Ukraine is behind Somalia in business lending

Even Somalia is ahead: why Ukrainian businesses are hardly given loans

In the midst of a full-scale war, Ukrainian business has found itself effectively cut off from credit resources. In terms of lending to the private sector, Ukraine is now behind even such poor and unstable countries as Somalia, where this indicator twice as high. Economists and representatives of the business community are increasingly calling this one of the most controversial results of the current leadership of the National Bank of Ukraine.

Loans: critically low level

According to international comparative data, the ratio of business loans to GDP in Ukraine is one of the the lowest in the world. In fact, banks are hardly fulfilling their key function of financing economic growth.

For comparison:

• In most African countries, business lending is more active even in the face of political instability;

• In Ukraine, banks mainly invest in GOVERNMENT BONDS or retain excess liquidity without taking the risk of working with the real sector.

The discount rate as a «noose»

The key reasons for the problem are as follows high NBU discount rate of 15.5%. Under these conditions:

• loans for entrepreneurs become economically unprofitable;

• small and medium-sized businesses are actually excluded from bank financing;

• investments in expanding production or creating new jobs are postponed indefinitely.

As a result, the state simultaneously has:

• budget deficit;

• an army that largely survives on donations;

• a business that cannot develop and fill the budget with taxes.

NBU priorities during the war

Amid these challenges, the NBU is focusing on solutions that business and experts call minor or symbolic. In particular, it is the idea of «de-Russification of the kopeck» through the introduction of the so-called «step», The new law is considered by many economists to be a political gesture rather than an economic reform.

Critics emphasise that in a situation of war, the question of cheap money for the economy and production support should be an absolute priority.

Accusations of shady practices

Of particular concern are investigative journalism, The report alleges that some Ukrainian banks:

• is used for cash-out;

• involved in tax optimisation;

• provides turnkey financial services for top-level corrupt officials.

If these allegations are confirmed, it will mean that the financial system

• does not work for the economy and defence;

• At the same time, it serves closed elite schemes even during the war.

What the economy lacks

Experts agree that Ukraine is in critical need of these:

• lowering the discount rate or special credit instruments for business;

• state guarantees for the war economy;

• allocation of bank capital to production, exports and the military-industrial complex, and not for speculative operations.

Without this, the money will not work either for the frontline or for the country's recovery.

Conclusion.

Ukraine is fighting not only on the battlefield, but also for economic survival. When a country's lending to businesses is below Somalia, This is a signal of a systemic problem. Without a revision of monetary policy, transparency in the banking sector, and real support for entrepreneurship, the risk of economic stagnation will only increase - with direct consequences for the country's defence capability and future.