Germans Extend Credit to Small Business

On February 12 NBU First Deputy Chairman Anatoly Shapovalov announced that the authorized capital of the German-Ukrainian Fund (GUF) had been paid in full. Its cofounders are Ukraine’s National Bank and Cabinet of Ministers, which contributed DM 10 million each, and Germany’s creditor Kreditanstalt fЯr Wiederaufbau (KfW) with its DM 12 million contribution made in a series of installments from 1996 to 1999. The NBU paid its share in two installments in 1998 and 2001, with the cabinet paying in 2001. Under its charter, the GUF is a nonprofit foundation, and the revenue generated will not be paid out to its cofounders. The fund has been given this status by the governments of Ukraine and Germany aiming to direct the interest drawn on loans toward augmenting the funds channeled to support Ukrainian manufacturers. “Credit resources are ample,” Mr. Shapovalov stressed. The GUF aims to refinance small and medium private businesses in Ukraine. “Small and medium business is a cornerstone of Ukraine’s transition economy in terms of economic development and creating new jobs,” believes Frau Doris Kern, KfW Vice President. Drawing on its long experience, KfW has chosen to enlist the services of five select commercial banks in Ukraine rather than work directly with clients. Frau Kern maintains that banks participating in the program come to realize that extending credit to small business can also be rewarding and have long-term prospects, thus debunking the stereotype that loans to small and medium businesses is unprofitable. From 1997 to February 1, 2002, banks participating in the GUF micro- credit program provided a total of 3500 loans totaling 32 million euros (DM 59.5 million). The funds were used to boost liquid assets and purchase materiel. Most of the loans went to micro-enterprises with no more than twenty employees and individual entrepreneurs (1,500) and small ones with no more than 250 employees (1,900 loans). Technical assistance of the program is provided by IPC, a German consulting firm whose experts render advisory services to participating banks and ensure a high level of loan repayment (up to 99.7%), reports Petro IZHYK, The Day.