Market dynamics
The non-bank financial leasing market is growing for the fourth year in a row. According to the results of 2019, the growth of new business was 18% and in monetary terms its volume reached UAH 26 billion.
In the last three years, the growth rate of the non-bank leasing market has significantly outpaced the growth rate of Ukraine’s economy as a whole, which makes it the engine of economic growth and recovery of the country.
According to the results of 2019, the leasing portfolio of companies (excluding banks) increased by 15% and reached UAH 29 billion.
According to the results of 2019, non-banking institutions provided 77% of all financial leasing services on the market, and represent 74% of the national leasing portfolio.
Fig. 1. Dynamics of market growth (left) and leasing portfolio (right), UAH million and%.
Reasons for growth
Among the reasons behind the steady growth of the market in 2019 are:
– Macroeconomic stabilization in the country and steady growth of Ukraine’s GDP , which allowed the recovery of demand for leasing services.
– Increased financing of leasing services through a bank loan , which stimulated the development of supply.
– Financing of leasing companies at the expense of MFIs , which expanded the resources of companies and increased confidence in their activities.
– Financing of leasing operations through the issuance of securities , which allowed to expand the resource base of companies.
– Deregulation of the market by Natskomfinopslug, which reduced barriers to market entry and contributed to the inflow of investment and increased business activity.
Market forecast
The current crisis caused by the COVID-19 pandemic does not allow us to expect market growth in the current 2020.
According to the optimistic scenario (Ukraine’s GDP will fall by 4% in 2020), we can expect some decline in the non-bank leasing market in 2020 compared to the previous year. But in 2021 we should expect a gradual growth, and in 2022 the market will outpace the level of 2019 and grow by 49%.
Fig. 2. Optimistic scenario of market growth, UAH million and %.
Further market development
The degree of market downturn in 2020 and its further development largely depends on:
– Anti-crisis measures of the Government of Ukraine and their ability to increase access to financial resources of leasing companies.
– Regulatory policy on the market: in 2020 the regulation of the financial leasing market will be transferred from Natskomfinposlug to the National Bank of Ukraine. The degree of regulation and reporting that the NBU will set for this market can significantly accelerate or restrain its development and growth.
– Inclusion of leasing in government programs to support business in various sectors of the economy on an equal footing with a bank loan. As it is provided, for example, by the framework laws on support of the agricultural producer (1877-IV,), but in fact throughout history the state supports only credit products.