New credit opportunities for SMEs
On September 5, 2017, the German-Ukrainian Fund (GUF) and ProCredit Bank signed a loan agreement for the financing of small and medium-sized enterprises (SMEs). The agreement was signed under the SME Promotion Program funded by the German Government through KfW and in cooperation with the European Union's EU4Business initiative. The agreement provides lending for SME at 15% per annum in UAH.
Under the terms of the signed agreement, loans are provided to the target SMEs for the purchase or modernization of main machines or equipment, purchase, construction or reconstruction of premises or replenishment of working capital necessary to expand the existing or create a new production.
Two categories of enterprises can use the program:
- Small enterprises with a staff of up to 50 people with annual income that does not exceed the equivalent of 5 million euros.
- Medium-sized enterprises with a staff of no more than 250 people and annual income of no more than 10 million euros in equivalent.
According to the agreement, four categories of industries have priority:
- Agriculture, forestry and fisheries;
- Processing industry;
- Temporary placement and organization of food;
- Supply of electricity, gas, steam and air conditioning.
The loan agreement between the GUF and ProCredit Bank was signed within the framework of an agreement between Ukraine and Germany.
According to Sebastian Knoke, Head of Cooperation at the German Embassy: "In 1996 the German government contributed through KfW over 6 million EUR to GUFs capital. Since then it has been continuously supporting GUF by providing long-term loans and grants for technical assistance. The SME promotion program is one of such loans; it offers 10 million EUR to SME through Ukrainian banks. I am very happy that ProCredit Bank joins this Program and will be able to on-lend funds to SMEs in local currency and at very attractive conditions.”
"Within the framework of the new development strategy by 2020, the German-Ukrainian Fund plans to expand the volume of SMB lending in the national currency significantly through the development and introduction of exchange risk hedging mechanisms in conjunction with the National Bank of Ukraine," said Oleg Strinzha, Executive Director of the GUF.
"The volume of the SME loan portfolio increased by more than 50% in 2016. By supporting SME as the most dynamic and mobile sector of the economy, ProCredit Bank helps to increase their competitiveness on the domestic and international markets. In the long run these changes should have a positive effect on the economic growth of Ukraine as a whole," said Viktor Ponomarenko, chairman of the board of ProCredit Bank.
The new GUF program combines with the currency risks hedging provided by the European Union through the German Development Bank (KfW). Berend de Groot, Head of Cooperation of the Delegation of the European Union to Ukraine, stressed, "The Ukrainian SMEs are eager for local currency loans provided under reasonable terms, and such loans currently are almost unavailable in the market. Improving access to affordable long-term finance in local currency is one of the goals of the EU4Business initiative. Therefore we are pleased to team up with KfW under this Programme for the benefit of the Ukrainian SMEs, and indirectly for the whole economy".
Remind that on April 4, 2017, the German-Ukrainian Fund supported by the German Government held the First Financial Fair for Small and Medium-Sized Business in Kyiv, which presented the SMB Support Program. Under its terms, the German State Development Bank KfW has pledged to provide Ukraine with 300 million hryvnias to support SMB financing for the coming 40 years.