On October 30, the Kyiv City Administration and the German-Ukrainian Fund (GUF) presented a Joint Programme on the Subsidy of Interest Rates for Loans to Small and Medium-Sized Enterprises (SMEs) in Kyiv. The programme is implemented for the loans that are issued under the GUF's SME Support Programme, funded by the German Government through KfW in cooperation with the European Union's EU4Business initiative.
This joint programme is an additional component to a €10 million programme by the German government aimed at stimulating the Ukrainian economy by facilitating access to cheaper credits for SMEs. The German Federal government provides funding for banking loans through KfW and the GUF. Under its EU4Business initiative, the EU provides €5 million to cover the foreign exchange risks for SME loans to ensure that they can be provided in local currency (UAH).
Thanks to this programme, 50% of the interest rate for Kyiv-based SMEs will be covered by a grant from the Kyiv City Administration. Thus, the interest rate for loans issued by the GUF's partner banks for Kyiv-based SMEs will be reduced to 7.5%, the lowest in Ukraine. Funds for subsidy of interest rates for SME-loans will be provided from the Kyiv city budget.
"In my opinion, this programme is a good example how the efforts of international and local financial support programmes can be combined. The contribution by the City of Kyiv on top of Germany's support will substantially improve access to finance for SMEs in Kyiv," said Lutz Horn-Haacke, Director of KfW Office in Ukraine.
The first deputy chairman of the Kyiv City Administration Gennadiy Plis said that the reduction of interest rates of SME loans (from 15% to 7.5%) will not only create new jobs and stimulate the rapid growth of the existing business in the capital, but will also improve working conditions and the quality of services at the expense of upgrading equipment.
"Small and medium-sized enterprises provide significant revenues to the local budget. In general, there was UAH 19.8 billion income to the city budget in 2016 from business entities. In turn, the Kyiv City Administration provides loan-financial support from the city budget in volume of UAH 10 million in 2017, and it is planned to allocate UAH 20 million in 2018. With these funds 50% of the nominal interest rate set by the loan agreement will be compensated for Kyiv entrepreneurs," said Gennadiy Plis.
The following main areas have been identified for SME support under the programme:
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support of investment projects of SMEs engaged in the manufacturing;
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support of entrepreneurial initiative in the sphere of housing and communal services;
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support for the development of private educational institutions in the city of Kyiv.
KfW’s SME lending programme in Ukraine is part of the second phase of the EU4Business SME Finance Facility, which aims to stimulate local currency lending, especially for micro, small and medium-sized enterprises (MSMEs) in Ukraine that are not earning foreign currency and cannot afford the high costs of borrowing.
