The European Bank for Reconstruction and Development (EBRD) is supporting food security and other critical industries in wartime Ukraine with a new risk-sharing agreement for KredoBank, a subsidiary of PKO Bank Polski, as well as opening a TFP limit for guarantees and cash advances to enhance the Ukrainian bank’s product offer.
Under the risk-sharing agreement signed today in London between the two institutions, which have an existing relationship, the EBRD provides a €25 million unfunded risk-sharing instrument, which covers 50 per cent of the credit risk of newly originated financing provided by KredoBank up to a total value of €100 million, subject to a portfolio cap of 50 per cent. The EBRD’s facility is provided in two equal tranches.
The risk-sharing facility will help KredoBank 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. It will also help safeguard food security and preserve livelihoods in Ukraine, where core economic sectors have been severely impacted by Russia’s invasion last February.
In addition, €15 million of the total €100 million covered portfolio will be available to finance long-term investments of micro-, small- and medium-sized enterprises (MSMEs) in technologies and equipment to EU standards, including investments in sustainable and green technologies, under the SME Competitiveness Programme in the European Union's (EU) Eastern Partnership (EaP SMEC).
By joining the EBRD EaP SMEC programme, KredoBank and its clients will also benefit from expert advice in the form of training and support provided by consultants. Eligible borrowers will receive grant support in the form of investment incentives upon the completion of their investment projects.
“We are pleased to continue our strong cooperation with KredoBank. The resilience and adaptability of Ukrainian entrepreneurs in particular in the agri-food sector have been absolutely remarkable, in the face of the uncertainty and destruction brought by the war. Our new risk-sharing facility will enable KredoBank to narrow the lending gap, ensuring that companies have consistent access to finance to help clear bottlenecks in the trade of food and agriculture products,” said Francis Malige, MD Financial Institutions.
“This spring, Russian attacks meant that nearly a quarter of sowing land in Ukraine could not be sowed. Ukrainian business is working in extreme conditions and requires loans to keep going. As part of a big financial group, PKO Bank Polski, KredoBank already helps Ukrainian firms continue working in wartime. The new EBRD risk-sharing programme will open new opportunities to increase the volumes of loans and support critically important industries,” said KredoBank Chairman Jerzy Jacek Szugajew.
“The help of international institutions such as the EBRD is invaluable, as they have the appropriate mandate and funds needed to implement assistance activities. According to the calculations of PKO Bank Polski, the World Bank and the government of Ukraine, by 2032 Ukraine may need financing of up to US$ 750 billion. That is why this and each subsequent agreement on financial support for the Ukrainian economy is extremely important,” said Andrzej Kopyrski, PKO Bank Polski’s Deputy Chief Executive Officer.
The EBRD facility will be supported by a 50 per cent donor-funded first-loss risk cover as part of the Bank’s resilience package arrangements.The latest risk-sharing facility brings the total volume of enabled financing to €468 million under similar guarantees since the start of the war.
The EBRD has also opened a limit of up to €25 million available under its Trade Finance Programme (TFP). By participating in the Bank’s TFP programme, KredoBank will step up support to Ukrainian exporters and importers. The TFP will equip KredoBank with an important financial instrument which will strengthen its expertise in trade finance and address an increased demand from local businesses to support foreign trade.
Boosting Ukraine’s food security during the war is one of the EBRD’s five strategic priorities for the country. The Bank is also supporting trade, energy security, vital infrastructure and the pharmaceuticals industry and has committed to investing up to €3 billion in the country 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.
KredoBank is a leading bank in the western part of Ukraine, ranked 14th by total assets (US$ 1.1 billion). KredoBank is wholly owned by PKO Bank Polski SA, the largest systemically important bank in Poland, listed on the Warsaw Stock Exchange.
