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EBRD provides €15 million equivalent local-currency loan and €7.5 million guarantee -
Facilities will enable €30 million of new financing by Bank Lviv -
15 per cent of new loans to finance long-term EU-compliant sustainable investments by SMEs
The European Bank for Reconstruction and Development (EBRD) is providing a financial package to Ukraine’s Bank Lviv, comprised of a local-currency loan for the equivalent of €15 million and of a €7.5 million risk-sharing instrument. This will support €30 million loans to private micro-, small- and medium-sized enterprises (MSMEs), including those affected by Russia’s war on Ukraine.
Since the Russia’s full-scale invasion of Ukraine in February 2022, more than five and a half million Ukrainians have relocated to the western part of the country from other regions, some bringing their businesses with them.
The loan, divided into two tranches – €10 million committed and €5 million uncommitted, each maturing after three years – will help Bank Lviv to maintain a sustainable and diversified funding base to provide continuing access to medium-term finance for businesses. The loan’s funding costs will be reduced by the local currency interest rate subsidy from the European Union’s EU4Business initiative in Ukraine.
The €7.5 million unfunded risk-sharing instrument will be provided in two equal tranches, each covering 50 per cent of the credit risk of Bank Lviv’s newly originated loans up to a total value of €30 million, subject to a portfolio cap of 50 per cent. This facility will help Bank Lviv to provide access to finance for Ukrainian companies operating in critical industries such as primary agriculture and agricultural services, food processing, transport and logistics, retail and pharmaceuticals.
In addition, up to €4.5 million of the total €30 million covered portfolio will support private MSMEs’ long-term investments in EU compliant and green technologies. Eligible sub-borrowers will also receive EU-funded technical assistance and investment incentives upon completion of their investment projects.
EBRD’s exposure under both facilities will be supported by a 50 per cent donor-funded first-loss risk cover as part of the Bank’s resilience package arrangements.
Owned by European shareholders, JSC Bank Lviv is one of the fastest-growing banks in the west of Ukraine with 19 branches in the region as well as its headquarters in the regional capital Lviv. The bank primarily deals with MSMEs and is undergoing a major transformation towards sustainable business expansion in its home region, increasing its loan portfolio from US$ 35 million in 2017 to US$ 133 million in the first quarter of 2023.
The EBRD, which is Ukraine’s largest institutional investor, has committed to investing €3 billion there in 2022-23.
The EBRD was swift to condemn the Russian invasion and pledged to stand by Ukraine. In early April 2022, the EBRD’s Board of Governors voted to suspend open-endedly the access of Russia and Belarus to EBRD finance and expertise, and the Bank has closed its offices in both countries.
As well as a resilience package for Ukraine and neighbouring countries affected by the war, the EBRD has pledged to help finance Ukraine’s reconstruction once conditions permit.
