A total of 112 enterprises received UAH 380 million in loans during the first year of the programme of the German-Ukrainian Fund (GUF) to support investment projects of small and medium-sized enterprises (SMEs) in the framework of the EU4Business initiative.
The SME Investment Support Programme is funded through a €10 million loan from the German government, provided to Ukraine through the German Development Bank KfW within the framework of the SME Support Project.
“Given the possible fluctuations in the exchange rate, KfW together with the GUF sought options for exempting partner banks and SMEs from currency risks and possible losses from devaluation of the national currency. The decision was found within the framework of the European Union initiative EU4Business, which provided financial assistance to compensate currency risk losses under SME loans,” Lutz Horn-Haacke, the Director of the KfW Office in Ukraine told a press conference to mark the first year of the initiative today.
In order to exempt banks and entrepreneurs from the currency risks, as well as to create attractive SME financing conditions, the European Union, through KfW, provided the GUF with financial assistance to compensate possible currency losses on SME loans in the amount of €5 million.
“The Commission of the European Union clearly understood that the main barriers that restrict the access of Ukrainian SMEs to financing their investment projects are currency risks and high interest rates. To overcome these barriers, the EU Commission launched within the EU4Business Initiative a program on compensation of currency risk losses for financial institutions that provide SME financing,” said Simone Raudino from the EU Delegation Union to Ukraine.
Thanks to the financial assistance of the European Union, Ukrainian entrepreneurs received access to financial resources in national currency at an interest rate below the average market level for up to 6 years.
“Within the framework of the new Programme, the German-Ukrainian Fund introduced an effective model of SME Financing under the German Government loan and EU financial assistance, which allowed to finance SME projects for more than UAH 380 million in just one year. The next step is to scale this model to meet the investment needs of a larger number of SMEs in Ukraine who seek to develop and modernize their business,”said Oleg Strynzha, Executive Director of the GUF.
In order to provide more affordable financing for SME investment projects and introduce a transparent mechanism for SME support on the basis of the GUF model, the Kyiv City State Administration joined the German-Ukrainian Fund with the initiative of interest rates compensation on SME loans in the framework of the GUF and its partner banks lending programmes.
“To support the development of Kyiv entrepreneurs, the Kyiv city authority introduced the Programme on partial compensation of interest rates on SME loans on the basis of the GUF model, which complies with European principles and approaches, due to which the cost of lending to SMEs became affordable for implementation of their long-term investment projects,”noted Nataliya Kondrashova from the Kyiv city authority.
The active phase of the GUF Programme began in September last year, with the first loans to GUF partner banks – ProCredit Bank, Kredobank and Ukrgasbank.
“The combination of the GUF Programme with the initiative of the Kiev authority to compensate interest rates on loans to SMEs allows to finance those enterprises, that without interest compensation could not attract a loan at all, because of inability to service a debt. In addition, the possibility of obtaining credit guarantees under the EU4Business initiative through the European Investment Bank also allows to finance SMEs with insufficient collateral,” explained Yevhen Mezger, Deputy Chairman of the Board of Ukrgasbank.
One of the beneficiaries of the programme was LLC "Rehabilitmed", which took an investment loan from Ukrgasbank to purchase new equipment for the production of medical products.
“Affordability of the loan was a key factor in making a decision on the implementation of an investment project on the purchase of German high-tech equipment for the production of medical goods. Thanks to the implementation of this project, the company almost doubled the volume of production, the number of staff increased by 5 employees, as well as opportunities for exporting goods to European countries,”said Olga Radinovich, General Director of "Reabilitymed" Ltd.
“Along with the programme on compensation of currency risk losses, the European Union, within the framework of the EU4Business initiative, is implementing a number of other projects aimed to improve and develop various spheres of entrepreneurial activity. In this regard, the EU4Business initiative serves as a unifying platform for ministries and institutions of Ukraine, implementing a comprehensive approach to SME development in Ukraine,”noted Valeriy Mayboroda, Acting Fund Manager of the GUF.