Financial Sector Transformation Project Quarterly Progress Performance Report
Financial Sector Transformation Project FY 2019 Q3 PROGRESS REPORT
(01 April – 30 June 2019)
Award No: EEM-E-00-00002-00/AID-121-BC-17-00001
Prepared for USAID/Ukraine C/O American Embassy 4 Igor Sikorsky St, Kyiv, Ukraine 04112
Prepared by:
DAI Global LLC Financial Sector Transformation Project 7600 Wisconsin Avenue, Suite 200 33-B Taras Shevchenko Blvd., Europe Bethesda, MD 20814 Plaza Business Center, 6th floor, Kyiv, 01032, Ukraine facebook.com/FSTProject http://www.fst-ua.info
Table of Contents
I. ACRONYMS AND ABBREVIATIONS 3 II. CONTEXT UPDATE 4 III. EXECUTIVE SUMMARY 6 IV. KEY ACHIEVEMENTS 8 V. PROGRESS AGAINST TARGETS 14 VI. PERFORMANCE MONITORING, EVALUATION AND LEARNING 16 VII. LESSONS LEARNED 16 VIII. ENVIRONMENTAL MONITORING 16 IX. PROGRESS ON LINKS TO OTHER ACTIVITIES 16 X. PROGRESS ON LINKS TO HOST GOVERNMENT 17 XI. PROGRESS ON INCLUSIVE DEVELOPMENT 17 XII. FINANCIAL INFORMATION 18 XIII. SUB-AWARD DETAILS 18 XIV. ACTIVITY ADMINISTRATION 18 XV. ATTACHMENTS 20 ATTACHMENT A: DELIVERABLES TABLE 21 ATTACHMENT B. PROJECT DOCUMENTS AND PUBLICATIONS 25 ATTACHMENT C. PERFORMANCE DATA TABLE 26 ATTACHMENT D. SUB-CONTRACTOR TABLE 34 ATTACHMENT E: GIS AND FUTURE ACTIVITIES TABLE 35 ATTACHMENT F: IMPLEMENTATION PLAN 39
2 I. ACRONYMS AND ABBREVIATIONS DGF Deposit Guarantee Fund EU European Union FSR State Commission for Regulation of Financial Services Markets GfK Growth from Knowledge GOU Government of Ukraine IFRS International Financial Reporting Standards IMF International Monetary Fund IOPS International Organization of Pension Supervisors IOSCO International Organization of Securities Commissions LC Leasing Company MEDT Ministry of Economic Development & Trade MIA Ministry of Internal Affairs MOES Ministry of Education and Science MOF Ministry of Finance MSP Ministry of Social Policy NABU Independent Association of Ukrainian Banks NBU National Bank of Ukraine NBU-BU National Bank of Ukraine’s Banking University NGO Non-Government Organization NPF Non-state Pension Fund OECD Organization for Economic Cooperation and Development PFU Pension Fund of Ukraine SSMNC Securities and Stock Market National Commission US CFTC U.S. Commodity Futures Trading Commission US SEC U.S. Securities and Exchange Commission UUL Ukrainian Union of Lessors UWF Ukrainian Women’s Fund VRU Verkhovna Rada of Ukraine VR-FBC Verkhovna Rada Finance and Banking Committee
3 II. CONTEXT UPDATE Ukraine is rated by USAID as a “non-permissive environment” or NPE country because of the threat of war with Russia, the conflict in the separatist held territories, and endemic corruption that constrains efforts to institutionalize a market economy.
This quarter was dominated by the presidential election and the run-up to voting for a new parliament. On March 31, comedian and actor Volodymyr Zelensky finished first in the presidential vote with 30.5%, with incumbent President Petro Poroshenko in second position with just under 16%. In the run-off election on April 21, Zelensky prevailed easily with over 75% of the popular vote. During the campaign Zelensky did not define his priorities or his economic and social policies, leaving the nation uncertain about future policy direction. In May, President Zelensky dissolved the Parliament and called for early elections (scheduled for July 21). The Ukrainian Parliament of The inauguration ceremony of Ukrainian President 450 members is elected half by party list, and half by Volodymyr Zelensky; Kyiv, May 20, 2019 single member constituencies. As of July 19, polls indicate that Zelensky’s political party (Servant of the People) is polling above 45%, followed by the pro-Russian Opposition Platform (10.5%), Golos party founded by rock star Svyatoslav Vakarachuk (6.0%,) Petro Poroshenko’s new European Solidarity (7.7%), and Yulia Tymoshenko’s Batkivchyna Party (7%). All political parties must surpass the minimum vote requirement of 5% for representation in the parliament. Some parties that were important in the last Parliament will likely disappear, including Samopomich and the Narodnyi Front. This reflects the highly personalized and fractionalized nature of Ukrainian political parties. President Zelensky’s Servant of the People party may achieve a majority of parliamentary seats, but this majority could prove to be fragile. Thus, President Zelensky may choose (or have to) negotiate a coalition with one or more of the other parties in the Parliament.
Policy uncertainty is likely to continue into the fall. President Zelensky has consistently advanced an anti-corruption theme, and stated his intention to reach agreement with the IMF on a stabilization package of reforms to allow for the repayment of high foreign debt obligations in 2019-2020. Policy details, however, are scarce and the informed public is carefully watching his political appointments to government ministries. Thus far, the President has only announced appointments to a few key positions (former Economics Minister Abromavicius to the Board of the defense industry monopoly UkrOboronProm, ex-Finance Minister Daniliyuk to the National Defense Security Council). One early appointment to head the Presidential Administration, Andriy Bohdan, proved controversial because of his status as an attorney for the oligarch and former owner of Privat bank, Ihor Kolomoisky.
During the quarter, the exchange rate moved in a narrow range between 26 – 27 UAH: $1, and was at 26.15/$1 on June 30. In mid-June, Ukraine borrowed $1 billion on the Eurobond market (7 year term, 6.75%), which was a significant drop from the 9.5% it paid in December 2018. This reflects the fall in interest rates globally rather than a significant improvement in Ukraine’s debt position. The country’s credit rating by Moody’s was unchanged at B-. Foreign currency reserves are $20 billion, inflation is about 8- 9%, and economic growth is forecast at 3%. The interest rate on 3-month hryvnia-denominated government bonds was 17.24% at end June, and the NBU discount rate was 17.5%.
4 Last quarter FST introduced a new elements framework to describe more accurately the purpose, objectives and range of its activities. This diagram is presented below. The main components are: Enabling Environment: Financial markets depend on trust. Trust is the result of knowledge, because you are more likely to have confidence in and use a product or service you understand. Trust is reinforced by the existence of a legal and regulatory regime, including enforcement, that protects you against manipulation, abuse, or fraud. Access to Finance. Entrepreneurship requires funding. This refers to the ability of individuals/enterprises to obtain financing or financial services, including loans, leases, investment products, insurance, and risk management services. It also includes credit history and reporting, and insolvency procedures. Financial Disclosure/Transparency. Information moves markets. Disclosure is important to price discovery, to fair competition, to investment and to combating fraud and corruption. This element includes information disclosure systems, tax and accounting, transparency, anti-money laundering, advertising, and corporate governance management practices. Financial Infrastructure. Markets require business support services. This includes the institutions and practices that are critical to the functioning of markets: clearing and settlement, payment systems, messaging, IT, exchanges and brokers, SROs, capital pools (insurance companies, pension funds, private equity, etc.), and digital finance tools.
FST ELEMENTS FRAMEWORK
ENABLING ENVIRONMENT
PUBLIC REGULATION CONFIDENCE SUPERVISION
FINANCIAL INFRASTRUCTURE SME GROWTH ACCESS TO FINANCE FINANCIAL CAPITAL CAPACITY INCLUSION LEASING DIGITAL MARKETS BUILDING FINANCE INVESTMENT (IT, TRAINING) COMMODITY MARKETS (ENERGY, AGRICULTURE)
FINANCIAL DISCLOSURE / TRANSPARENCY FINANCIAL AML, BEPS REPORTING
ANTI-CORRUPTION INITIATIVES
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III. EXECUTIVE SUMMARY A. Key Achievements
DO1. CORRUPTION REDUCED IN TARGET SECTORS
FST continued its efforts to develop a more transparent reporting system for financial entities, working with the Ministry of Finance (MOF) and the three financial sector regulators. On June 20, FST's sub- contractor Vizor Ltd. installed the software for the Financial Reporting System (FRS) in IFRS/XBRL on the system of the “hub” manager, the NSSMC. The system is now “live" (meaning it is now fully operational) and .receives reports from the market. Financial entities will continue to report in a "test mode" until the end of 2019. Annual reports for 2019 are due in the first quarter of 2020, when an estimated 4000 financial company reports are expected. This will improve financial information disclosure according to international standards and provide important information to investors. FST has thus fulfilled its responsibility regarding software development and installation under the MOU with the Securities Commission and the European Union. FST will continue to provide technology and promotional support for implementing the FRS.
FST held several meetings with interested parties (commercial banks, the NBU, Fintech companies, media companies) to refine the concept of a digital comparison tool (DCT) for bank consumer lending products. FST evaluated procurement options, and prepared a justification memo for holding a limited competition among five organizations. FST completed an RFP to develop, operate and promote a sustainable DCT, and bids were received in late June. During the next quarter, the project expects the winning subcontractor to develop the comparison tool and develop the promotion/advertising plan, with an official launch in October. When completed, the DCT will provide accurate, fair, and reliable rankings of bank loan products, articles on consumer finance, and information on consumer protection. The aim is to bring increased competition and transparency to the market.
DO4. ECONOMIC GROWTH
FST implemented an active program to build confidence in financial markets through its communication, educational, and legal/regulatory efforts. On May 21, the Board of the NBU approved the creation of a new department in the bank, the Division of Financial Consumer Rights Protection. The Division reports directly to the NBU Governor. This was the result of FST’s analysis (and recommendation) to the NBU that it could and should take a more pro-active stance to protect consumer rights in lending. FST prepared a legal brief on the consumer protection powers of the NBU under existing financial sector legislation, arguing that they allowed the NBU to be a more assertive regulator in consumer protection. FST’s brief was presented to senior management of the NBU in January 2019. FST will support the new Division of Financial Consumer Rights Protection with legal and advisory services, recommendations on how to deal with consumer complaints, and other organizational and analytical issues.
In collaboration with the NBU, FST undertook three major activities to improve financial literacy (defined as containing three elements, knowledge, attitudes, behavior). First, in June FST held a press conference to release the results of the FST/NBU survey of financial literacy in Ukraine. The survey used the OECD methodology and questions, thereby permitting a comparison of Ukraine's score on the Financial Literacy Index (11.6, tied with Poland in 30th place) with those of 30 countries (average score =13.2). DCOP Yulia Vitka presented the report, and financial market regulatory authorities and senior executives of five banks provided comments. There were 75 social media stories and two television reports based on the event.
Second, on June 12 the NBU presented the draft of the National Financial Literacy Strategy, prepared with the assistance of FST consultant Robert Drake of Australia, at the Financial Inclusion Forum. The strategy includes an implementation plan covering the launch of the strategy by the NBU in collaboration
6 with the private sector, NGOs, and other government agencies. The document is available at: https://bank.gov.ua/doccatalog/document?id=96715983).
USAID Mission Director Susan K. Fritz and National Bank of Ukraine Governor Yakiv Smolii opened the international forum, which was organized jointly by the NBU, FST, the OECD, Mastercard and VISA. Over 300 people participated and there was wide media coverage of the event.
The third financial education initiative was the joint FST and NBU Economic Information Days conducted in Lviv, Dnipro and Chernivtsi. These events were aimed at improving public understanding of the role of the NBU in controlling inflation and promoting economic growth. USAID Mission Director Susan K. Fritz opens the international forum on financial inclusion; Kyiv, June 12, 2019 At the end of May, the Ministry of Education formally approved the new financial literacy curriculum, textbook and workbook that USAID/FST developed for 10th - 11th form students in Ukraine’s secondary schools. This is an optional course in the national curriculum. However, based on experience with the predecessor USAID pilot course (2012-2018), the project anticipates that it will be taught in more than 1000 schools to approximately 20,000 students, starting in the fall. FST has agreed with the Ministry of Education to produce an electronic version of the course, and to organize a seminar for the Ministry’s methodologists in August as a “train-the-trainers” workshop.
During the quarter, FST and the Ukrainian Union of Lessors (UUL) conducted two additional seminars on leasing finance in the regions for SMEs, bringing the total for this effort to ten in 2019. Member companies of UUL provided the speakers for the events, and UUL member leasing companies organized a "market fair" promotional event held simultaneously with the training. FST also conducted a seminar on international risk assessment practices in leasing for UUL members. FST’s efforts focused on promoting leasing as a financing option for SMEs, strengthening the professionalism of the industry, and building the capacity and reputation of the UUL.
FST continued to work on developing products for exchange trading of oil futures. FST completed its analysis and recommendations to the regulation on oil and oil products and submitted its report to the Ministry of Energy. The recommended changes are essential requirements to permit exchange trading of oil futures.
In digital finance, FST/SWIFT and the NBU held two ISO 20022 messaging workshops during the quarter. When completed, the new system will greatly facilitate digital finance transactions, simplify adherence to AML and currency control compliance, and modernize Ukraine’s financial payments infrastructure. The participants in the workshop on May 13-14 considered three new messages (pacs.009, pacs.002, and pain.002) related to credit transfers among financial institutions and payments status reports used to report failed or pending transactions. During the workshop on June 19-21, participants discussed two new messages (pain.013, pain.014) related to creditor payment activation. The next workshop will take place in September 2019. It will include a question and answer session and a discussion of a new set of messages: account report and account statement messages.
FST supported six regional press conferences organized by the PFU to publicize its new E-services to workers and pensioners. The new PFU web portal services, which are the result of USAID/FST’s purchase and transfer of a $1.25 million Oracle server in 2018, include: enrolling for pension benefits; making appointments; checking on employer contributions to one’s account; and receiving verification
7 of contribution records. Ukrainians who are employed in the formal sector and documented on the PFU data base can now download a certificate with a QR code verifying payments by their employer(s). This certification capability will prove valuable to individuals when they apply for government subsidies, loans or financial services, and visas for foreign travel.
B. Quantitative Highlights
FST can report on four performance indicators (including two related to leasing): Media. There were 703 media mentions about the Project and its activities from April 1 to June 30. This brought the cumulative number of media placements for FY 2019 to 1,350, compared to the Project fiscal year target of 900 (source: FST and USAID media monitoring results). Training. The total number of person hours of training provided this quarter by FST and completed by management and/or staff of financial intermediaries was 1,053. This was due to three training events on leasing finance. Leasing. The number of leasing contracts concluded by lessors as of last quarter (Q2 FY19) was 7,073. The cumulative value of these leasing contracts was US$353 million (data from the FSR as of March 31, 2019, due to a lag in reporting). The FST FY19 full year target for leasing contracts is 10,000, and the target for value of leasing contracts is US$820 million, suggesting that FST is likely to reach its targets.
C. Activity Administration
As reported last quarter, the Inpredkadry Directorate of the General Directorate for Servicing Foreign Representative Offices Government Enterprise (GDIP) requested all technical assistance projects to obtain a tax code in order to continue further cooperation with GDIP after February 28, 2019. Some donors and international implementing partners raised concerns about the proposed procedure for registration with tax authorities, and asked the Ministry of Economic Development and Trade and the Ministry of Finance to help resolve the tax registration issues. This request is still in process. Thus far, GDIP continues to provide services to the international technical assistance projects, including to FST. We will continue to monitor and report on the situation.
D. Subsequent Reporting Period
FST is submitting a revised implementation plan to incorporate a grants component as the result of a modification to its contract in June. There are also some minor adjustments to planned items due to current political uncertainties (composition of the Parliament, ministerial appointments) and/or counterpart issues. The revised work plan is provided in Annex F.
IV. KEY ACHIEVEMENTS DO1: CORRUPTION REDUCED FST’s activities to combat corruption focus on financial information disclosure, ethical market conduct, and legal/regulatory reform, especially the areas of money laundering and tax evasion. During this quarter, the Project made notable contributions to improving the environment for internationally accepted business practices in the financial markets.
Framework Element 3: Financial Disclosure/Transparency FST continued its efforts to develop a more transparent reporting system for financial entities, working with the MOF and the three financial sector regulators. On June 4 – 5, FST organized a two-day training session for IT personnel from the three regulators and the Ministry of Finance on how to operate the
8 Financial Reporting System software developed by FST subcontractor Vizor Ltd. On June 19, FST's sub-contractor Vizor Ltd. installed the software for the Financial Reporting System in IFRS/XBRL on the system of the “hub” manager, the NSSMC. The system is now “live" (meaning it is now fully operational) and receives reports from the market. Thus far, 600 reporting entities are registered in the system. Financial entities will continue to report in a "test mode" until the end of 2019. Annual reports for 2019 are due in the first quarter of 2020, when an estimated 4000 companies will file their documents. This will improve financial information disclosure in alignment with international standards and provide investors with reliable data. FST has thus fulfilled its responsibility regarding software development and installation under the MOU with the Securities Vizor team eating cake to celebrate FRS "go-live" event; Commission and the European Union, signed in 2018. Dublin, July 3, 2019 The project also received a formal letter from the operator of the FSR Hub, the NSSMC, requesting FST to "provide support in developing and deploying the informational website for the FRS/XBRL.” The letter continues “:.. we hope for your support in developing software for the website as well as creating content, based on materials provided by the NSSMC." FST has determined that the web site development activity can be carried out using in-house IT staff. Additional resources (local consultants, event costs) might be required for user training events and promotion. FST sponsored the participation of Kateryna Rafalska in the Annual IFRS Foundation Conference held on June 20-21, 2019 in London. Ms. Rafalska is one of the key persons at the NSSMC involved in the process of the FRS implementation. The experience and knowledge she acquired at the conference will facilitate implementation of the FRS and the introduction of global best practices on the Ukrainian financial market. FST is developing a digital comparison tool (DCT) to rank bank retail loan products (personal loans, credit cards, mortgages, car loans). In addition to ranking banks by total cost of credit, the DCT will incorporate qualitative indicators of banks (such as disclosure practices, compliance with laws, and customer satisfaction). The FST comparison tool is expected to bring transparency to the market and increase competition among banks in the consumer lending market. It will also serve as a platform for financial literacy and consumer protection information. This quarter FST continued to discuss the DCT with key parties and validate the concept, including research on international comparison tools (supported by an international consultant) and discussions with key stakeholders (banks, the NBU, fintech and media companies, NGOs). In addition, FST signed non-binding Letters of Cooperation with several banks to provide data to the DCT based on the agreed upon methodology. The participating banks represent 90% of the bank consumer lending market. They will also serve on the steering committee of the eventual DCT. Based on its research and discussions, FST decided to hold a limited competition among five organizations to develop, operate, and promote the DCT through December 2020. FST prepared and issued a RFP and held a two-hour bidders conference to explain the RFP requirements and to answer questions. Three proposals were received at the end of June, and FST expects to select a winning subcontractor in mid-July. The target date to launch the DCT is October 2019. This will require completion of the technology for the DCT, recruitment of staff, development of information templates for submission by the banks, production of an implementation and advertising plan, and formation of a tripartite FST/ Banks/Sub-contractor steering committee. FST views this activity as a partnership with the private sector, subject to joint decision-making and consultations. FST continued to support the development of a new, transparent system of professional certification of stock market specialists and asset managers. The current system is out-of-date, does not incorporate international standards or ethics training, and has suspiciously high pass rates (90%). Several working group meetings were organized by FST consultants to review the documents for the new examination
9 and certification process. FST assisted the NSSMC to prepare a draft regulation to formalize the certification system, which the NSSMC posted for public comment. A meeting will be held in July to discuss the regulation with the market prior to possible modification and adoption by the Commission.
DO4: MARKET DRIVEN ECONOMIC GROWTH FST promotes sustainable, market driven economic growth through a sound, trusted financial sector. The main areas of FST emphasis are: (1) improving the enabling environment for financial market (public confidence through communications, consumer protection and financial education), and legal/regulatory reform; (2) developing financial infrastructure; and (3) increasing access to finance, especially for small and medium producers. FST also promotes and uses financial technology innovations in support of these activities.
Framework Element 1: Enabling Environment
A. Legal and Regulatory
Civil Society Outreach FST continued and expanded its program to provide legal financial advice to vulnerable groups in the quarter. Letters of Cooperation were signed with legal clinics of law schools in Kharkiv and Kyiv, and trainings by FST staff on consumer lending and protection were provided to faculty and students of these universities. In June, students began to advise needy clients on financial issues. The initial pilot project reports for May-June will be available for analysis in July. Regarding the legal clinics in Lviv, Chernivtsy, and Vinnytsya, FST is in the process of signing Letters of Cooperation and FST plans to launch these pilot projects (including required training) in September. FST also met with the Association of Legal Clinics (Chairman of the Management Board and his Deputy) to discuss possible cooperation. FST will consider funding the activities of the legal clinics under its new grants-under-contract component. FST completed a study of insurance industry complaint-resolution mechanisms as a first step toward establishing a pilot project with an NGO on disputes resolution and arbitration. The report, received in June, is now being analyzed as a potential pilot activity for the fall.
B. Education and Awareness Communications and Public Outreach FST conducted three major events with the NBU during the quarter to address elements of financial literacy (knowledge, attitudes, behavior). FST completed analysis of a public opinion survey, conducted in December 2018 through face-to-face interviews with a nationally representative sample of 2007 respondents aged 18-79. It is the first ever survey in Ukraine to use the OECD methodology for measuring financial literacy (knowledge, attitudes, behavior), thus permitting a comparison of Ukraine’s results with those of 30 other countries. Ukraine’s score of 11.6 (compared to the 30-country average Financial Literacy, Financial Inclusion and Financial of 13.2) tied it with Poland for 30th position on the Well-being in Ukraine; June 2019 OECD Financial Literacy Index. The survey also revealed that the least financially literate Ukrainians were 18-25 year olds, followed by young married couples and the elderly. FST organized three presentations based on the report. First, on April 16, FST organized an expert round table discussion at the Kyiv School of Economics with key financial sector stakeholders (regulators, government agencies, banks, NGOs, NBFIs) to discuss the survey results and recommendations for a National Financial Literacy Strategy. Second, on June 5, FST, jointly with the
10 NBU, held a press conference to release the survey results to the public. The survey results were widely covered by the media generating 260 mentions in local and national media, including two television stories by national channels. Third, on June 11, FST made a presentation of the survey results to NBU department heads and members of the Board of Directors at a meeting chaired by NBU’s Governor, Yakov Smolii. The study is available on-line at: http://www.fst-ua.info/wp-content/uploads/2019/06/Financial-Literacy- Survey-Report_June2019_en.pdf
Hard copies of the report were distributed to the press, government officials, financial industry executives and civil society representatives at the Financial Inclusion Forum on June 12, 2019. On June 12 2019, FST, jointly with the NBU, Visa, and MasterCard, conducted an international conference, “Forum on Financial Inclusion: Leaving No One Behind”. The event brought together over 300 participants and speakers from 12 countries, including presenters from international organizations and the Central Banks of England, Jamaica, and Romania. The Forum opened with a statement by Her Majesty Queen Maxima of the Netherlands, who serves as the UN Secretary-General's Special Advocate for Inclusive Finance for Development, the Honorary Patron of the G20's Global Partnership for Financial Inclusion (GPFI), and the Honorary Chair of the Dutch Money Wise Platform. USAID Mission Director to Ukraine, Belarus and Moldova Susan Fritz delivered opening remarks, along with NBU Governor Yakiv Smolii. Natalia Bondarenko, NBU, Presentation of the National The highlight of the forum was the presentation by Financial Literacy Strategy for Ukraine; International NBU Head of Communications Natalia Bondarenko of forum on financial inclusion, Kyiv, June 12, 2019 the proposed new National Financial Literacy Strategy for Ukraine (available at: https://bank.gov.ua/doccatalog/document?id=96752180). FST consultant Robert Drake supported the research and writing of the strategy. The document includes an implementation plan covering the launch of the strategy by the NBU in 2020, in collaboration with the private sector, NGOs, and other government agencies. A video record of the Forum is available for viewing at: https://finclusion.bank.gov.ua/ A short video on the Financial Inclusions Forum is at: https://drive.google.com/open?id=10xy66wkrcsKtQeZpb3R1QgbeFgjOdvSQ
In April-June, the NBU, with the support of the FST Project and the Kyiv School of Economics, conducted three Economic Information Days in Lviv, Vinnytsya, and Dnipro. NBU Deputy Governors Dmytro Sologub, Serhiy Kholod and Oleh Churiy discussed financial issues with local business leaders and participated in trainings for journalists. FST experts delivered lectures on consumer lending and consumer protection to university students and professors, journalists, and regional economic authorities. The main aim of these events was to enhance communication between the NBU and the Robert Bond and Robert Drake, Presentation of the public, as part of its strategy to become a modern, Financial Literacy Survey results; Lviv, Apr 11, 2019 transparent central bank with public support for its vital role in the national economy. Overall, 1,800 individuals participated in these three educational
11 events. In the fall and winter of 2019, the NBU intends to conduct Economic Information Days in 5 more cities: Ternopil, Chernivtsi, Odesa, Kherson, and Kharkiv.
Financial Literacy Course The new FST-produced materials for the Financial Literacy Course “Finance: What, Why, How” (including a textbook, workbook, and curriculum) were formally approved by the Ministry of Education and Science of Ukraine as part of the Ministry’s high school course offerings. The Course will be taught on an optional basis nationwide to 10th - 11th form students in more than 1,000 schools, starting in the fall. In August, FST will conduct a two-day seminar for Ministry of Education methodologists who are responsible for training teachers in economic-related courses to improve their understanding of the new Financial Literacy Course content, and to expose them to innovative ways of teaching the subject matter. This will be a “train the trainer” seminar.
Pension Fund of Ukraine FST supported six regional press conferences organized by the PFU to publicize its new E-services to workers and pensioners. In Kyiv, the Chairman, two deputy chairpersons, and the head of the IT department participated. The PFU acknowledged in all six press conferences that its new E-Services would not have been possible without the $1.25 million Oracle SuperCluster M8 server provided by USAID in February 2018. USAID's purpose in providing the server was primarily to allow the PFU to Press conference organized by the PFU to publicize its centralize all its records and improve data security new E-services to workers and pensioners ; Lviv, Apr 9, 2019 (completed). The PFU, with the encouragement of FST, decided to use its enhanced technology and computing capacity to improve the efficiency of its customer service. The new PFU web portal services include: enrolling for pension benefits; making appointments; checking on employer contributions to one’s account; and receiving verification of contribution records. Ukrainians who are employed in the formal sector and documented on the PFU data base can now download a certificate with a QR code verifying payments by their employer(s). This certification capability will prove valuable when individuals apply for government subsidies, loans or other financial services, and visas for foreign travel.
Framework Element 2: Access to Finance
Legal FST was relatively less active in the legal/regulatory area this quarter due to the presidential election and the subsequent dissolution of the Parliament. FST’s legal unit supported other project activities, reviewed and prepared comments on regulations (professional certification for the NSSMC, consumer protection for the NBU, the currency law regulation of the NBU, etc.), and reviewed the financial sector legislation that will have to be resubmitted to the new Parliament.
Leasing On April 15-16, FST and the Ukrainian Union of Lessors (UUL) conducted a two-day training course on risk management and processes for leasing companies who are members of UUL. The purpose of the training was to fill in important gaps in the understanding by Ukrainian firms of an asset-based approach to leasing finance. The program also included a discussion of assessing risk issues when entering new markets, using medical equipment leasing as an example. There were about 20 participants from 14 leasing companies, representing Risk, Sales, and Finance departments. Participants were able to compare their risk practices with international best practices, and to learn about the most recent trends in risk management.
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In April, FST and the UUL concluded a series of regional training/market fair seminars with events in Kharkiv and Vinnytsya. These events served to educate SMEs and regional economic authorities on leasing as an attractive financing option for small businesses and municipalities. The presentations focused on what leasing is and why it is a good alternative to bank financing; the documentation needed to lease; how to calculate the costs and payments under leasing contracts; and how to avoid fraud. During the 10 events across Ukraine, approximately 650 persons attended. There were also numerous stories in the regional media related to leasing.
FST Consultant Thomas Reinke advanced his assignment to support increased sustainability by the Ukrainian Union of Lessors. He developed a five-year strategic plan for UUL self-reliance, complete with a set of core activities, financial projections, and recommended organizational changes (governance, dues). The study and its recommendations will be presented to, and discussed with, the UUL Board of Directors in July.
Capital and Commodity Markets FST continued to work on developing instruments for the exchange trading of oil futures. During the quarter, FST submitted its proposed revisions to the Regulation on the Procedure for Accepting, Shipping, Storing, Releasing and Keeping Records of Oil and Oil Products by Enterprises and Organizations in Ukraine (Ministry of Energy # 281/171/578/155). The report included three important amendments to the Regulation: (1) standardizing and simplifying record-keeping and document flow at oil depots; (2) updating the Regulation in line with current laws; and (3) standardizing a unit of measurement. These proposed amendments, which are essential to facilitate exchange trading of oil futures, are now under review by the Ministry of Energy.
FST launched a survey of the grains market and the demand for hedging instruments by small and medium producers. The purposes of the study are (1) to analyze existing practices regarding hedging by SME grain market producers (use, demand, interest) and (2) to identify the main characteristics of the market (products, volumes, participants, constraints, opportunities, etc.). The survey will be completed in the next quarter. FST plans to engage an international consultant to review and comment on the survey results (and may involve the US CFTC in the process if appropriate) and present the results to the market.
Framework Element 4: Financial Infrastructure
Digital Finance The NBU is transferring its System of Electronic Payments (SEP) to a new system of payment messages based on the ISO 20022 standard. USAID/FST is providing technical assistance to accomplish this through a subcontract with SWIFT. ISO 20022 is a financial messaging standard that has already been applied to many financial processing areas, including securities settlement, payments, and financial regulatory reporting. In Ukraine, the system will greatly facilitate digital finance transactions, and simplify adherence to AML and currency control compliance. The goal of this activity is to modernize Ukraine’s financial payments infrastructure, improve the country’s competitiveness, and integrate Ukraine’s payment system with global markets. The workshop consists of an explanation of a message by SWIFT, followed by message specification development by SWIFT. The messages are then reviewed and modified by the NBU payments department. Workshop participants discuss specific questions that arise as the NBU works on the messages. This process is supported by the exchange of emails between SWIFT and the NBU. At the end of the project, the NBU should have a technical specification ready to be given to software developers at the NBU, who must update the settlement mechanism, and to banking software developers who will develop connection software for banks.
13 The activity, which consists of seven messaging workshops, was launched in March 2019. Two more workshops were held May 13-14 and June 19-21, 2019. In addition to personnel from the payments, technology, and legal departments of the NBU, commercial banks and banking software developers participated. The workshop of May 13-14 discussed three new messages (pacs.009, pacs.002, and pain.002) related to credit transfers among financial institutions and payments status reports used to report failed or pending transactions. The workshop of June 19-21 discussed two new messages (pain.013, pain.014) related to creditor payment activation. In addition, one day was dedicated to answering questions from the previous workshop, and one day was devoted to an online tool provided by SWIFT to construct messages, called MyStandards. The next workshop is planned for September 2019. It will include a question and answer session and a discussion of a new set of messages: account report and account statement messages.
Pension System FST completed a study of the private pension system in Ukraine, focusing on its performance and its contribution to supplemental income in retirement for pensioners. The analysis concludes that the private pension system in Ukraine is a failed experiment. After 14 years of operation, the pension funds are characterized by poor coverage of the work force, poor investment returns, high expenses, and lack of basic disclosure of performance and fees. The report recommends that Ukraine consider moving toward simpler, more effective supplemental retirement savings mechanisms. The report will be presented to a round table of experts in late July and then distributed to a larger audience in hard copy and
electronically. Voluntary Private Pensions in Ukraine: Assessment and Recommendations; June, On May 16, FST's Natalia Goryuk participated in a roundtable 2019 meeting of the Verkhovna Rada Committee on Social Policy, Employment and Pension Provision, "Current Functioning of the Pension Fund of Ukraine." Members of Parliament, representatives of the executive authorities, academic institutions, and representatives of Human Rights organizations also participated. FST initiated a review of and commentary on the NSSMC’s proposed Pillar 2 mandatory accumulation law, as part of its routine monitoring of pension legislation.
V. PROGRESS AGAINST TARGETS This quarter FST achieved progress on four quarterly indicators (of which two are related to leasing). • Media. There were 709 media mentions about the Project and its activities from April 1 to June 30. The media mentions mainly focus on financial literacy, pension reform, access to leasing finance and financial reporting of companies. Most media mentions about USAID/FST activities are on the Internet, but the Project also had short segments (3-5 minutes) on television about e-services of the Pension Fund, on financial literacy of Ukrainians and on access to leasing. • Training. The total number of person-hours of training provided by FST and completed by management and/or staff of financial intermediaries this quarter was 1,053. The cumulative number of person-hours of U.S.-funded training provided to support financial sector development during FY 2018-19 is 7,974. • Leasing. The number of leasing contracts concluded in Q2 FY19 was 7,073, as of March 31, 2019 (the latest official FSR data available). The revised end of FY19 target for leasing contracts is
14 10,000. The value of leasing contracts concluded over Q2 FY2019 was US$353 million as of March 31, 2019 (the latest FSR data available), compared to the end of FY19 target of US$900 million. Current developments in the Ukrainian leasing market suggest that FST is likely to meet or exceed the end of FY2019 targets for both of these indicators.
Media FST project activities appeared in various media outlets 709 times in April – June 2019. This brought the total number of media placements to 1,356 over the first three quarters of FY2019.
USAID/FST Media Mentions By Region, April – June 2019 # total TV Internet Print Radio All of Ukraine 385 2 375 8 Cherkasy Region 8 8 Chernihiv Region 8 7 1 Chernivtsy Region 1 1 Dnipropetrovs'k Region 5 5 Donets'k Region 10 1 9 Ivano-Frankivs’k Region 11 11 Kharkiv Region 24 2 21 1 Kherson Region 11 1 10 Khmelnitsky Region 8 1 7 Kirovograd Region 14 11 3 Kyiv Region 6 6 Luhansk Region 3 3 Lviv Region 38 4 32 2 Mykolayiv Region 14 1 11 1 1 Odesa Region 27 5 21 1 Poltava Region 12 1 10 1 Rivne Region 8 7 1 Sumy Region 10 7 3 Ternopil Region 7 5 2 Vinnytsya Region 50 3 46 1 Volyn region 20 20 Zakarpattya Region 9 8 1 Zaporizhzhya Region 8 7 1 Zhytomyr Region 12 1 7 4 Total 709 21 649 37 2
Training FST conducted training activities in Kharkiv and Vinnytsya for SMEs on leasing finance, in cooperation with the Ukrainian Union of Lessors. The main goal of these trainings was to raise SME awareness of leasing as a financing option for various business activities, specifically, financial and operational leasing; leasing of passenger and commercial transport; leasing of infrastructure and agricultural equipment. In addition, FST conducted a training on international practices in risk assessment for leasing companies. Training participants learned about the Risk Assessment Customer Rating System and about international approaches to risk assessment. Specific risk topics included: customers and assets/ transactions; simplified approval processes; credit underwriting scoring models; and strategies for entering new markets.
15 Trainings for SMEs on Leasing, Q3, 2019
# # # # Oblast of people of men of women of person-hours Access to finance via leasing - Kharkiv 74 47 27 333 oblast Access to finance via leasing - Vinnytsia 50 30 360 oblast 80 Risk assessment in leasing – Kyiv 24 12 12 360 Total 178 109 69 1,053
FST Events There were 1099 participants in FST activities this quarter, of which 64% were women and 36% men. The total number of events held in Q3 was 15. In April 2019, FST conducted six press conferences with the Pension Fund of Ukraine (Lviv, Vinnytsya, Poltava, Kharkiv, Odesa and Kyiv) to inform Ukrainians about the new e-services of the Pension Fund of Ukraine and to increase the number of the PFU portal users. Also, in May 2019 FST conducted two trainings on Effective Communications and Data Visualization for the Pension Fund of Ukraine staff. In cooperation with the National Bank of Ukraine, FST conducted several events in support of public confidence, information disclosure, and financial literacy. These included Economic Information Days in Lviv (April 11-12, 2019), Vinnytsya (May 27-28, 2019) and Dnipro (June 6-7, 2019); the National Financial Literacy Survey Findings press conference (June 5, 2019); and the Financial Inclusion Forum (June 12, 2019). On April 5, 2019, FST supported a Deposit Guarantee Fund Award Ceremony for winners of the Financial Literacy video contest for university students, organized as part of Global Money Week.
VI. PERFORMANCE MONITORING, EVALUATION AND LEARNING FST provided support to the COR and the Mission in developing indicators for the new CDCS Results Framework. FST revised its Performance Indicator Reference Sheets for the “Inclusive, innovative finance expanded” goal on the IR and sub-IR level, and provided all the required data to USAID on data collection methodology and other specifics. FST also identified baselines and targets for the new and revised indicators. The Project updated its MELP to include all USAID indicators and report on them as required. The total number of FST indicators for reporting now is 30. (See annex C).
VII. LESSONS LEARNED There were no special lessons learned this quarter. Ukraine continues to be a difficult implementing environment but progress can be made with persistence and commitment.
VIII. ENVIRONMENTAL MONITORING FST has an approved Environmental Mitigation and Monitoring Plan (EMMP) and updated it previously in FY 2018. No mitigation measures were required this quarter.
IX. PROGRESS ON LINKS TO OTHER ACTIVITIES FST coordinates its activities with those of other USAID projects and international agencies involved in financial sector reform, economic growth, anti-corruption and related areas. It also participates in events sponsored by its counterparts and partners. During the Quarter, the Project:
16 • Met with the USAID/Energy Security Project to discuss possible collaboration on clearing and settlement in energy markets. • Continued cooperation with EU-Finstar (Financial Reporting System) and EU FINREG (private pensions) projects. • Continued to participate in the IFI working group of financial legislation (IMF, USAID, US Embassy, EU, World Bank, EBRD). • Coordinated efforts with Mastercard, VISA, the OECD, and the World Bank to organize the Financial Inclusion Forum of the NBU on June 12. • Participated with the Kiev School of Economics and the EMA association in the NBU’s Economic Information Days program. • Signed Letters of Cooperation with 9 commercial banks securing their participation in the development of the DCT, including an agreement to provide data on consumer loans according to a standard template. • Renewed cooperation with the US SEC on legal analysis (comments on draft Law #6303) and on training of regulators (Ukrainian delegation to the annual SEC seminar on regulation for emerging market countries, April 1 to 12).
X. PROGRESS ON LINKS TO HOST GOVERNMENT FST has signed Protocols of Understanding with the NBU, NSSMC, the DGF, the PFU and the Ministry of Social Policy. It maintains good working relationships with all of them. The Project also works with other GOU bodies, including the Ministry of Finance and the Ministries of the President and of the Cabinet, and with regional authorities. During the Quarter, the Project:
• Supported the inter-ministerial steering committee (NBU, NSSMC, FSR and the MOF) on the IFRS/XBRL taxonomy for financial reporting. • Continued meetings with factions of the Parliament regarding financial sector reform legislation. • Responded to numerous information requests on international experience related to pensions from the Ministry of Social Policy • Included regional authorities (oblast and city levels) in its leasing programs.
XI. PROGRESS ON INCLUSIVE DEVELOPMENT FST strives to achieve inclusive development. This quarter the Project carried out multiple activities in Number of men and women participants in the the area of financial education in the regions. The events in Q3, 2019 Project conducted information events with the Men 394 NBU in three oblasts and supported efforts by the 36% Pension Fund of Ukraine to promote its e-services in five oblasts through regional press conferences. The PFU’s eservices will benefit primarily elderly Women persons in rural areas. 705 64% FST’s goal is to have equal participation of men and women in its activities. The percentage of women participating in FST leasing training activities this quarter was 69 out of a total of 178, or 39%. In FST’s public outreach events, the percentage of women was 64% (705/1099). Overall, participation of women in both FST events and trainings was 60.6% (774/1277). FST also strives to give women prominent roles as speakers and commenters in all the events it organizes directly.
17 FST has a commitment to reach out beyond Kyiv to Ukrainian small businesses, municipal authorities and citizens. This quarter information events were held with the Pension Fund in Lviv, Vinnytsya, Poltava, Kharkiv, Odesa and Kyiv; events with the NBU in Vinnytsya, Lviv and Dnipro; and leasing trainings in Kharkiv and Vinnytsya oblasts. This reporting period FST also initiated started a program with Kharkiv Law School’s legal clinic to provide legal financial advice to lower income groups. Next quarter similar activities will come on-stream in Lviv and Chernivtsi.
XII. FINANCIAL INFORMATION DAI/FST will submit a separate financial report. It will include obligations, actual expenditures, cash flow, and pipeline projections (Burn-Rate).
XIII. SUB-AWARD DETAILS See Attachment D
XIV. ACTIVITY ADMINISTRATION
Constraints and Critical Issues As reported last quarter, the Inpredkadry Directorate of the General Directorate for Servicing Foreign Representative Offices Government Enterprise (GDIP) requested all technical assistance projects to obtain a tax code in order to continue further cooperation with GDIP after February 28, 2019. However, several donors and international implementing partners expressed concerns about the proposed procedure of registration with tax authorities, and asked the Ministry of Economic Development and Trade and the Ministry of Finance to help resolve tax registration issues. There still has not been a determination from the Ministry about the procedures to follow, and GDIP continues to provide services to the international technical assistance projects. We will continue to monitor the situation.
A. Personnel During March – April FST advertised for positions to strengthen its Communications Team. A long-term Senior Public Confidence/Communication Specialist and Assistant Communication Specialist were recruited, but FST only was able to hire an Assistant Communication Specialist (Vladyslava Volkova). Accordingly, and based on her superior performance, FST promoted Marina Kuligina, Communication Specialist, to the position of Senior Communication Specialist. She was given a new job description and increased responsibilities to manage activities to strengthen public trust in the financial sector. The FST Project also recruited an experienced local long-term Grants Manager, Olesya Dolinska, who will be responsible for managing and administering the grants under contract program (see below). She will also ensure compliance with the approved Grants Manual; USAID regulations and policies; and DAI policies and procedures, systems, and internal controls. FST is currently recruiting a local long-term Grants Officer to provide administrative support to the FST Grants Manager.
B. Contract Modifications and Amendments DAI Global and USAID/Ukraine signed an Amendment of Solicitation/Modification of Contract #06 in June 2019. The main purposes of the modification were: 1) To revise the obligated amount of the subject award, date through which the obligated USAID amount is anticipated to be sufficient to cover the expenditures under the task order, anticipated Level of Effort (LOE) and itemized budget; 2) To add Grants under Contract (GUC) to the FST SOW to achieve the objectives (DO) 1 “Corruption Reduced in Target Sectors” and (DO) 4 “Inclusive, Sustainable Market-Driven Economic Growth”, as well as special requirements such as administering of grants, Grants Manual submission for CO approval, Initial Environment Examination, etc.
18 C. Status of Deliverables/Milestones See the Deliverables Table in Annex A.
D. Summary of Future Activities and Geographical Information See the Future Activities table in Annex E.
E. Status of Deliverables/Milestones See the Deliverables Table in Annex A and Performance Data Table in Annex C.
F. Summary of Future Activities and Geographical Information See the Future Activities table in Annex E.
G. Coordination and Partnerships See parts IX and X above.
H. Summary of Construction Activities N/A - The Project does not fund construction activities
I. Summary of Geographical Information See Attachment E.
J. Schedule of Future Events See Attachment E.
19 XV. ATTACHMENTS
A. Deliverables Table
B. Project Documents and Publications
C. Performance Data Table
D. Sub-Contractor Table
E. GIS and Future Activities Table
F. Revised Implementation Plan
20 ATTACHMENT A: DELIVERABLES TABLE
FST – Deliverables Completed Q3 2019, April-June 2019
DO1: Corruption Reduced in Target Sectors
Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 3: Financial Disclosure / Transparency 1. Software development for the IFRS/XBRL Financial Apr-Jun Improved financial markets information disclosure. Official Reporting System completed. System is live starting June 19. 2019 requirement for financial entities to report using XBRL starting 1/1/2020. 2. Support the participation of NSSMC representatives in June 20-21, Implementation of global best practices in the Ukrainian international conferences/trainings (Annual IFRS Foundation 2019 financial market. Conference in London). 3. Conduct competition to select digital comparison tool (DCT) Apr-Jun Promotion of transparency, financial disclosure, banking sector subcontractor: justification of the restricted competition 2019 competitiveness. procedure, request for proposals, bidder conference. Partnership with banks on DCT methodology and participation in ratings system. 4. New methodology developed for mystery shopping survey May-Jun 80+ commercial banks surveyed to collect data (signed on bank consumer lending, vendor selected, survey fieldwork 2019 contracts) and check compliance with consumer lending law; launched. test a proposed verification methodology for the DCT. 5. “Transparent System of Certification of Stock Market Apr-Jun Draft regulations developed and approved by NSSMC Specialists and Asset Managers.” 12 working groups meetings 2019 committee. New system is a transparent, independent were held, to discuss new structure of the study, examination certification process to increase market professionalism, and certification process. introduce ethics training, and implement international standards. 6. Video on salary legalization and the payment of May 2019 Emphasizes the importance of employment in the formal contributions to the pension system. economy for future pension benefits, and the importance of paying contributions to the sustainability of the pension system.
21
DO4: Inclusive, Sustainable, Market-driven Growth
Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 1: Enabling Environment A. Legal / Regulatory 1. Memorandum to the NBU on establishing a Call Center as May 2019 Strengthened consumer protection in the banking sector part of the NBU’s new department of consumer protection. Support for the NBU to implement consumer protection activities under current legal framework. 2. Signed LoCs with Kharkiv Yaroslav Mudryi National Law May 2019 Develop capacity of civil society to address consumer financial University and “Kyiv-Mohyla Academy” National University, protection issues, provide vulnerable groups with high-quality established monitoring and evaluations systems for the legal free legal aid and financial advice. clinic pilot programs. 3. Report on consumer complaints handling procedures on the June 2019 Input report for piloting dispute resolution with the “Civil insurance market completed, with recommended approach to Liberties’” NGO. alternative dispute resolution in insurance field. B. Public Confidence 1. Public Opinion Survey Report on Financial Literacy Apr-Jun - Assessed levels of financial literacy and financial inclusion of Completed 2019 Ukrainians, based on the OECD methodology. - On April 16, FST, jointly with the NBU and Kyiv School of - The survey data permitted first ever direct cross-country Economics, held a roundtable discussion with key comparisons. stakeholders of the survey results. - Identified key elements of the national financial literacy - On June 5, FST and the NBU held a press-conference to strategy. release the survey report. Received 260 mentions in local and - Promoted the importance of financial literacy to the public national media, including 2 TV stories. and stakeholders. - On June 11, FST presented the survey results to the NBU department heads and Board at a meeting chaired by Governor Smolii. - On June 12, FST distributed the survey report at the Financial Inclusion Forum. 2. National Financial Literacy Strategy Developed Apr-Jun - A more comprehensive, prioritized approach to improve Draft national financial literacy strategy that defines objectives, 2019 financial literacy at the national level. key initiatives, implementation responsibilities, and leadership - Benchmarks to measure progress toward financial literacy. roles. The NBU presented the Strategy at the Financial - Individual financial well-being as the objective of financial Inclusion Forum, June 12. sector reforms. 3. Economic Information Days Conducted Apr-Jun Increase transparency, financial literacy and knowledge of FST, jointly with NBU and Kyiv School of Economics, 2019 consumer rights protection. conducted regional outreach program Economic Information Support NBU public communications strategy. Days in Lviv, Vinnytsya and Dnipro. 4. Videos, educational materials produced for NBU, DGF June 2019 - Educate the public about NBU mandate and functions.
22 Deliverable (Name & Description) Date Contribution to Key Objective Published 1,000 copies of NBU image brochure “National - Promote NBU strategic communication, transparency and Bank of Ukraine: Open. Independent. Modern.” openness. 5. Issued RFPs for public opinion surveys on levels of June 2019 - Promote NBU strategic communications, transparency and awareness, perceptions, sources of information, and attitudes openness. toward the NBU. - Support external communication functions of the National Bank of Ukraine. 6. Financial Inclusion Forum June 12, - Enable stakeholders to identify financial inclusion objectives, Conducted the Financial Inclusion Forum, jointly with the NBU, 2019 obstacles, and opportunities. VISA, MasterCard, and the OECD. - Highlight the importance of a coordinated strategy to expand access and usage of financial services in Ukraine. - Highlight the importance of financial inclusion to stimulate economic growth and improve quality of people’s lives. 7. Support for the proposed NBU Educational and Information Apr-Jun Increase financial literacy and financial inclusion of younger Center. 2019 Ukrainian citizens. Legal expertise to review the charter for the proposed Center completed. 8. Approval of Financial Literacy Course Apr-Jun - Increase financial literacy capacities and consumer protection Finance: What, Why, How course materials (curriculum, 2019 awareness among Ukrainian students. textbook and workbook) for 10th-11th grade students formally - Promote a more knowledgeable, empowered financial approved by the Ministry of Education. consumer. 9. Produced 4 videos on pension issues to be broadcast Aprl-May - Educate the public on pension issues. nationally as Public Service Announcements. -. 2019 - Highlight importance of contributory service period and contributions for future pensions. - Publicize PFU’s new e-services available on its PFU web- portal. - Increase sustainability of the pension system. 10. Conducted six regional press conferences with the Apr 2019 - Public awareness of on-line e-services of the PFU. Pension Fund of Ukraine to publicize its new e-services for - Efficiency and sustainability of the pension system. Ukrainians (Lviv, Vinnytsya, Poltava, Kharkiv, Odesa and Kyiv). More than 180 journalists from 24 oblasts across Ukraine participated, generating 250 media mentions, 15 TV and 2 radio stories. 11. Training on Effective Communication and Visualization for May 2019 - Increase the capacity of the PFU to communicate with the PFU public and media. FST conducted 2 two-day training sessions on strategic communications for the PFU Communication Officers from Kyiv and regions.
23 Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 2: Access to Finance 1. Risk Assessment Training for UUL. April 15-16, Increased professional capacity of leasing companies. 2019 Understanding of asset-based approach to risk measurement and its application to new market segments. 2. Regional training program for SMEs, regional economic April 2019 154 SME representatives participated in 2 regional officials on access to finance via leasing in Kharkiv and training/promotion events on Leasing Finance for SMEs. Vinnytsya. Capacity building and self-reliance for the UUL. 3. Round table “Leasing Market in Ukraine: Current Situation May 21, FST NBFI team lead and UUL director spoke at a round table and Opportunities.” 2019 organized by the Financial Club. Promoted leasing industry and the UUL. 8 media publications on leasing posted. 4. Leasing Market progress report. June 2019 The number of leasing contracts concluded by lessors last quarter (Q2 FY19) was 3,865, and the value of these leasing contracts was US$190 million (data from the FSR as of March 31, 2019). 5. Completed the Regulation on the Procedure for Accepting, Apr-Jun The Instruction was delivered to the Ministry of Energy and is Shipping, Storing, Releasing and Keeping Records of Oil and 2019 being reviewed. Changes to allow for the standardization of Oil Products by Enterprises and Organizations in Ukraine, as contracts that are an essential precondition for the exchange approved by Order of the Ministry of Energy and other trading of oil futures authorities # 281/171/578/155. 6. Contract signed with the company UkrAgroConsult to carry June 2019 The purpose of the survey is to analyze the demand for, and out the Grain Market Derivatives Survey. use of, hedging instruments by Ukrainian small and medium grain market participants. The study should also identify the major characteristics of the market and provide a profile of the participants. Framework Element 4: Financial Infrastructure 1. Report on Ukraine`s private pension system completed. May-June Analysis of the private pension system and its performance in 2019 terms of contribution to the FST objective of a fair, balanced, sustainable pension system. 2. Verkhovna Rada Committee on Social Policy, Employment May,16 Support for the institutional development of the PFU, especially and Pensions hearing on the functioning of the PFU. 2019 improved services and information for citizens 3. Comments on and proposals to the NSSMC bill on Pillar 2. May 2019 Continued monitoring of the Pillar 2 mandatory accumulation pension system as part of the overall pension system and financial architecture 4. Conducted two ISO 20022 messaging workshops with the Apr-June Development of the payments infrastructure of Ukraine. NBU. 2019 Facilitation of digital financial transactions.
24
ATTACHMENT B. PROJECT DOCUMENTS AND PUBLICATIONS
1 Analysis of prerequisites and options for the development of a Call Center by the National Bank of Ukraine, May, 2019 2 Report on financial consumer complaints handling procedures on the insurance market, June 2019 3 Presentations on consumer protection for the Economic Information Days in Zhytomyr; May 27-28, 2019 - Financial Consumer Protection: International Experience (for teachers) - Financial Consumer Protection: Ukrainian context (journalists) - How Can a Financial Consumer Protect His Rights? (for students) 4 Brochure - Q&A: Key issues to understand before signing a lease contract 5 Brochure - FAQ: What is leasing? 6 Materials of Financial Literacy Course for 10th graders (Curriculum, Textbook, Workbook) 7 Financial Literacy, Financial Inclusion and Financial Well-being in Ukraine. Survey Report 8 Presentations on Consumer Protection for NBU Economic Info Days "Economic Express" in Lviv, Vinnytsia and Dnipro 9 Presentation for press-conference on financial literacy survey results 10 Robert Drake’s presentation for Financial Inclusion Forum 11 Robert Drake’s presentation for Stakeholders’ Roundtable on Financial Literacy 12 Robert Drake’s article on financial literacy published in the Novoe Vremya, May 2019 https://biz.nv.ua/expert_author/robert-dreyk.html 13 PFU annual report in Ukrainian and English 14 Pension videos - Formal Employment is a Guarantee of Your Future Pension https://youtu.be/iKZOnFOWOyk - Advantages of Electronic Pension ID Cards https://youtu.be/rp0SzqFXDrY - Voluntary Participation in the Mandatory State Social Insurance System: How Can One Buy Lacking Years of Qualifying Service Period? https://youtu.be/agtTS4TJtX8 - What is a Qualifying Service Period? How Does It Influence Your Future Pension? https://youtu.be/oWxRkX66TTQ - How Are Old Age Pensions Granted? https://youtu.be/VjvOwbZzpUA 15 National Financial Literacy Strategy draft document 16 NBU presentation “Vision of the National Financial Literacy Strategy” 17 NBU Image Brochure “National Bank of Ukraine: Open. Independent. Modern” in English and Ukrainian https://drive.google.com/file/d/1_d03AQvIZ18FWI4up3NMM2ZRhX6d3g5E/view* 18 PFU presentation on new online services available on the PFU web-portal for Ukrainians at regional press conferences in Lviv Vinnytsya, Poltava, Kharkiv, Odesa and Kyiv* 19 Video on Financial Inclusion Forum * Limited distribution ** Not for distribution
25
ATTACHMENT C. PERFORMANCE DATA TABLE
Possible new Mission PMP indicators
Context indicators
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection DO1: Corruption Reduced in Target Sectors Sub-IR 1.2.2 Increased financial sector transparency Proportion of private and state Unit of Measure: owned companies submitting Percent DO1_ 1 annual standardized financial Source: FRS Public 0 N/A N/A 1.6% 100% Annual reports on time to the Financial Portal Reporting System Hub Definition: This is a direct indicator of increased financial transparency due to the Financial Reporting System (FRS) based on IFRS standards and implemented as a result of the U.S. Government assistance. Justification: The FRS system will include financial data on 3,000-5,000 reporting financial companies, banks, and state-owned enterprises. It is a major step forward
in standardizing financial information reporting, promoting transparency and competition, and encouraging foreign investment. The FRS collects, validates and processes financial statements created under the IFRS taxonomy in XBRL (standardized business reporting language) format. Disaggregated by: N/A Project Purpose: Create a financial sector that supports businesses of all sizes with products which serve a wide range of business needs Unit of Measure: % Source: National Overall non-banking financial 7% 10% as of 0.1 Commission for 9% 11% 8.1% 13% 15% Annual sector as % of GDP as of 2016 09.30.2017 Financial Services Regulation Definition: This indicator directly measures growth of the non-banking financial sector supporting production, consumption and capital formation affecting economic activity in Ukraine (such as finance and leasing companies, moneylenders, etc.)
Justification: Indicates changes in the volumes of assets of non-banking financial sector providing support to production, consumption, and capital formation. Disaggregated by: N/A
Person hours of training Unit of Measure: completed by management and number (of person 7,974 Annual 0.2 or staff of financial 0 0 0 790 1,530 2,230 hours) 3,622 (as of intermediaries supported by Source: project records 06.30.2019) USG assistance
Definition: This standard indicator EG4.2-4 uses the following equation to express the number of USG-supported training hours that were completed by training participants: Hours of USG supported training course x Number of people completing that training course. Inclusive financial markets are defined as supporting equitable access to essential financial services (credit, savings, insurance, leasing, remittances and payment services) of diverse providers (including banks, credit unions, NGOs, non-bank financial institutions, buyers, and suppliers) to low-incomes families and female and male-owned micro-scale enterprises/activities. Justification: Indicates expenditure of USG funds to build country capacity. This will be used to demonstrate financial inclusion and depth of access to finance. 26
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Disaggregated by: sex (male/female) Unit of Measure: million $33,736.1 $33,298.6 $35,636 Credit to private sector 0.3 USD mln as of $34,000 mln as of $35,000 as of $37,000 $40,000 Annual (context indicator) Source: NBU 12.31.2016 09.30.2017 09.30.2018 Definition: This indicator expresses the value of financial resources provided to the private sector by the banking system of Ukraine. Justification: Indicates changes in the financial support of production, consumption, and capital formation affecting economic activity in the country. The number
reported is the remaining balance as of the end of the reporting period. Disaggregated by: N/A European Business Association Unit of Measure: Score 2,85 3.07 3,03 2.85 0.4 (EBA) Investment Attractiveness from 1 to 5 (best) 2nd half 3.0 3.1 2nd half 3.2 3.25 Annual 2nd half 2017 1st half 2019 Index (context indicator) Source: EBA 2016 2018 Definition: This context indicator is the Index developed by the European Business Association which measures the confidence of businesses operating in Ukraine (1-3 negative value; 3-4 neutral value; 4-5 positive value)
Justification: Measures the level of satisfaction with the current investment climate in Ukraine Disaggregated by: Year Ratio of foreign currency 46,3% 46.1% 44,6% Unit of Measure: % 0.5 deposits to all deposits (context as of 46% as of 44% as of 40% 38% Annual Source: NBU indicator) 01.01.2017 09.01.2017 09.30.2018 Definition: This context indicator is a proportion of FCD to all deposits in the banking system of Ukraine. This indicator should decrease as confidence in local currency grows.
Justification: Allows to understand the level of confidence in the local currency of Ukraine and the level of currency substitution. Disaggregated by: N/A Unit of Measure: Score (0=the worst; 100=the best) 48.7 0.6 Financial System Score Source: World 50 52 Annual (as of 2018) Economic Forum Global Competitiveness Report
Definition: This context indicator is a composite score of the financial system based on nine sub-indexes. The score is weighted against results of all participating countries. This index is a part of the overall Global Competiveness Index 4.0, which measures national competitiveness defined as the set of institutions, policies, and factors that determine the level of productivity.
Justification: This context indicator is a score measuring the depth (the availability of credit, equity, debt, insurance and other financial products) and the stability (the mitigation of excessive risk-taking and opportunistic behavior) of the financial system. Disaggregated by: N/A Cross-Component Indicators Unit of Measure: 37,180 89,143 Person hours of US-funded Number (cumulative) Males: Males: Quarterl 0.7 training provided to support Source: Implementing 0 39,060 5,936 41,060 17,690 42,660 89,143 44,020 y financial sector development partners; reports, Females: Females: activity reporting 31,244 71,453 27
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection (as of (as of 09.30. 2017) 09.30.2018) Definition: This indicator measures the number of USG-supported training hours that were completed by training participants and is calculated by using the following equation - number of persons trained multiplied by the number of hours in the training curricula. Indicator is cumulative for each reporting period. A person should meet training completion criteria in order to be counted. Training is considered a project provided if it is conducted by the project directly, is directly
sponsored by the project, or implemented under MOU by partners engaged by the project. Justification: A measure of intensity of trainings provided by the project on financial understanding and awareness. Disaggregated by: Project sub-component, sex, topic, region of Ukraine, international, local; category of participants Unit of Measure:
Number Number of media placements 1,978 Quarterl 0.8 Source: Implementing 0 250 822 550 900 4,156 (as of 1250 produced with USG assistance (as of y partners’ reports, 06.30.2019) 09.30.2018) activity reporting Definition: Number of media placements (audio, video, text messages) produced by the project in a given time period. Each airing/printing of the same message is counted separately.
Justification: A measure of intensity of project media campaigns Disaggregated by: Project-subcomponent, type of media, region of Ukraine Sub - Component A: Increased Public Confidence in, Understanding, and Use of Financial System Unit of Measure: Score Financial consumer rights from 1 to 5 (best) compliance with relevant EU A9 Source: Implementing 0 1 1 4 1 5 Annual directives and international partners’ reports, standards activity reporting Definition: This indicator measures changes in financial consumer rights protection, which leads to increased public confidence and use of financial system in Ukraine. Assigns score to current state of legislation that implements European Union directives and international standards (higher score means better compliance of the legislation) Justification: A measure of progress towards compliance of financial consumer rights protection with EU standards and international standards. Disaggregated by: N/A Unit of Measure: score Index of financial literacy and 53 A10 Source: public opinion Bi-annual awareness as of 2018 survey Definition: This is a direct measure of public understanding of the financial system and financial services offered by the financial institutions in Ukraine Justification: A measure of progress towards increasing confidence and use of the financial system of Ukraine by public Disaggregated by: N/A Unit of Measure: 17,4% 19,8% Loans to population as % of the percentage 16,3% A11 as of August 17% as of 18% as of 19% 21% Annual total bank loans Source: National Bank 2016 09.30.2017 09.30. 2018 of Ukraine Definition: This is a direct measure of public use of the financial system and financial services offered by the Ukrainian financial sector. Justification: A measure of progress towards increasing the use of the financial system of Ukraine by public. Disaggregated by: N/A 28
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection This index Unit of Measure: Score 3,4 Trustworthiness and confidence 3,2 component 1-7 (best) WEF A12 in financial system index 3.4 WEF Report 3.5 was 3.5 N/A 3.6 N/A Annual Source: WEF Global Report (context indicator) 2017-2018 discontinue Competitiveness Index 2015-2016 d in 2018 Definition: This context indicator is a part of indexes under pillar 8 of the World Economic Forum Global Competitiveness Index. Justification: This indicator allows to receive independent measure of business confidence in financial system from an internationally trusted source. Disaggregated by: N/A Unit of Measure: Number of calls to the NBU call Number A13 6,100 N/A N/A 20,000 40,000 Annual center Source: National Bank of Ukraine Definition: This is an indicator of expanded inclusive innovative finance due to better access of population to information on innovative financial products through the establishment of a reliable information channel at the National Bank of Ukraine as a result of the U.S. Government assistance. Justification: Creation of a fully functioning call center at the National Bank of Ukraine will help (1) expand innovative financial products by providing information to
people about them and (2) protect financial sector consumers by providing advice on how to resolve their complaints and by taking action to resolve the systemic problems. Disaggregated by: N/A Unit of Measure: Number of referrals from digital Number A14 comparison tool to lending Source: Google 0 N/A N/A 14,000 600,000 Annual sources Analytics; FST Activity records Definition: The digital comparison tool (DCT) presents the cost of credit in real terms (all costs paid to the creditor) and in total terms, (all costs paid to the creditor and the third parties for services required in the credit agreement) and, hereby, enables consumer loan comparison. The tool provides technical possibility to link the interested consumer with selected creditors and documents the lead referrals.
Justification: This indicator measures the number of referrals from the DCT, which demonstrates action taken by consumers empowered to make rational decisions in selecting creditors and credit products mainly based on total costs. Disaggregated by: N/A Sub - Component B: Transformed Non-Banking Financial Sector Regulatory Environment Unit of Measure: Score (see scorecard from 1 Improvements in the securities B15 to 5) 0 1 0 3 2 4 4 Annual and capital markets legislation Source: Activity reporting Definition: This is a direct indicator of a transition to a more effective regulation of securities and capital markets and of better compliance of this regulation with international practices. This change allows to achieve higher investor confidence and protection thus better servicing the needs of Ukrainian citizens and enterprises in raising the capital. Justification: This is direct measure of the securities and capital markets regulatory environment change Disaggregated by: N/A
29
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Unit of Measure: # of Number of new products new products introduced or contracts introduced or contracts B16 developed in capital and 0 1 1 3 7 4 5 Annual developed commodity markets with the Source: Activity assistance of FST reporting Definition: This is a direct indicator of financial products introduced and contracts developed with the USG assistance. Justification: This is direct measure of results which happened due to the securities and the capital markets regulatory environment change Disaggregated by: N/A Unit of Measure: Score from 1 to 9 Ukraine’s compliance with B17 Source: NSSMC 0 0 0 3 0 6 9 Annual IOSCO principles reports, activity reporting Definition: This indicator is a direct measure of change introduced to the laws, rules and regulations, which enable compliance of the National Securities and Stock Market Commission with IOSCO principles in the area of inspection, investigation, and enforcement and allow the NSSMC to use these powers to assist its foreign counterparts. The indicator is based on a scorecard and assigns score to each change introduced, that implements IOSCO principles. Total possible points - 9 Justification: A measure of progress towards transformation of the non-bank financial sector regulatory environment Disaggregated by: N/A Unit of Measure: Score (Score card from 1 to 9) Operational and IT functions B18 Source: Technical Leads 0 5 3 9 9 0 0 Annual improvements in NSSMC and implementing partners’ reports Definition: This indicator measures the operational and IT functions improvements of NSSMC. The indicator assigns a score to improvements in the area of the NSSMC’s IT system, strengthening of information security process and infrastructure modernization. Justification: This is a measure of improved efficiency of NSSMC, which is a major partner in the legislative work directed to transformation non-banking financial sector regulatory environment. Disaggregated by: N/A Sub - Component C: Increased Access to Finance for SMEs Unit of Measure: 7,401 Number of leasing contracts 7,502 9,124 7,073 Number as of Quarterl C19 concluded during the reporting 8,500 as of 9,700 as of 10,000 as of 11,000 Source: Regulator, October 31, y period. 09.30.2017 09.30.2018 03.31.2019 surveys 2016 Definition: This is a direct indicator of increased access to finance for SMBs as a result of USG assistance expressed by a number of leasing contracts concluded within the reporting period.
Justification: Indicator of development of the leasing market and improved capacity of leasing companies to finance private sector of Ukraine including SMEs. Disaggregated by: N/A
30
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection
Unit of Measure: 288 Value of leasing contracts 421.1 789 353.1 Millions of US dollars as of Quarterl C20 concluded during the reporting 330 as of 380 as of 820 as of 900 Source: Regulator, October 31, y period. 09.30.2017 09.30.2018 03.31.2019 surveys 2016 Definition: This is a direct indicator of increased access to finance for SMBs as a result of USG assistance expressed by value of leasing contracts concluded with the reporting period.
Justification: Indicator of development of the leasing market and improved capacity of leasing companies to finance private sector of Ukraine including SMEs. Disaggregated by: N/A Unit of Measure: Score from 1 to 5 NBFI Legal and Regulatory C21 Source: Verkhovna Rada 0 0 0 2 1 4 5 Annual Environment Reform reports, activity reporting Definition: This indicator is a direct measure of NBFI legal and regulatory reform, which enable environment for the NBFI market development including increased access to finance for SMEs. Total possible points are 5.
Justification: A measure of progress towards NBFI legal and regulatory reform. Disaggregated by: N/A Sub - Component D: Increased financial inclusion and expanded digital finance solutions Unit of Measure: 44% Share of digital payments using 31,2% 39% as of D22 Percent 33% 35% as of 38% 40% Annual payment cards as of 2015 2017 Source: NBU 09.30.2018 Definition: Percent of cashless transactions by volume. The indicator of a share of cashless payments out of the total amount of operations conducted with the help of payment cards. Justification: Indicator of expanded cashless economy Disaggregated by: N/A
Unit of Measure: 2,200 Number of digital transactions 1,287 as of 2,311 as of D23 Number in millions 1,600 2,000 as of 2,500 3,000 Annual using payment cards 2015 2017 Source: NBU 09.30.2018
Definition: This is a direct indicator of increased financial inclusion and expanded digital finance solutions in Ukraine Justification: Measures the number of digital transactions in the economy that should increase due to expansion of digital financial services and increased financial
inclusion. Disaggregated by: N/A Unit of Measure: Score Improvements in the Digital from 1 to 4 (best) D24 0 1 1 2 1 3 4 Annual Finance Legislation Source: Verkhovna Rada, activity reporting Definition: This indicator measures improvements in the digital finance legislation leading to better financial inclusion of population and expanded use of digital
financial services. 31
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Justification: Improved legislative environment boosts increased financial inclusion of population and expanded use of digital financial services. Disaggregated by: N/A
Female participants in USG- Unit of Measure: assisted programs designed to Percent D25 increase access to productive Source: Financial Sector N/A N/A N/A 47% 50% Annual economic resources (assets, Transformation Activity credit, income or employment) database Definition: This indicator is a ration of women to all males and females who participate in activity interventions [GNDR-2]. Justification: This indicator measures progress towards gender inclusion in USG assistance interventions. Disaggregated by: Sex Unit of Measure: Score Source: Financial 11.2 Literacy, Financial (as of D26 OECD Financial literacy index Inclusion and N/A N/A N/A 12 Bi-annual December Financial Wellbeing in 2018) Ukraine Report of survey company Definition: This index is based on scores for financial knowledge, attitudes and behavior. The survey used to collect data is based on a questionnaire developed by the Organization for Economic Co-operation and Development / International Network on Financial Education (OECD / INFE). This allows calculation of the OECD financial literacy index and comparison with 30 other countries. The survey measures: • the overall level of financial literacy of Ukrainians, including financial knowledge, behavior and attitudes • financial product awareness and use
• levels of financial well-being • awareness of financial consumer protection rights • demographic differences, such as by income, age and gender. Justification: Financial literacy is a vital condition for promoting financial inclusion and stability. Financial education plays an important role in helping individuals to access and use the financial services. Improvement of financial literacy levels is associated with higher levels of financial inclusion. Disaggregated by: N/A Unit of Measure: Interquartile Range of the Cost Percent TBD N/A D27 of Credit for Personal N/A TBD TBD Annual Source: Mystery in June 2019 Unsecured Loans in Ukraine shopper survey Definition: This indicator measures interquartile range of the annual percentage rates (total cost of the credit including fees and third party costs) of bank personal unsecured loans. This range provides a measurement of the spread within the data set and how far apart the first and third quartile are. If the interquartile range is large this means that the middle 50% of observations are spaced wide apart and that there is a significant difference between the total annual percentage rates of different bank personal loans. Total annual percentage rate is the total cost of a credit to the consumer, including fees and third party charges (e.g., required insurance). APR provides borrowers with a bottom-line number they can use to compare the total cost of a loan. Justification: Decrease in difference between the annual percentage rates of different banks is an indication of increased competition in the consumer lending market, improved efficiency of banks and associated strong impact on public confidence in the banking system. 32
Unit of Measure and Frequency
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Disaggregated by: N/A Sub - Component E: Balanced and Sustainable Pension System Unit of Measure: Score (Score card from 1 to 5) Material improvements in the E28 Source: Technical Leads 0 5 2 0 5 0 0 Annual Pension Fund efficiency and implementing partners’ reports Definition: This is the indicator of the extent, to which the Pension Fund is able to maintain a balanced and sustainable pension system. Specifically, it demonstrates (1) to what extent the Pension Fund has modernized ICT facilities, which enable it to reduce administrative costs and provide improved services; (2) developed and started implementing action plan to improve financial sustainability of the pension system. The indicator assigns a score to improvements in the area of the Pension
Fund IT system, infrastructure modernization, development of a roadmap and implementation of the information campaign on the pension system. Justification: A direct measure of progress towards effective pension system Disaggregated by: N/A 10,8% as of March Unit of Measure: 9,8% 11,2% 2019 (PFU Percent as of March Pension expenditures ratio to as of report) E29 Source: Ministry of 11,2% 2019 (actual 11% 11% 10,5% Annual GDP (context indicator) December Final Finance of Ukraine, expenditures 2016 expenditures Pension Fund of Ukraine ) ratio to GDP data - TBD in December 2019 Definition: This is context indicator - percent of total pension fund expenditures to GDP Justification: A measure of success of reforms of the pension system; can be used to understand effectiveness of the pension system Disaggregated by: N/A Unit of Measure: Score Improvements in the pension from 1 to 4 (best) E30 0 1 1 4 1 0 0 Annual system legislation Source: Verkhovna Rada, activity reporting Definition: This indicator measures progress in pension related legislation towards more sustainable and balanced pension system Justification: A measure of the pension system improvements. Disaggregated by: N/A
33
ATTACHMENT D. SUB-CONTRACTOR TABLE
Status
End Date End
bawardTitle
Start Date Start operation)
Su
ReportingPeriod
IP(Prime) Name
SubawardeePOC
USAID Award No. Award USAID
SubawardeeName
ProgrammaticArea
Subaward Sign Date Subaward
SubawardeeAddress
Subaward Description Subaward
SubawardeeWebpage
Project / ActivityName
Subaward Amount, USD Subaward
Program Program Component/Objective
Duration covered subaward Duration this by
Location (Latitutde, longitude, Location town, (Latitutde, district and region locationeach of for district
Implementation Suite 7, the of the Financial DOI: Corruption Cubes Offices, Reporting System 4. Improve disclosure, Financial Sector 19- Reduced in Target Conor Beacon South (FRS), training, Oct 2018 19- AID-121-BC- SUBK-KYV- 15-Jul- Kyiv, financial and https://www.vizo Firm Fixed Transformation (FST) VIZOR LIMITED Oct- $524,759.00 Sectors. A. Creation Ongoing Crowley, Quarter, documentation, - July Oct-
17-00001 18-0177 19 Ukraine transactional reporting rsoftware.com/ Price (FFP) Activity in Ukraine 18 of Fair, Transparent CEO Sandyford, system 2019 18 systems Markets Dublin 18, certification, and Ireland maintenance and support services.
Society for Development of SUBCONTR Worldwide DO4: Inclusive, Avenue Adèle ISO 20022 ACT No. Financial Sector Interbank 30- Sustainable, Market- 6. Implementation of Ilona Pouna AID-121-BC- 14- Kyiv, https://www.swif 1, 1310 La standard message Firm Fixed Feb – Sep 22- 1002990- Transformation (FST) Financial Sep- $247,170.00 driven Growth. A. ISO 20022 for payment Ongoing Senior 17-00001 Feb-19 Ukraine t.com/ Hulpe, Belgium specifications Price (FFP) 2019 Feb-19 19S-31752- Activity in Ukraine Telecommunicati 19 Access to system Account Tel: + 32 2 655 relevant for the 00 on SCRL, Finance/NBFIs Director, 3111 NBU’s SEP S.W.I.F.T. SCRL CEE payment system Analysis & advice Indefinite on the status & 1002990- 12. Assisst with design Quantity DO4: Inclusive, operations of the IQC-17S- Financial Sector 15- 31- and development of Michael 1775 Tysons Contract 12- AID-121-BC- Ernst & Young Kyiv, Sustainable, Market- https://www.ey.c NBU Money March - 27368-00, Transformation (FST) Mar- May- $30,516.60 the NBU Information Ongoing Beaulieu, Blvd. Tysons, (IQC), Apr- 17-00001 LLP Ukraine driven Growth. D om/ Museum & May 2019 Task Order Activity in Ukraine 19 19 and Education Center Manager VA 22102, USA Firm Fixed 19 Financial Inclusion. Educational & #6 for Financial Literacy Price Task Informational Order Center
FST Quartely Report Table 2 Subawards Apr_June 2019.xlsx
34
ATTACHMENT E: GIS AND FUTURE ACTIVITIES TABLE
FST – Projected Q4 Activities, July-September 2019
DO1: Corruption Reduced in Target Sectors
Activity/Description Partners Date Location Objective Framework Element 3: Financial Disclosure / Transparency 1. Assistance to the NSSMC to inform/educate NSSMC July-Sep Kyiv Support the Financial Reporting System to reporting entities on the Financial Reporting 2019 improve information disclosure, increase System. transparency. 2. Transfer ownership of the Financial Reporting NSSMC Sep 2019 Kyiv Commit the financial sector regulators to the System software to the NSSMC. and other reporting system for standardizing financial financial information, promote transparency, and regulators encourage foreign investment. 3. Implement the DCT. Banks, Sep 2019 Kyiv Increased competition among banks; fair loan NBU, future comparisons based on best international vendor standards; empowerment of consumers to make rational choices in selecting credit products. 4. Report and public presentation on mystery Banks, Sep 2019 Kyiv Improved financial information disclosure, shopping survey of banks and consumer Marketing compliance with consumer lending law. lending. Agency 5. “Transparent System of Certification of Stock NSSMC, July-Sep Kyiv Development of the curriculum and support on Market Specialists and Asset Managers” CFA 2019 tests database development. implementation. Ukraine 6. Improvement of AML data analytics within the NBU, STTA July-Dec Kyiv Needs assessment report on AML data NBU. 2019 analytics to identify possible IT solutions. 7. Conduct AML training program, jointly with NBU, STTA July-Dec Kyiv Training of AML chief officers of banks on best the NBU, for AML chief officers of banks. 2019 practices of KYC and CDD. 8. Expert support of the AML draft law during its NBU, MOF, Sept-Dec Kyiv Harmonization of the Anti-money Laundering readings at the Parliament. FIU, STTA 2019 Law with the requirements of key international standards, including application of a risk-based approach in customer due diligence. 9. BEPS: NBU, Aug-Dec Kyiv Implementation of the OECD/G20 Action Plan - Support the NBU on the exchange of STTA, EY 2019 on Base Erosion and Profit Shifting (BEPS), to information among relevant authorities for eliminate tax strategies that exploit gaps and purposes of banking supervision. mismatches in rules to shift profits to low or no- tax locations.
35 Activity/Description Partners Date Location Objective - Support the interagency working group on the improvement of information exchange among Ukrainian authorities. 10. Training and workshops to develop ethical CFA July-Dec Kyiv Ethical conduct for their professional activities. standards for the financial industry. 2019 11. Workshops on financial topics for non- NABU, July-Dec. Kyiv Understanding financial manipulations, specialists from government agencies. others 2019 fraudulent practices.
DO4: Inclusive, Sustainable, Market-driven Growth
Activity/Description Partners Date Location Objective Framework Element 1: Enabling Environment A. Legal / Regulatory 1. Assist the NBU to establish the Call Center NBU Jul-Sep Kyiv - Strengthen consumer protection in the banking and develop consumer protection regulations. 2019 sector. - Support the NBU in consumer protection activities under current legal framework. 2. Launch pilot programs with Chernivtsi Legal Sep 2019 Chernivtsi Develop capacity of civil society in consumer National University and Ukrainian Catholic Clinics Lviv protection, provide people with high-quality free University in Lviv. legal aid and financial knowledge. 3. Present report on financial consumer “Civil Aug-Sep Kyiv Enhance consumer complaints handling complaints handling procedures, and pilot Liberties” 2019 procedures in insurance industry, provide alternative dispute resolution for insurance by a NGO, consumers of insurance services with fair, fast NGO. Insurance and free mechanism for resolving disputes. companies 4. Analysis of real estate construction financing NSSMC, July-Sept Kyiv Identification of consumer abuse issues; policy schemes. NBU, 2019 recommendations to promote fair market Associations conduct. B. Public Confidence 1. Conduct NBU's Economic Information Days in NBU, Kyiv Sep 2019 Odesa, Raise financial literacy and consumer protection in the regions. School of Ternopil rights awareness among Ukrainian citizens, Economics support communications strategy of the NBU. 2. Conduct a public opinion survey on deposit DGF Sep 2019 nationwide - Assess awareness of Ukrainian citizens about insurance system. various aspects of the deposit guarantee system. - Identify additional information needs regarding the guarantee system.
36 Activity/Description Partners Date Location Objective 3. Assist the NBU with implementation of the NBU Jul-Sep Kyiv Coordinate stakeholders’ efforts to advance National Financial Literacy Strategy. 2019 financial literacy at the national level 4. Conduct and analyze surveys on levels of NBU Jul-Sep nationwide - Promote the NBU’s strategic communications, awareness, attitudes, sources of information, 2019 transparency and openness. about the NBU. - Support external communication functions of the National Bank of Ukraine. 5. Conduct training for DGF on Internet DGF Aug 2019 Kyiv - Increase the DGF communication and Marketing Instruments. outreach capacities. - Raise awareness about the deposit insurance system. 6. Develop and promote an on-line multimedia DGF Aug 2019 Kyiv Improve household personal finance, increase interactive course on financial literacy financial literacy Issue an RFP on development of the on-line multimedia interactive course on financial literacy. 7. Develop and produce videos, education NBU, DGF, Jul-Sep Kyiv Educate and raise awareness of the general materials for the NBU, DGF, PFU. PFU 2019 public about financial and pension issues 8. Implement a ToT workshop on updated MinEdu, Aug 2019 Lviv - Raise levels of financial literacy and consumer Financial Literacy Course materials for the NBU, DGF, protection awareness among youth Ministry of Education. Banking - Promote a more knowledgeable, empowered University financial consumer 9. Support the NBU’s proposed Educational and NBU July 2019 Kyiv Help increase financial literacy and financial Information Center for Financial Literacy. inclusion of Ukrainian citizens. 10. Develop materials for the e-textbook on MinEdu, Aug-Sept Kyiv - Raise levels of financial literacy and consumer Financial Literacy NBU, 2019 protection awareness among youth Banking - Promote a more knowledgeable, empowered University financial consumer Framework Element 2: Access to Finance 1. Present the Report on Leasing Opportunities Sep 2019 Kyiv To facilitate entry by leasing companies to the in the Health Care/Medical Equipment sector. medical equipment market. Focus on clinics, small businesses. 2. Present the UUL Strategic Plan and Road UUL July 2019 Kyiv To ensure sustainability of the Association on a Map to UUL members. long-term basis for development of the leasing market. 3. Participate at Agroport South Trade Fair, UUL, July 18-20, Kherson Promote leasing as a reliable tool for SME Kherson. Leasing 2019 access to finance. Companies 4. Continuing work on the Grain Market UkrAgroCo Jul-Sep Kyiv Grain commodity market status report, Derivatives Survey. nsult and 2019 promotion of hedging and other risk
37 Activity/Description Partners Date Location Objective market management practices among small/medium participants producers. 5. Support exchanges and other stakeholders in Ukrainian Jul-Sep Kyiv Development of new regulations for oil products developing market standards for new financial Energy 2019 and introduction of new financial instrument in instruments; trading, clearing and settlement Exchange, the commodity market systems; price discovery mechanisms Oil and Gas Association 6. Trainings for market participants and private Ukrainian Jul-Sep Kyiv Presentation and trainings for oil and gas stakeholders on specifics of commodity trading Energy 2019 market participants on specifics of new Exchange, regulations for oil products Market participants 7. Development of the investor education NSSMC, Jul-Sep Kyiv Develop more professional financial market program for the NSSMC STTA 2019 participants, increase ethical standards. Framework Element 4: Financial Infrastructure 1. Assistance to the NBU on the implementation NBU, STTA Apr-Dec Kyiv Strengthen consumer protection in the banking of consumer protection activities. 2019 sector. 2. Continue to monitor legislation on Pillar 2 and Jul-Aug Kyiv Stability of the pension system, risks from 3. 2019 premature implementation of the accumulation pension system (Pillar 2). 3. Expert roundtable discussion of the report on MSP, PFU, July 2019 Kyiv Complete the comprehensive analysis of Voluntary Private Pensions in Ukraine. Public NSSMC, Ukraine’s pension system. distribution of the report. FSR Recommendations to improve system of private retirement savings. 4. Report and presentation of the survey of Banks, EY Sep 2019 Kyiv Promote understanding among banks, FinTech, banks and FinTech companies on digital facilitate investment in digital finance solutions. finance. 5. Additional workshops on ISO 20022 on SWIFT, Sep 2019 Kyiv Modernize payments technology for digital payments messaging. NBU finance.
38
ATTACHMENT F: REVISED IMPLEMENTATION PLAN
Implementation Plan July – December 2019 █ Change in Activity █ Grants Component
DO1: Corruption Reduced in Target Sectors
Activity Counterpart Jul Aug Sep Oct Nov Dec Deliverable A. Creation of Fair, Transparent Markets Information exchange between state authorities for the 1. Support in implementation of BEPS principles NBU, MinFin purposes of banking supervision and detection of banks related parties improved 2. Expert support for the AML law in the Comments to Rada Banking and Finance Committee NBU, Minfin, Rada Commitee Parliament submitted Training of AML chief officers of banks on best practices of 2. AML training program for banks NBU, banks, STTA KYC and CDD delivered; materials developed 3. Improvement of AML data analytics within the Needs assessment report to identify IT solutions submitted NBU, STTA NBU to the NBU Trainings on FRS for reporting entities and key stakeholders 4. Improve disclosure, financial and transactional delivered NSSMC, NBU, Minfin, FSR reporting systems Educational web-site developed FRS system ownership rights transferred to the NSSMC 5. Develop and promote Digital Comparison Tool Comparison methodology, educational materials and on-line Selected vendor, banks (DCT) for retail loans loan comparison tables developed; public launch held B. Education, Training, Communication on
Corruption 1. New program of examination/certification of New training curriculum approved by the NSSMC; NSSMC, CFA Society financial analysts NSSMC Regulations examination/certification approved 2. Training on financial sector issues for the NABU Training conducted, materials developed National Anti-Corruption Bureau of Ukraine 3. Trainings and workshops for financial industry NSSMC, CFA Training conducted, materials developed representatives on ethical dilemmas 4. Training on disclosure forms, conflict of interest, Postponed until new management in place. Moved to first DGF and ethical issues for DGF quarter of 2019-2020, if agreed.
39
DO4: Inclusive, Sustainable, Market-driven Growth
Activity Counterpart Jul Aug Sep Oct Nov Dec Deliverable A. Access to Finance/NBFIs 1. Support for the NBU on harmonization of NBFI Comments to draft laws submitted to the NBU or Rada regulations with EU Directives, Road map, and NBU Banking and Finance Committee; 2-3 roundtables held public outreach 2. Analysis of the real estate construction financing Report with consumer abuse issues identified and policy NSSMC, Associations schemes recommendations prepared 3. Analysis of consumer protection in the payday Materials (brochures, calculator) for consumers NBU, FSR, Associations (HCST) lending market developed and published NBU, FSR, Rada Banking and 4. Legal advice on financial leasing, microfinance, Draft amendments/comments to the Laws submitted to Finance Committee and other NBFI related legislation the NBU, FSR or Rada Banking and Finance Committee Associations 5. Analysis and evaluation of opportunities for 2 Financial guarantees/loans for LCs designed, draft funding sources of SMEs, Lessors and other NBFI, UUL, LCs regulation microfinance 6. Implementation of ISO 20022 for payment NBU, SWIFT, Banks 11 Payments messages developed, workshops held system 7. Capacity building of Association “Union of UUL Strategic Plan approved by UUL members UUL, LCs Ukrainian Lessors” Trainings provided 8. Evaluation of Ukrainian leasing market UUL, LCs Report prepared; presentation held opportunities in healthcare segment B. Capital and Commodity Markets 1. Legal and regulatory advice to NSSMC, ministries NSSMC, Ministry of Energy, 2 Analyses of draft Laws with recommendations (IOSCO, IOPS Principles and EU Directives) Ministry of Agriculture 2. Survey on knowledge, awareness, and behavior Market participants, CFTC, regarding commodity futures, risk practices in NSSMC, Ministry of Report on the Agricultural Survey prepared; and public agricultural sector to identify gaps, market Agriculture presentation held opportunities 3. Develop NSSMC/NBU regulatory capacity in NSSMC, NBU, US SEC, CFTC, CFTC training; conference on capital and commodity capital and commodity markets; training for market market participants markets participants on specifics of commodity training Changes to the Regulation on recordkeeping of oil products approved by the Ministry of Energy; public 4. Support the reform of trading, clearing and USAID ESP, NSSMC, NBU, presentation settlement systems in capital and commodity Ministry of Energy, Expert recommendations regarding clearing solutions for markets Associations the energy market; Trainings on clearing and settlement issues
40 Activity Counterpart Jul Aug Sep Oct Nov Dec Deliverable 5. Research and analysis of capital market Report with recommendations on access to UAH Market participants, US SEC instruments to facilitate UAH financing financing through capital markets 6. Analysis of Ukraine’s private pension system in Report on the private pension system; various MSP, PFU, NSSMC, FSR comparative international perspective recommendations 7. Analysis of financial instruments for pension Report on financial instruments for pension investment NSSMC, FSR, market funds (inflation-linked bonds and infrastructure securities) C. Public Confidence / Communication 1. Support UUL International Conference “Funding, UUL, LCs Conference for about 100 participants, publications Sources and Options in Leasing Industry”
2. Develop educational materials on leasing UUL, LCs 4 articles, 5 videos, hand outs
3. Conduct Survey on Deposit Insurance System DGF Survey report produced and presented to the public
4. Develop National Financial Literacy Strategy NBU Strategy, 2 study tours
5. Conduct surveys on levels of awareness, perceptions, sources of information, and attitudes NBU Survey reports produced and presented to the NBU toward the NBU and the NBU brand 6. Develop and produce videos, education materials NBU, DGF, PFU 3-5 Video spots produced and posted/broadcast for NBU, DGF, PFU 7. Develop and promote on-line multimedia On-line multimedia course developed, public DGF interactive course on financial literacy presentations conducted D. Financial Inclusion VRU, Supreme Court of 1. Financial Consumer Protection legislation Ukraine, Cabinet of Ministers Informational campaigns held (in particular in regions); 4 promotion (the draft Laws 8055 and 2456-д) of Ukraine, Ministry of Justice Workshops / events held of Ukraine 2. Analysis of financial consumer complaints Input report for piloting disputes resolution at the NGO NGO handling/dispute resolution procedures level; results presented Trainings for NBU staff; 3. Supporting NBU in consumer protection Changes to NBU Regulations; NBU, Banks, Fin. companies activities Round tables; Call-center IT options analysis Survey results presented; 4. Mystery Shopping Surveys in Consumer Lending NBU, Banks, Fin. companies NBU of letters to banks on compliance with the Consumer Lending Law
41 Activity Counterpart Jul Aug Sep Oct Nov Dec Deliverable 5. Assist with design and development of the NBU Information and Education Center for Financial NBU Concept for the Center developed Literacy Financial Literacy Course taught at schools; 6. Outreach efforts to students on finance Banking University, DGF, NBU E-textbook developed 7. Messaging application for PFU outreach to PFU PFU developing application on its own; FST will promote. workforce, pensioners 8. Analysis of worker remittances NBU, STTA Report with recommendations 9. Analysis of diaspora investment STTA Report with recommendations E. Grants Under Contract (GUC)
Component 1. Develop and approve GUC Manual DAI/W, USAID Grants Under Contract Manual approved and included in FOM as Chapter 12 2. Develop and approve grantee selection criteria DAI/W, USAID Grantee selection criteria approved for RFA for sole source and competitive grants 3. Conduct training on grant management Grant management training held 4. Develop grant application and grant agreement DAI/W Grant application and grant agreement packages packages (templates, instructions) 5. Negotiate, approve and sign grant agreements Potential grantees/partners with core partners (non-competitive Grant agreements negotiated grants/restricted eligibility) 6. Launch RFA Potential grantees RFA launched 7. Conduct grant orientation meetings for new Potential grantees Orientation meetings on grant management and reporting grantees conducted for ne grantees
42