The European Investment Bank has provided its first ever local currency loan in Ukraine to improve small and medium-sized businesses’ access to affordable financing.
The loan to ProCredit Bank Ukraine denominated in Ukrainian Hryvnia, equivalent to EUR 60 million, has been made possible by the European Union and TCX, an international currency exchange fund. It is a landmark deal combining EIB financing with donor resources.
The European Union has supported the transaction by allocating EUR 5 million of grant funding which allows for an affordable interest rate on the loan. The EU contribution forms part of the European Union's wider EU4Business initiative, which brings together EU support for SME development and improving the business environment in the Eastern Partnership region.
Furthermore, the operation has been made possible by the EIB’s investment in TCX – an innovative financial institution which provides long-term local currency and interest rate derivatives in emerging market currencies to its investors and their clients.
At a dedicated signing ceremony ahead of the Eastern Partnership Business Forum in Tallinn, Estonia, EIB’s Vice-President Vazil Hudák said: “This is a historic transaction, one that is set to make EIB funds even more available to clients than before. We are thankful for the European Union’s support and happy to be extending our partnership with the ProCredit Group, one of the most reputable intermediaries in the region when it comes to providing credit to SMEs.”
Johannes Hahn, Commissioner for European Neighbourhood Policy and Enlargement Negotiations, said: “Improved access to affordable long-term finance in local currency is one of our main priorities under the EU4Business Initiative, particularly for SMEs in Ukraine. I am pleased that today we can join forces with the EIB to address these shortcomings, offering these SMEs better conditions for access to finance."
Victor Ponomarenko, General Manager of ProCredit Bank Ukraine, said: “As a bank that aims to be the principal bank for small and medium-sized enterprises in Ukraine, we know that access to affordable medium to long-term local currency funding is key to facilitating investment. This loan will support us in contributing to the further development of SMEs.”
The development of local currency finance remains a challenge in Ukraine due to its high exposure to exchange rate movements. SMEs selling their goods and services domestically in local currency but borrowing in foreign currency are highly exposed to the currency risk. The EIB operation is tailored to enhance access to affordable medium- to long-term local currency funding for domestic businesses in order to ultimately strengthen their market position and competitiveness whilst mitigating their exposure to exchange rate volatility.
ProCredit Bank Ukraine is a long-standing partner of the EIB and is currently one of the key players in SME financing in Ukraine with a proven track record and significant experience supported by an extensive branch network throughout the country.
