Expert opinion: How did lending conditions change for Ukrainian business during the war?

Valerii Mykhailovskyi, Expert on Environmental and Social Risk Management, shared details on the functioning of Ukraine's credit sector during the war. He answered today's topical question: how and what kind of business can get a loan?

Valerii Mikhailovsky,
Expert in environmental and social risk management;
Manager at PricewaterhouseCooper that is an international network of companies offering professional consulting and auditing services.

The banking system of Ukraine during the war has enough liquidity to ensure the smooth operation and fulfillment of its obligations to customers, there is no reason to expect a liquidity crisis or non-return of deposits. In other words, in the short and medium term, depositors can be calm about their deposits and account balances. The situation with liabilities (simply: with depositors' funds) is more or less clear, but what about the assets (loan portfolio) of banks?

Are banks ready to finance the economy during martial law? What funding programs are available in the market? These issues are important and of interest to business in the first place.
​The war will be a litmus test that will show who assessed credit risks, especially when considering the medium and long-term scenarios of our victory. In other words, the longer the war, the more difficult the quality of the loan portfolio will be. It is too early today to make estimates and conclusions, as most credit business customers have a liquidity reserve sufficient to service their obligations for several months, even when operating is suspended.

Moreover, the National Bank allowed banks to disregard non-payment of loans as arrears during wartime and 30 days thereafter if non-payment is related to Russian aggression.
To talk about a mass resumption of lending is currently impossible
Today, banks are beginning to individually consider open credit limits for current customers, to make the territorial division of the country into zones depending on the activity of hostilities, to introduce credit vacations to pay interest on loans for martial law. There is also a practice when banks allow the use of credit within open credit limits only for certain purposes (payment of wages, purchase of fuel), but to talk about a mass resumption of lending is currently impossible.

Most banks do not consider loan applications from new customers and prefer limited lending to well-known borrowers. In the current wartime, state-owned banks are more likely to finance the economy and can afford riskier lending approaches, while commercial banks are more conservative and restrained.

Banks faced a number of barriers, namely: difficulties in reviewing and assessing collateral, formulating approaches to credit analysis, obtaining the necessary information and documents from borrowers. Overcoming the above-mentioned barriers is quite difficult, one of the ways is state guarantees, which in wartime should be a catalyst for lending to the economy.

Lending conditions in accordance with decision of

the Government of March 18

By a decision of March 18, the government expanded the program "Affordable Loans 5-7-9%" Any business will be able to get a loan at 0% during martial law and a month after its completion. After that, the loan rate will be 5%. The maximum amount of such a loan is up to UAH 60 million. The term of crediting under the program "5-7-9%" will depend on the purpose of the funds. The loan for the implementation of the investment project and for the refinancing of the debt is provided for a maximum of 5 years. To finance working capital - for 3 years.

Agricultural producers: features of lending

Farmers have the opportunity to obtain credit for a sowing campaign to purchase materials needed for its implementation. The agricultural company can get a loan for 6 months without paying interest. The state provides a guarantee for the lending bank - if the borrower does not pay on the loan, the state will repay for him 80% of the amount owed to the body of the loan. Thus, the state assumes the interest costs on the loan of the agricultural producer, as well as the financial risk on the loan of the agricultural producer to the bank. This will stimulate lending to agricultural producers, but not so clearly.

Banks participating in government programs finance agricultural producers through their own cash liquidity, which includes funds of individuals, legal entities and shareholders of the bank. During the war, the population withdraws its funds from current / card accounts and bank deposits, the balances on the accounts of legal entities are reduced due to the suspension / reduction of legal entities, so liquidity in banks is an important deterrent to financing the economy (business representatives).

In this case, the role of the state can again be decisive; the NBU can help banks increase cash liquidity by providing refinancing loans and so on.
In conclusion, if you are a business representative and you are looking for where to get additional funding from the bank during the war - chances are. First, it is necessary to negotiate with your current lending bank to dispose of the free credit limit. It is also worth turning to banks that are actively working with government programs "5-7-9%".

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