The Project has two components:
- Component 1: A credit line of EUR 400 Million to finance eligible sub-loan projects, and
- Component 2: Technical Assistance supporting the disbursement of these sub-loans. This support includes capacity building to banks and to potential final beneficiaries working in the cereals, oilseeds and aquaculture/fisheries sectors. In addition, the TA Project will support public infrastructure projects which improve the performance of the targeted value chains.
In 2014, Ukraine signed the Association Agreement with the European Union (EU), the commercial part of which included the creation and implementation of the Deep and Comprehensive Free Trade Area (DCFTA) with the EU in order to create new trade opportunities, boost foreign direct investment, drive economic modernization and create new jobs.
The Association Agreement has been fundamentally changing the business environment in the country ever since. The DCFTA arrangement – consisting of a substantially preferential trade regime with the EU – foresees the implementation of a wide range of reforms aimed not only to enhance trade relations between the EU and the signatory nations, but also to facilitate convergence to EU standards in various business-related regulations in the areas of food safety, technical standards, public procurement, competition policy, intellectual and property rights, and more.
At the same time, local businesses in all sectors have been subject to growing competitive pressure due to an increased presence of foreign firms which are already fully compliant and comfortable with the EU regulations. Consequently, local firms need to work towards more compliance with EU standards, while also continuing to invest in cutting-edge production technologies, in order to remain competitive.
The agri-food sector is of great significance for Ukraine: it is one of the largest sectors in the country with an annual turnover of around EUR 16 billion, and it employs 15% of the total workforce. It is a key contributor to economic growth in rural regions, representing about 9% of Ukraine’s GDP. The majority of players in the sector are farmers, SMEs, Mid-Caps or cooperatives, which are largely underserved by the financial sector.
Against this background, the European Investment Bank (EIB, the EU Bank) has made available a line of credit of EUR 400m, along with donor-backed Technical Assistance, in order to support SMEs and Mid-Caps in the agri-food sector in Ukraine. The Technical Assistance is financed through the Neighborhood Investment Platform (NIP) and the Eastern Partnership Technical Assistance Trust Fund (EPTATF).
EIB’s Ukraine Agri-Food Value Chain Project is implemented by the Ministry of Finance of Ukraine with the support of the agent bank (Ukreximbank), which on-lends the funds to the participating financial intermediaries in order to finance the eligible investments by SMEs and Mid-Caps.
The EIB loan
The EIB loan is made available to support productive investments by SMEs and Mid-Caps, as well as public service providers, along the entire value chains. The funding is available through local financial intermediaries, who apply to participate in the program (if you are a representative of a bank, read more about eligibility here).
The cereals, oil seeds and aquaculture/fisheries value chains have been identified as the best placed to satisfy domestic demand for quality produce, as well as to increase the competitiveness of the sector and its exports to the EU and global markets. The figure below shows examples of where along the value chain the loan can be put to work:
The program could provide funding to the following activities:
- primary production of grain and oilseeds;
- expansion, upgrading and certification of drying, cleaning, sorting, testing and storage facilities for grain and oilseeds;
- upgrading of aquaculture and fishery production facilities;
- machinery and infrastructure for fish processing and canning;
- testing stations, testing laboratories, research and professional training facilities;
- agricultural knowledge outreach and certification offices;
- fishery control and monitoring systems.
The EIB loan is further supported by the EU and the United Kingdom through technical assistance services.
Based in Kyiv, the Technical Assistance Team – led by the Denmark-based consulting firm NIRAS – works on two main levels:
- providing support and advice to financial intermediaries (commercial banks and agricultural leasing companies) which lend to SMEs and Mid-Caps in the cereals, oilseeds and fisheries sectors, and
- direct assistance to beneficiary companies on investment planning and credit applications.
Read more about the Technical Assistance services which the team can provide here.