Last week in Brussels, the first-ever Ukraine's Future Summit took place, and it was a fantastic day! 🤩 We were honored to be a part of Financial Markets for Ukraine’s Prosperity panel featuring our Chairman Andrey Kolodyuk, Anna Jarosz-Friis, Jack Parrock, Harald Riener, Arthur Zagorodnykov, and Nadiya Bihun. Here are the takeaways ✍
First, the European Union remains the biggest budget provider for Ukraine since the beginning of the war. To ensure its resilience, several steps were made. Among them is bridge financing to help stabilize the economy and create a robust framework for businesses to operate as usual.
Also, derisking instruments for the next four years were developed. For example, 15% of the Ukraine Facility program will go to SMEs. It’s worth mentioning that the big focus of the program are guarantees for risk-investing and so-called red zones.
A huge part of the panel was dedicated to the private sector, which is crucial for financing the reconstruction, as international money isn’t simply enough. Ukrainian SMEs have proved they can perform even during war and are the backbone of the economy. However, most financial support goes to big enterprises and state-owned companies.
To continue development and stay on track, the Ukrainian private sector requires around $5 bln per year, but the influx of money is chunked in many ways. How to unblock the bottlenecks?
Our association has done a market mapping and there are several interesting findings. For the last 20 years, the Ukrainian market was built without institutional money, but mostly privately. However, private investors expect other players to contribute to scaling things up. That’s not happening for internal reasons.
To begin with, there are limitations on the part of institutional investors. Currently, 20 funds in Ukraine are raising money, yet two-thirds are below $50 mln making them impossible to get funds because of operational limitations. In our opinion, big European and international institutions should adjust for small fish, as most of Ukraine's current investments have been done by US funds for decades.
Last but not least is banking in Ukraine which can be described as reliable, flexible, and healthy. In 2023 net profit reached 86 bln hryvnas. That is 4x higher than in 2022 and 20% higher than in 2021 before the war. Despite that, the private sector and the real economy still suffer from a lack of funds. As of now, most credits are boosted by government programs, thus we need to find a way to use liquidity much more effectively.
Also, it’s worth mentioning at the moment, most funding to SMEs and domestic businesses is provided by local banks. There are 63 banks, 43 being local with private capital. Ironically, these banks are at a constant disadvantage and often can’t get access to international programs like IFC can grant.
In conclusion, we want to leave the words from Anna: Investing in Ukraine means investing in the future EU member.
#UFS2024
