Financial sector news

On October 8, the Verkhovna Rada of Ukraine adopted in the second reading draft law No. 11238 “On the National Development Institution.” The document creates the legal basis for launching an institution that will operate on the principle of a “bank of banks” — attracting funds from international partners and private investors and directing them to the real sector through a network of partner banks. The main focus is on supporting small and medium-sized businesses, recovery projects, and high-risk initiatives.

The new institution will be created by reorganizing the Entrepreneurship Development Fund. On this basis, a national instrument for indirect financial support to businesses will be formed — through guarantees, preferential credit lines, factoring, and other risk financing mechanisms in cooperation with banks.

The institution will become an important link in the post-war economic recovery system, especially for SMEs, relocated companies, and businesses in frontline regions, which often do not have access to market financing.

The National Development Institution's operating model is based on the best international practices of development banks, in particular Germany's KfW, which played a key role in rebuilding the economy after World War II. Like its foreign counterparts, the Ukrainian institution will not compete with the market, but will compensate for its “failures” by assuming part of the risks and reducing the cost of financing priority sectors.

The new institution will consolidate the existing business support programs of the Entrepreneurship Development Fund, expand the range of tools and the scale of resource mobilization. Thanks to this, funds from international financial organizations and private investors will be channeled through partner banks into strategic areas—manufacturing, innovation, and infrastructure.

It should be noted that the document was supported in the first reading back in June 2024, after which it was finalized by the relevant committee. Its adoption in the second reading paves the way for the final completion of the legislative procedure and the practical launch of the National Development Institution.