State owned KfW Bank of Germany together with State owned Oschadbank Ukraine will apparently target the ever under financed SME market in Ukraine following the signing of a memorandum to do just that via a vehicle called the “German-Ukrainian Fund”.
The “German-Ukraine Fund” is not exactly new. It has been around since 1998 when it was created by Presidential Decree 574/98. It’s creation was with the very same intent as the memorandum signed on 24th December 2016, and its structure 31.3% National Bank of Ukraine, Ministry of Finance Ukraine 31.3% and KfW 37.4% appears to be unchanged.
Needless to say that since its creation in 1998, judging by the woeful state of financing for the Ukrainian SME market, the results have been less than spectacular over the past 18 years.
Traditionally Oschadbank is not a bank that has ever had anything to do with the financing of SMEs. It certainly has experience of financing large scale projects (all plundered naturally), but would not be on any list associated with the financing of SMEs.
Indeed it would be fair to state that Oschadbank has absolutely no experience of SME financing – a banking sector that undoubtedly has its own very specific competencies requiring sector expertise.
KfW Bank, aside from being able to borrow cheaply due to being 100% owned by the German State, is split into 3 major banking subsidiaries. Of most relevance to Ukraine is KfW Entwicklungsbank which lends to governments, commercial banks and public enterprises that engage in the microfinancing of SMEs.
It would appear that whatever the EBRD has done behind the scenes to the internal workings of Oschadbank, part of any result is to open up the banking horizons of Oschadbank and attempt to focus them upon what is an SME economic engine historically ignored. If nothing else it would diversify the loan portfolio of Oschadbank if a significant number of loans actually take place.
(A reader may suspect that both the EBRD and KfW will have to lend a good deal of experience regarding microfinancing to Oschadbank for the foreseeable future – though that too may be no bad thing in the short-medium term as the internal Oschadbank management develops.)
All in all, some reasonably positive news to (almost) close the year 2016 – particularly for Ukrainian SMEs or SMEs coming to Ukraine. If 2016 has been a difficult year for Ukraine, 2017 unfortunately does not seem likely to get any better – that the environment Ukraine finds itself within will get worse is more probable.
So it is with this sliver of hope for Ukrainian SMEs and SMEs entering Ukraine in 2017, that the blog wishes all those who celebrate Christmas on 25th December a thoroughly enjoyable day.