IFU CAPITALIZES UKRAINIAN BANK FOR SMALL BUSINESSES
IFU has set up a loan facility for Bank Lviv to spur economic growth among smaller businesses in Western Ukraine. Companies supported need to establish a Danish interest.
The economic crisis in Ukraine has led to a freeze down of the Ukrainian market for short-term loans to smaller businesses. Consequently, many of these businesses have difficulties in financing further growth by investing in e.g. new technology.
This is also the case in Western Ukraine holding a high concentration of smaller businesses, including around 50 Danish-owned companies operating on a permanent basis in the country. Against that background IFU has set up a loan facility to provide short term loans for smaller businesses.
Administered by Bank Lviv
However, as IFU is only engaging in direct financing either through share capital or long-term loans, the fund cannot service the demand for short-term financing. Therefore Bank Lviv and IFU have invented this new instrument that initially has been funded with one million Euros by IFU.
The loan facility will be administered by Bank Lviv, which is a well-established bank having a good reputation and close relations with many of the Danish companies operating in Western Ukraine as well as other local and foreign-owned small businesses.
The bank will handle all individual loan contracts as part of their normal business with local corporate clients.
“As a long-term investor, IFU is not able to assist these smaller companies directly in getting short-term trade financing. But by cooperating with Bank Lviv we have invented a novel instrument that can”
Olexiy Parkhomchuk, Investment Director, IFU
Buying Danish technology
To qualify for a loan from the new facility it is necessary to establish a Danish economic interest. This can be in the form of a Danish company operating in Ukraine or a local company wanting to purchase products or technology from Denmark.
In general, Danish commodities have a good reputation in Ukraine especially within the agricultural and energy sectors. But they are often deselected for other alternatives because they are considered more expensive. By attaching a loan facility to Danish commodities, they could become more favourable and thereby strengthen the competitiveness of Ukrainian companies as well as increase Danish export to Ukraine.