Supporting smallholder farmers during Ukraine’s turbulent times
Svitlana Zubrytska has been country manager for Oikocredit Ukraine since the office was established in 2004. Before that she worked as a loan officer for the Ukrainian Agricultural Finance Development Foundation.
Getting access to loans has been a challenge for smallholder farmers in Ukraine for several decades. Since the agrarian reforms following the country’s independence from Russia in 1991, mainstream investors have favoured large-scale agricultural production.
Oikocredit’s partners in Ukraine, predominantly credit unions, have been addressing this gap by providing loans to small agricultural enterprises. The recent political turbulence has exacerbated the situation of these small business and the credit unions, which required a well-judged response from Oikocredit, as country manager Svitlana Zubrytska explains in this interview.
What were the initial effects of the conflict on Ukraine’s credit unions and their clients?
“The first effect was the massive withdrawal of savings by the credit unions’ members who were afraid of an escalation of the conflict and further devaluation of the local currency. They also hesitated to allocate savings for longer periods. As a result, the credit unions couldn’t meet the demand for new loans, particularly the long-term loans needed by smallholder farmers.”
You said in a recent video that Oikocredit and its partners needed to be more cautious with loans at this time. What challenges were you facing?
“During this period no one could predict what might happen in eastern Ukraine and Crimea and how the economy would react. Both lenders and borrowers avoided investment projects due to the rapid currency devaluation and economic uncertainty. Additionally, the hyperinflation of 2014 and 2015 seriously affected the local population’s capacity to repay loans.”
How did Oikocredit and its partners support clients during this turbulent period?
“Oikocredit worked closely with its partner organizations, visiting them and staying in regular contact to provide support. We allowed early repayment of loans for those partners who wanted to repay before the currency further devalued, and we revised payment schedules when the credit unions had liquidity problems, allowing them to make repayments at a later date than originally agreed.”
Is the situation more positive for building business now?
“Politically, the armed conflict in eastern Ukraine is confined within known borders and since May 2016, the economy has stabilized and is making a modest recovery. We are seeing positive signs of recovery from Oikocredit’s partners. Four of the credit unions we work with have come back to us asking for new loans now that they feel more confident in their clients’ ability to repay loans. It’s a positive sign of renewed progress in Ukraine.”
During the turbulent period you also worked on developing other partnerships that benefit the agricultural sector.
“In 2015 we entered a new partnership with Megabank PJSC, a medium-sized bank that provides financial services to small and medium enterprises (SMEs). Megabank wants to focus more on financing SMEs in the agricultural sector, which often struggle to get access to loans. Supporting SMEs is essential as they are a driving force for local economies and provide jobs.
That’s why we also renewed our partnership with Poltava Sad Ltd, a medium-sized farm that cultivates grain, spices and vegetables in central Ukraine. With more than 200 full-time staff and additional seasonal workers, the company is an important local economic player. It also provides additional income for rural families by renting plots from around 1,900 villagers.”