How small business works in a full-scale war

04/ 03/ 2024

On February 21, the European Business Association, within the framework of the Unlimit Ukraine project with the support of OLX Ukraine and PrivatBank, as well as information support from the Ministry of Digital Transformation of Ukraine, the Entrepreneurship and Export Promotion Office, and Diia Business, presented the results of the Small Business Sentiment Index 2023 survey. Anna Derevyanko, Executive Director of the European Business Association, noted that the index results show a slight but positive trend towards improving small business sentiment, as businesses have adapted and are thinking about development. At the same time, additional or new financial support opportunities are needed. The speaker emphasized that entrepreneurs currently rely mainly on their strengths, so dialogue and trust-building between business and government is extremely important because it will be difficult to build a strong economy without it. Iryna Hubarets, Sector manager in charge of competition and economic cooperation issues at the Delegation of the European Union to Ukraine, commented on certain indicators of the Index, including the fact that SMEs remain optimistic and continue to work in the country despite concerns about the economic situation. The use of digital tools among SMEs is low, which encourages the development of digital sales channels. There is also a need to investigate the causes and solutions to the lack of export activity of SMEs and the low level of bank lending. The European Union is implementing several programs and initiatives in Ukraine aimed at supporting small entrepreneurs, in particular, SMEs with export potential and innovative ideas. For example, grants of up to EUR 10,000 can be attracted under the current competition administered by the NGO Easy Business. In total, EU grants have been implemented in five waves since the start of Russias full-scale invasion, totaling €5.5 million, and have already helped more than 1,100 companies. Three more programs are available this year. Igor Syrovatko, Head of Customer Service at OLX in Ukraine and Central Asia, spoke about the state of e-commerce in Ukraine. E-commerce can be seen as a progressive advantage, but it can have different relevance for each business. Some industries, such as hairdressing and beauty salons, rely mainly on offline channels. At the same time, online sales eliminate the geographical barrier and allow for target audience research and product range expansion. In Ukraine, e-commerce continues to grow due to technological advances, improved mobile coverage, and a growing population. Overall, despite possible fluctuations, the future of e-commerce remains promising. Oksana Kutsokon, Head of SME Business, PrivatBank JS CB, said: Given PrivatBanks market share, we can say that our customers set the trend. We see an increase in demand for business loans. At the end of 2022 and 2023, the loan portfolio of PrivatBanks business grew by 2 times compared to 2021, of which 37% are clients of the agricultural business, which is a fairly new direction for our Bank. And in 2023, we issued UAH 29 billion of new loans to almost 24,000 customers, which is 25% more than in 2022. We have no less ambitious expectations for lending growth this year. Also, Privatbank is a leader in lending under the State Program 5-7-9, which gives a significant impetus to stimulate the economy by making business lending much more affordable, and the rapid growth in the number of loans issued is a clear confirmation of this. Dariia Korniichuk, owner of Aroma Fields, Ukraines first full-cycle production of essential oils and hydrolates, spoke about the challenges for businesses related to the war. Among them is the occupation of the companys production site, which led to the loss of a significant number of plants and financial losses amounting to about a million hryvnias, as well as the outflow of people abroad, especially women, who make up a significant part of the customer base, which leads to a decrease in the number of end users. In addition, the company is experiencing staff shortages and difficulties in increasing production capacity due to the lack of an electricity supply line to the production location. Despite this, Aroma Fields has been developing for two years. We are grateful to the speakers for their insights into the work of SMEs, including an assessment of the business and economic situation in the country, further expansion and investment plans, negative factors affecting SMEs, and support measures to help SMEs overcome the challenges of wartime.

Anna Derevyanko, Executive Director of the European Business Association, noted that the index results show a slight but positive trend towards improving small business sentiment, as businesses have adapted and are thinking about development. At the same time, additional or new financial support opportunities are needed. The speaker emphasized that entrepreneurs currently rely mainly on their strengths, so dialogue and trust-building between business and government is extremely important because it will be difficult to build a strong economy without it.

Iryna Hubarets, Sector manager in charge of competition and economic cooperation issues at the Delegation of the European Union to Ukraine, commented on certain indicators of the Index, including the fact that SMEs remain optimistic and continue to work in the country despite concerns about the economic situation. The use of digital tools among SMEs is low, which encourages the development of digital sales channels. There is also a need to investigate the causes and solutions to the lack of export activity of SMEs and the low level of bank lending. The European Union is implementing several programs and initiatives in Ukraine aimed at supporting small entrepreneurs, in particular, SMEs with export potential and innovative ideas. For example, grants of up to EUR 10,000 can be attracted under the current competition administered by the NGO Easy Business. In total, EU grants have been implemented in five waves since the start of Russia’s full-scale invasion, totaling €5.5 million, and have already helped more than 1,100 companies. Three more programs are available this year.

Igor Syrovatko, Head of Customer Service at OLX in Ukraine and Central Asia, spoke about the state of e-commerce in Ukraine. E-commerce can be seen as a progressive advantage, but it can have different relevance for each business. Some industries, such as hairdressing and beauty salons, rely mainly on offline channels. At the same time, online sales eliminate the geographical barrier and allow for target audience research and product range expansion. In Ukraine, e-commerce continues to grow due to technological advances, improved mobile coverage, and a growing population. Overall, despite possible fluctuations, the future of e-commerce remains promising.

Oksana Kutsokon, Head of SME Business, PrivatBank JS CB, said: “Given PrivatBank’s market share, we can say that our customers set the trend. We see an increase in demand for business loans. At the end of 2022 and 2023, the loan portfolio of PrivatBank’s business grew by 2 times compared to 2021, of which 37% are clients of the agricultural business, which is a fairly new direction for our Bank. And in 2023, we issued UAH 29 billion of new loans to almost 24,000 customers, which is 25% more than in 2022. We have no less ambitious expectations for lending growth this year.

Also, Privatbank is a leader in lending under the State Program “5-7-9”, which gives a significant impetus to stimulate the economy by making business lending much more affordable, and the rapid growth in the number of loans issued is a clear confirmation of this.

Dariia Korniichuk, owner of Aroma Fields, Ukraine’s first full-cycle production of essential oils and hydrolates, spoke about the challenges for businesses related to the war. Among them is the occupation of the company’s production site, which led to the loss of a significant number of plants and financial losses amounting to about a million hryvnias, as well as the outflow of people abroad, especially women, who make up a significant part of the customer base, which leads to a decrease in the number of end users. In addition, the company is experiencing staff shortages and difficulties in increasing production capacity due to the lack of an electricity supply line to the production location. Despite this, Aroma Fields has been developing for two years.

We are grateful to the speakers for their insights into the work of SMEs, including an assessment of the business and economic situation in the country, further expansion and investment plans, negative factors affecting SMEs, and support measures to help SMEs overcome the challenges of wartime.