mentioned that if an infrastructural project features alternative fuels and is applicable to the AFIF funding stream, then the MDB can help the entrepreneur in question get this project going for cheaper, for example, for €100 million instead of €150 million, she said. In many such cases, co-lending is present.
The CEO explained that the MDB lends under its sharing agreements, and then funding arrives from sustainable financing instruments, such as via the European Investment Bank.
However, all projects supported by EU programmes, like those applicable to AFIF, "must meet strict environmental and technical requirements". The existence of these defined benchmarks ensures that projects within these streams align with EU climate and energy goals, she remarked.