Quarantine was introduced in Ukraine in early March. Restrictions are constantly being tightened and extended. How does your business work in such conditions?
As you know, leasing companies have been included by the Cabinet of Ministers in the list of enterprises that support the country’s livelihood. Accordingly, we continue to finance farmers, complying with all quarantine requirements. Of course, there are difficulties. For example, the Ministry of Internal Affairs does not register used cars and trucks, including grain trucks. Therefore, this segment is currently not receiving funding. With regard to agricultural machinery, it is registered: both new and used, respectively, are actively funded. In such circumstances, we record even an increase in customers since the beginning of February, by about 20-25%, compared to the same period last year. We attribute this to the fact that farmers were concerned about a significant restriction on international trade, or even the closure of borders for the import of new machinery. Accordingly, farmers began to actively buy everything that was in warehouses from dealers.Currency fluctuations also affected the stability of banks: everyone began to be more cautious about issuing new loans. In this context, it should be noted that customers have become more likely to use the product of reverse leasing – it is the issuance of money on the security of equipment. This indicates a shortage of working capital among farmers. Now many PPE sellers have canceled installment programs, respectively, the same situation with fuel – traders cancel deferred payments, and farmers need these MTP for sowing. Accordingly, farmers have increased cash gaps. The vast majority of applications are under the “reverse leasing” program.that customers have become more likely to use the product of reverse leasing – is the issuance of money on the security of equipment. This indicates a shortage of working capital among farmers. Now many PPE sellers have canceled installment programs, respectively, the same situation with fuel – traders cancel deferred payments, and farmers need these MTP for sowing. Accordingly, farmers have increased cash gaps. The vast majority of applications are under the “reverse leasing” program.that customers have become more likely to use the product of reverse leasing – is the issuance of money on the security of equipment. This indicates a shortage of working capital among farmers. Now many PPE sellers have canceled installment programs, respectively, the same situation with fuel – traders cancel deferred payments, and farmers need these MTP for sowing. Accordingly, farmers have increased cash gaps. The vast majority of applications are under the “reverse leasing” program.
Many of the companies during the quarantine switched to remote work, how do you work with customers?
We started working on the principle of banks without branches, even when it was not “mainstream”. 10 years ago, when we started, we tried to open a branch, but realized that it was ineffective. We now have an office in Kyiv. Physically, clients came to us for quarantine infrequently. For example, when a farmer is not even in Vinnytsia, but in the Vinnytsia region, it is an additional 150 kilometers. It is not convenient for him to go to Vinnytsia to sign an agreement, let alone Kyiv. That’s why he sends the documents, and we evaluate them, make decisions and sign the contract. Our clients have worked remotely before. Now BankID helps a lot. We teach customers to use an electronic signature. When we started working, many customers did not even have e-mail, and now our farmer can give a head start to advanced IT professionals. Regarding official requirements,then we took care of the safety of our employees, now in our office there are antiseptics, masks and medical gloves. But from the beginning of quarantine none of the clients came to us, everything works remotely for us.
What is the average “check” for the issuance of concluded contracts during the quarantine period?
As always, the average bid is UAH 1.5 million. Maturity from 1 year to 5. Now, of course, all customers are trying to sign a contract for the maximum term. Everyone needs long money, everyone wants to feel a margin of safety. It is not clear what will happen to the harvest this year. It was a dry winter, so there are fears that the harvest will not be the best. – What equipment is currently in demand? – Demand has been growing since the end of winter. They take everything: seeders, tractors, sprayers, there is also a demand for combines. This year we saw that farmers began to buy better and new equipment. If earlier applications were for 20-year-old equipment, now, if they take the consumed equipment, it is a maximum of 4-5 years. Plus they try to take with modern equipment – autopilots and navigators, today new technologies are very important for farmers.There is also a demand for food production equipment. Quarantine has also exposed the medical crisis. We have received applications for medical equipment before, but now their number has increased. If last year there were about 10 applications for the whole year, now since the beginning of the year we have already received 40. We have even signed leasing contracts for several companies, but this equipment is not typical for us. We have satisfied only regular and reliable customers in this new segment. Now people are looking for different niches where you can earn. Bank deposits have ceased to generate significant income. Therefore, the business began to invest in everything that can be profitable in today’s conditions.If last year there were about 10 applications for the whole year, now since the beginning of the year we have already received 40. We have even signed leasing contracts for several companies, but this equipment is not typical for us. We have satisfied only regular and reliable customers in this new segment. Now people are looking for different niches where you can earn. Bank deposits have ceased to generate significant income. Therefore, the business began to invest in everything that can be profitable in today’s conditions.If last year there were about 10 applications for the whole year, now since the beginning of the year we have already received 40. We have even signed leasing contracts for several companies, but this equipment is not typical for us. We have satisfied only regular and reliable customers in this new segment. Now people are looking for different niches where you can earn. Bank deposits have ceased to generate significant income. Therefore, the business began to invest in everything that can be profitable in today’s conditions.Therefore, the business began to invest in everything that can be profitable in today’s conditions.Therefore, the business began to invest in everything that can be profitable in today’s conditions.
Banks have become more picky about their customers. Has your number of problem loans increased?
The number of customers requesting restructuring has increased, but not by much. Somewhere around 3% of the total portfolio. Those clients who saw that they could have problems with repayment, in time began to apply for restructuring or “reverse leasing”. Roughly speaking, try to repay the old loan with a new one, but stay in the repayment schedule. Why? Because now there is a credit bureau. The entire loan market is actively using it, plus the NBU is actively monitoring borrowers. A client who allows overdue payments, or does not pay at all, is left with the opportunity to take financing not only from leasing companies, but also from all banks. Therefore, now the payment discipline of customers has become much higher than it was before 2015. Everyone is watching this and trying to get out of a bad situation before it starts. In general,farmers are more fortunate in this crisis than others: carriers or builders, restaurateurs or services, non-food retail. Farmers need to go to the field in time, sow, harvest and sell the harvest. Today, the country’s food security depends on the agricultural sector. They do not have the problems that other people have, for example, in keeping the same distance. As Lukashenko said: “A tractor is in the field, and there is no one for a kilometer.”
How has your client changed? Who uses your services more: medium or large businessmen?
Now the number of large enterprises that turn to us has increased significantly. This is not usual for us, we have historically focused on financing micro and small businesses. Most of them are farmers with a land bank of 500-1000 hectares, or medium – up to 5-10 thousand hectares. Larger agricultural enterprises are now applying because it has become more difficult to obtain financing from banks, so everyone is looking for sources of loan diversification.
Do you plan to ease the conditions of leasing in connection with quarantine?
No. We have rather mild conditions and one of the main advantages is that we give a loan in hryvnia without pegging to the exchange rate. Now the situation with the hryvnia is unstable. In the crisis, we left our financing conditions unchanged. Therefore, this is already a step forward. We did not “tighten the nuts.” We are not talking about lowering rates, now the situation is unstable. We need to understand where to take our money to provide customers with financing. Today, at the macro level, there is no understanding of what will be on the market. Negotiations with the IMF are under way, but still remain at the level of words. It is also unclear what the budget deficit will cover. The entire financial sector is closely watching the government’s decision in this regard.
Why don’t you work with government programs to support farmers, such as lowering interest rates?
We do not work with the state in principle. Because, as a rule, then all the controlling bodies that can only be imagined come to you and try to find mistakes. Everyone thinks that if you work with budget money, you could “earn”. We have a principle that we never work with the budget. We do not fund budget organizations and do not participate in tenders or other government programs. We had clients who went for government lending “5-7-9”. None of them received these loans, although, in my opinion, they meet all the requirements for these programs.
What changes do you expect in the country after quarantine?
It is already clear. how fragile international food production chains are. Many countries are talking about restricting critical exports, including food. And here Ukraine has certain problems. When we look at where to buy Ukrainian pasta or vegetables, we will not find much competition. We are far behind and cannot provide for ourselves. It is necessary for the development of Ukrainian processing and cultivation of vegetables. We have an ambiguous attitude to quarantine. On the one hand, it is needed to protect the health of citizens. On the other hand, we are witnessing the decline of the economy. What can we die faster from: coronavirus or starvation? The conditions for easing quarantine are also unclear, and it is impossible to predict what the economy will be like.
What are the development plans?
We have already gone through three crises: 2008, 2014, the crisis of the banking system. Today’s crisis is the fourth. And we learned the lesson that you should never close a business, for example, lay off people. Today we even recruit employees, we do not lay off anyone. We need to look calmly where there are opportunities, and on the contrary we can recruit valuable staff who are fired in the market. We even experienced a shortage of staff three months ago. That’s why we definitely don’t plan to fire anyone and optimize something. Recently introduced a product – reverse leasing of real estate. There is a great demand for financing in large sums for a period of 3-5 years. Real estate financing can give “long money” to the market, and this money will be cheaper, this product is now in demand. And the amount of money issued for it can be greater than for a combine or tractor.Our company issued corporate bonds two years ago. At that time it was very difficult to place them in Ukraine, but in world practice for leasing companies it is a stable source of attracting resources. As I said, we issue “long money”, and it is corporate bonds that allow us to receive it. At the beginning of the year we were approached by investment funds, we saw increased demand for our bonds, but the first issue has already been placed with us. So far, we have decided to make the next issue, but we will return to the practical steps and conditions of the issue after the third quarter, when we hope the economy will start to grow.namely, corporate bonds make it possible to obtain them. At the beginning of the year we were approached by investment funds, we saw increased demand for our bonds, but the first issue has already been placed with us. So far, we have decided to make the next issue, but we will return to the practical steps and conditions of the issue after the third quarter, when we hope the economy will start to grow.namely, corporate bonds make it possible to obtain them. At the beginning of the year we were approached by investment funds, we saw increased demand for our bonds, but the first issue has already been placed with us. So far, we have decided to make the next issue, but we will return to the practical steps and conditions of the issue after the third quarter, when we hope the economy will start to grow.