Micro, small and medium-sized business: stability in times of war, potential for the reconstruction of Ukraine

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Dmytro Lyvch,

co-founder of the Center for Economic Recovery, chairman of the board of the NGO “EasyBusiness”

Hostilities and full-scale aggression caused the loss of sales markets for goods and services, a decrease in domestic demand due to the huge number of forced migrants, the outflow of specialists, the destruction of supply chains, the destruction of production and warehouse facilities, and equipment. But more than 66% of Ukrainian MSMEs continued to work in wartime conditions, and hundreds of enterprises recorded the beginning of their work precisely during the time of large-scale Russian aggression.

According to analytical research by EasyBusiness, in the pre-war period, micro, small and medium-sized enterprises (MSMEs) accounted for more than 99% of registered enterprises in the country and were the main engine of economic development and innovation.

Despite the war, blockade of ports and “energy terror”, the majority of MSMEs survived and continue their activities.

Many of them reoriented themselves to the production of dual-purpose goods or the production of equipment for the military.

In the conditions of war, the work of the private sector not only fills the budget, but also contributes to the strengthening of the country’s defense capabilities. Also, Ukrainian business has strengthened its social responsibility – entrepreneurs are actively engaged in volunteer and humanitarian aid.

According to the results of the study from “Advanter”in which more than 500 managers and owners of small and medium enterprises participated, as of the end of 2023, 9.6% are still stopped or almost not working.

As for business activity (Ukrainian Business Index), in November 2023 this indicator was 36.3 points out of a possible 100.

With regard to the expectations of entrepreneurs regarding the results of their own activities: 13.8% – noted an increase in volumes compared to the plan, 25.5% – acted within the planned indicators, on the other hand, 51.2% – ended the year with financial indicators lower than expected.

Given the current trends and uncertainty causing economic turbulence, grants for small and medium-sized businesses are vital today.

It is entrepreneurs who support macroeconomic stability and pay taxes to the budgets of various levels.

And it is this business segment that forms the middle class, which is a powerful factor in the protection of democracy, the growth of the population’s well-being and the rapid recovery of life, especially in the de-occupied communities and regions. During the war, grant money can save hundreds of Ukrainian businesses, which will become real drivers of successful recovery and economic growth.

In particular, it is about relocated enterprises that continue to work in a new place, integrating into new communities, restoring and building new partnerships and logistics.

It is also important that grant support is aimed at adapting the economy to the green transition and global competition through standardization and certification of services, goods or production.

Therefore, MSME support programs provide entrepreneurs with the necessary resources not only for recovery, but also for development, stimulating the introduction of innovations and, as a result, strengthening competitiveness in foreign markets and opportunities for increasing export potential.

Grant programs help businesses to reduce their financial burden, provide an opportunity to free up or attract resources for development, for example, product marketing, increasing the efficiency of production processes, and personnel training. These steps strengthen the capacity and resilience of MSMEs even in war.

How it works can be seen on the example of one of the largest state support programs, “eRobota”. According to the Ministry of Economy, as of the beginning of 2024, more than 11 thousand Ukrainians have received grants from the state to start or develop a business. Of these, more than 2,000 citizens directed funds to start their own business, others – to scale up business, develop and launch new areas of activity.

The number of applications for the support program and their quality is constantly increasing. How the volume of granted grants is also increasing: in 2023, three times more grants were granted than in 2022.

The most popular fields of activity among those financed are processing industry, trade, hospitality and public catering (HORECA).

In general, over the course of the program, the state provided more than 6.5 billion hryvnias in grants for the development of entrepreneurship, and another 9 billion hryvnias are planned for 2024.

In addition to sufficiently powerful support from the state, grant funds from international organizations and funds, from the governments of Ukraine’s partner countries, are available for the development of Ukrainian business today.

The key role belongs to the European Union, which, since the beginning of the large-scale Russian war, promptly and significantly increased support for Ukrainian MSMEs.

Currently, there are a number of EU-funded programs and activities aimed at a wide range of goals: from the development and acquisition of new skills to overcoming barriers on the way to entering European markets. The European Union provides comprehensive assistance to Ukrainian MSMEs also in the development of women’s business and youth entrepreneurship, actively supports the development of startups and innovations.

As Iryna Hubarets, coordinator of the sector of competition and economic issues of the Representation of the European Union in Ukraine, said, after the start of a full-scale military attack by Russia on Ukraine, the possibility of taking loans decreased: “There was no longer any talk of investment funds – there was a need for non-refundable aid and working capital. Therefore, all EU projects were reoriented, new directions appeared – micro-grants, as well as small and medium grants for amounts and goals adapted to the different needs of different categories of entrepreneurs. It helped them stay afloat in difficult times.”

Key areas of EU assistance:

• financial instruments, access to financing;
• support of MSMEs through non-financial instruments: business coaching, consultations, etc. The program, which was implemented before the start of the full-scale Russian war, is also working in this direction, and aims to help MSMEs of Ukraine to adapt to the norms, requirements and standards of the EU in order to enter the European markets.
• improvement of the business environment and business conditions. In this direction, the EU actively cooperates with the Government of Ukraine.

One of such programs is EU4Business

“Since the beginning of the full-scale Russian aggression, the EU and Germany jointly through the EU4Business program have carried out five grant competitions, within which more than 5.5 million euros have been provided to more than 1,100 Ukrainian MSMEs. For the economy of Ukraine in times of war, it is very important to support MSMEs so that they can survive , so that they gradually recover and develop in the future. Every entrepreneur is important and every single enterprise helps the country: it provides jobs, pays taxes and supports economic activity,” commented Henrik Witfelt, Acting Director, on the start of the sixth wave of grant support. head of the “Economic cooperation, energy, infrastructure and environment” department of the Representation of the European Union in Ukraine.

As part of this program, 100 Ukrainian micro, small and medium-sized enterprises with export capacity and innovation potential can receive up to 10,000 Euros each for recovery, development and resilience in times of war. This time, EasyBusiness became the grant competition partner, whose team is successfully working to strengthen the sustainability of Ukrainian MSMEs, in particular, through the implementation of grant programs.

You can apply for a grant through the website – from January 16 to February 11, 2024.

It is micro, small and medium-sized businesses that are one of the key drivers of economic recovery in Ukraine. Macro-financial assistance from partners is vitally important for us today – it allows us to balance the budget. But it is the support of private sector partners that will allow us to grow economically. Successful sustainable development of Ukrainian business, increasing its export opportunities and competitiveness on European markets will become a reliable foundation for reconstruction, restoration and further economic development of Ukraine.

You can find out more about the European Union’s support for small and medium-sized businesses in Ukraine by following the link

The publication was prepared with the support of the European Union within the communication campaign “Together we stand. Together we are Europe”. Its content is the sole responsibility of the author and does not necessarily reflect the position of the European Union.

#РазомВыстоимо #РазомМыЕвропа

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