FinancEast program: 600 million hryvnias of investments for development of entrepreneurs of Donbass



The FinancEast program, funded by the European Union under the EU4Business initiative, sums up the first year of implementation.

From December 2019 to November 2020, the EU provided more than 240 million hryvnias to representatives of micro, small and medium-sized businesses in the territories of Donetsk and Luhansk oblasts controlled by the Government of Ukraine. Thus, IHR were able to attract UAH 596.16 million in their investment projects.

Photo: EU4Business

“Donetsk and Luhansk oblasts continue to receive significant EU assistance and support for the development of the region’s investment climate and sustainable economic and social recovery,” said  EU Ambassador Matti Maasikas, Head of the EU Delegation to Ukraine . “In just one year of its work, the FinancEast program within the EU4Business initiative has shown a very significant result, which shows that the region’s SMEs have a great interest in modernizing their production facilities and developing their business.”

The program is implemented by the German State Development Bank KfW and the Entrepreneurship Development Fund within the project “Support of the European Union for Eastern Ukraine” and the EU4Business initiative. Main partners: Oschadbank JSC, OTP Leasing LLC and Ukrgasbank JSB.

FinancEast provides reimbursement of up to 50% of the cost of investment projects. According to the team, this is exactly what intensified the delayed investment potential of the Eastern SMEs.

Photo: EU4Business

Lyudmyla Hordiyuk, Deputy Director of the KfW Office in Ukraine:  “In this context, it is important to note the successful and well-thought-out concept of the program, which was developed by KfW together with the Entrepreneurship Development Fund. The program would never have been so successful without the interest of partner agencies that worked directly with IHR. Monetary compensation played a dual role: it covered half of the investment costs for entrepreneurs and guaranteed the repayment of half of the loan or lease for partner institutions. Thus, the program not only allowed to support entrepreneurs working in the controlled territory of Donetsk and Luhansk regions, but also returned financial institutions to these regions. “

The main condition for participation in the program – a stable financial condition and economic activity in these areas for at least 1 year. The program is also open to micro, small and medium-sized enterprises (sole proprietors or legal entities) with up to 250 employees and an annual income of up to 10 million euros in hryvnia equivalent.

IHR participants can be from different sectors of the economy. However, summing up the year of implementation, the program team found that 93.7% are engaged in agriculture.

Photo: EU4Business

“Most often, investment projects involved the purchase of a variety of agricultural machinery and equipment. These are tractors, combines, reapers and harvesters, seeders, loaders, sprayers, etc. At the same time, we have investment projects for the purchase of equipment to modernize the production process of industrial SMEs. Also in the program’s portfolio are IHR, which are engaged in transportation and cargo handling, trade, repair and maintenance of cars, – says  Valery Maiboroda, authorized representative of the Fund for Entrepreneurship Development .

During the year of the program implementation, 146 investment projects from 119 IHR were supported. This gave a big impetus to the development of these enterprises even against the background of economic unrest caused by the COVID-19 pandemic. After all, quarantine is not a reason to pause sowing and harvesting.

“This is a very profitable program. Otherwise no way. It is very difficult for a small farm to get machinery. Thanks to EU assistance, the economy is on its feet. We can increase the quality of tillage, crop quality, improve storage conditions of the corn crop, which we have collected, ”  –  says  Oleg Gorokhov, head of the farm” Gorokhov “ ,  which in the Luhansk region. The farm received a financial lease of a modern tractor and seeder worth a total of 110 thousand dollars in hryvnia equivalent, which improved the quality of tillage and crops, as well as storage conditions.
https://www.youtube.com/embed/coD_022nwko?wmode=transparent&jqoemcache=Vu0GK

At the end of last year, the Stepovo agricultural enterprise learned about the FinancEast program through the partner institution OTP Leasing. Having prepared the necessary documents, the farm received a financial lease of a powerful tractor and cultivator worth a total of 7.5 million hryvnias. ”In 2014-2015, our company lost a lot. There was a war zone here. Thanks to EU aid program we can move forward and live a normal life ”  –  is divided  Nicholas Kostylev, director of the private agricultural enterprise” Steppe “ . https://www.youtube.com/embed/P7rsZyow0i0?wmode=transparent&jqoemcache=NreyK

The FinancEast program has been implemented for only a year, but due to the high demand for it from entrepreneurs in eastern Ukraine, all funds allocated by the European Union have already been approved to finance IHR investment projects and work for the Ukrainian economy.

Regarding additional funding under the FinancEast program, Valery Maiboroda assures: “It will depend on the evaluation of the results of the program, which will be analyzed by representatives of KfW and the European Union. Preliminary results of the program give reason to hope for its continuation. But the final decision is up to the European Union. “

Additional Information:

The Entrepreneurship Development Fund was  established on the basis of the German-Ukrainian Fund, which was established by the German State Development Bank KfW, the Cabinet of Ministers of Ukraine and the National Bank of Ukraine.

EU4Business  is an EU initiative that supports the private sector in the Eastern Partnership countries, including Ukraine. It aims to improve the business environment by providing professional advice on access to finance for SMEs. EU4Business support is provided jointly with other organizations. The initiative promotes growth and job creation.

Source