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How to motivate Ukrainians to buy military bonds

The Ministry of Digital Transformation never stops making pleasant surprises. From October 3, a new service is available in the “Diia” application, namely the purchase of military bonds. The service was implemented by the Ministry of Digital Transformation in cooperation with the National Securities and Stock Market Commission, the Ministry of Finance of Ukraine, the National Bank of Ukraine and Ukrzaliznytsia.    

Military bonds were given the names of temporarily occupied cities and territories of Ukraine (Crimea, Donetsk, Luhansk, Kherson, Melitopol, Mariupol and Horlivka). Therefore, investments in them are positioned by developers as a contribution to the liberation of these territories.   

The application offers hryvnia bonds with a maturity of up to 1.5 years and a maximum nominal yield of 16% per annum.    

The idea is good and highly relevant. The volumes of funds attracted to the budget through the placement of hryvnia government issued bonds are constantly decreasing: if in May they amounted to UAH 27.2 billion, then in June (after a sharp increase in the NBU key policy rate) — already UAH 8.8 billion, in July — UAH 6.5 billion, in August — UAH 7.2 billion, in September — only UAH 899 million. The results of two auctions in October show that the Ministry of Finance managed to attract only UAH 56.3 million in hryvnias.

According to the NBU, from the beginning of the large-scale war to October 10, the redemption of the state’s obligations denominated in the national currency (UAH 149.2 billion) significantly exceeded the amount of new borrowings in hryvnia (UAH 100.2 billion).

Given the specifics of the NBU’s interest rate policy, banks actually left the primary government bond market. Having an alternative in the form of NBU deposit certificates at 23% per annum, no bank will be interested in investing in government issued bonds with a yield of 12–16% per annum.

In such circumstances, citizens of Ukraine can become the main investors in military bonds. For individuals, investments in government issued bonds at 12-16% per annum are a real alternative to deposits, the average interest rate for which varies from 11 to 12% per annum. An additional advantage of investments in government bonds is the absence of tax on income from securities and investors receive a one hundred percent guarantee from the government to pay back the full amount oftheir funds.      

The current account balances of households in national currency exceed UAH 400 billion. The number of users of “Diia” is more than 17 million people. That is, there is both a resource and a technical possibility.      

The Ministry of Digital Transformation reported that for the first three days of new service, Ukrainians had purchased military bonds worth UAH 25 million through Diia. How to evaluate thisamount: is it a lot or a little?   

Having allowed for the fact that it was only the first three days of the service, we risk to say that UAH 25 million is a very small amount both in terms of the state’s needs, and Ukrainians’ possibilities.    

For comparison: after the Russian massive missile attacks of Ukraine (October 10), Serhii Prytula together with Serhii Sternenko raised UAH 352 million ‘for revenge’ in one day (!). That is, Ukrainians are still ready not only to invest, but also to donate much larger amounts than the state borrows at interest.       

“Diia” surely emphasizes that the service is intended primarily to increase the wealth of Ukrainians, and not to raise funds for the state. But the Ministry of Finance, which actually issues government bonds, on the contrary, stresses that government bonds are about supporting the state, and not about earnings, and it is confirmed by the yields for government issued bonds, which are significantly lower than the NBU’s key policy rate of 25%.    

Let us try to find out the reasons for such difference in scale, which, in turn, can help the government with the financing of military expenditures in the future.   

The aim   

The above-mentioned example of the fundraising suggests that insufficiently high interest rates for government issued bonds (which the NBU constantly insists on) is not the main reason for the Ministry of Finance’s modest success in placing military bonds. Ukrainians do not seek to earn money in the war.  

The noble character of Ukrainians was obviously taken into account by the Ministry of Finance, therefore, it was repeatedly emphasized that military bonds are primarily a tool to support the budget during the war, and not a tool for maximizing income from investment activities.    

However, Ukrainians do not have much confidence in the authorities, so for them (that is, for us) “supporting the budget” or “helping the state” are not very effective incentives for action.          

However, Ukrainians believe in the Armed Forces of Ukraine. Attention should be focused on them. The developers of the new service partially took into account this important point, but the purpose of investing still remains quite blurred. In addition to the army, it includes the economy, salaries, pensions, social benefits, that is, most of the state’s obligations financed from the budget.       

To motivate Ukrainians to buy military bonds, the aim must be clear and definitely a priority – supporting the Armed Forces of Ukraine. It would be even better if it were as specific as possible: everyone is already convinced that the option with drones is quite effective, but also a worthy goal could be, say, providing the Armed Forces of Ukraine with warm clothes.        

But all this will work only if the state keeps its word and suppositional clothing reaches everysoldier.


As discussed above, the military bond yields are probably not a decision making factor for Ukrainians to buy bonds. However, clarity on this matter is essential.

It is not necessary for 17 million users of “Diia” to understand such intricacies as the difference between the primary and secondary bond markets, the nominal and market yields of securities, and so on.

On the one hand, the nominal value of one bond is UAH 1,000, and on the other hand, in practice, the buyer has to pay a little more for it, and the actual yield is slightly lower than the nominal yield (see an example on the official application portal) .

In order to attract the general public to finance the military needs of the state, the terms of military bonds placement through “Diia” should be as transparent and clear as possible.    

Partners (last but not least)   

The developers of the service honestly note that “Diia” does not sell bonds on its own. Partners buy bonds from the state and sell them through the app. From the point of view of experienced people, everything is logical.      

However, imagine a situation: a patriotic citizen has decided to invest in the combat capability of the Armed Forces of Ukraine, despite the moderate profitability of these investments. And this Ukrainian, having chosen, say, the “Crimea” bond in his application, is surprised to recognize that he has to buy it not from the state, but from the (not) Russian “Alfa-Bank”. (It is clear that the fate of the bank has not been decided and it still has a dealer license from the NBU, but should it be in the application?).    

It is not easy to predict the reaction of our potential investor. He is most likely to close “Dіia” and begin to donate “for revenge” to Prytula, “Come Back Alive” or thousands of other volunteers.     

In fact, the choice of “partners” for the sale of military bonds through “Diia” should be considered as extremely bad. Although Ukrgasbank is state-owned, but recently a negative information background has been formed around it, which is related to the accusation of bank officials in stealing UAH 206 million in 2014-2019.     

Another partner is the Bond UA application, whose website states that it was created by the ViaVersa company in cooperation with the BTC Broker investment company. We did not manage tofind information about ViaVersa, but BTC Broker is a professional (licensed) participant in the stock market, whose founders are eleven people with a maximum share in the capital of 9.9%. Perhaps they are all honest entrepreneurs, but according to European standards (which are implemented by the the National Securities and Stock Market Commission), the ownership structure of this company can be interpreted as non-transparent.       

To be fair, the official portal of the application states that the list of banks and partners will be updated. So, I hope that in the future the developers of the service will be more meticulous about selecting partners.        

A logical solution could be to involve all state banks as intermediaries. But the very fact of an intermediary between the state and the investor in this case seems problematic.       

Ideally, to attract citizens to finance military expenditures in significant volumes, the state should provide them with actual access to the primary market of military bonds. Without any intermediaries. At least during the war.       

The National Bank of Ukraine could easily cope with this task, taking as an example the position of the US Federal Reserve during the Second World War, many employees of which were engaged in the processing of State Treasury military bonds.

If this requires a few technical amendments to the legislation, then given the importance of the goal, the people’s deputies will certainly do it without much controversy.

The precedent was set in July, when an unusual (in peacetime) operation was added to the list of powers of the NBU, in particular for a special period maintaining state agencies’ accounts designed to meet the needs of the state in repelling armed aggression against Ukraine and eliminating its consequences, as well as for administering charitable donations and humanitarian aid.

For the success of the case, a wide advertising campaign is also necessary with maximum use of the resource of the informational telethon and other advertising tools. An important element of encouragement can also be the provision of operational information on the results of the sale of military bonds to citizens on a permanent basis.

In conclusion, I would like to congratulate the developers on the implementation of a wonderful idea and express the hope that after taking into account all the nuances, the sale of military bonds through “Diia” will become a significant contribution to the future Victory.


Mykhailo Dzhus, Head of the Money Markets Department of GROWFORD Institute

Oleksandr Shcherbakov, CEO of the asset management company “Optima-Capital”