Speaking at the roundtable on ways to improve financial support mechanisms for small and medium enterprises (SMEs) within the framework of programs supported by the German-Ukrainian Fund, NBU Deputy Governor Ms Rozhkova said that following continued efforts to clean up the banking sector, the National Bank of Ukraine is faced with the task of restoring lending.
“We note signs of a lending recovery, especially lending to SMEs. This being said, the quality of loans issued to SMEs is much higher compared loans provided to other business segments. We believe that this segment will become a key driver of lending recovery and the country’s economic growth. In addition, the NBU is open to market proposals that could help revive lending in Ukraine,’ said Ms Rozhkova.
In its turn, Director of the NBU Financial Controlling Department and Executive Director of the German Ukrainian Fund Mr Oleh Strynzha underlined that the aim of the roundtable discussion to get a feedback from banks on the key drivers of lending growth to SMEs.
“The GUF (GUF) has become engaged in the Development strategy for SMEs developed by the Ministry of Economic Development and Trade. One of the areas of this Strategy is to provide SMEs with greater access to financing. To this end, the German-Ukrainian Fund will increase the volume of products available to partner banks (long-term credit lines in foreign currency) and develop new areas – long-term credit lines in domestic currency and a mechanism to issue loan guarantees. In particular, the GUF intends to offer long-term loans in domestic currency by using exchange risk-hedging facilities provided by the European Commission. It is important for us to hear what bankers think the prospects and challenges for SME lending.
The First Secretary of the Embassy of the Federal Republic of Germany in Ukraine on economic cooperation and development Mr Sebastian Knoke, who was present at the roundtable, emphasized the importance of the development of SMEs for the support of the domestic economy, adding that this is of particular relevance in the current juncture as it could help create jobs.
Deputy Executive Director of the GUF Mr Vitalii Mayboroda presented a new vision of the Fund on the implementation of its lending programs: “The GUF believes that the most efficient way is combine its financial support of SMEs with other measures designed to incorporate SMEs into a value-add production chain in Ukraine’s priority economic sectors. This approach will contribute to greater transparency of their activities and make cash flows of SMEs more predictable across the entire value-add production chain, promote the development of cashless economy and foster the indirect involvement of these business segments in export operations. The main thing is that all these measures can be implemented as part of the Development Strategy for SMEs until 2020 under the auspices of the Ministry of Economic Development and Trade and relevant ministries”.
During the roundtable discussion, banks mentioned high interest rates as the key factor adversely affecting SME lending. However, they acknowledged that interest rates have been gradually moving downward recently. Separately, the participants pointed to the need to further improve the investment climate, including through continued efforts to enhance creditor rights protection. In addition, bank representatives backed an approach to SMEs financing offered by the GUF as part of the Value Chain, which would help boost the investment activity of SMEs and increase the capitalization of the domestic economy. Bankers showed a keen interest in long-term credit lines (5-7 years) to finance the loan programs of SMEs based on the NBU’s refinancing rate which moves downward in line with the slowdown in inflation.
In addition, the Memorandum on Cooperation and Partnership between the German-Ukrainian Fund and CREDITINVESTBANK PJSC was signed at the roundtable.
The roundtable was attended by representatives from the German-Ukrainian Fund, Embassy of the Federal Republic of Germany, the NBU, Ministry of Economic Development and Trade, Ministry of Finance of Ukraine, banks and the Independent Association of Banks of Ukraine.
The GUF is a non-banking financial institution founded in 1999 by the Government of the Federal Republic of Germany represented by the German development bank (KfW - Kreditanstalt fur Wiederaufbau), the Cabinet of Ministers of Ukraine and the NBU. The GUF focuses its activities on strengthening the competitiveness of Ukrainian MSMEs by providing loans to finance investments and working capital through selected partner banks, as well as providing technical assistance to these banks.
The GUF’s founding partners are the National Bank of Ukraine (31.3%), the Ministry of Finance of Ukraine (31.3%) and Kreditanstalt für Wiederaufbau (KfW) (37.4%). GUF programs and projects are funded by the German Government through German development bank (KfW).
The Project Monitoring Unit (PMU) is responsible for general management of GUF funds. It is established under the Ministry of Finance of Ukraine for the effective implementation of investment projects, and projects of international technical assistance provided to Ukraine by international financial institutions.
The GUF is administered at the staff and infrastructure level by the Project Monitoring Unit (PMU) under the jurisdiction of the Ministry of finance of Ukraine (http://ifcp.gov.ua). The PMU was established to stimulate the economic and social development of Ukraine through the implementation of the priority government programs and international financial cooperation projects.