Ukrainian Union of Lessors is working together with the USAID Financial Sector Transformation project to identify and promote potential sectors of Ukrainian economy that could significantly benefit from leasing services, while providing Ukrainian leasing industry potential for diversification, expansion and growth. As part of this activity, studies are conducted into different sectors of economy, which were identified as having the most potential for leasing expansion. We are providing some of the findings of these studies.
Medical equipment
Medical equipment market is forecasted to reach 2.3 billion UAH (about 84 mil. USD) in size by 2021. This will be a 78% increase in market size within 5 years, with an average growth level at 15%.
Such market growth will be driven by new healthcare legislation that changed the health care financing system, an increase in the number of general clinics; expanded network of rural hospitals and cooperation with IFIs.
97% of medical institutions, of which 20% are private institutions, have made a transition to a new financing model in 2019. The state authorizes a newly established state agency called the National Health Care Service of Ukraine to compensate the costs of medical institutions for the medical services provided. According to this model, NHCSU compensated 128 mil. USD in 2018, and 646 mil. USD in 2019. Increasing efficiency medical services financing model is likely to contribute to an increasing demand for medical equipment.
The market of medical equipment is expected to continue expanding both globally, and in Ukraine in the next five years. Due to implemented reforms, the medical equipment market is gaining momentum in Ukraine. However, the sustainable growth of the medical market requires financing, which can be provided through leasing.
Key players in the medical equipment market in Ukraine are privet service providers, which are all small and medium sized enterprises (SMEs). SMEs as medical service providers have a common problem in Ukraine: lack of access to finance that would allow rapid expansion. Bank loans are hard to get and expensive, the domestic capital market is shallow, and there is a limited choice of instruments to raise investment capital.
A survey of market participants indicates that Ukrainian medical businesses have used their own working capital in recent years for procurement of medical equipment. However, they are now increasingly looking for outside funding for business expansion.
At the same time, leasing of medical equipment is rather small. Value of medical equipment constituted only 105 mil. UAH (about 4 mil. USD) in the leasing portfolio of Ukrainian companies and has decreased by 5% compared to the year before.
All the above indicates, that leasing has ample opportunity to expand into this business segment, which is currently not addressed by the industry.