On 25 October 2024, the National Bank of Ukraine (NBU) signed two new cooperation agreements with International Finance Corporation (IFC) in Washington, D.C. The purpose of the agreements is to support SMEs’ access to finance and contribute to Ukraine’s economic recovery amid the ongoing challenges posed by russia’s invasion.
Cooperation between the NBU and IFC will take place in two areas: development of digital financial services, and establishment of infrastructure for asset resolution companies (ARCs).
IFC in partnership with State Secretariat for Economic Affairs (SECO), Facility for Investment Climate Advisory Services (FIAS), and the UK Government will provide advisory services to the NBU.
“We are sincerely grateful for the strong technical and financial support provided by the World Bank Group and appreciate our long-standing successful cooperation. The assistance of the Group’s experts is always efficient and professional, and the NBU together with them continues to implement ambitious reforms and programs in a wide range of areas. These include improving the banking supervision and regulation system, introducing a war risk insurance system that will significantly improve the conditions for attracting investment to Ukraine, developing instant payments, tokenization and oversight, green finance, and much more,” said NBU Governor Andriy Pyshnyy.
“These agreements to advance digital financial services and address non-performing loans are part of IFC’s efforts to improve access to financing for Ukrainian businesses amid Russia’s invasion,” said Alfonso Garcia Mora, IFC’s Regional Vice President for Europe, Latin America, and the Caribbean. “This is the result of fruitful cooperation between IFC, SECO, FIAS, GGF and the Government of Ukraine. Together, we aim to build a more inclusive and sustainable financial sector, vital for rebuilding Ukraine’s economy.”
Advancing Ukraine’s Digital Financial Services Ecosystem
As part of the first agreement, the NBU and IFC aim to further advance Ukraine’s digital financial services ecosystem, building on previous successful collaborations between the two institutions.
Key initiatives include driving innovation through open banking, enhancing financial inclusion by promoting financial services via agent banking models, encouraging businesses to introduce innovative financial services under the NBU’s supervision utilizing the regulatory sandbox, and supporting the growth of cashless transactions.
These changes are expected to enhance competition in the banking sector, improve the supply of financial services, foster a cashless economy, and contribute to the Ukrainian financial sector’s alignment with European standards.
Addressing Non-Performing Loans
Under the second agreement, the NBU and IFC are planning to address the growing issue of non-performing loans (NPLs) by creating a legal framework for establishing ARCs in Ukraine. ARCs are currently absent from Ukraine’s financial sector. They are expected to be vital for managing NPLs and attracting private investment.
By efficiently resolving NPLs, ARCs can help reduce the overall number of NPLs, thereby improving the banking sector’s resilience. The partnership with ARCs will also help mitigate risks for banks and other financial institutions to maintain their lending in Ukraine. The agreement includes legislative reforms, training initiatives, workshops, and more. The agreement is supported by FIAS.
Since February 2022, IFC – a member of the World Bank Group (WBG) – has invested USD 1.6 billion in Ukraine, including over USD 1.1 billion from its own account and USD 530 million mobilized. This is more than double its average annual financing before the invasion.
This support is part of the WBG’s response package. The WBG has mobilized more than USD 47 billion in financing to date, including commitments and pledges from development partners.