The COVID-19 Guarantee Scheme will not be reaching its targets if it is rolled-out as planned


The COVID-19 Guarantee Scheme that has been launched by the Malta Development Bank, will not alleviate the difficult situation currently being faced by the majority of businesses, if it is rolled out as planned.  This was already stated in the press release that was issued jointly by the Gozo Business Chamber and the Gozo Tourism Association on Saturday 4 April 2020 in its reaction to the measures introduced by the Malta Development Bank in relation to the COVID -19 Guarantee Scheme.  This press release voiced the concerns of the members of both associations.

As indicated by the European Commission, in its latest press release on the 3 April, the amended Temporary Framework enables “Member States to up to the nominal value of € 800,000 per company, zero-interest loans, guarantees on loans covering 100% of the risk, or provide equity. This can be combined also with so-called de minimis aid (to bring the aid per company to up to €1 million) and with other types of aid.  It should be particularly useful to address urgent liquidity needs of small and medium-sized enterprises in a very speedy manner.”

The required flexibility that is being granted by the European Commission up till December 2020 is clearly not being utilised at a local level.  A 1% reduction of interest over the already high interest rates being charged will have little or no impact, and compares negatively to the flexibility that is being offered by the Commission, and also to what is being offered and implemented in other countries.

The assessment of the present risk being faced, also calls for a situation where those enterprises which are still functioning, despite the current economic scenario, need to be provided with the required liquidity to continue.  All the sectors are being exposed to ‘risk’ and those that are not assisted at this particular point in time will fall by the wayside.  These are the same businesses which fall under ‘Annex B’, or which do not fall under any one of the annexes under the COVID Wage Supplement Scheme offered by the Government.  If they are not provided by the Banks with the required liquidity, these businesses will default on their obligations.

To this end the Chamber calls for effective measures such as zero-interest loans, and loans covering 100% of the risk, that should be implemented indiscriminately at all levels.


(Article published on the 08 April 2020)