Ukrainian SMEs: Consequences, Challenges and Opportunities - February 2024

Main Findings

The war in Ukraine has presented the country with massive economic challenges. With millions displaced, livelihoods have suffered, as the government, private enterprises and NGOs struggle to adapt to the new reality. This report examines ways to best aid small and medium enterprises (SMEs) in Ukraine and identifies promising sectors of the economy for support. It also defines guidelines and effective approaches to take while engaging SMEs in Ukraine. Our main findings are as follows.

Retail trade and service-sector enterprises, including retail stores, bakeries, pharmacies, automobile repair shops, rural transportation services, and hairdressers, have done well under current circumstances. With typically short value chains and relatively limited equipment required there are opportunities in this sector for growth. Supporting such SMEs can provide wider societal benefits as well. Revitalizing shops, cafes, pharmacies, repair shops, and similar enterprises restores a sense of normalcy to daily life, thereby broadly contributing to community resilience.

There is also potential for small-scale manufacturing SMEs that contribute to the construction sector. SMEs involved in, for example, the manufacture of doors, windows and roofing materials, could potentially thrive should reconstruction efforts accelerate, as is planned.

For SMEs that are or wish to export, helping them diversify their products and expand into new markets can contribute to growth by reducing their dependence on specific trade partners.

Some necessary steps in achieving success in the above initiatives include the development of specialized skills that are required in technical and specialized sectors. In many cases this could be best accomplished through partnerships with educational institutions or vocational training centers.

To best achieve these aims, efforts must be made to improve the overall operating environment for SMEs. Advocacy efforts are needed to push for policy reforms that address issues related to taxation, regulation, and bureaucratic red tape, which are currently a hinderance to business recovery. Greater coordination and effective partnerships among NGOs, government bodies, and private enterprises can streamline interventions and ensure a more comprehensive engagement. Ensuring local communities voices are taken into account is also critical.