By Ukraine Rebuild News Staff
Small and medium enterprises (SMEs) in Ukraine, who have cut staff by an average of 22% since the Russian invasion, will need better access to international financing if they are to play a significant role in the reconstruction of the country when the fighting stops, says the Center for Strategic and International Studies (CSIS).
A report by the Washington, DC-based think tank said the war has led investors and banks to channel funding to larger companies and avoid SMEs because they “often struggle to demonstrate creditworthiness and provide the collateral required by traditional banking systems.”
A study by the European Bank for Reconstruction and Development (EBRD) published in March of this year showed that the average SME in Ukraine suffered a 43% profit drop since the war started and 6% have suspended operations entirely.
Some 70% reported increased costs at the same time, while 68% said labor productivity has fallen because of constant air raid sirens and shelling, and 50% complained that they lacked funds needs to pay salaries.
“SMEs are widespread and play a significant role in all sectors of the Ukrainian economy. The need for investment in reconstruction will also be immense,” CSIS said. “Most sectors—including agriculture, digital services, infrastructure, energy, construction, healthcare, and housing—require immediate financing.
CSIS called on international financial institutions and development financial institutions to cooperate among themselves to share due diligence information and create simpler, more uniform procedures for grants, loans and guarantees for SMEs. They also must create a centralized source of information to increase awareness among SMEs of the financing opportunities available to them, CSIS said.
The think tank also called on the institutions to prioritize reconstruction projects that improve the situation of SMEs.
“For example, improvements in the information technology (IT) sphere can also help integrate Ukraine into the European market and solve cross-border logistics challenges,” the CSIS report said. “By understanding the IT sector’s unique requirements and growth potential, tailored financing solutions can address the specific needs of digitized SMEs.”
