UAH 1 billion in support for small and medium-sized enterprises in Ukraine: results of German-Ukrainian cooperation
As part of the European Entrepreneurship Week, the Entrepreneurship Development Fund presented the results of the Small and Medium Enterprises Support Project, funded by the Government of Germany and the European Union through the German Development Bank, KfW. During the eight years of German-Ukrainian cooperation, they developed a system of lending to small and medium-sized Ukrainian enterprises in the national currency and financed SMEs for about UAH 1 billion
The team of the former German-Ukrainian Fund (since 2020, Entrepreneurship Development Fund) together with consultants from the Frankfurt School of Finance and Management has developed a new program to support investments of small and medium enterprises in national currency to protect against currency risks.
To do that, KfW has attracted EUR 5 million in financial assistance from the EU to Ukraine under the EU4Business initiative. Therefore, the Fund offered SMEs a long-term credit resource in hryvnia at 14-15% per annum. Afterward, local authorities joined the program with interest compensation programs of up to 50%, which halved the annual percentage for entrepreneurs.
The Ambassador Extraordinary and Plenipotentiary of the Federal Republic of Germany in Ukraine Anka Feldguzen shared the cooperation results: "Germany was able to provide a basis for the success of Ukrainian small and medium-sized enterprises through the financial support of 12 million euros. This project is a living example of excellent donor cooperation, as over 300 SMEs have received loans under the program. Germany will continue working with the Entrepreneurship Development Fund."
Within the Project, several activities were carried out that contributed to the institutional development of the German-Ukrainian Fund. Changes in the Fund's financial performance confirmed the effectiveness of these measures. In particular, in the period from 2015 to 2019:
- net interest income increased by 600%
- net profit increased from -3.6 million euros to 5.6 million euros
- GUF equity increased by 177%
The implementation model of the GUF Program combined with the compensation mechanism of interest rates from local authorities underlaid the "Affordable Loans 5-7-9%" State Program. Thanks to the effective functioning model, the Government of Ukraine chose the German-Ukrainian Fund as a platform for implementing the "Affordable Loans 5-7-9%" State Program and renamed it to the Entrepreneurship Development Fund.
Serhii Marchenko, Minister of Finance of Ukraine, stressed, "The Entrepreneurship Development Fund is currently one of the main lending drivers in Ukraine because it's really the "5-7-9%" State Program administrator. Under this program, 4.5 thousand loans have been issued for small and medium enterprises for the total amount of 11 billion hryvnias."
"The former German-Ukrainian Fund is a leader in financial innovation and provides financial efficiency for both Ukrainian small and medium-sized enterprises and our contribution, which is essentially the EU taxpayers' contribution," Head of Cooperation Programs, EU Delegation in Ukraine, Stefan Schleuning, said.
Note. The "Support for small and medium enterprises" project is divided into two parts: investment and consulting. The investment component is represented by a loan in the amount of 10 million euros from the German Government, provided to Ukraine through the German Development Bank, KfW. The consulting component included a €2 million grant for the GUF institutional development, consulting support to partner banks, marketing events, and financial fairs. This component was implemented with the Frankfurt School of Finance and Management participation.