EBRD develops local currency lending to SMEs in Ukraine

"The use of local currency gives greater comfort to potential borrowers, who will not be exposed to foreign exchange risks," it said.

The EBRD is providing a four-year local currency loan in hryvnias (UAH) worth US$25 million equivalent to PJSC ProCredit Bank Ukraine (PCBU).

Read alsoEBRD: Ukraine to see 2% growth in 2017For the EBRD this will be one of the first UAH-denominated loans to a commercial bank in Ukraine as well as the first synthetic local currency facility hedged through a cross-currency swap with the TCX fund. This mechanism will allow providing Ukrainian SMEs with lending in local currency. 

Grant funding provided through the EU Neighbourhood Investment Facility will help reduce the interest rate cost of the foreign exchange (FX) risk hedge in order to achieve better cost of funding in local currency (UAH).

"We are lending to a well-known and well-established financial institution in Ukraine. This loan will support ProCredit Bank's growth strategy focused on the expansion of SME lending much needed in the country. We are confident that the instrument we employ has a good potential for replication and will contribute to the development of local currency lending in this country," Francis Malige, EBRD Managing Director for eastern Europe and the Caucasus said.

The Netherlands-based Currency Exchange Fund (TCX) is a special purpose fund that provides over-the-counter derivatives to hedge the currency and interest rate mismatch. Its shareholders include most major development finance institutions in the world and a number of specialized microfinance investors.

UNIAN memo.The EBRD is the largest international financial investor in Ukraine. To date, the Bank has made a cumulative commitment of almost EUR 11.6 billion through 383 projects since the start of its operations in the country in 1993.

ProCredit Bank Ukraine is a development-oriented commercial bank offering customer service to small and medium enterprises and to private individuals. The bank is part of the international ProCredit group whose parent company is the Germany-based ProCredit Holding. ProCredit Holding AG & Co. KGaA, based in Frankfurt am Main, Germany, is the parent company of the development-oriented ProCredit group, which consists of banks for small and medium enterprises (SMEs) and whose operational focus is on South-Eastern and Eastern Europe.