Setting-up the Conditions to Establish a Credit Guarantee ... · Ukraine does have a mechanism to guarantee loans, but it has not performed well and it does not target SMEs Components

OECD Global Relations Secretariat

2nd meeting of the Task Force on a Credit Guarantee Scheme

Wednesday 15 October 2014 Kyiv, Ukraine

EASTERN EUROPE AND SOUTH CAUCASUS INITIATIVE

Setting-up the Conditions to Establish a Credit Guarantee Scheme for Agribusiness SMEs in Ukraine

2 CONFIDENTIAL – NOT FOR DISTRIBUTION

Issues for consideration / approval at today’s Task Force

1. Discussion of the potential organisational type of CGS for Ukraine and challenges for

implementation

2. Confirmation of the pilot regions

3. Confirmation of the project workplan

FOR APPROVAL

TF Proposals to be submitted to the

OECD-Ukraine Co-ordination Council


This project emerges from the Sector Competitiveness Strategy for Ukraine project, which provided policy recommendations on implementing a CGS in Ukraine

• Main recommendation:

implementation of a credit guarantee scheme to improve access to finance in agribusiness

• Advocates a six-step approach to the design and implementation of a credit guarantee scheme

• Advocates a pilot project which focuses on regions with high agricultural production and low access to credit

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Access to Finance Land Reform Complete the land reform to provide land as

collateral

Risk-sharing facilities Credit Guarantee Schemes

Supply chain financing

Examples

Insurance and derivatives market

Develop an agricultural insurance market

Develop a derivative market to hedge producers from price movements

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Phase I “Setting-up the Conditions

to Establish a Credit Guarantee Scheme in

Ukraine”

PROJECT RECAP


TARGETING

PARTNERSHIP

What is the objective of the scheme?

Who does the scheme target?

How to identify partner banks?

How to cover administrative costs?

How to assess risks?

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PRICING 4

RISK MANAGEMENT 5

• Objectives • Financial Sustainability • Additionality goals

• Identification of partner banks • Identify areas for capacity building • Identify how to reduce interest rates & collateral requirements

• Identify relevant segments • Eligibility criteria

• Link to risk • Average fees

• Coverage ratio • Payment rules • Monitoring • Leverage ratio guidelines

MISSION

SHORT TERM ACTIONS

How to set up, run and supervise the scheme?

• Supervision • Roles • Operational mechanism

OPERATIONS AND GOVERNANCE 6

Six elements were identified to properly design and manage a CGS

Task to be completed by: OECD IPC

MEDIUM TERM DIRECTIONS

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Sources: OECD (2012), Implementing Credit Guarantee Schemes in Ukraine:

PROJECT RECAP

5 CONFIDENTIAL – NOT FOR DISTRIBUTION 5

The OECD has already made progress on formulating preliminary criteria for mission, targeting and partnerships

Suggested private partners: • Examples of the banks lending to agribusiness:

Metabank, Crédit Agricole, BMBank, Aval, UniCredit, Alpha-Bank, Ukreximbank, Prominvestbank, Kredobank, Megabank

• Banks lending to SMEs: Nadra Bank, Pravex Bank, UkrSibbank, Kredobank, Metabank, Crédit Agricole, VTBBank, ERSTE Bank

‘’The Ukrainian Agribusiness Guarantee Scheme is an independent credit guarantee instrument that aims to support agricultural SMEs in rural areas and is working under the regulation of the National Bank of Ukraine.

Its long term aim is to create a liquid credit market for bankable agribusiness SME projects that promote productivity growth in the sector’’

Mission statement Target Partners

General target criteria • Four defined pilot regions • Bankable agribusiness SME projects that

benefit from multiple risk assessments

Eligibility criteria • Borrower type: agriculture, livestock,

forestry, rural lending • Farm size: 100–2000 ha land • Project types:

1. Fixed capital investment 2. Infrastructure investment 3. Productivity enhancing operating

expenses • Defined length of loan (e.g. to match

agricultural/seasonality cycle) 1. Short term: 2-6 months 2. Medium term: 6 months-3 years

The Mission Statement is the guiding principle of the CGS and should underpin and inform any design mechanisms and criteria of the scheme

CGS can be successful as an independent instrument working in symbiosis with the commercial banks, regulatory authorities and SMEs Market players need to go through a tender process

Precise eligibility criteria will help in targeting credit constrained SMEs, therefore raising the impact of the scheme and improving SME productivity

Involvement of practitioners & market players (e.g. banks, credit unions, co-operatives) must be strong and public sector intervention in the operational aspects of the scheme must be minimal

REMINDER

In this Task Force meeting we will begin to discuss broad governance models for the CGS


Agenda

1. Different architectures for a CGS

2. Market and non-market failures in Ukraine

3. Piloting the project

4. Next steps, project governance and roles, timeline

• Different types of Credit Guarantee Scheme can be differentiated based on who operates them

• Four types can be identified, and they have different advantages and risks

• OECD countries have chosen to adopt different types of CGS

• Given the current financial needs for agribusiness SMEs in Ukraine, the Task Force needs to agree on a suitable format for the CGS


By asking questions such as:

o How has the fund been capitalised?

o What is the ownership structure?

o How are the guarantees delivered?

we can identify four types of Credit Guarantee Scheme:

Source: Green (2003)

Different types of Credit Guarantee Scheme can be differentiated based on who operates them


Public Private

Public/Private

Four types can be identified:

International Donors

Usually involves state subsidies, often in the form of an initial capital injection

Generally funded by the private sector through private contributions

Combination of public and private resources

Generally funded by international donor funds

Established by a government body through public policy

Incorporated through company law, usually as a joint stock or limited liability company

Usually established as a non-profit limited liability company or a foundation

Typically bilateral and multilateral initiatives between international donors and NGOs

Administrative unit within government or independent organisation

Generally operated by the private sector (e.g. banks and chambers of commerce)

Usually operated as a corporate body, with an Executive Board comprised of various stakeholders and general staff

Usually the donor agency, often in conjunction with NGOs

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Core task: to allot guarantees and payments; to ensure sustainability and additionality

TYPES OF CGS


Each type has a different set of advantages and risks

PUBLIC

PRIVATE

PUBLIC/PRIVATE

INTERNATIONAL DONOR

Coordinational difficulties

Managed by experienced managers and with direct involvement from the banking sector

May not target true additionality Requires private stakeholders who can provide

learning effects Requires sufficient capital & credibility

International schemes often combine the guarantee fund with technical assistance to firms

Requires Interested and experienced parties May not be compatibility with banking &

regulatory system

Requires strong political will & sufficient public funds

More vulnerable to moral hazard

ADVANTAGES RISKS

In case of default the guarantee is paid directly from the state budget, which gives the scheme

higher credibility within the banking sector

Higher credibility within banking sector Greater oversight & strategic guidance

All stakeholders involved to reduce moral hazard


Chile: FOGAPE Afghanistan: ACGF Hungary: GARANTIQA

Administration

Credit operation

Supervisory systems

Delegated to financial institutions

Direct controls by national regulatory authority

Legal body governed by organic (public) law

OECD countries have implemented well-functioning credit guarantee schemes of different forms

Conducted by financial institutions; screening by ACGF

No supervision: internal control by ACGF

Private limited company Non-profit

Direct controls by national regulatory authority

Both individual assessments & standardised

Resources Public (Ministry of Finance)

USAID & DEG donor funds Public / Private (30.7: 69.2%)

Legal status

Best practice because…

Functions effectively as a non-endogenous institution

Has developed innovative tools to tackle moral hazard

Scheme is self-sufficient; admin costs covered by fees

Low-cost public CGS Has achieved additionality Coverage ratio has

decreased over time Payment system which

mitigates moral hazard

Banco Estado de Chile Local office for operations; Board & Board of Trustees

based in Germany

Three corporate bodies, shareholders, Fund staff

Best-practice example of a functioning private-public CGS

Has been sustainable and has had a wide outreach

Unincorporated German civil law foundation

OECD EXAMPLES


Given the current financial needs for agribusiness SMEs in Ukraine, the Task Force needs to agree on a suitable format for the CGS

International Donors or

Public/Private

For discussion

The OECD recommends an international or PPP model, to maximise oversight and learning effects

GUARANTEE SCHEME

Legal Form Limited liability company

or foundation

Funding International donor

funds

Administration Technical staff and PPP Executive Board

* Public sector involvement needs to be assessed

* Structure around know-how and expertise

* If international donors are the main operators of the scheme, which legal form would facilitate multilateral cooperation?


Agenda

1. Different architectures for a CGS

2. Market and non-market failures in Ukraine

3. Piloting the project: selection of regions

4. Next steps, project governance and roles, timeline

• Interest rates in Ukraine are high, and banks add a risk premium on loans to agribusiness

• Performance between banks varies widely, and banks do not have sufficient tools to evaluate risk

• Current supply-side policy measures do not encourage banks to invest in the SME sector

• Ukraine currently has a guarantee mechanism, but it is highly vulnerable to moral hazard and does not target SMEs

• Since previous schemes have been highly vulnerable to moral hazard, the OECD recommends an international or PPP model, to maximise oversight and learning effects


Despite the high potential of Ukraine’s agriculture sector, loans are either not provided or are provided at an extremely high interest rate, particularly to SMEs

Studies by the IFC and others have found that very few SMEs use external finance to fund their business operations. The cost of loans has been identified as the primary disincentive.

This is a supply-side project to target market failures within the financial sector; particularly to build capacity for lending to agribusiness SMEs.

All sectors

Agribusiness

REMINDER

5.6%


Financial institutions are reluctant to lend to agribusiness SMEs because they perceive the sector to be highly risky and transaction costs to be high

Source: Potential for Agricultural Finance in Ukraine, EFSE (2012)

Banks do not have sufficient tools to evaluate risk Performance between farms varies enormously

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Production of winter wheat

• Performance between farms varies highly in Ukraine, making credit appraisal more difficult

• SME farmers are not necessarily more risky, but banks have less information on their creditworthiness.

• To assess the very specific risks applicable to agribusiness, banks will need to increase their knowledge of the sector.

• This will include developing IT tools to get standard figures on agricultural production coefficients, production costs and profits.

• Currently banks prefer standardised tools.

The greatest obstacles to developing agricultural lending, as identified by banks


Current supply-side policies do not incentivise banks to invest in lending to agribusiness SMEs, and lending to this segment is still low

Interest-rate compensation programme

(Art. 13 of Law “On State Support

to Agriculture”(2004))

Source: supply-side survey in EFSE (2012) Key: 1 = least important; 7 = most important

Has increased finance to the agricultural sector.

But: ─ Does not encourage banks to

decrease interest rates ─ Does not target SMEs

─ Budget small & process opaque

The OECD has recommended a credit guarantee scheme as a “market-friendly” instrument to share risk and reduce the costs of learning, to encourage commercial banks to invest in lending to this segment

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Large agri-holdings

Inputsuppliers

Outputtraders

Outputprocessors

Larger farms Smaller farms Ruralhouseholds

Level of importance of various agricultural client groups for commercial banks in terms of their future growth


Ukraine does have a mechanism to guarantee loans, but it has not performed well and it does not target SMEs

Why is the current scheme not effective? Components of the scheme

Legal framework Law on State Budget of Ukraine (Art. 17)

Administration Ministry of Finance

o Guarantees are granted on the Decision of

the Cabinet of Ministers

o It does not target SMEs

o Administered by only 7 members of staff at the Ministry of Finance

o It is very vulnerable to moral hazard and is adversely affected by the weak creditor rights in Ukraine

o In practice it is largely used by state-owned enterprises

Under this scheme, 82% of the arrears paid by the state are still outstanding


Since previous schemes have been highly vulnerable to moral hazard, the OECD recommends an international or PPP model, to maximise oversight and learning effects

Payment rules

OECD: Chile Ukraine

Loan default Banks must follow all of the compliance mechanisms & start the debt collection process

If the debtor cannot meet his obligations he must inform the MoF 10 days before default

Guarantee payment application

Only if defaulter cannot pay after 425 days can the bank request guarantee payment

The Cabinet of Ministers will consider the case in their next meeting

Guarantee payment

The Guarantor then has 15 days to deny or accept the reimbursement

If the Cabinet of Ministers agree, they will instruct the MoF to make the payment to the creditor immediately

OECD Ukraine

Generally a technical body removed from political involvement

Ministry of Finance, acting under the

instructions of the Cabinet of Ministers

Credit guarantee

schemes are generally targeted at SMEs. They can be sectoral (often agribusiness) or non-

sectoral

In practice mostly state-owned enterprises

Generally commercial banks (who select

borrowers and utilise guarantees)

The guarantee is based on a contract agreed

between the state, the lender and the

borrower. In case of default, payment will

be made to the lender.

Granting of guarantees

OECD: Chile Ukraine

Guarantee rights

Assigned to commercial banks via a tendering process. They can choose the loans they want guaranteed based on certain criteria

Decision made by the Cabinet of Ministers of Ukraine , based on an evaluation of the borrower made by the Ministry of Finance

Guarantee coverage

The coverage ratio is 50-80%, based on loan amount

The coverage ratio Is set via the same decision-making process as the decision to award guarantee rights

Guarantee fee Charges 1-2% of the

total loan amount to participating banks

Set via the same decision-making process as the previous two aspects, with suggestions made by MinEcon & Trade (etc.)

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Could the proposed model be suitable for Ukraine? What could the legal or institutional

impediments be?

For discussion


Agenda

1. Establishing a Credit Guarantee Scheme (CGS) in Ukraine

2. Different forms for a Credit Guarantee Scheme (CGS)

3. Piloting the project

• Rationale for maintaining pilot regions

• Preliminary findings on access to finance in pilot regions

4. Project management and roles, key decisions and next steps


Vinnystia

Dnipropetrovsk

Donetsk

Lviv

Poltava Kharkiv

Cherkassy

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Gross agricultural output, UAH m

Regions with an important

agribusiness sector but low state

support

Identification of the pilot regions subject to feasibility of study visits

Note: Agricultural state support programmes include i) interest rate compensation programme, and ii) the leasing programme. Source: SSCU (2013), Agriculture of Ukraine Statistical Yearbook 2012, SSCU, Kyiv. Ministry of Agriculture Policy and Food of Ukraine (2012), “Implementation of Financial Support to Agricultural Entities Through the Mechanism of Interest Rate Compensation and Lease Payments”, internal working document.

• In 2011, UAH 624 million

was allocated to the interest rate compensation programme for agricultural loans and the agricultural machinery leasing programme.

• Four pilot regions:

Cherkassy, Vinnytsia, Poltava and Kharkiv.

• Other regions for consideration: Khmelnytskiy and Donetsk

Regions with an important agriculture sector still have low state support

Regions with relatively high contributions to agricultural production do not receive support proportional from state programmes to their needs

Reminder


Vinnytsia

Volyn Zhytomyr

Zakarpattia

Zaporizhia

Ivano-Frankivsk

Kirovohrad

Lviv

Mykolaiv

Poltava

Rivne Sumy

Ternopil

Kharkiv

Kherson Khmelnytskyi

Cherkassy

Chernivtsi Chernihiv

Odessa Dnipropetrovsk

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Number of agribusiness SMEs (100-2000ha)

At this stage, the OECD recommends that the project maintains the proposed pilot regions, due to favourable conditions confirmed by further analysis

Removed from the analysis: Kyiv and Kyiv region, Luhansk, Donetsk, AR Crimea.

The OECD-proposed pilot regions have both a high number of agribusiness SMEs and a high number of local bank branches. Their closest peers for both indicators are Zaporizhia and Mykolaiv, although neither ranks highly in terms of gross agricultural output, and Odessa and Dnipropetrovsk, although both already have a comparatively high level of finance.


Agenda

1. Establishing a CGS in Ukraine

2. Different forms for a Credit Guarantee Scheme (CGS)

3. Rationale behind the selected pilot regions

4. Project management and roles, key decisions and next steps

• Next steps: engaging with commercial banks

• Suggested reforms to decrease risks for commercial banks lending to agribusiness SMEs

• Task Force division of responsibilities

• Planned activities for next phase (presented in February 2015)

• Points to be discussed / approved by the Task Force


The first stage of the project will be to gather more information on the attitudes of commercial banks. OECD is distributing a survey for these banks, to better-assess the environment for a CGS

Building blocks

Interest in expanding agri-SME

lending

Attitudes towards a guarantee facility

Current barriers to SME lending

Impact of a guarantee facility on

lending decisions

Possible loan terms with CGS facility

Capacity for expanding agri-SME

lending

What is the purpose of the survey for financial institutions?

• To identify current barriers to agri-SME lending: attitudes, capacity and obstacles of private banks

• The evaluate the fit of the proposed instrument: would a guarantee facility be used and both significantly increase the prevalence of lending and decrease its cost?

Who will be targeted?

• Private banks in the pilot regions, who already have some experience in lending to agribusiness SMEs

How will the survey be distributed?

• The OECD would like the NBU to assist in distributing the survey


The issue of high credit risk in Ukraine must be addressed if the project is to be successful and the cost of credit reduced

Sources: *UkraineBusinessInsight, March/April 2013.

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2008 2009 2010 2011 2012 2013

Ukraine

OECD

NPLS are high in Ukraine, and Moody’s and Fitch have estimated that sector-wide impaired and restructured exposures could be as high as 55‐60% of gross loans*

Non-performing loans in Ukraine (% total gross loans)


The government of Ukraine can take measures to decrease risks for commercial banks lending to agribusiness SMEs – which will also increase the chances of a sustainable CGS

Preliminary recommendations

Strengthen creditor rights in problem loan resolution

• Increase the efficiency of the court system: speed-up and simplify the process for collateral recovery; decrease loopholes for asset transfer & conflicting verdicts

• Reform corporate insolvency legislation to allow for out-of-court settlement • Reduce tax obstacles to restructuring, writing off and selling bad loans

Measures to develop the agricultural insurance market

• Lack of consumer trust is the main barrier to the development of the agricultural insurance market in Ukraine. Government should increase regulation of the sector

FOR DISCUSSION

0102030405060708090

100

2013

2008

Recovery rate on defaulted loans


Commercial banks will be targeted based on their expertise and interest in lending to agribusiness SMEs

Which banks could be targeted? Factors to consider

Preliminary suggestions: Raiffeisen Bank, Credit Agricole and ProCredit*, as well as OTP Bank** & Megabank

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Vinnytsia

Cherkassy

Poltava

Kharkiv

For discussion

• Experience lending to SMEs

• Experience lending to agribusiness

• Presence in pilot regions and rural areas

• Interest in expanding lending to agribusiness

SMEs and enthusiasm for project

• Market share of financial sector

• Capital adequacy

Commercial banks lending to agribusiness

* However there are only 13 branches in pilot regions ** 26 branches in pilot regions

Expert recommendation:*** Good practice to be ‘friends’ with 7-10 financial institutions,

even if some are not regular customers

*** GIZ Publication



National Bank of Ukraine

Ministry of Agrarian Policy

Civil society and private sector Representatives

Relevant ministries and government agencies

Chaired by Deputy Prime Minister of Ukraine

OECD + Sweden (donors)

The Governance of the CGS Project still needs to be confirmed, but will involve representatives of the Government, Financial institutions and OECD

Ministry of Finance Ministry of Economic

Development

Representatives

Oleksandr

Voronovych

Co-chaired by Minister of Economic Development and Trade

Representatives

Viktor Denysenko

Serhiy Shpychenko

Dmytro Boyarchenko

Representatives

Vitaly Sabluk

Representatives

Nataliya Shipilova

Task Force of the CGS Project

Chairman:

Mr. Vitaly Sabluk

State Agency for Regulatory Policy

Representatives

Oleg Sheyko


Suggested roles for Task Force members

Ministry of

Finance

Ministry of

Economic

Development

Ministry of

Agrarian Policy National Bank of

Ukraine

State Agency for

Regulatory

Policy

• Advising on potential partner banks and facilitating introductions for ICP. Reviewing the selection of potential partner banks and findings; providing feedback and advice

• Reviewing banking legislation’s compatibility with a CGS

• Reviewing regulatory

legislation for the CGS and financial sustainability issues

• Providing data, information,

and introductions

• Building capacity amongst target farmers to use the scheme and marketing of the scheme

• Providing support in proposed pilot regions through network of local offices

For discussion

• Reviewing legislation that places constraints on SME financing; enabling reforms

• Provide requisite contacts,

data and information

• Providing feedback and advice on proposed target segments (of agribusiness SMEs) and activities

• Putting IPC and the OECD in contact with agribusiness associations where needed; providing relevant administrative documents

• Providing requisition data and information, particularly on agricultural activity in the pilot regions

• Issues concerning any state contribution to funding

• Issues concerning potential

taxation of the scheme

• Providing requisite data and information

Hold a coordination meeting amongst Ukrainian Task Force members before each Task Force meeting

OECD: project management and coordination; analysis of IPC reports and technical documents; additional desk analysis, donor screening

and governance issues

IPC: pre-feasibility and feasibility study; design of CGS key features, risk management procedures and funding framework; analysis of

suitable governance and organisational structures; capacity building activities

29 CONFIDENTIAL – NOT FOR DISTRIBUTION 29 29

Action plan for rest of 2014 and first half of 2015

Timeline

Q4 2014 Q1 2015 3RD TF Meeting (10 Feb 2015)

Key activities

Key tasks

• Pre-feasibility study: identifying, interviewing and assessing potential stakeholders. Identifying the main obstacles to agribusiness SME financing.

• Feasibility study: drafting general concepts on the scheme’s key components, including governance, funding, operations and structures and legal/regulatory framework, supported by an action plan

• Discussion on the management team for a CGS: staffing and resources.

• Task Force approval of identified stakeholders, and the progress of the feasibility study, as well as feedback and advice on these findings

• NBU works with OECD and ICP to facilitate engagement with private banks already lending to agribusiness SMEs, particularly in the pilot regions

• The OECD and IPC will review legislative and regulatory barriers to agri-SME financing, as well as findings from the pre-feasibility study, and draft general concepts for the scheme based on international best practice

• The Task Force will assist the OECD and IPC in this stage by providing information, data and contacts; as well as feedback & advice

• NBU works with OECD and ICP to facilitate engagement with private banks already lending to agribusiness SMEs, particularly in the pilot regions


Issues for consideration / approval at today’s Task Force

1. Discussion of the potential organisational type of CGS for Ukraine and challenges for

implementation

2. Confirmation of the pilot regions

3. Confirmation of the project workplan

FOR APPROVAL

TF Proposals to be submitted to the



ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Antonio Somma Head of Programme OECD Eurasia Competitiveness Programme Tel: + 33 1 45 24 93 90 Email: [email protected]

Contact details

Gabriela Miranda Project Manager Ukraine OECD Eurasia Competitiveness Programme Tel: + 33 1 45 24 95 01 Email: [email protected]

Annie Norfolk Beadle Project Analyst OECD Eurasia Competitiveness Programme Tel: + 33 1 45 24 64 01 Email: [email protected]

Yerim Park Project Coordinator OECD Eurasia Competitiveness Programme Tel: + 33 1 85 55 64 13 Email: [email protected]

mailto:[email protected]









Annex 1: Funding of the scheme

Levy on participating banks Banks may reject the scheme from the outset

Continued subsidies through soft loans Increased change of moral hazard

Direct budgetary appropriations May not be feasible in developing economies

Equity Cheapest form & increases transparency

Lump-sum payment Most schemes are funded and have received some form of lump-sum payment upon set-up

To ensure instrument credibility, it is essential that it is sufficiently capitalised. This should be the least distortive form possible. Normally the most viable scheme is one that is in private hands but has received some initial start-up help

from government and/or donors. Additional sources include membership fees and investments.

Funding sources: In most countries the national government supplies funds for guarantee schemes. In emerging economies, donors often provide initial funds to establish the scheme. There should often also be private sector funding, particularly to reduce moral hazard, decrease political influence, and diversify.


Annex 2: Regulation of the scheme

In order to win the confidence of banks, guarantees must be safe and liquid securities that can be enforced judicially. Therefore a degree of regulation is essential. However institutional context will define whether it is regulated under

domestic law applicable to financial institutions, or whether it is regulated as a special entity

Regulated as financial institution Regulated as special entity

The instrument will be taken more seriously by banks and are more likely to participate.

High costs involved and possible danger of signalling false soundness to the financial system.

Even if they are not classified as financial institutions, guarantee schemes should be subject to the same type of prudential standards and supervision

Capital adequacy requirements

FIVE B

ASIC

M

EASU

RES

A risk fund

Continuous loan portfolio evaluation

Mandatory accounting standards

A central debtors reporting system

• The government should attach high priority to the scheme

• The scope of the scheme should justify the regulator’s effort

• The regulator must have the capacity and desire to acquire new skills for monitoring small loan guarantees

Usually the domestic banking

supervisor (here: the NBU) will oversee the scheme. However:

Documents

Setting-up the Conditions to Establish a Credit Guarantee ... · Ukraine does have a mechanism to guarantee loans, but it has not performed well and it does not target SMEs Components