As the Ukrainian business community continues to grapple with the new realities created by Russia’s full-scale invasion, state-owned bank Oschadbank has identified support for the country’s micro, small, and medium-sized businesses (MSMEs) as one of its strategic priorities. Through a combination its own initiatives and cooperation with the Ukrainian government and international institutional partners, Oschadbank is seeking to provide Ukrainian entrepreneurs with the tools they need in order to not only survive but thrive in today’s uniquely challenging Ukrainian business environment.
According to Oschadbank research, MSMEs currently account for relatively small share of Ukrainian GDP that is far lower than the average of around fifty percent in most developed Western democracies. Bank officials believe consolidating this segment of the Ukrainian economy and building it up to contemporary European levels is crucial for the country’s broader development. “We want to see the MSME share of Ukrainian GDP rise to above half and are confident this will help Ukraine transition away from the old oligarch-dominated economy toward a more prosperous future,” says Natalia Butkova-Vitvitska, Oschadbank Board Member in charge of micro, small, and medium-sized businesses.
Oschadbank launched a separate unit to serve MSME clients in 2015 and currently has the third largest MSME loan portfolio on the Ukrainian market with more than 240,000 clients. Over the past two and a half years, the bank has adapted its offer to reflect the fast-evolving wartime conditions in the country, while also taking into account the new concerns and priorities among Ukraine’s entrepreneurial class.
One of the key issues for many companies in Ukraine’s MSME sector has been relocation. With almost twenty percent of Ukraine currently under Russian occupation and much more of the country located too close to active combat zones to allow for even a modicum of economic stability, many MSMEs have sought assistance to relocate their businesses to other parts of Ukraine. Another key area of activity is support for Ukrainian entrepreneurs looking to enter new export markets. As well as providing a range of financial tools to MSMEs, Oschadbank also offers consulting services to help small business owners make the right decisions.
Encouragingly, the bank has recently identified a positive trend of more companies seeking loans for investments rather than working capital. While only around 20% of loans to entrepreneurs in 2023 were to finance investments, this figure was approaching 50% by summer 2024. Growing demand for investment financing is a strong indication that the Ukrainian business community is recovering from the initial shocks of Russia’s full-scale invasion and is increasingly looking to move forward. Ms. Butkova-Vitvitska believes this could have important implications for the demographic situation in the country, as investment creates new work places that help support the population and could also encourage refugees to return to Ukraine.
Ms. Butkova-Vitvitska says the effectiveness of the bank’s initiatives in the MSME sector depend on the agility and adaptability of the Oschadbank team. She points to steps taken in response to rolling energy blackouts in summer 2024 as evidence of the bank’s ability to react promptly to changing wartime conditions. “We constantly face new challenges that demand flexibility on a month-to-month basis and sometimes even on a day-to-day basis. This has taught us that if you have the right team in place and the right attitude, you can operate effectively even in the most demanding business climates,” notes Ms. Butkova-Vitvitska. Thanks to this flexibility, the bank financed loans worth more than 40 billion hryvnias between 2022 and the middle of 2024.
With over 1,200 staff servicing MSME clients across Ukraine and the country’s largest nationwide branch network, Oschadbank is well positioned to take the pulse of the MSME community and assess the often rapidly evolving outlook among Ukrainian entrepreneurs. “Our employees are used to working in a very dynamic environment,” comments Ms. Butkova-Vitvitska. “Everyone understands that they cannot expect to work standard eight hour days in the current circumstances, but we are all very proud of the role we play and the support we are able to provide for Ukraine.”
The bank remains the main provider of grant instruments from the Ukrainian government in support of MSMEs in areas including agro-industrial projects, processing, and industrial parks, as well as initiatives specifically targeting the veteran community. Oschadbank is also actively developing preferential financing for businesses in the form of partner programs. The bank cooperates with more than 300 partners including a number of globally recognized brands. This makes it possible for businesses to obtain loans with no down payment and annual interest rates starting at 0.01%.
The bank’s extensive nationwide network, along with local knowledge accumulated over many years, is a key factor that has helped make Oschadbank a logical partner for international financial institutions looking to support the Ukrainian MSME sector. “We know the Ukrainian market at a personal level and we understand the needs of our clients very well,” says Ms. Butkova-Vitvitska. “This makes it possible for us to help international financial institutions reach their target audience in Ukraine.”
Ms. Butkova-Vitvitska cites a number of additional advantages that she believes have played a role in establishing partnerships between Oschadbank and international financial institutions including the European Bank for Reconstruction and Development, the European Investment Bank, the European Investment Fund, Germany’s GIZ development agency, and the Western NIS Enterprise Fund. These include the bank’s credit risk management expertise and extensive experience gained through the successful implementation of previous projects with multiple international partners. “We have a very clear understanding regarding the rules of cooperation, along with detailed knowledge of how such partnerships should work. Crucially, we also have the necessary expertise to decrease risk levels to a minimum for our partners,” she says. “Oschadbank serves as a natural bridge between international financial institutions and Ukrainian clients.”
An important part of Oshchad’s preparation for cooperation with international partners has been the introduction of ESG criteria, with donors also providing guidance. For example, Oshchadbank was helped by colleagues from the Deutsche Sparkassenstiftung für internationale Kooperation (German Sparkassen Foundation for International Cooperation) to implement ESG criteria. With the help of German partners, bank employees where able to study best ESG practices and develop appropriate plans for Ukraine that were subsequently adopted. This has created greater opportunities for cooperation with a range of international institutional partners.
The good news for Ukraine’s entrepreneurs is that international financial institutions appear to share Oschadbank’s current commitment to supporting the MSME segment, with many viewing it as the key to the country’s long-term economic transformation. Ms. Butkova-Vitvitska says that while Oschadbank provides an array of information and detailed statistical data to partners, the international financial institutions she cooperates with in Ukraine generally have a good understanding regarding the specifics of the country’s entrepreneurial class and the potential for the future expansion of the sector. “They are concentrating their efforts on Ukrainian MSMEs rather than big corporate clients because they recognize that this is what will ultimately make the Ukrainian economy grow.”