DEG: USD 10 million to promote Ukrainian SMEs

Investment in Emerging Europe Growth Fund III

DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH is helping small and medium-sized enterprises in Ukraine to gain access to long-term financing more easily. It participates in the Emerging Europe Growth Fund III (EEGF III), managed by Horizon Capital, with a total of USD 10 million. The fund invests in export-oriented industries, particularly IT, light manufacturing and food. Another focus is on companies from e-commerce, healthcare and other sectors that are geared towards the domestic market. Its anchor investors include the Western NIS Enterprise Fund (WNISEF), the International Finance Corporation (IFC, a member of the World Bank Group), the European Bank for Reconstruction and Development (EBRD) and the Dutch development finance institution FMO. The fund’s target size is USD 150 million.

Target size of up to USD 150 million

Ukraine has made progress with structural reforms in recent years and expects economic growth rates to rise again, in excess of three percent from 2018 onwards. For the country’s SMEs, the limited availability of equity financing is a major obstacle to growth. This is where the Emerging Europe Growth Fund III comes in. It is already the third private fund to be set up by Horizon Capital, an investment company that has specialised in Ukraine since 1994.

Contribution to creating jobs in Ukraine

Among the first investments already made by the EEGF III are a light manufacturing company and an IT product company, both of which are noted for their social involvement. The EEGF III will focus on small and medium-sized companies with growth capital needs, as they tend to have a large impact on job creation.

As Dr Tilman Kruse, Head of DEG’s Corporates/Funds Europe/Middle East/Central Asia department, explains: "With our investment, we are putting our weight behind Ukrainian SMEs. The investment company’s team effected successful investments in the predecessor fund and these are creating growth and jobs through anti-cyclical measures and strengthening good corporate governance." Through its involvement, DEG is sending an important signal to further private and institutional investors.

As one of the largest development finance institutions in Europe, DEG not only provides financing for companies but also makes long-term funding available to banks and funds. This financing helps to promote the provision of long-term loans to small and medium-sized companies, which are essential for the development of the local economy. In addition, DEG boosts the investors’ environmental and social management, leading to positive effects on the companies they co-finance, for instance in the form of improved occupational health and safety.