Fabian Demicoli

GRTU in defence of cheaper financing for small businesses


GRTU has been arguing for years that the banks impose
exorbitant charges and interest rates. This has been confirmed by the Governor
of the Central Bank himself just two weeks ago who emphasized that lending
rates in Malta are amongst the very highest in the Euro Area and so are bank
charges.

It has also been confirmed by the European Commission that is
regulating on what they call the Multilateral Interchange Fees (MIFs) which
refer to fees that are hidden, which are paid without knowing exactly what they
cover and fees which the bank imposes for a service you are neither using nor
need.

These are arguments and actions made by institutions
that hold the highest standing. GRTU has documents in hand supplied by none
other than its own members that show that interest rates commonly vary between
5% and 7%. The fact that bank interest rates and charges are high is undeniable
and this is why the debate on the subject has geared up. This in not just a
national debate, it is a debate that has been going on both in the EU and
Global level to which Malta is finally catching up to and there is no turning
back.

Malta's banking sector has been praised even by GRTU
for not committing the mistakes other banks made. In any case however the
Maltese Government would have been there to support the local banks should they
have found themselves in difficulty as was the case in other countries. This is
much more than any small business could ever aspire for should it be in
difficulty. The crises in the EU financial sector revealed the cruel and
catastrophic domino effect we must by all means possible try to avoid in the
future. The banking sector and with it the financial system stopped working. As
a result businesses stopped and employment stopped. Difficulties in the
financial sector have proven therefore to have devastating effects on the
country's socio and economic stability which in turn also affects other
countries.

The European Commission's programme for the banking
sector was set up to protect the EU citizens, businesses, Governments and the
financial sector itself. The plan which is already being enacted aims to
ameliorate the fitness of banks and putting in place a backup plan, should a
crisis occur, which does not involve putting in jeopardy citizens, businesses
and Governments. This is the stability we should aim for not safeguarding the
banks' interests at the expense of everyone else.

Banks must be paid their fair share and nothing else.
The risk they take for providing loans is accurately calculated with the
Government having to intervene to make a guarantee should the banks not find
the collateral provided by the business sufficient. What about the risk the
enterprise owner takes when taking out a loan with a bank? A startup risks not
only losing any starting capital he had but also his  

own house which is home to his family if things do not
go well and he cannot pay up! The percentage of defaulters in Malta is very low
and banks announce millions of Euros in profit on a yearly basis after having
taken precautionary measures towards defaulters. So yes we can easily say that
the risk is very well calculated.

The bottom line is that today Maltese businesses
compete not only with Maltese companies but also with foreign companies and the
interest rate of the loans they take out impinges heavily on their
competitiveness. How can a Maltese enterprise taking out a loan at 6% compete
with foreign enterprises taking loans at under 3%. It is not an issue of
Government control. If banks lending interest rates and charges are excessive
and impinging on the competitiveness of our enterprises and our country, then
yes, they need to be regulated. This based, of course, on evidence found by
competent authorities. We are therefore very pleased the MCCAA is taking action.
GRTU has already held a meeting on the subject with the authority and we are
informed work is underway.

If this is now an issue that is being taken up
seriously and is an issue of public debate it is only thanks to GRTU that has
relentlessly continued to represent the interest of its members. GRTU squarely
and solely stands behind the interest of its members which are micro, small and
medium enterprises. We stand behind no one else. While GRTU has collaborated
with local banks only for the benefit of its members, GRTU is not linked
financially to the banks. This is GRTU's clear and transparent position.

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