An evaluation of the access to finance of small and medium enterprises in Malta

Abstract

Small and Medium Enterprises (SMEs) are acknowledged globally for their crucial contribution to the economy. The Maltese economy is also heavily reliant on SMEs. Although SMEs are renowned for their significant role, access to finance has presented several issues to SMEs throughout the years. Thus, the main aim of this study is to identify whether access to finance is a challenge for SMEs in Malta and, if so, understand the main reasons behind this. This study relies on two distinct but complementary methodologies. The first is a qualitative one and relies on primary information obtained through semi-structured interviews carried out with local banks, the Malta Chamber of SMEs and Malta Enterprise. The second is a qualitative approach and involves the use of secondary data available from the Survey on the Access to Finance of Enterprises (SAFE), a standardised questionnaire conducted among several European countries. The findings suggest that external financing, bank financing in particular, is extremely important to local SMEs. However, SMEs do encounter several constraints when trying to access their required financing, mainly owing to the fact that financial institutions are heavily regulated with regards to lending. This has, in turn, made access to finance more expensive for SMEs as well as more difficult. On the grounds of the findings obtained, this study has identified that access to finance is indeed a challenge for SMEs in Malta.