STATE PROGRAMMES “5-7-9%”: SUPPORTING MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES

25/09/2024

On September 13, 2024, the Government of Ukraine adopted the Resolution “On Amendments to Resolution No. 28 of the Cabinet of Ministers of Ukraine dated 24 January 2020.”

This resolution enhances the financial state support available to micro, small, and medium-sized enterprises (MSMEs) through key state programmes such as "Affordable Loans 5-7-9%," "Affordable Factoring," and "Affordable Financial Leasing 5-7-9%".

Significance of Resolution

      The Resolution introduces several developments, including:

• the possibility for businesses to reduce interest rates by combining the "5-7-9%" state programmes with authorized banks’ partner programmes;
• an improved mechanism for providing guarantees to authorized banks through the Entrepreneurship Development Fund (EDF);
• the implementation of World Bank environmental and social standards for loans granted to agricultural enterprises, effective from 12 January 2024, within the framework of the "5-7-9%" programme.

With these developments in mind, it is important to highlight the key aspects of the programmes mentioned.

"Affordable Loans 5-7-9%" Programme:

Loans under the "5-7-9%" scheme can be provided for the following purposes:

• investment purposes, such as the acquisition and/or modernization of fixed assets. This may include purchasing commercial vehicles, property for production purposes, non-residential real estate, or land for economic activity. Such real estate cannot be leased or transferred to third parties for paid or unpaid use. It also covers construction, reconstruction, or repairs in non-residential buildings;
• financing MSME working capital (excluding condominiums).

The maximum loan amount: UAH 60 million.

Maximum loan term: up to 10 years for investment purposes; and up to 3 years for working capital financing, with the possibility of extension until 31 December 2025.

"Affordable Factoring" Programme:

This state programme operates within the same framework to secure MSMEs' working capital.

The maximum amount of financing: UAH 150 million, including the costs deducted under the "Affordable Loans 5-7-9%" and "Affordable Financial Leasing 5-7-9%" programmes.

Impact of the programme: MSMEs are empowered to mitigate losses, reduce the risk of non-payment by counterparties, and strengthen the entire supply chain for delivering goods.

"Affordable Financial Leasing 5-7-9%":

The size of the deposit (share of the enterprise's own participation in the project): from 20%.

Lease term: up to 60 months for investment projects.

The maximum amount of financing for an entire group of related counterparties: up to UAH 90 million.

One-time commission fee for financing: 1.5% of the financing amount.

In addition to these programmes, the government has also set terms for international cooperation, which involve securing affordable financing for Ukrainian enterprises. This includes agreements with the World Bank, the International Bank for Reconstruction and Development, the International Development Association, and partnerships with the IMF to balance support for small and medium-sized enterprises with the fiscal capacity of the state.

Conclusion. The state programmes “5-7-9%” provide the delivery, insurance and registration under one contract. Moreover, programmes facilitate the possibility of financial leasing, factoring, and loan for business entities of the utility sector of the economy. Finally, it opens an availability of partner programmes with manufacturers and sellers of machinery and equipment.

 

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