NBU, Ministry of Finance, KfW have signed UAH300 mln program

During the First Financial Fair organized by the German-Ukrainian Fund with financial support of the German Government, representatives of the founders of the Fund – National Bank of Ukraine, Ministry of Finance and KfW – have signed a new financing program to support SMEs for UAH300 million.

The key event of the first financial fair for SMEs, which was held on April 4, 2017 in Kyiv, was signing of a new program of German-Ukrainian Fund (hereinafter GUF) to support SME financing. The program was signed by GUF’s founders: Oleg Strynzha from the National Bank of Ukraine; Deputy Minister and GUF CEO Yuriy Butsa from the Ministry of Finance of Ukraine, and Lutz Horn-Haacke, KfW Office Director in Ukraine, from German development bank KfW.

About the Program

The new program aims to support investment projects of small and medium enterprises in Ukraine that produce import-substituting products. Under this program, enterprises can obtain loans for purchasing or upgrading production equipment and facilities, as well as get funding in local currency for promotion of their products to national and international markets.

GUF’s new program is implemented under the German Government loan, which was provided to Ukraine in the amount of €10 million. However, financing of SMEs investment projects via GUF partner banks will be made in the national currency, which became possible with the financial assistance of the European Commission, provided by the German-Ukrainian Fund through KfW in the amount of €5 million to cover possible losses from exchange rate differences. Also, foreign exchange losses are assumed by GUF, releasing the partner banks and their borrowers from possible exchange rate differences on loans.

Thus, the cost of credit for SMEs in local currency will be approximately 17% lower than the average value.

The new program of the German-Ukrainian Fund financial support to SMEs will be provided through GUF partner banks in national currency at an interest rate lower than the average level. Financing businesses in local currency became possible by the Agreement on compensation for currency losses, signed between the European Commission, the KfW German development bank and the German-Ukrainian Fund on the amount of €5 million.

For whom

Credit program is open for individual entrepreneurs or businesses that employ less than 250 employees and annual turnover less than €10 million equivalent, which are active at least 3 years, show profits for the last four consecutive quarters and have positive credit history a bank for at least 12 months, and are not in property of large companies. The maximum term of investment credit is 6 years and a loan for working capital is 2 years.

Priority sectors for investment loans in frames of the program are agriculture, manufacturing, hotels and restaurants, as well as projects in energy efficiency and renewable energy.

What's New

An important difference between the new program and previous programs by GUF is the introduction of bonuses for GUF partner banks, depending on the share of this bank investment loans in the SME loan portfolio, the share of priority credits in the total amount of investment loans and depending on the number of jobs created in SMEs as part the new program.

The proposed bonus system increases the margin of partner banks, which actively finance the investment projects of SMEs in the priority areas, almost twice, comparing with the current level of the key rate of the NBU. Thus, increasing the margin of partner bank is not at the expense of SMEs, but is provided by the GUF, which turns it into reward for the bank for active SMEs investment lending.

Also GUF bonuses for partner banks can be seen as refunding operating expenses for banks for processing investment projects of SMEs that are quite costly compared to the potential income on such transactions.

The management of German-Ukrainian Fund is confident that the new program will restore lending to domestic production, increase investment activity of SMEs and provoke the growth of new workplaces in the economy of Ukraine.

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