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The Ukrainian dream is the name of the program announced by the President himself, so vividly and with a hint of success. Under the president’s idea, citizens who regularly pay taxes will be able toapply for 5% credits for their own needs: housing, electric cars, education, etc.

Therefore, “Affordable Loans 5-7-9%” can be conventionally called a pilot project of the presidential program.

To assess the value of the program “Affordable Loans 5-7-9%”, it is necessary to look back at the banks’ lending to the economy a few years ago. Anyone will hardly like what will be seen. Since 2016, the National Bank of Ukraine has transited to the inflation targeting regime, the key feature of which was the maintenance of extremely high key policy rates (the so-called expensive money policy). In the same year, 2016, a notorious NBU Board Resolution No.351 was adopted, which introduced very strict requirements for measuring credit risk generated by banks’ asset operations, which entailed obliging banks to reserve significant provision. Taken together, this has destroyed banks’ motivation to lend to the corporate sector and, instead, has made investments in securities and consumer lending more attractive.

As a result, in 2018-209, corporate lending “froze”, which was one of the reasons for the decline in the industry that began long before the coronavirus crisis. In 2020, lockdowns were added to all this.

The program “Affordable Loans 5-7-9%” started in February 2020. The coronavirus crisis made its adjustments and the program, which had initially been focused on creating new jobs, was “reoriented” to save existing industries. In total, in 2020, the program issued 7,600 loans totaling UAH 17.4 billion (mostly for refinancing of previously received loans).

In 2021, there was a significant increase in loans provided under the program, due to changes approved by the government in the last days of 2020. The program was extended to more businesses (by increasing the annual income limit from EUR 10 to EUR 20 million), terms of loans for the quarantine period were eased (interest compensation for working capital loans was set up to 0%) etc. 

In total, in less than 2021 (as of December 13), the program provided 21,000 loans in the amount of UAH 58.8 billion, including UAH 41.1 billion as anti-crisis loans, UAH 11.9 billion as refinancing of previously received loans, UAH 5.8 billion for capital investments. That is, the volume of lending under the program has tripled compared to the previous year.

Taking into account the above indicators and the fact that the volume of hryvnia loans to the corporate sector for 11 months of 2021 increased by UAH 93.2 billion (to UAH 513.7 billion), we can make a logical conclusion that the program 5-7- 9% played a crucial role in the partial lending activity recovery.

Speaking about the prospects of the program “Affordable Loans 5-7-9%” next year, two aspects should be considered: the number of participating banks rose from 23 to 40 in 2021, and the expenditures to ensure the functioning of the Business Development Fund (which implements the program) increased one-and-a-half times – up to UAH 3 billion in the budget of 2022.

Affordable Mortgage 7%.

According to GRADUS research, 40% of Ukrainians need to buy housing, and only 3-5% can buy it. Therefore, payment programs from developers are popular. More than half of the flats are bought in this way. The demand exists. The problem is in proposals for such loans, so the program “Affordable Mortgage 7%” should partially solve this problem.

The results of the program “Affordable Mortgage 7%” are “more modest”: as of December 9, 2021, 1,185 loan agreements amounting to UAH 1.034 billion were signed. The relatively small number of loans was due to too strict requirements for the subject of the mortgage (not more than 3 years). However, at the end of October, the government significantly eased these restrictions remaining them only for cities with a population of more than 1 million (not more than 10 years). In addition, a limit of possible excess of the regulatory area of the mortgage object was increased from 20% to 40%, which is paid by the borrower himself. These changes give reason to expect the intensification of the program in the near future.

The relevance of the program “Affordable Mortgage 7%” can be illustrated by two aspects. The first aspect is “unbearable” for most potential borrowers market rates – the weighted average effective rate on mortgage loans in October 2021 was 14.9% in the primary market and 13.5% in the secondary one. The second aspect is excessive market concentration – in the first 10 months of 2021, almost 90% of new transactions were concluded by only five banks.

However, raising the key policy rate, the National Bank of Ukraine limits the potential of both programs, as the number of future loans will decline with increasing interest rate compensation for each of them.

Founder and Chairperson of the Board of the Growford Institute Vitalii Lomakovych for