FinancEast program: 153 investment projects, more than 600 million hryvnias
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Military equipment in the fields instead of crops – this was the case in 2014 on the land of the farm headed by Oleksiy Dashivts in Slovyansky district of Donetsk region.
When the Armed Forces liberated this territory, the enterprise was able to resume work – but not to develop. Banks considered it too risky to work in eastern Ukraine, so getting a loan or leasing equipment was impossible.
This was changed by the European Union’s program for refinancing investments of micro, small and medium-sized enterprises (MSMEs) in the territories of the Donetsk and Luhansk regions under the control of the Government of Ukraine – FinancEast. Yes, thanks to the program, Oleksiy managed to purchase a modern tractor, which, according to him, he would not have been able to do on his own for a long time.
“We really suffered a lot from the hostilities. We had unsown areas because military equipment was in our fields. We started to come out of the crisis thanks to the European Union funding program.”– said the director of the “Donetske” farm.
The article tells about the program, how it helped the entrepreneurs of the east and what changed after the full-scale invasion.
In the territories of the Donetsk and Luhansk regions under the control of the Government of Ukraine, the economy slipped year after year. One of the key reasons for this was the problem of businesses accessing finance. To solve it, the EU initiated a program FinancEast.
The program started in 2019 as part of the initiative EU4Business and the Agreement between the Government of Ukraine and the EU “Support of the European Union for the East of Ukraine”. Its main goal was to promote the economic recovery of the Donetsk and Luhansk regions in the territories under the control of the Government of Ukraine, and to increase its investment attractiveness – through the financing of micro, small and medium-sized businesses.
“First of all, we wanted to provide business financing, which would give it the opportunity to develop its own economic activity. We also wanted to give banks the opportunity to return to the eastern regions of Ukraine.”– noted at the presentation of the program in 2019 Frederic Kuhne, head of the cooperation department of the Representation of the European Union in Ukraine.
Specialists of the German Development Bank worked on the program KfW and Entrepreneurship Development Fund (FRP) in cooperation with partner financial institutions: JSC “Oschadbank”, LLC “OTP Leasing” and JSC “Ukrgazbank”.
To participate in the program, enterprises had to meet several conditions:
- be a micro, small or medium-sized enterprise with no more than 250 employees and an annual income of up to 10 million euros in hryvnia equivalent;
- have clear intentions in making investments in production;
- carry out economic activities in the territories of the Donetsk or Luhansk regions under the control of the Government of Ukraine for at least 1 year.
Lipar’s novel, the director of the company “Kormo-Trans-Logistic”, which mainly deals with transportation, after the occupation of his native Donetsk in 2014, resumed the company’s work already in Mariupol. In 2021, the team had more than 200 employees.
Then the company won a tender for work with factories in Mariupol, in particular, Azovstal. It was an ecological project to help enterprises clean the coast of the Sea of Azov from slag – waste from blast furnace production. Here the company needed another excavator. And thanks to the FinancEast program, Roman Lipara was able to purchase the necessary equipment worth UAH 5.5 million.
“This support is very serious. And we can not only develop business for ourselves, develop the automotive industry, but we can also help the city and our region to become cleaner, more ecological.” – said the director of “Kormo-Trans-Logistics”.
The FinancEast program quickly became popular among entrepreneurs in eastern Ukraine, and its effectiveness exceeded all expectations.
“None of the donors and we did not even expect that the program would have such a demand from MSMEs of Eastern Ukraine”– said the deputy executive director of the FRP Valery Maiboroda, beating up results of the first year of the program.
Most of the participants in the program were farmers who, thanks to the program, were able to purchase agricultural machinery and the necessary equipment: tractors, combines, harvesters, planters, etc.
Entrepreneurs engaged in industrial production, freight transportation, trade, repair and maintenance of cars also took advantage of the help. In total, 153 investment projects with a total value of UAH 612.75 million were financed within the framework of the program.
“The ultimate goal for the European Union was to enable banks to increase their confidence in working with micro, small and medium-sized enterprises (MSMEs) in the region and thus ensure sustainable access to finance for such entrepreneurs. MI think we succeeded“, he said Christian Ben Hellhead of the operational sector, agriculture, food security and land resources of the EU Representation in Ukraine.
Save the harvest
At the beginning of 2022, it was planned that a certain number of MSME investment projects from the eastern region would be financed under the FinancEast program. But on February 24, Russia carried out a full-scale invasion of the territory of Ukraine. But this did not stop the implementation of the program.
“We have consulted with the EU to redirect the remaining funds within the program to support farmers during the planting campaign,” – said the doctor Bianca Clausendirector of the sustainable economic development department of KfW Eastern and Southeastern Europe, Turkey, Central Asia.
The EU agreed, because during the five months of the Russian invasion, Ukrainian farmers suffered more than $23.3 billion in losses. These are the farmers who in 2019-2021 provided almost 10% of world wheat exports, 15% of corn and barley exports and almost 50% of sunflower oil exports.
Thus the Additional Component of the program was launched. AKB “Lviv” was chosen as the financial partner of FinancEast to support agribusiness during the sowing campaign and harvest, because it was an active partner of both KfW and FRP, thanks to which it was possible to save precious time for the procedure of its evaluation and selection.
“Thanks to additional program component FinancEast farmers were able to purchase fertilizers on time. It was critically important to grow and harvest crops, which are needed now more than ever during the war.” – the executive director of the FRP spoke about the results of the additional component Andriy Gapon.
As a result, farmers in the west of the country sowed 10% more wheat and rye in the military spring than last year. And from the collected almost 14,000 tons of high-quality grain, 31.5 million loaves of bread can be baked.
Meanwhile, the entrepreneurs of Eastern Ukraine – FinancEast participants do not give up.
During the first two days of the full-scale invasion, the Kormo-Trans-Logistic company managed to partially relocate its business from Mariupol to Zaporizhzhia.
“We had a whole division in Mariupol. After all, a third of the turnover was related to work at the Ilyich metallurgical plant and the already legendary Azovstal. We managed to take out some of the equipment that was in operation. But, unfortunately, the excavator, which we bought within the FinancEast program remained there, as did most of the fixed equipment”– says the director Lipar’s novel.
Since the company has been engaged in logistics for more than 25 years, the business has remained alive.
“We repurposed all employees who wanted to stay with us, some were sent to other routes. Temporary housing was equipped on the territory of the base. We even managed to pay off the loan under the program ahead of schedule.”
Zaporozhye, which seemed like a safe haven back in February, became a front-line area by the end of the year. And even this did not make Kormo-Trans-Logistics give up. On the contrary, due to the urgent need for international humanitarian cargo, they began to invest more in cars that meet the requirements of European transportation.
“The whole country is under fire, but we are not going to stop work! Our equipment not only delivers humanitarian goods, but also fights in the Armed Forces”– says Roman Lipara with pride.
The publication was prepared with the financial support of the European Union. Its content is the exclusive responsibility of the “FinancEast” Project and does not necessarily reflect the position of the European Union.
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