Financing capital projects in the Maltese markets : an analysis of the current situation and recent trends

Abstract

In recent years investment projects in Malta spanned over the leisure, commercial and manufacturing sectors, apart from the massive capital outlays undertaken by public corporations. In the past, firms used to rely heavily, if not exclusively, on banking finance, but as the monetary sector becomes liberalised, and financial instruments become diversified, entrepreneurs are seeking other alternative sources of finance. These possibilities have become realisable following the setting up of the Malta Stock Exchange in 1992 and have led to a series of considerations regarding the financing mix. This study identifies trends in the capital project financing techniques adopted by fifteen selected local companies. These results are based on interviews. They suggest that in the near future, capital projects will be financed mostly through bank and capital market funds, apart from internal funds and own funds. Project developers are still cautious of new financing techniques adopted abroad such as venture capital and leasing. Yet, there is a more acceptable attitude towards raising funds on the capital market. This is witnessed by the increase in the amounts of funds raised on the Malta Stock Exchange, especially in the past two years.