On October 30, the Kyiv City Administration and the German-Ukrainian Fund (GUF) presented a Joint Program on the Subsidy of Interest Rates for Loans to Small and Medium-Sized Enterprises in Kyiv.
The program is implemented for the loans, issued under the GUF’s SME Support Program, funded by the German Government through KfW in cooperation with the European Union’s initiative EU4Business on the compensation of Currency Risk Losses for SMEs.
This joint program is an additional component to a 10 million EUR program by the German Federal government for Ukraine aimed at stimulating the Ukrainian economy by facilitating access to cheaper credits for small and medium sized enterprises. The German Federal government provides funding for banking loans through KfW and the GUF. EU’s EU4Business initiative provides funds to cover the foreign exchange risks for SMEs loans in the amount of 5 million EUR so that the loans can be provided in local currency (UAH).
Thanks to this Joint Program by the KSCA and the GUF, 50% of the interest rate for Kyiv-based SMEs will be covered by a grant from KCSA. 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 program is a good example how efforts of international and local financial support programs 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 KCSA Gennadiy Plis said that the double 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 the 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. At the expense of these funds 50% of the nominal interest rate set by the loan agreement will be compensated for Kiev entrepreneurs,” — said Gennadiy Plis.
Within the framework of the Joint Program, the GUF and the KCSA identified the following main areas of SMEs support:
- support of investment projects of SMEs engaged in the manufacturing;
- support of entrepreneurial initiative in the sphere of housing and communal services;
- support for the development of private educational institutions in the city of Kyiv.
“The work of the German-Ukrainian Fund is aimed at expanding the opportunities of accessible SME lending. Long-term cooperation with KCSA has allowed finding a new credit tool, lowering interest rates to the lowest level in Ukraine — 7.5%,” commented Oleg Strynzha, Executive Director of the GUF.
The compensation of interest rates for SMEs in Kiev is provided on 24 months term, which is especially important at the initial stage of the investment project implementation.
“Today’s event, as well as the program presented, is the evidence of the Kyiv City authorities follow-up to the European principles and approaches to support and development of SMEs, the main among which is “think about small enterprises“, Juana Mera-Cabello, Head of Economic Cooperation, Social and Regional Development Section, Delegation of the European Union to Ukraine, concluded.