GUF and ProCredit Bank expand SME lending
On 5 September 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 Programme funded by the German Government through KfW and in cooperation with the European Union's EU4Business initiative. The agreement provides lending for SMEs at 15% per annum in UAH.
According to Sebastian Knoke, Head of Cooperation at the German Embassy: "In 1996, the German government contributed over EUR 6 million to the GUFs capital through KfW. Since then, it has continuously supported the GUF by providing long-term loans and grants for technical assistance. The SME Promotion Programme is one such loan; it offers EUR 10 million to SMEs through Ukrainian banks. I am very happy that ProCredit Bank has decided to participate in this programme and will be able to on-lend funds to SMEs in local currency at very attractive conditions.”
The loan agreement between the GUF and ProCredit Bank was signed as part of an agreement between Ukraine and Germany.
"Within the framework of the new development strategy, by 2020, the German-Ukrainian Fund plans to expand the volume of SME 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.
Under the terms of the signed agreement, loans will be provided to the target SMEs for the purchase or modernisation of main machines or equipment as well as the purchase, construction or reconstruction of business premises. The funds may also be used to replenish working capital needed to expand existing production or to establish new lines of production.
"The volume of the SME loan portfolio increased by more than 50% in 2016. By supporting SMEs as the most dynamic and mobile sector of the economy, ProCredit Bank is helping 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.
Enterprises eligible to take part in the programme are:
- Small enterprises with a staff of up to 50 people and annual income that does not exceed the equivalent of EUR 5 million
- Medium-sized enterprises with a staff of no more than 250 people and annual income that does not exceed the equivalent of EUR 10 million
According to the agreement, the following four industries have priority:
- Agriculture, forestry and fishery
- Temporary placement and organisation of food
- Supply of electricity, gas, steam and air conditioning
The new GUF programme combines hedging provided by the European Union through the German Development Bank (KfW) with currency risk. Berend de Groot, Head of Cooperation of the Delegation of the European Union to Ukraine, stressed, "Ukrainian SMEs are eager to receive local currency loans provided under reasonable terms and such loans are currently 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 Ukrainian SMEs, and indirectly for the whole economy".
Note that on 4 April 2017, the German-Ukrainian Fund, supported by the German Government, held the First Financial Fair for small and medium-sized business in Kyiv at which the SME Support Programme was presented. Under the terms of this programme, the German KfW Development Bank has pledged to provide Ukraine with UAH 300 million to support SME financing in the next 40 years.