Raising the Key Policy Rate to 16% Will Not Automatically Make Loans More Expensive for SMEs — Banker

The National Bank’s 0.5 percentage point increase in the key policy rate to 16% will not lead to a widespread revision of lending rates for small and medium-sized businesses.

This was reported by Oksana Shulha, Director of the Small and Medium-Sized Business Department at GLOBUS BANK.

According to her, the actual cost of a loan is influenced by many more factors than the key policy rate alone. These include the bank’s funding base, the loan term, the risk profile of the individual borrower and competition among banks. For partner and government programmes, compensation mechanisms also play an important role.

“There is no direct arithmetic relationship between the National Bank’s decision and the actual interest rate on a specific loan. The cost of financing is influenced by the bank’s funding base, the loan term, the borrower’s risk profile and market competition. In the case of partner or government programmes, compensation mechanisms also come into play. Therefore, we do not expect a sharp revision of SME lending terms in October,” the banker noted.

According to her forecast, by the end of the year, the most competitive offers will continue to be banks’ partner programmes with manufacturers and suppliers of machinery, equipment and vehicles, as well as government business support programmes.

Currently, under partner programmes, more than 65% of loans range from UAH 1 million to UAH 3 million. Most commonly, these are loans with terms of 3 to 5 years, while interest rates may range from approximately 15% to 18% per annum, depending on the product and transaction terms.

Oksana Shulha noted that for entrepreneurs, the key consideration is increasingly not the nominal interest rate itself, but whether an investment can generate income quickly enough to cover debt servicing costs.

“For entrepreneurs today, what matters is not only the nominal interest rate, but also the overall economics of the loan. If a partner programme enables them to obtain machinery or equipment that starts generating income immediately, while the monthly payment matches their actual cash flow, the loan remains a viable business tool even when the key policy rate is relatively high,” — the expert emphasised.