Financial Sector Transformation Project Quarterly Progress Performance Report
Financial Sector Transformation (FST) Activity in Ukraine FY 2020 Q 1 PROGRESS REPORT (01 October 2019 – 31 December 2019)
Award No: EEM-E-00-00002-00/AID-121-BC-17-00001
Prepared for USAID/Ukraine COR: Andriy Nesterenko C/O American Embassy 4 Igor Sikorsky St, Kyiv, Ukraine 04112
Prepared by DAI Global LLC COP Robert Bond 7600 Wisconsin Avenue, Suite 200 Bethesda, MD 20814 United States Table of Contents
I. ACRONYMS AND ABBREVIATIONS 3 II. CONTEXT UPDATE 4 III. EXECUTIVE SUMMARY 4 IV. KEY NARRATIVE ACHIEVEMENT 7 V. PROGRESS AGAINST TARGETS 16 VI. PERFORMANCE MONITORING, EVALUATION AND LEARNING 18 VII. LESSONS LEARNED 18 VIII. ENVIRONMENTAL MONITORING 19 IX. PROGRESS ON LINKS TO OTHER ACTIVITIES 19 X. PROGRESS ON LINKS TO HOST GOVERNMENT 20 XI. PROGRESS ON INCLUSIVE DEVELOPMENT 20 XII. FINANCIAL INFORMATION 20 XIII. SUB-AWARD DETAILS 20 XIV. ACTIVITY ADMINISTRATION 21 XV. ATTACHMENTS 21 ATTACHMENT A. STATUS OF DELIVERABLES 22 ATTACHMENT B. FUTURE EVENTS AND GEOGRAPHIC DETAILS 24 ATTACHMENT C. PROJECT DOCUMENTS AND PUBLICATIONS 28 ATTACHMENT D. PERFORMANCE DATA TABLE 29 ATTACHMENT E. SUB-AWARDS TABLE 38 ATTACHMENT F. SUMMARY GRANT AWARDS TABLE 40 ATTACHMENT G. IMPLEMENTATION PLAN OCTOBER 2019 – DECEMBER 2020, REVISED 41
2 I. ACRONYMS AND ABBREVIATIONS AML Anti-Money Laundering BEPS Base Erosion and Profit Shifting CDCS Country Development Cooperation Strategy CFA Chartered Financial Analyst DCT Digital Comparison Tool DGF Deposit Guarantee Fund EBA European Business Association EBRD European Bank for Reconstruction and Development EU European Union FATF Financial Action Task Force FRS Financial Reporting System FSR National Commission for Regulation of Financial Services Markets GDIP General Directorate for Servicing Foreign Representative Offices GOU Government of Ukraine GUC Grants under contract ICT Information and Communication Technologies IFI International Financial Institutions IFRS International Financial Reporting Standards IMF International Monetary Fund IOSCO International Organization of Securities Commissions iXBRL Inline eXtensible Business Reporting Language KPI Key Performance Indicator MOU Memorandum of Understanding MP Member of Parliament NBFI Non-Bank Financial Institution NBU National Bank of Ukraine NGO Non-governmental Organization NPF Non-state Pension Fund NSSMC National Securities and Stock Market Commission of Ukraine OECD Organization for Economic Cooperation and Development OECD/INFE Organization for Economic Co-operation and Development/International Network on Financial Education P2P Lending Peer-to-Peer Lending PFU Pension Fund of Ukraine PSA Public Service Announcement RFA Request for Application RFP Request for Proposal SEP System of Electronic Payments SME Small and medium enterprise SOE State-owned enterprise US CFTC U.S. Commodity Futures Trading Commission US SEC U.S. Securities and Exchange Commission UUL Ukrainian Union of Lessors XBRL eXtensible Business Reporting Language
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. During the first quarter of this fiscal year, there were no major changes in the war with Russia in the Donbas region, except for an exchange of prisoners between the two countries in late December. During 2019, the Government of Ukraine reports that 97 Ukrainian soldiers were killed in the Donbas conflict, mainly from sniper fire, and an additional 499 were wounded.
President Zelensky has made anti-corruption a theme of his government. During the first quarter, a number of anti-corruption laws were enacted (parliamentary immunity, asset disclosures by public authorities, judicial reform, and electoral laws) and some investigations were announced. Nevertheless, there were no significant arrests or convictions of those accused of corruption, and reform of the court system has been slow. Judicial action against, or efforts to recover assets from, those who engaged in financial fraud or failed to repay related party loans has been almost non- existent. A continuing controversy is the demand for compensation for the nationalization of Privatbank (December 2016) by its former owner, Ihor Kolomoisky.
An IMF technical mission visited Ukraine in President Zelensky signed AML No. 361-ІХ September to discuss a $6 billion Extended Fund on December 27, 2019 Facility, and the IMF in Washington announced in December that an agreement had been reached “in principle.” Nevertheless, some issues remain: the independence of the NBU; the nationalization of Privatbank; the need for Ukraine to prosecute those who committed financial crimes; and the need to redouble efforts to recover stolen assets. During the quarter, economic growth was about 3.5% (the GOU target is 5-7%/year), inflation slowed to about 5%, and the hryvnia continued to strengthen vis-à-vis the US$, ending the year at UAH 24:$1, representing a 14% appreciation for the calendar year. Ukraine’s per capita income (purchasing power parity) increased to $9,283. Central Bank reserves were about $24 billion.
At the Project level, the Rada passed an anti-money laundering law (AML) prepared with significant FST assistance. The new law will bring Ukraine’s legislation into compliance with European and international standards. Similarly, the Rada passed on first reading two other FST priority laws, one that will create a regulated capital and commodity market and one that will reform the tax system to combat base erosion and profit shifting (BEPS) as a means to evade taxation. It is expected that these two laws will be adopted in February -March 2020.
III. EXECUTIVE SUMMARY
The FST project progressed significantly on transforming Ukraine’s financial sector in Q1 of FY 2019-20. Legislative reform continued with the enactment of one FST priority law and passage on first reading of two others. The Project became actively engaged with the NBU in crafting the new legal/regulatory regime for the non-bank financial institutions, required by the passage of the Split Law in September 2019. FST initiated the development of Liga.Money to bring competition and disclosure to the consumer lending market, with an anticipated public launch in March 2020.
4 The Project formally transferred the iXBRL software for financial reporting to the Securities Commission, and completed the first phase of the ISO 20022 message development with the NBU. Activities in support of financial consumer protection, leasing, and public confidence building continued on pace.
A. Narrative Highlights
On December 6, the Rada enacted a new anti-money laundering law (AML) which transforms Ukraine’s framework for preventing money laundering and is a major leap forward in achieving FST’s anti-corruption objective. The AML Law adopts a radically new approach to combatting money laundering in Ukraine, which cost the nation an estimated $12.3 billion in 2018. Instead of a rules-oriented, “check the box” approach, the new law requires an in-depth assessment of AML risks, focuses on identifying ultimate beneficial owners of financial transactions, and imposes significant fines: FST and its international consultants began working with the NBU and the Ministry of Finance on the draft law in 2017 and supported it throughout the legislative process.
Two additional FST priority laws passed first reading in December. On December 3, a second major FST anti-corruption objective was achieved with the passage of the BEPS Law on tax reform. This law will combat corruption through limiting profit shifting by Ukrainian companies to lower tax countries. FST and its subcontractor EY drafted the original BEPS law and supported its adoption by the Rada with commentary and legal drafting advice. On December 19, the Rada approved the Regulated Markets Law, which establishes the basis for new The Draft Regulated Markets Law (No.2284) passed first financial instruments (derivatives) by reading; Kyiv, December 19, 2019 reforming the legal/regulatory framework for capital and commodities markets. This is an important law for FST to achieve its economic growth objectives since it is critical to promote investment and access to finance. FST played a direct role in the Regulated Markets Law – drafting, commenting, revising, negotiating with regulators, and promoting the law to market participants. The regulated markets law is essential to the development of capital markets and risk management practices in Ukraine. It is anticipated that both laws will be enacted by the Rada in January/February 2020.
FST agreed with the NBU to provide advice and support on implementing a new legal/regulatory framework for NBFIs. FST provided comments and recommendations on the Law on Financial Services and began to develop policy (concept) papers to guide regulation of leasing companies, finance companies (including ‘payday’ lenders), factoring companies, and pawn shops. This activity is important to spurring the growth of the non-banking sector and to protecting the rights of users of financial services.
FST executed a subcontract with Liga.Net, a private Ukrainian media company, to develop, promote and operate a digital comparison tool to introduce clear, accurate, and reliable information on retail bank products for consumers. Called Liga.Money, this consumer finance disclosure and competition initiative is being implemented with the cooperation of ten leading Ukrainian banks. FST is harnessing the power of these banks to provide accurate information on
5 loan rates and fees to consumers, enabling the calculation of real effective interest rates, and to sustain the initiative through the payment of subscription and lead referral fees.
FST signed three grant awards during the quarter. These were with the Ukrainian Union of Lessors (UUL) to support leasing finance, with the Ukrainian Catholic University in Lviv for legal aid to vulnerable consumers of financial services, and with the NGO Civil Liberties for dispute resolution in the insurance sector. Five other grants are at an advanced stage of negotiation and will be signed in January 2020.
Two workshops were held with the NBU on ISO 20022 messages for the System of Electronic Payments (SEP), which will modernize Ukraine’s payments system and lower transaction costs. FST also supported two FinTech events to promote the movement toward cashless transactions, the adoption of new regulations to promote innovation, and the adoption of new technology by banks.
FST began transitioning its support for the leasing industry to a grants approach which will make support for leasing in Ukraine more self-reliant. FST’s grant to the UUL focuses on capacity building and increased self-reliance of the association to conduct activities in support of its members. During the quarter, FST published a market survey of opportunities in medical equipment leasing in Ukraine, and with the UUL held a roundtable discussion with health care and medical equipment companies.
B. Quantitative Highlights
FST monitors the achievement of Project objectives using the indicators in its Monitoring, Evaluation and Learning Plan (Annex B). FST compiles and analyzes quantitative data organized by standard performance plan indicators, context indicators, and the Project performance indicators. The quantitative highlights during this quarter were: • Media. There were 222 media mentions about the Project and its activities from October 1 to December 31. Media placements were on financial consumer protection, anti-corruption, the III Kharkiv International Legal Forum; Kharkiv, NBFI regulatory environment, increased access to September 24-28, 2019 finance for SMEs, digital finance, and the introduction of Liga.Money.
• Leasing. The latest official FSR data available for the number of leasing contracts concluded is 13,554 as of 09.30.2019. This exceeds the FST end of FY19 target for leasing contracts of 10,000. The value of leasing contracts concluded was US$919.5 million as of 09.30.2019, compared to the FST end of FY19 target of US$900 million.
• Ratio of foreign currency deposits to all deposits. According to NBU data, hryvnia and foreign currency deposits of individuals and businesses grew in 2019. The ratio of foreign currency deposits to all deposits as of September 2019 decreased to 40.3%, which is close to FST’s FY2018 target of 40%.
6 • Loans to population as % of the total bank loans. The share of loans to the population (consumers) as a percentage of the total bank loans was 24.6% at the end of September 2019, which surpasses the FY2019 target of 19%.
• European Business Association Investment Attractiveness Index. This measure of business confidence increased +0.10 points in the 2nd half of 2019 to 2.95, up from 2.85 in the 1st half of 2019. This indicator is measured on a scale of 1 to 5 (1-3 negative value; 3-4 neutral value; 4-5 positive value).
C. Activity Administration The FST project had no administrative issues in the quarter.
D. Subsequent Reporting Period FST’s fifteen month Implementation Plan (October 2019 – December 2020) has been updated and is provided in Annex G, with specific activities, approximate dates and locations, deliverables, and anticipated impact on and relevance to Project objectives.
IV. KEY NARRATIVE ACHIEVEMENT
1. LEGAL AND REGULATORY REFORM
The FST project continued to take advantage of a favorable environment for financial sector legislative reform. One FST priority law was enacted, and there was positive movement on two others. FST also launched its legal/regulatory implementation support of the NBU as the new regulator of the NBFI sector, beginning in July 2020.
Anti-money Laundering
On December 6, 2019, the Verkhovna Rada approved the new Anti-Money Laundering (AML) Law. The Law was signed by the President and promulgated officially just before the New Year. It will come into force on April 28, 2020.
The AML Law adopts a radically new approach to combatting money laundering in Ukraine. Instead of a rules-oriented, “check the box” approach, the law requires an in-depth assessment of AML risks. Financial institutions and advisers must take adequate and proportionate measures to deal with higher-risk clients (e.g., PEPS, or politically exposed persons) and report suspicious transactions to the Financial Monitoring Unit. For example, the new rules for transactions reporting will require a focus on complex or unusual transactions rather than a conveyor belt approach of reporting all transactions above a certain threshold. There is also a requirement for better identification of clients. This, in turn, will lead to faster and more efficient investigation of crimes, including corruption-related ones. Fines for violations have increased substantially in the new law.
The USAID Financial Sector Transformation (USAID/FST) project provided legal and technical advice at every step of the process, from conceptualization to drafting assistance and comments, and advocacy of this transformative piece of legislation.
In the first half of 2020, FST will engage STTAs to assist the NBU in updating its ML/TF regulations to address risk-oriented approach and other aspects of the new Law.
7 BEPS
In December 2019, FST and its subcontractor, Ernst and Young, assisted Parliament’s Banking and Finance Committee in finalizing the legislation aiming to implement the OECD Action Plan on Base Erosion and Profit Shifting (No.1210). The Law is expected to be passed in early 2020.
Once passed, BEPS will improve the legislative framework through removing gaps in the international tax regulation that currently exist and that allow companies to “conceal” their profits through moving them into low-tax countries. In particular, BEPS law is to implement 9 out of 15 actions envisaged by the OECD Action Plan on Base Erosion and Profit Shifting, including rules on related parties’ and international group taxation.
FST will continue assisting the Parliament’s Committee to finalize the text of the Law.
Regulated Markets and Derivatives Law
In October 2019, the draft Regulated Markets and Derivatives Law was registered (No.2284) with the Parliament. It passed first reading in December 2019. Its adoption is a necessary precondition for the development of capital markets in Ukraine and creation of financial instruments that will enable risk management practices for businesses. This law is also critically important for the USAID Energy Security Project’s efforts to initiate energy trading.
In November-December, FST worked with the Securities Commission, the National Bank, and the Energy Regulator (NERUC) to forge consensus on language clarifying their respective roles in market regulation. FST lawyers then drafted appropriate amendments to the law reflecting this consensus. Verkhovna Rada Committee hearings on the Once the Law is passed, it will change the existing Draft Regulated Markets Law (No.2284); Kyiv, regulatory landscape for capital and commodity November 26, 2019 markets in Ukraine. In particular, commodity exchanges will be brought under the regulation of the NSSMC, with the rules applicable to spot commodity trading on exchanges being largely similar to the rules applicable to securities and derivatives exchange trading. The Law will also introduce new definitions of derivatives and various concepts relevant to their trading and settlement, all aiming to launch the derivatives market in Ukraine in compliance with international best practices.
FST will continue assisting the NSSMC and Parliament’s Committee in finalization of the text of the Law. FST will also consider assisting the NSSMC in public promotion of the Law.
Split Law implementation
A law (called “Split”) overhauling the regulatory landscape of non-bank financial services markets was passed by the Parliament in September 2019. It will come into force on July 1, 2020.
In November 2019, the NBU requested FST assistance with preparing policy papers on the regulation of individual segments of the NBFI market, namely: leasing companies; financial companies involved in lending (mostly high cost short-term loans to individuals); financial
8 companies involved in factoring; and pawnshops. FST will research and develop these policy papers in January-February 2020. Once the NBU approves the draft papers, it plans to discuss them with the relevant NBFI associations, companies, consumer groups, international agencies and other stakeholders in the spring of 2020. Following that public comment period, FST will assist in commenting/drafting specific regulation and/or legislation. Additional legal and regulatory assistance will be provided to the two financial sector regulators after July 1, 2020, to the end of the Project.
NSSMC Powers Law
The draft NSSMC Powers Law (IOSCO Principles) is also a FST priority in capital markets legislation reform. The Draft Law envisages comprehensive changes in the area of the NSSMC’s operational and financial independence, increasing its powers to regulate the market. It would also enable the NSSMC to become a signatory to the IOSCO MoU (information exchange among securities regulators globally), a goal of USAID and the US SEC of twenty years duration.
In November-December 2019, FST reviewed the updated version of this draft Law and provided comments to the NSSMC. FST experts also participated in several working groups held under the auspices of the NSSMC to discuss the draft in anticipation of its submission to the Parliament.
2. PUBLIC CONFIDENCE AND COMMUNICATIONS
The FST communications team conducts activities in support of project objectives and those of its partners. In addition to the activities listed below, FST supported press conferences and announcements by its new grants recipients, assisting them to prepare communications plans and public information about their grants (fact sheets, press releases).
NBU Economic Information Days in Regions
In October – November 2019, FST supported three Economic Information Days programs carried out by the NBU in Chernivtsi, Kharkiv and Kherson. The main aim of these events is to enhance communication between the NBU and the public, as part of its strategy to become a modern, transparent central bank with public support for its vital role.
The 2-day program included a series of lectures, press conferences, meetings, and interactive events explaining the main functions of the National Bank to university students, professors, journalists, and members of the business community. NBU Deputy Governors Oleh Churiy, Dmytro Sologub, and Sergiy Kholod spoke to regional business representatives on issues of current trends in central banking and NBU policies NBU Economic Info Days, and participated in educational workshops for Chernivtsi, October 2-3, 2019 journalists. FST staff presented lectures on financial consumer protection, financial reporting and disclosure, and the importance of comparison shopping for financial products (Liga.Money). The three regional events were attended by 1,874 individuals.
9 Public Opinion Survey on Deposit Guarantee System
The DGF is required by Law to conduct periodic research to assess public awareness of the deposit guarantee system. USAID/FST has supported previous public opinion surveys of knowledge of the DGF as part of its consumer protection activities (there were substantial losses by bank clients during the 2013-14 financial crisis due to ignorance of the DGF’s payout rules and limits for deposits). FST subcontracted a Ukrainian polling firm to assess how well Ukrainians know and understand the domestic deposit guarantee system, and to identify their additional information needs. The survey is based on face-to-face interviews with a nationally representative sample of 2006 respondents aged 18+. The fieldwork was carried out in December 2019. The survey findings will be presented to the public in the next quarter.
The survey also aims to comply with Principle 10 of the Core Principles of Effective Deposit Insurance that recommends that each IADI (International Association of Deposit Insurers) member country conduct a periodic assessment of public awareness of the deposit guarantee system.
Videos about DGF
In October – November 2019, FST produced four videos about the deposit guarantee system: This is an important component of building trust in the financial system because about 50% of all depositors lost money during the banking crisis for lack of understanding about Deposit Guarantee Fund rules.
1. How to calculate interest on a deposit https://youtu.be/ytquA5wVg40 2. What deposits are not covered by the DGF Video "How to calculate interest on a Deposit Guarantee Fund? deposit"; November 2019 https://youtu.be/1yykyYHIwM4
3. How to claim your money from a bank to be liquidated https://youtu.be/Wh7eOmw0Lh0
4. What is the coverage for foreign currency deposits? https://youtu.be/05EamA5IcDA
Promotion of Liga.Money Digital Comparison Tool
On October 24, FST and its subcontractor Liga.net held a press conference to announce the signing of the contract to develop LIGA.MONEY, the digital comparison tool for consumers of bank retail products. FST and Liga speakers were joined by representatives from the NBU's Office of Consumer Protection and commercial banks who are supporting the initiative.
On November 27, FST and Liga.Net held a roundtable discussion on consumer lending. FST presented the results of its third wave of mystery shopping survey of banks; Liga spoke about the comparison tool, Liga.Money; and the NBU discussed draft regulations it was preparing for banks, to be introduced in early 2020.
10 In order to generate public interest for Liga.Money, FST Project is promoting the importance of comparison shopping, international experience of how digital comparison tools work, and the value of these tools for consumers. As part of its pre-launch promotional activities, FST Project produced a fact sheet about the Liga.Money comparison tool and two animated short videos about comparison shopping: - 1st video “How to compare and choose the best loan”, November 2019: https://youtu.be/7Z1SMPy3vaU - 2nd video “Comparison shopping for mortgage finance”, December 2019: https://youtu.be/dTX5BxvJ8vM
Video “How to compare and choose the best Video “Comparison shopping for mortgage loan”, November 2019 finance”, December 2019
3. FINANCIAL CONSUMER PROTECTION
Consumer Protection Implementation
In December 2019, the NBU published its Regulations on the Provision of Banking and Other Financial Services Information by Banks, and Methodological Recommendations on Procedures for Complaints Consideration by Banks. Both documents were initially published for public discussion in June 2019 as part of the Framework (or Concept) of the Financial Services Consumer Protection. FST commented on the Framework after its publication, suggesting ways to strengthen the Framework and make financial companies more responsible for compliance in the consumer protection area. Some of FST’s comments were All-Ukrainian Conference of the Association of accepted by the NBU, especially improvements in Legal Clinics of Ukraine; Bila Tserkva, the Methodological Recommendations on October 4-5, 2019 Procedures for Complaints Consideration by Banks.
FST will continue to provide legal and regulatory assistance to the NBU and the NSSMC to implement the Consumer Protection Law in 2020. FST also plans to support the development of a complaints management function at the NBU (including software development) and expects to support international training and conferencing opportunities for the new office of consumer affairs.
11 Consumer Lending Survey
In January 2017, FST committed to monitor the implementation of the newly enacted Consumer Lending Law. The Law was to come into effect in June 2017, and the project carried out a “pre- effective date of the law” survey of consumer lending practices in the spring of 2017. Subsequently, two “post-effective date of the law” surveys were conducted. These surveys have been based on desk studies of advertising, real visits to bank branches, live interaction with bank lending personnel, and the signing of actual loan agreements so that contract terms and conditions (including the real cost of credit) could be verified. The bank visits are called “mystery shopping” and the taking out of actual loans (all repaid) “full-cycle visits.”
In November 2019, FST presented the results of the third wave of the mystery shopping survey of consumer lending in Ukraine. This survey focused exclusively on compliance with the Consumer Lending Law by banks. FST’s mystery shoppers took out 71 consumer loans in 20 banks in 6 major cities. In spite of some improvement, Ukrainian banks still fail to comply with many of the provisions of the Law on Consumer Lending. None of the surveyed banks received a 100% satisfactory rating for compliance with all the 2017 Law’s provisions, indicating the need for banks to Mystery shopping survey results ( third wave) become more customer oriented. Violations of the presentation; Roundtable "Banks and Law are frequent in terms of disclosure of Consumer Lending", Kyiv, November 27, information, loan terms and conditions, the real 2019 cost of credit, and third party insurers. In 90% of loans with insurance, the borrower was not given a choice of an insurance company. The customer was told immediately that there is only one insurance company with which the bank works. Such practices were observed in all 14 banks where life or medical insurance was a prerequisite for a loan. Also in breach of the Law, in 35% of loans with insurance, the borrower was “forced” to enter into an insurance agreement that was not listed in the consumer loan passport. The declared real annual interest rate (all expenses to the bank but not including insurance) ranged from 54% to 338%. Insurance charges ranged from UAH 150 to UAH 1,800.
FST will also use its consumer shopping surveys to support a new indicator to measure increased competitiveness in the consumer lending market, the Interquartile range of the cost of credit for personal unsecured loans in Ukraine. This will capture the spread within the data set received from the regular consumer lending surveys. In the last survey, the spread of real interest rates on bank loans ranged from about 80% to 300%. Increased competition among banks (in part due to the introduction of Liga.Money) should result in a decrease in this indicator. This would result in substantial savings for consumers, and have an associated strong impact on public confidence in the banking system.
Liga.Money
In October 2019, FST signed a sub-contract with LigaBusinessInform LLC to develop, operate and promote the DCT, now named Liga.Money. Liga.Money will be a comparison tool that provides consumers information on four bank retail credit products (personal loans, car loans, mortgages and credit cards) based on the real effective interest rate. After entering his/her data, the consumer will receive up to five offers from participating banks. Commercial banks will prepare
12 and provide the data according to an agreed upon methodology with FST and Liga, who will verify results. The comparison tool will also feature qualitative ratings of banks, based on verification of compliance with relevant laws and regulations by mystery shopping surveys. The Liga.Money website will also have news stories, articles on personal financial management, consumer advice, and explanations of the credit process (terms, real cost of credit, etc.).
FST experienced delays with the development of the Liga.money software. Translating the methodology for calculating effective real interest rates into a software program useable by both banks and consumers proved more difficult than anticipated. Testing and completion of a working prototype will be conducted next quarter, and we hope to initiate a series of launch/promotion activities in March.
During the quarter, and while the Liga.Money calculator is under Liga.Money presentation; Kyiv, October 24, 2019 development, FST and Liga engaged in several pre-launch activities. Public events (press conference, financial expert roundtable) were held and materials were developed promoting the site to the media and the financial market. FST and Liga also discussed policies governing the web-site, including revenue generation, advertising, personal data protection, conflicts of interest, and creation of a steering committee with the banks. Liga.net began hiring appropriate staff (data managers, journalists, editors, marketing) to operate the site. Importantly, discussions with the participating banks on governance of the DCT, on financing Liga.Money through subscriptions/referrals payments, and on contractual arrangements were advanced. The support of the banks is critical to the success of the initiative.
FST and Liga will launch Liga.Money next quarter. This will require intensive work to complete and rigorously test the technology, to complete and test the consumer interface and features, to develop the right tone of voice and image for the site, and to prepare and review the educational and news content. A series of meetings will also need to be held with the banks. Liga.Money will be the first comparison lending tool in Ukraine to enable consumers to compare offers from banks based on the real interest rate, taking into account both interest and fees. This is revolutionary in Ukraine because banks and financial intermediaries do not provide this information, and because Ukrainian consumers have become accustomed to comparing only the total amount they have to pay for a loan. Ukrainian consumers shop carefully for vacation bargains, but they do not shop wisely for money. Liga.Money can become the “go to” place for comparison shopping for consumer loans and for information on financial literacy and consumer protection, helping to inject competition and growth to the consumer lending market.
4. CAPITAL AND COMMODITY MARKETS
In November-December, FST worked with the Securities Commission, the National Bank, and the Energy Regulator (NERC) to forge consensus on language clarifying their respective roles in market regulation. Consensus was eventually reached in a way that NERC will continue regulating the balancing, day-ahead and intra-day energy markets, while the NSSMC will be in charge of futures trading regulation at any of the markets and clearing activity if introduced in Ukraine.
13 FST drafted the respective amendments to draft law 2284 to establish the above-mentioned delineation of authorities in accordance with EU Directives, and it is now reflected in the draft law. It is expected that the draft law will be discussed at a number of Committee round tables, where FST will participate, and voted in second reading in February-March.
As part of the promotion of the knowledge and use of derivatives, FST continued its work on the Agro Derivatives Study, which analyzes the benefits of hedging of price risks by Ukrainian agro producers with financial instruments. We plan to present the study in February at a round table of commodity and financial experts and agricultural producers.
Stock Market Professional Certification Reform
FST has supported the professionalization of securities markets participants as part of its combatting corruption initiative. Unethical behavior by capital market and investment “professionals” contributed importantly to the collapse of the market for stocks and corporate bonds due to fraudulent practices. On December 27, the NSSMC approved the Regulations on stock market professionals' attestation. In order to become effective, the Regulations need to be sent by the NSSMC to the State Regulatory Service for approval, and then registered by the Ministry of Justice. It is expected that this will happen by the end of March 2020. The Regulations fundamentally reform the certification system of financial market professionals in Ukraine. As a result, employees of brokers, custodians, stock exchanges and other market participants will be required to know and act on capital markets rules and regulations of professional conduct. They will also work in compliance with applicable ethical standards, and there will be a special exam module dedicated to testing professionals’ ethics. The reform also provides transparency to the exam-taking process, and makes it objective and independent of the regulator and/or any other stakeholders that might have conflicting interests.
FST engaged knowledgeable local consultants to assist the NSSMC in drafting the Regulations throughout 2019. In parallel, FST consultants drafted the examination program (curriculum taxonomies) for several stock market qualifications and moderated the working group meetings among stakeholders to discuss them. The NSSMC is expected to approve the exam programs later in 2020.
5. ACCESS TO FINANCE: LEASING
Leasing finance for SMEs is a special focus for FST. Leasing is particularly attractive for SMEs with scarce financial resources because it provides them with the possibility to finance up to 80% of the purchase price of an asset, without having to offer any supplementary guarantees. Additionally, since lessors retain ownership of the leased asset, they can provide funding to businesses when other types of lenders cannot.
FST implemented two major activities on leasing Market Survey "Opportunities for Leasing during this quarter. Medical Equipment in Ukraine"; Kyiv, December 2019 1. A Market Survey on Opportunities for Leasing Medical Equipment in Ukraine This analysis of the medical equipment market globally and in Ukraine was aimed at facilitating the leasing industry to take a closer look at opportunities to expand their portfolios
14 into an important but neglected area. The survey provides a profile of the medical equipment market in Ukraine and places it in the context of global health care trends. It notes that there is an increase in small, private health care facilities in Ukraine due to recent government reforms, but that these clinics and hospitals often lack the finance to upgrade technology. Most of these enterprises are operating on their own capital, without access to bank loans or other types of finance. On December 12, 2020, the Round Table discussion was held to present the Survey and set up a dialogue among the stakeholders of the medical equipment market. Participants included medical equipment distributors/vendors, private clinics, the USAID Health Care project, leasing companies (members of UUL), and government representatives. The UUL will support further promotion of this topic in 2020, which could result in the initiation of new leasing deals with medical equipment on the market.
2. UUL Grant FST awarded a $130,000 grant to the UUL for strengthening its activities to further promote leasing as a financial option for small and medium enterprises (SMEs). The grant will develop a self-reliant capacity for the UUL to continue its activities in support of leasing finance. Grant funds are intended to improve UUL communications and outreach programs, develop a market research and analysis function, and support the professional development of UUL members.
6. DIGITAL FINANCE
FST supports both increased communication about digital finance and the transformation of the financial technology infrastructure to support a cashless economy. In early December, FST partnered with VISA and the Ukrainian Association of FinTech and Innovative Companies on UAFINTECH. 2019. This was an international conference and networking forum dedicated to digital finance, and attended by an estimated 500 participants. The conference combined discussions of international experience (Japan, Poland, Sweden, etc.) with commentary on Ukrainian realities in the FinTech ecosystem. On December 18, FST convened 60 representatives of FinTech companies and banks to discuss the relationship among banks and FinTech companies. The discussion was informed by the FST/EY survey that compared the views of banks and FinTech companies on digital finance (innovation, adoption, investment, legal regulatory issues, etc.). The presentation of survey results was followed by a panel discussion featuring NBU Deputy Governor Holod, Expert Discussion “Ukrainian FinTech and Anatoliy Rohalskyi of Monobank, Svyatoslav Komakha Banks’ Digital Transformation”; Kyiv, of Portmone, and Marharyta Pobilets of Finik.pro. December 18, 2019
The survey report “Ukrainian FinTech and Banks’ Transformation” was published on AIN web portal. Also published were interviews with NBU Deputy Governor Holod and three FinTech entrepreneurs. In the first three weeks since publication on December 18, the web page has had more than 4,000 views.
FST’s support for improved digital finance infrastructure focuses on moving Ukraine’s System of Electronic Payments (SEP) of the NBU to a new messaging platform based on ISO 20022. SEP processes 97% of interbank hryvnia transfers in Ukraine, and the expected changes will improve efficiency, lower costs, and support new digital payments applications. During the quarter, FST/SWIFT and the NBU held two more ISO 20022 messaging workshops. On October 15-16,
15 workshop participants (NBU, banks, other financial authorities) considered three new messages (camt.052, camt.053, and camt.054) related to reporting: intraday reporting for liquidity management, end of day reconciliation and credit/debit notification. During the workshop on December 18-19, participants discussed two new messages (camt.060, pacs.010). The first message is used to request an account report, and the second one - to execute a direct debit between two financial institutions. A review workshop will be held on February 5-6, 2020 to finalize the 16 messages covered in the first stage of ISO 20022 implementation activity.
7. GRANTS PROGRAM
FST made three grant awards during the quarter to a business association, a university legal clinic, and a non- governmental civil association. The total amount of these three grants was about $250,000. Negotiations and approvals were initiated on five other awards totaling almost $500,000 for professional finance education, individual insolvency counseling, digital finance, and legal clinics advice for financial services consumers, including creating a new clinic in Slovyansk to serve the part of Ukraine affected by the war. Grant activity is summarized in UUL Grant presentation; Kyiv, December 12, 2019 attachment F.
V. PROGRESS AGAINST TARGETS
This quarter, FST can report on the following quarterly indicators:
• Media. There were 222 media mentions about the Project and its activities from October 1 to December 31. Media placements were on financial consumer protection, anti-corruption, the NBFI regulatory environment, increased access to finance for SMEs, digital finance, and the introduction of Liga.Money.
• Leasing. The latest official FSR data available for the number of leasing contracts concluded is 13,554 as of 09.30.2019. This exceeds the FST end of FY19 target for leasing contracts of 10,000. The value of leasing contracts concluded was US$919.5 million as of 09.30.2019, compared to the FST end of FY19 target of US$900 million.
FST Events
There were 808 participants in six events organized or co-organized by FST in Q1 2020, of which 493 (61%) were women and 315 (39%) men.
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Liga.Money Digital Attended by businesses, banks, Comparison Tool 26 Oct 2019 Total: 32 professional associations, and Presentation Press journalists Conference Total: 324 FST activities at this event were NBU Information Days 6-7 Nov 2019 men: 132 attended by students, lecturers, in Kharkiv women: 192 journalists, businesses, schoolchildren Total: 307 FST activities at this event were NBU Information Days 20-21 Nov men: 89 attended by students, lecturers, in Kherson 2019 women: 218 journalists, businesses, schoolchildren Total: 61 Banks and Consumer 27 Nov 2019 men: 28 Attended by businesses, journalists Lending event (Kyiv) women 33 Discussion of medical equipment Medical Equipment in Total: 26 market; FST also presented the UUL Ukraine: Just Lease It 12 Dec 2019 men: 18 with its Grant Award. Attended by (Kyiv) women: 8 medical equipment companies, medical clinics, lessors, & journalists Total: 58 FinTech Survey Attended by FinTech businesses, 18 Dec 2019 men: 31 Presentation (Kyiv) banks, & journalists women: 27
Anti-corruption legislation FST played a lead role in preparation and passage of a new Anti-Money Laundering Law (AML). FST provided international advisory services to the NBU, the Ministry of Finance, and the State Financial Intelligence Unit in 2018 -19, and to the Verkhovna Rada Banking and Finance Committee in 2019 prior to passage of the law. The Verkhovna Rada passed AML Law #361-IX on December 6, 2019, and the President of Ukraine signed it on December 27, 2019. Other indicators for which FST has data are: Ratio of foreign currency deposits to all Loans to population as % of total deposits. According to NBU data, hryvnia and bank loans (NBU data) foreign currency deposits of individuals and businesses grew in 2019. The ratio of foreign currency deposits to all deposits as of September 24.6% 2019 decreased to 40.3%, which is close to FST’s FY2019 FY2018 target of 40%. 19.8% Loans to population as % of the total bank FY2018 loans. The share of consumer loans as a percentage of the total bank loans was 24.6% at 17.4% the end of September 2019, which surpasses the FY2017 FY2019 target of 19%. Share of digital payments using payment cards. According to the NBU, this indicator reached 50% as of the end of September 2019. This surpasses the target of 38% set by FST for this indicator for FY2019. Number of digital transactions using payment cards. According to NBU, the number of card transactions reached 2,992 million at the end of September 2019. This surpasses the FST target of 2,500 million for this indicator for FY2019.
17 European Business Association Investment Attractiveness Index increased +0.10 points in the 2nd half of 2019 to 2.95, up from 2.85 in the 1st half of 2019. This indicator is measured on a scale of 1 to 5 (1-3 negative value; 3-4 neutral value; 4-5 positive value). Although the Index remains in negative territory, the positive change reflects some improvement in the business environment. This includes: gradual stabilization of the political situation; the start of land market reform; a stable national currency; reform of the Tax and Customs Services; the launch of the concession mechanism; the start of the Supreme Anticorruption Court; a decrease in inflation; the abolition of dividend repatriation limits; and an increase in consumer purchasing power. The EBA Investment Index, created in 2008, has never recorded a positive value. Improvements in the securities and capital markets legislation. The Verkhovna Rada passed on first reading law #2284, which provides for organized market trading of financial instruments (derivatives). FST was involved in drafting and commenting on the legislation. FST worked with the Securities Commission, the National Bank, and the Energy Regulator (NERC) over several weeks preceding the voting to forge consensus on language clarifying their respective roles in market regulation, leading to passage of the legislation. The next reading of this law is tentatively planned for February 2020.
VI. PERFORMANCE MONITORING, EVALUATION AND LEARNING
In Q1 2020, FST continued its performance monitoring of the routine data collection of indicators, including the new USAID/FST indicators, and verified their accuracy.
For the purposes of monitoring its grants program activity, FST has developed a relevant set of indicators (milestones), monitoring-related requirements, reporting schedules, activity reporting forms and logs, for each grantee.
Gender, Monitoring and Evaluation Manager (GMEM) conducted brief individual trainings for the new members of FST staff responsible for data collection in their respective areas on USAID performance monitoring and evaluation. During these trainings, GMEM familiarized them with the USAID M&E system, including the FST Performance Monitoring and Evaluation Plan and tracking table.
VII. LESSONS LEARNED
FST received the results of a USAID project evaluation that focused on selected FST implementation activities. Four questions were addressed in the evaluation: • In what ways has FST contributed to advancing public confidence in the financial system? • To what extent did FST affect SMEs’ and marginalized groups access to finance? • To what extent did FST change the ways in which financial institutions and financial consumers communicate? • In what areas of FST’s Scope is assistance no longer needed?
In general, the evaluation team (ET) assessed FST performance positively in all its substantive components. The ET noted that FST had made “strong contributions” to the institutional development of its beneficiaries (NBU, NSSMC, DGF, PFU), to financial awareness and consumer protection, to increased access to finance by SMEs through leasing, and to pension reform. The ET praised the transformative nature of FST’s legal and regulatory work, noting that it was essential to economic growth and increasing access to finance, and suggesting FST should
18 be prepared to expand its efforts under the new government. Likewise, the ET noted FST’s strong contributions to better communications between financial institutions and the public.
The evaluation report suggested three areas in which a change of focus might be useful. First, the report recommends that FST shift its approach to financial awareness to emphasize more consumer protection as part of its financial literacy and public outreach activities. Second, FST should explore transferring its financial literacy activities more directly to the NBU. Third, FST should end its involvement in most pension reform activities since it has achieved the objectives in its Scope, and encourage the IMF and World Bank to take the lead in Pillar 2 pension reform. FST, working with the COR, will implement these recommendations.
VIII. ENVIRONMENTAL MONITORING
FST has an approved Environmental Mitigation and Monitoring Plan (EMMP) and updated it in FY 2018. No mitigation measures were required this period. Under its grants-under-contract program, FST is reviewing proposals for potential impact on the environment.
IX. PROGRESS ON LINKS TO OTHER ACTIVITIES
The FST project coordinates its activities with those of other USAID projects and international agencies involved in financial sector reform. For example, FST actively supports the USAID Energy Security Project (ESP) with legal and technical advice on key issues of clearance and settlement and trading on energy markets. In November, FST and ESP held several joint meetings with the Securities Commission and the National Energy and Utilities Regulatory Commission (NEURC) to discuss draft law #2284 on regulated derivatives markets. With FST in the lead, a successful compromise on potentially overlapping spheres of regulation was agreed, and both regulators supported adoption of the draft law.
On November 13, 2019, FST facilitated a meeting for the USAID Democratic Governance East Activity (DGE) Project with Chairman of the Pension Fund of Ukraine Evgeniy Kapinus and PFU Head of PR and Communications Hanna Shvets. The purpose of the meeting was to present the DGE Project and its activities in the East of Ukraine to the PFU Chairman, and to discuss possible areas of collaboration.
FST is coordinating its NBFI implementation activities with the CAP (credit unions) project.
FST coordinates actively with other international financial institutions (IFIs) active in providing financial sector technical assistance and advice. Examples during the quarter include: • Hosting a meeting of the IFI legislative working group (IMF, World Bank, EU, EBRD) to discuss and coordinate efforts on financial sector reform legislation. • Participation in a series of meetings at the NBU to coordinate donor technical assistance for Split law implementation. • Attendance at a meeting with a new World Bank/IFC financial inclusion project to avoid duplication of efforts and to plan joint activities. • Cooperation with the Visa, Mastercard, and Ukrainian banks in support of digital finance development and communication.
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X. PROGRESS ON LINKS TO HOST GOVERNMENT
FST has five beneficiaries from the Government of Ukraine (GoU): the NBU, the NSSMC, the DGF, the PFU, and the Ministry of Social Policy. During this quarter, interaction was limited with the Ministry of Social Policy because there was no activity on pension policy. Working relationships are generally excellent with counterparts and FST has a strong reputation for delivering timely technical assistance and training to its beneficiaries. With the NBU, for example, FST is providing technical assistance to multiple departments: communications, strategy reform, payments, anti-money laundering, consumer protection, international relations. FST continues to work with a steering committee of financial regulators on Financial Reporting System implementation. This quarter, the Project has been particularly active in working with the Office of the Presidency and the Finance Committee of the Verkhovna Rada on financial sector reform legislation.
XI. PROGRESS ON INCLUSIVE DEVELOPMENT
FST supports financial inclusion primarily through its activities in consumer protection and digital finance. FST also emphasizes the participation of women in its public events, especially as speakers and commentators whenever possible. In this quarter, FST supported or organized six events attended by 808 participants, of which 493 (61%) were women and 315 (39%) men. XII. FINANCIAL INFORMATION A financial report for FST will be submitted separately to USAID/Ukraine by DAI/HQ.
XIII. SUB-AWARD DETAILS
FST had two significant subcontracts during the first quarter of 2020. Information on the subcontracts is provided in Table E. • FST has an active subcontract with the Society for Worldwide Interbank Financial Telecommunication SCRL, S.W.I.F.T. SCRL to support the National Bank of Ukraine to develop a new messaging system for Ukraine’s SEP payment system. The contract will allow the NBU to transition to the ISO 20022 standard message system used internationally, based on best market practices applied in major RTGS payment systems in the U.S. and Europe. The definitions of the message specifications will be achieved through a number of interactive workshops with the NBU and other financial sector experts, conducted in the NBU premises in Kyiv, Ukraine (February 14, 2019 – February 29, 2020). • FST also subcontracted with INFORMATSIINE AGENTSTVO LIGABIZNESINFORM, TOV (LIGA) to introduce to the market a Digital Comparison Tool (Liga.Money) that complies with international standards on transparent, accurate and fair comparisons of credit products. The objectives of Liga.Money are to improve the disclosure of information to consumers about the real cost of credit products, to empower them to make quality decisions for their financial well- being, and to introduce competition among banks for customers based on price and quality of service. The contract with LIGA is for it to develop the IT solution, prepare financial articles for the web site, promote the site to potential customers, and manage day-to-day operations (October 10, 2019 – November 30, 2020).
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XIV. ACTIVITY ADMINISTRATION A. Constraints and Critical Issues
There were no administrative constraints or issues to report this quarter.
B. Personnel Two long-term local personnel were added to the project in the quarter. A Team Lead for the NBFI/Access to Finance position was hired (Volodymyr Kuzio) to replace Ivan Vyshnevskiy, who resigned in September. A legal and regulatory specialist was added to strengthen the FST legal team (Nina Bydantseva). Also during the quarter, FST recruited successfully a Senior Technical Writer (Yuriy Svirko), who will join the staff in January, and a Capital and Commodity Market Expert (Anton Shevchenko), who will replace Kostiantyn Nemoliuk. FST may hire an additional lawyer, depending on demands for services from counterparts.
C. Contract Modifications and Amendments
There were no amendments or modifications to the contract this quart
D. Status of Deliverables/Milestones
See the Deliverables Table in Annex A.
E. Schedule of Future Events and Geographical Information
See the table in Plan in Annex B.
XV. ATTACHMENTS
A. Status of Deliverables
B. Future Events and Geographic details
C. Project Documents and publications
D. Performance Data Table
E. Sub-Awards Table
F. Summary Grant Awards Table
G. Implementation Plan for October 2019 – December 2020, Revised
21 ATTACHMENT A. STATUS OF DELIVERABLES
FST – Deliverables Completed Q1 2020, October-December 2019
DO1: Corruption Reduced in Target Sectors
Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 3: Financial Disclosure / Transparency 1 AML Law passed Dec 2019 Fundamentally transforms Ukraine’s framework for preventing and combatting money laundering, including corruption. 2 Regulations on Stock Market Professionals Attestation approved Dec 2019 Aims to increase the professionalism of financial markets participants by the NSSMC; new training curriculum tentatively agreed by introducing new educational standards for certification. 3.Iimplementation of the digital comparison tool (Liga.Money): Oct-Dec Promotion of transparency, financial disclosure, banking sector subcontractor selected; IT solution for comparison initiated; web 2019 competitiveness. page content agreed; pre-launch promotion activities started; two “Just-in-time” financial education for consumers videos on comparison shopping for loans and Liga.Money produced. Private sector partnership with banks.
DO4: Inclusive, Sustainable, Market-driven Growth
Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 1: Enabling Environment A. Legal / Regulatory 1 B. Public Confidence 1 Presentation of the 3d wave of mystery shopping survey of Nov 2019 Revealed actual consumer lending practices on the Ukrainian consumer lending by banks market; provides data for further operation of Liga.Money, the Digital Comparison Tool 2 Regional communications program “Economic Information Days” Oct-Nov Increase transparency, knowledge of consumer rights protection. conducted by the NBU with support from FSTand Kyiv School of 2019 Support NBU public communications strategy. Economics, in Chernivtsi, Kharkiv and Kherson. 3 Public opinion survey on knowledge of the deposit guarantee Oct-Dec Assess levels of awareness about the deposit guarantee system. system in Ukraine. 2019 - Support the DGF strategic communications. 4. Public opinion survey and elite interviews on perceptions, sources Oct 2019 - Support NBU strategic communications, transparency and of information, and attitudes toward the NBU. openness. - Support external communication functions of the National Bank of Ukraine. 5. 4 videos on deposit guarantee system Oct-Nov Raise awareness of the public about the deposit guarantee system 2019 6.Short animated video introducing the new 1,000 hryvnya banknote Oct 2019 Publicize the value of the Hryvnya as the national unifying symbol 7. Produced promotional materials (one pager and two videos) Nov-Dec Promote the importance of comparison shopping for comparing bank about Liga.Money digital comparison tool 2019 retail credit products.
22 Deliverable (Name & Description) Date Contribution to Key Objective Framework Element 2: Access to Finance 1 Draft Law on Regulated Markets and Derivatives passed in the first Dec 2019 Introduces a comprehensive regulation for derivative markets in reading Ukraine; brings commodity exchanges under the remit of the NSSMC; regulation of both stock and commodity exchanges brought into compliance with international standards. 2 UUL Grant award and first milestone under the Grant Dec 4, 2019 Assist the UUL to promote leasing as a financing option for small and medium enterprises (SMEs), strengthen its communications and outreach program, and support the professional development of UUL members. 3 Medical Equipment Market Survey Publication and Round Table Dec 12, 2019 Market research for Leasing Medical Equipment in Ukraine intended Discussion to add this sector to lessor portfolios, begin dialogue among lessors, medical companies and clinics. 4. Survey of FinTechs and banks, “Ukrainian FinTech and Banks’ Dec 18, 2019 Facilitate the development of the FinTech market, cooperation Transformation” and four interviews (NBU Deputy Governor and between banks and FinTechs, increased investment in digital three leading FinTech entrepreneurs) published on AIN web portal. transformation. Event held to present the findings to the market. Framework Element 4: Financial Infrastructure 1. Implementation of ISO 20022 messaging standard for the NBU’s Oct 15-16, Modernize the NBU’s payment system, support movement toward payment system. Dec 18-19, cashless economy. Support AML compliance. 2019
23 ATTACHMENT B. FUTURE EVENTS AND GEOGRAPHIC DETAILS
FST – Projected Q2 Activities, January-March 2020
DO1: Corruption Reduced in Target Sectors
Activity/Description Partners Date Location Objective Framework Element 3: Financial Disclosure / Transparency 1 Support implementation of BEPS principles NBU, Minfin, Jan-Feb Kyiv Comments on BEPS law to Rada Tax and Finance Rada 2020 Committee submitted Committee 2 AML training program for banks NBU, banks, Mar-Apr Kyiv Trainings of AML chief officers of banks on best STTA 2020 practices of KYC and CDD delivered; materials developed 3 Support implementation of AML Law NBU, STTA Feb-Apr Kyiv Overview of the best practices of financial sector 2020 AML competent authorities’ regulation (conducting business- and customer risk assessment, risk- sensitive CDD measures, third parties reliance, etc.) 4 Reform of certification of stock market NSSMC, Jan-Jul 2020 Kyiv Test database developed professionals CFA Society, STTA 5 iXBRL Tool Development for FRS of NSSMC, NSSMC Mar 2020 Kyiv Software procurement for developing software tool to financial regulators [DO1.A.5] enable IFRS financial reporting in iXBRL format. Creation of free of charge tool for preparation of financial statements in accordance with the requirements of the Law of Ukraine on Accounting and Financial Reporting and Cabinet of Ministers of Ukraine Resolution 419 on Approval of the Financial Statements Submission Procedure. 6. Launch of Liga.Money: Banks, NBU, Feb 2020 Kyiv Increased transparency, increased competition - comparison web-tool operating Liga among banks; fair loan comparisons based on best - active promotion campaign underway international standards; empowering consumers to - educational content developed make better choices in selecting credit products based on comprehensive cost analysis
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DO4: Inclusive, Sustainable, Market-driven Growth
Activity/Description Partners Date Location Objective Framework Element 1: Enabling Environment A. Legal / Regulatory 1 Support the development of new regulations for NBU, Jan-Jul 2020 Kyiv Assessments of financial sectors (policy papers) on NBFI markets NSSMC, EY, leasing, microfinance, factoring and pawnshops to STTA guide new NBU regulations. 2 Legal advice on financial services framework law, NBU, ULU Jan-Jul 2020 Kyiv Comments to draft laws and regulations to ensure financial leasing and microfinance legislation compliance with international standards, taking into account the Ukrainian context; assistance with drafting/commenting regulations. 3 Policy Analysis of real estate construction financing NSSMC Feb 2020 Kyiv Report with consumer abuse issues identified and schemes as part of Split Law implementation policy recommendations provided 4 Support in the development of consumer protection NBU Jan-Jul 2020 Kyiv Comments to draft regulations submitted; regulations on banking and NBFI markets international training of NBU department staff 5 Research, recommend new sectoral NBU, Jan-Mar Kyiv Develop new legal/regulatory framework for NBFI. legislation/regulation for NBFIs (leasing, factoring, NSSMC, EY 2020 Support the development of the sector to spur financial companies/PDL policy papers) [DO4.A.2] investment, consumer interest/demand. Deliverables – recommendations to the NBU on NBFI policy papers (leasing, factoring, PDL) 6 Survey on knowledge, awareness, and behavior NSSMC, Feb 2020 Kyiv Provide agricultural market participants, investors, regarding commodity futures and risk practices in Market regulators with information on using commodity agricultural sector [DO4.B.2] participants futures/options for risk management, and recommendations for derivatives market development.. Deliverables – publication of the Grain Derivatives Survey (research paper), round table discussion. B. Public Confidence 1. Public awareness campaign and legal counseling UBA, MOJ Jan-Nov Kyiv Support UBA grant activity on personal insolvency for indebted individuals about personal insolvency 2020 and debt resolution (effective from Oct 2019): (1) provisions introduced by the Bankruptcy Code of terms of FX mortgage restructuring, (2) ways restore Ukraine solvency, (3) debt resolution in insolvency. 2 Support NBU's Economic Information Days in the NBU, Kyiv Feb – Mar Dnipro, Raise consumer protection rights awareness among regions. School of 2020 Cherkasy, Ukrainian citizens, support communications strategy Economics Lviv of the NBU. 3 Analyze results of the public opinion survey on DGF Jan – Mar nationwide - Enhanced consumer protection for depositors. deposit insurance system, prepare a report, & hold a 2020 - Identify additional information needs regarding the round table discussion. guarantee system. 4 Develop an on-line multimedia interactive course DGF Jan – Mar Kyiv Improve household financial well-being. on personal finance. 2020
25 Activity/Description Partners Date Location Objective 5 Training for DGF staff on Social Networks and DGF Mar 2020 Kyiv -Increase the DGF communication and outreach Tools to Counteract Fake News and Information capacities. Attacks. -Raise awareness about the deposit insurance system. 6 Launch event for Liga.Money digital comparison Liga.net Feb. 2020 Kyiv -Promote the importance of comparison shopping for tool. bank retail credit products and Liga.Money DCT. 7. Develop and produce videos, education materials NBU, Liga Jan – Mar Kyiv Educate and raise awareness of the general public on consumer protection. 2020 about new consumer protection framework. 8. Develop a corporate identity (brand book) for the PFU Jan – Mar Kyiv -Increase and make more effective PFU e-services. Pension Fund of Ukraine. 2020 - Increase public confidence. 9. Develop a corporate identity (brand book) for the Securities Feb – Mar Kyiv - Improve the public image of the Securities Securities Commission. Commission 2020 Commission. - Build confidence in the financial system. Framework Element 2: Access to Finance 1. Legal and regulatory advice to NSSMC, ministries NSSMC, Jan-Jul 2020 Kyiv Develop new regulatory framework for NBFI sector; (IOSCO, IOPS and EU Directives) NERC provide assistance with drafting/commenting regulations to ensure compliance with international standards 2 Second Milestone under UUL Grant activities UUL Feb 25, 2020 Kyiv, Lviv Office set-up; hiring staff and short-term consultants; [DO4.A.Grants Program] preparing a conference on Trends in Leasing Market; promotion of leasing; launch of regional campaign; and training for the staff of UUL members. 3 Capital options for lessors/leasing companies UUL Mar 2020 Kyiv Contracting an international expert for analysis and (bonds, guarantees, etc.) to provide access to evaluation of funding options for lessors/leasing finance for SMEs [DO4.A.6] companies to provide access to finance for SME. Deliverable - Recommendations/Scheme on Transaction structure. 4 Vendor Financing programs in leasing business UUL Mar 2020 Kyiv Contracting an international expert for Vendor [DO4.A.7] Programs implementation in leasing business to comply with world trends Deliverable - Vendor Programs initiated and/or implemented 5 SME Component of a Diaspora Investment Fund USAID/EG Mar 2020 Kyiv Study with recommendations, regarding the potential feasibility study [DO4.A.9] SME market for the DIF, to examine risk parameters, to determine what kind of financing is most appropriate, and to evaluate potential Ukrainian financial intermediaries for the DIF Deliverable – Report on the potential SME market in Ukraine for the DIF NBU, EY Feb 2020 Kyiv To propose ways to channel worker remittances into 6 Analysis of worker remittances SME investment. STTA To propose ways to offer diaspora investment 7 Analysis of diaspora investment opportunities in Ukraine.
26 Activity/Description Partners Date Location Objective Framework Element 4: Financial Infrastructure 1. Study and recommendations on access of NSSMC, Mar, 2020 Kyiv Deliverable – Study and presentation CSD/CCP to the Payments System (DVP) SWIFT 2. Phase 2 of the ISO 20022 messaging platform NBU, Banks Mar 2020 Kyiv Cash management, exceptions and investigations, implementation. direct debit messages.
27 ATTACHMENT C. PROJECT DOCUMENTS AND PUBLICATIONS
1 Presentations for the November 27 roundtable on the 3d wave of mystery shopping survey of consumer lending by banks 2 [Stock market professionals certification: practice analysis report, prepared by STTA**] 3 Report: Opportunities for leasing medical equipment in Ukraine (a Market Survey) http://uul.com.ua/2019/rynok-medychnogo-obladnannya/ Presentation: http://www.fst-ua.info/wp-content/uploads/2019/12/presentation_Leasing-Medical- Equipment_Survey_12dec2019.pdf 4 Video on Round Table Discussion on Medical Equipment in Ukraine: Just Lease It https://www.youtube.com/watch?v=fzHWindz4rg 5 Presentation, How to compare and choose an appropriate loan, FST Roundtable Banks and Consumer Loans, Nov 27, 2019 6 Presentation, Informing consumers with digital comparison tool Liga.Money*, Conference Legislative changes in protecting consumers of financial services, Dec 06, 2019 7 Digital comparison tool for financial wellbeing of consumers*, NBU Info Days in Chernivtsi, Oct 2-3, 2019 8 Video #1. Shopping around for financial services, pre-launch promotion for Liga.Money 9 Video #2. Comparison of mortgages with different terms, pre-launch promotion for Liga.Money 10 The survey report “Ukrainian FinTech and banks’ transformation”, four interviews with the NBU’s Deputy Governor and three FinTech businessman published on AIN web portal as a special project (https://ain.ua/special/usaid-start-eng/) 11 Presentations for the Economic Information Days in Chernivtsi, Kherson, Kharkiv 12 FST Activity Factsheet 13 DGF Public Opinion Survey Questionnaire and Raw Data 14 Video on 1,000 UAH Banknote https://www.facebook.com/NationalBankOfUkraine/videos/1142516695944543/ 15 4 videos on deposit guarantee system: 1. How to calculate interest on a deposit https://youtu.be/ytquA5wVg40 2. What deposits are not covered by the Deposit Guarantee Fund? https://youtu.be/1yykyYHIwM4 3. How to claim your money from a bank to be liquidated https://youtu.be/Wh7eOmw0Lh0 4. What is the coverage for foreign currency deposits? https://youtu.be/05EamA5IcDA 16 2 videos about comparison shopping and Liga.Money on the following topics: -1st video “How to compare and choose the best loan”, November 2019: https://youtu.be/7Z1SMPy3vaU -2nd video “Comparison shopping for mortgage finance”, December 2019: https://youtu.be/dTX5BxvJ8vM 17 One Pager about Liga.Money 18 Report on public opinion survey interviews on levels of awareness, perceptions, sources of information, and attitudes toward the NBU.*
* Limited distribution ** Not for distribution
28 ATTACHMENT D. PERFORMANCE DATA TABLE Performance Indicator List and Tracking Table (PILTT) Possible new Mission PMP indicators
Context indicators
Frequency Unit of Measure and
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 Data not available yet due to the Proportion of private and state Unit of Measure: Parliament owned companies submitting Percent Finance DO1_ annual standardized financial Source: FRS Public 0 N/A N/A 1.6% 100% Annual 1 Committee reports on time to the Financial Portal decision to Reporting System Hub launch FRS reporting for 2020 in 2021. 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 8.1% as of 9% as of 0.1 Commission for 9% 11% 13% 15% Annual sector as % of GDP as of 2016 09.30.2017 09.30.2018 09.30.2019 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 Unit of Measure: Person hours of training number (of person 0.2 completed by management and 0 0 0 790 1,530 2,230 hours) 3,622 7,848 Annual or staff of financial Source: project records 29
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection intermediaries supported by (as of USG assistance 09.30.2019)
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. Disaggregated by: sex (male/female) Unit of Measure: million $33,736.1 $33,298.6 $35,636 $34,403 Credit to private sector 0.3 USD mln as of $34,000 mln as of $35,000 as of $37,000 as of $40,000 Annual (context indicator) Source: NBU 12.31.2016 09.30.2017 09.30.2018 09.30.2019 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 2.95 (EBA) Investment 3,03 0.4 from 1 to 5 (best) 2nd half 3.0 3.1 2nd half 3.2 2nd half 3.25 Annual Attractiveness Index (context 2nd half 2017 Source: EBA 2016 2018 2019 indicator) 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% 40.3% Unit of Measure: % 0.5 deposits to all deposits (context as of 46% as of 44% as of 40% as of 38% Annual Source: NBU indicator) 01.01.2017 09.01.2017 09.30.2018 09.30.2019 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) 42.3 48.7 0.6 Financial System Score Source: World 50 (as of 52 Annual (as of 2018) Economic Forum 2019) Global Competitiveness Report
30
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection 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 37,180 89,143 Unit of Measure: Males: Males: Number (cumulative) Person hours of US-funded 5,936 17,690 Source: Implementing 0.7 training provided to support 0 39,060 Females: 41,060 Females: 42,660 89,143 44,020 89,143 Quarterly partners; reports, financial sector development 31,244 71,453 activity reporting (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: 222 Number Number of media placements 1,978 (as of 0.8 Source: Implementing 0 250 822 550 900 1,988 (as of 1250 Quarterly produced with USG assistance (as of 12.31.2019 partners’ reports, 09.30.2019) 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 Compliance with international from 1 to 5 (best) standards for consumer A9 Source: Implementing 0 1 1 4 1 5 3 Annual protection is enhanced in partners’ reports, Ukraine 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
31
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Unit of Measure: score Index of financial literacy and 53 A10 Source: public opinion N/A 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% 24.6% Loans to population as % of the percentage 16,3% A11 as of August 17% as of 18% as of 19% as of 21% Annual total bank loans Source: National Bank 2016 09.30.2017 09.30. 2018 09.30.2019 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 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: TBD when Number of calls to the NBU Number the call A13 6,100 N/A N/A 20,000 40,000 Annual call center Source: National Bank center is of Ukraine operational 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 Number TBD – late A14 digital comparison tool to Source: Google 0 N/A N/A 14,000 February 600,000 Annual lending sources Analytics; FST Activity 2020 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.
32
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection 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 2 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 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 7 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 0 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 Operational and IT functions 9) B18 0 5 3 9 9 0 9 0 Annual improvements in NSSMC Source: Technical Leads and implementing partners’ reports
33
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection 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 13,544 Number as of C19 concluded during the reporting 8,500 as of 9,700 as of 10,000 as of 11,000 Quarterly Source: Regulator, October period. 09.30.2017 09.30.2018 09.30.2019 surveys 31, 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 Unit of Measure: 288 Value of leasing contracts 421.1 789 919.5 Millions of US dollars as of C20 concluded during the reporting 330 as of 380 as of 820 as of 900 Quarterly Source: Regulator, October period. 09.30.2017 09.30.2018 09.30.2019 surveys 31, 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 0 0 0 2 1 4 2 5 Annual Environment Reform Rada 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 50% as of D22 Percent 33% 35% as of 38% 40% Annual payment cards as of 2015 2017 09.30.2019 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. 34
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection Justification: Indicator of expanded cashless economy Disaggregated by: N/A
Unit of Measure: 2,200 2,992 Number of digital transactions 1,287 as of 2,311 as of D23 Number in millions 1,600 2,000 as of 2,500 as of 3,000 Annual using payment cards 2015 2017 Source: NBU 09.30.2018 09.30.2019
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 1 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.
Justification: Improved legislative environment boosts increased financial inclusion of population and expanded use of digital financial services. Disaggregated by: N/ 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% 48% 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 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
35
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection • 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: 39.15 pp. Interquartile Range of the Cost Baseline Percentage Points as of D27 of Credit for Personal N/A N/A N/A N/A collected in 35 Annual Source: Mystery September Unsecured Loans in Ukraine 2019 shopper survey 2019 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. Disaggregated by: N/A Sub - Component E: Balanced and Sustainable Pension System Unit of Measure: Score (Score card from 1 to Material improvements in the 5) E28 0 5 2 0 5 0 5 0 Annual Pension Fund efficiency Source: Technical Leads 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 Preliminary Unit of Measure: numbers for 9,8% Percent 11,2% 10,8% 2019 will be as of March Pension expenditures ratio to Source: Ministry of as of as of March available in E29 11,2% 2019 (actual 11% 11% 10,5% Annual GDP (context indicator) Finance of Ukraine, December 2019 (PFU March 2020 expenditures Pension Fund of 2016 report) when PFU ) Ukraine report is published Definition: This is context indicator - percent of total pension fund expenditures to GDP
36
Frequency Unit of Measure and
Baseline of
FY17 FY18 FY18 FY19 FY19 FY20 FY20
Source FY17
Actual Actual Actual Actual
Target Target Target Target Collection 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 1 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
37 ATTACHMENT E. SUB-AWARDS TABLE
Component/
Status
End Date End
Objective
Start Date Start
Subaward Title Subaward
ReportingPeriod
IP(Prime) Name
SubawardeePOC
USAID Award No. Award USAID
SubawardeeName
andregion each for
Location (Latitutde,
ProgrammaticArea
Subaward Sign Date Subaward
SubawardeeAddress
locationof operation)
Program Program Description Subaward
SubawardeeWebpage
Project / ActivityName
longitude, town, district longitude,district town, Subaward Amount, USD Subaward
Society for Avenue Adèle 1, Development of Worldwide A. Access to Ilona Pouna ISO 20022 Subcontract 1310 La Hulpe, Financial Sector Interbank DO4: Inclusive, Finance/NBFIs 6. Senior standard message AID-121-BC- No. 14-Feb- Kyiv, https://www.swift Belgium Firm Fixed Feb 2019 - Transformation (FST) Financial 29-Feb-20 $247,170.00 Sustainable, Market- Implementation of ISO Ongoing Account Tel: + 32 2 655 specifications 22-Feb-19 17-00001 1002990-19S- 19 Ukraine .com/ Price (FFP) Feb 2020 Activity in Ukraine Telecommunicati driven Growth. 20022 for payment Director, relevant for the 31752-00 3111 on SCRL, system CEE NBU’s SEP S.W.I.F.T. SCRL payment system
Digital Comparison Tool development, INFORMATSIINE A. Creation of Fair, media promotion, 23.Parkovo- Subcontract Financial Sector AGENTSTVO DO1. Corruption Transparent Markets Dmitry and operation. Fixed Firm AID-121-BC- 10-Oct- Kyiv, Syretska Str., Oct 2019 - No. PUR- Transformation (FST) LIGABIZNESINF 30-Nov-20 $421,168.00 Reduced in Target A.4. Digital Comparison http://www.lbi.ua/ Ongoing Bondarenko, Comparison of Price 10-Oct-19 17-00001 19 Ukraine Kyiv, 04112, Nov 2020 KYV-19-0089 Activity in Ukraine ORM, TOV Sectors Tool (DCT) for retail Director credit products Subcontract UKRAINE (LIGA) loans implementation and creation of explanatory content on financial matters. Public Opinion C. Public Survey of Financial Financial Sector Oct DO4: Inclusive, Confidence/Communica Vadym 34 Lesi Ukrainky Consumers AID-121-BC- PUR-KYV- Kyiv, https://sapiens.co Purchase Oct 2019 - Transformation (FST) Info Sapiens, TOV 23, Feb 13, 2020 $11,426.27 Sustainable, Market- tion 12. Conduct Ongoing Syvoglaz, Blvd, Kyiv, Awareness of the 23-Oct-19 17-00001 19-0124 Ukraine m.ua/ Order Feb 2020 Activity in Ukraine 2019 driven Growth. Survey on Deposit Dyrector Ukraine Deposit Insurance System Guarantee System in Ukraine Target group C. Public analysis/elite Confidence/Communica until the interviews on tion 5. Conduct surveys No Financial Sector Parties DO4: Inclusive, Natalia 15 Revutskogo knowledge, AID-121-BC- Noks Fishes Jul 24, Kyiv, on levels of awarencess, https://noksfishes. Complete Purchase Jul - Dec 10/17/PUR- Transformation (FST) perform their $18,449.14 Sustainable, Market- Kononenko, Str., of.10, Kyiv, awareness, 24-Jul-19 17-00001 Finance, LLC 2019 Ukraine perceptions, sources of info/ d Order 2019 KYV-19-0088 Activity in Ukraine obligations in driven Growth. Director 02091 perceptions, and information, and full attitudes toward attitudes toward the the NBU and the NBU and NBU brand NBU brand until the ERNST END Larysa 19-A Financial Sector Parties DO4: Inclusive, D. Financial Inclusion. 8. AID-121-BC- No TAS- YANG, TOV 8-Aug- Kyiv, https://www.ey.c Marchenko, Khreschatyk Str. The Remittances Purchase Aug 2019 - Transformation (FST) perform their $73,214.98 Sustainable, Market- Analysis of worker Ongoing 8-Aug-19 17-00001 2019-00130 (Ernst & Young, 20 Ukraine om/en_ua Representati Kyiv, in Ukraine Survey Order Jan 2020 Activity in Ukraine obligations in driven Growth. remittances LLC) ve 01001 full Public Opinion C. Public Survey on levels Confidence/Communica of awareness, tion 5. Conduct surveys Financial Sector DO4: Inclusive, Vadym 34 Lesi Ukrainky perceptions, AID-121-BC- PUR-KYV- Jul 22, Dec 31, Kyiv, on levels of awarencess, https://sapiens.co Complete Purchase Jul - Dec Transformation (FST) Info Sapiens, TOV $9,662.92 Sustainable, Market- Syvoglaz, Blvd, Kyiv, sources of 22-Jul-19 17-00001 19-0080 2019 2019 Ukraine perceptions, sources of m.ua/ d Order 2019 Activity in Ukraine driven Growth. Dyrector Ukraine information, and information, and attitudes toward attitudes toward the the NBU and the NBU and NBU brand NBU brand
38
Component/
Status
End Date End
Objective
Start Date Start
Subaward Title Subaward
ReportingPeriod
IP(Prime) Name
SubawardeePOC
USAID Award No. Award USAID
SubawardeeName
andregion each for
Location (Latitutde,
ProgrammaticArea
Subaward Sign Date Subaward
SubawardeeAddress
locationof operation)
Program Program Description Subaward
SubawardeeWebpage
Project / ActivityName
longitude, town, district longitude,district town, Subaward Amount, USD Subaward
https://www.ukra 29 V Financial Sector TSENTR DO4: Inclusive, Sergii AID-121-BC- PUR-KYV- Jul 2, Dec 31, Kyiv, B. Capital and groconsult.com/n Complete Тymoshenko The Grain Market Purchase Jul - Dec Transformation (FST) UKRAGROKON $38,098.84 Sustainable, Market- Fiofilov, 2-Jul-19 17-00001 19-0062 2019 2019 Ukraine Commodity Markets ews- d Str., office 5 Derivatives Study Order 2019 Activity in Ukraine SALT, TOV driven Growth. Director main/zernovye Kyiv,
D. Financial Inclusion. 4. Consumer Financial Sector DO4: Inclusive, Sergii 61 Chehorina St. AID-121-BC- PUR-KYV- FORSERVIS UA May 17, Kyiv, Mystery Shopping https://4service.gr Complete Lending Survey Purchase May - Dec Transformation (FST) Jun 30, 2020 $3,917.16 Sustainable, Market- Parshkovskyi Kyiv, 17-May-19 17-00001 19-0045 SALES LLC 2019 Ukraine Surveys in Consumer oup/ua/ d (Mystery Order 2020 Activity in Ukraine driven Growth. , Director 01042 Lending shopping)
FST Quarterly Report 1 Subawards + POs 2020.xlsx
39
ATTACHMENT F. SUMMARY GRANT AWARDS TABLE Grants
Grantee Award Date Amount Description Activity Ukrainian Union of Dec 4, 2019 $129,997 Strengthening the institutional capacity - Promoting leasing to SMEs Lessors of Association “Ukrainian Union of - Improving the professional level of market participants and Lessors” to ensure effective promotion of networking leasing to small and medium enterprises - Conducting market research and data analysis Civil Liberties NGO Dec 20, 2019 $99,956 Creation of a mechanism for alternative - Legal Counselling/consultations for consumers of insurance dispute resolution in the insurance services market with the possibility of further - Informational campaign on the launch of alternative dispute expansion to other financial markets resolution in the insurance market - Analytics and reporting on insurance services-related issues raised in disputes Ukrainian Catholic Dec 23, 2019 $38,435 Consumer protection and free legal aid - Legal Counselling on financial services-related issues University to consumers of financial services - Financial awareness events for schools, universities and other social organizations Ukrainian Bar Jan 8, 2020 $46,093 Providing consultations to citizens of - Free legal consultations on individual insolvency to Association vulnurable population groups on socially/financially vulnerable categories of the population individual insolvency issues - Methodological recommendations and guidelines on individual insolvency procedures and their submission to the Coordination Center for Legal Aid Provision - Proposals to amend the legislation on individual insolvency based on the project results Interbank Payment Jan 14, 2020 $44,350 Raising youth awareness of the security - "Moments of Cybersecurity" educational interactive quiz game System Members of cashless payments. "Cyber Security development Association «ЕМА» Minutes" Educational Interactive Quiz - Public event for bankers and other stakeholders to promote the Game game CFA Society of Jan 15, 2020 $98,538 Educational initiatives for finance - Professional education events Investment professionals - Training and workshops for industry representatives and Professionals Ukraine business community - Educational activities for students - Online course on the core concepts of financial instruments and investment markets in Ukrainian Association of Legal TBD Legal clinic advice for consumers of - Insitutional capacity building of Association of Legal Clinics of Clinics + Sloviansk LC financial services Ukraine, - Establishment of a new Legal Clinic in Sloviansk Association of Legal TBD Legal clinic capacity building for - Strengthening insitutional capacity of legal clinics in three Clinics + 3 LC (Kharkiv, counseling, education for consumer regions of Ukraine Lviv, Chernivtsi) protection - Legal Counselling on financial services-related issues - Financial education events for schools, universities and other social organizations TOTAL AMOUNT $457,369
40 ATTACHMENT G. IMPLEMENTATION PLAN OCTOBER 2019 – DECEMBER 2020, REVISED
Updated January 1, 2019 █ New activities █ Completed █ Stopped
DO1: Corruption Reduced in Target Sectors
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Activity Counterpart 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 Deliverable A. Creation of Fair, Transparent
Markets Report with recommendations on improvement of information exchange NBU 1. Support for BEPS implementation on tax issues; MinFin, Rada Committee Comments on BEPS law to Rada Tax and Finance Committee submitted Comments to GOU counterparts and 2. Support for the AML law in the NBU, MinFin, FIU, Rada Rada Tax and Finance Committee Parliament Committee submitted Trainings of AML chief officers of 3. AML training program for banks NBU, banks, STTA banks on best practices of KYC and CDD delivered, materials developed DCT activated, on-line loan 4. Digital Comparison Tool (DCT) for LigaBusinessInform (the comparisons for 4 credit products,
retail loans implementation vendor), banks referrals to banks, educational materials developed and posted Informational web-page developed; FRS manual for reporting entities; 5. Support for implementation of iXBRL Financial statement tool developed NSSMC, NBU, MinFin Financial Reporting System Webinars/multimedia content and workshops for reporting entities delivered 6. Support for AML implementation by Report on best practices in regulation NBU financial regulators and risk assessments
B. Education, Training,
Communication on Corruption New training curriculum approved by 1. New program of the NSSMC; examination/certification of stock market NSSMC, CFA Society NSSMC Regulations on examination/ professionals certification approved Test database developed
41 DO4: Inclusive, Sustainable, Market-driven Growth
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Activity Counterpart 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 Deliverable A. New Regulation of NBFI Markets/
Access to Finance Split Law Implementation Policy papers provided 1. Support development of the new NBU, NSSMC, Rada Comments provided on draft laws to Financial Services Law and sectoral Tax and Finance stakeholders and Rada Committee; legislation (leasing, financial Committee, New architecture of financial sector companies/PDL, other) Associations legislation developed Recommendations on international experience of NBFI regulation and 2. Assistance in drafting NBFI regulations NBU, NSSMC supervision; (disclosure, market conduct, licensing) Comments to draft regulations provided Report with consumer abuse issues 3. Analysis of the real estate construction NSSMC identified and policy recommendations financing schemes provided 4. Support NBU and NSSMC in Internal rules and regulations; operational transition and IT needs for NBU, NSSMC IT assessments/procurements upon NBFI supervision, upon request consideration Printed products, interactive training 5. Public outreach and communications on materials; NBU, NSSMC split and NBFI regulation Video and infographic materials; Press conferences, public events. Access to Finance 6. Capital options for lessors/leasing Recommendations/Scheme on companies (bonds, guarantees, etc.) to UUL, LCs transaction structure provide access to finance for SMEs 7. Vendor financing programs in leasing UUL, LC Vendor Programs initiated business Payments messages completed Phase-2 payments messages completed 8. ISO 20022 messaging implementation NBU, banks, SWIFT (direct debit, exceptions and investigations and cash-management and, possibly, DVP)
9. Diaspora Finance Desk Study USAID/EG Study with recommendations
Recommendations on formalization of 10. Worker remittances Study USAID/EG, EY remittances channels, SME investment options
42 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Activity Counterpart 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 Deliverable
B. Capital and Commodity Markets 1. Legal and regulatory advice to NSSMC, NSSMC, Ministry of Comments to draft laws submitted to other GOU entities on key legislation Energy, Ministry of the stakeholders; assistance with (IOSCO, IOPS and EU Directives) Economy drafting/commenting regulations 2. Survey on knowledge, awareness, and NSSMC, Market Survey results publication and behavior regarding commodity futures, participants presentation, policy recommendations risk practices in agricultural and energy CFTC on development of commodity futures sectors Trainings; US SEC Conference CFTC symposium NSSMC, NBU, US SEC, Report with recommendations on 3. Develop NSSMC/NBU regulatory CFTC, market framework for access by Ukrainians capacity in capital and commodity markets participants Central Securities Depository and potential CCP (Settlement Center) to the payments system Comments to the new legislation on clearing and settlement infrastructure; 4. Support reform of trading, clearing and NSSMC, NBU, Ministry Assistance with drafting new settlement systems in capital and of Energy, USAID ESP, regulations; commodity markets Associations Joint conference with ESP on commodity, energy trading C. Public Confidence /
Communication Implementation of the Consumer Protection Law Assistance with drafting of 1. Financial Consumer Protection legal NBU/NSSMC Regulations on market VRU, NBU, NSSMC framework establishment conduct and consumer complaints handling Trainings for NBU/NSSMC staff; IT platform for centralized handling of 2. Support NBU’s and NSSMC’s NBU, NSSMC, Banks, consumer complaints; consumer protection function / market Fin. companies Assistance with NBU Call-Center conduct supervision establishment; 1-2 study tours Report on the current status of dispute 3. Complaint Processing By Banks - NBU, Banks, NABU resolution at banks and research recommendations for improvement VRU, Cabinet of 4. ADR mechanism (Financial Ministers of Ukraine, Draft Law on Financial Ombudsman
Ombudsman) introduction Ministry of Justice of registered Ukraine 43 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Activity Counterpart 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 Deliverable 5. Public outreach and communications on Educational materials the new consumer protection framework Press-conferences; public events Strengthening Public Communications 1. Conduct Parliamentary-mandated Survey report produced and presented DGF survey on Deposit Insurance System to the public 2. Conduct surveys on levels of awareness, perceptions, sources of Survey Reports produced and NBU information, and attitudes toward the presented to the NBU NBU and the NBU brand Communication strategy developed for 3. Strengthen communication function of PFU, NSSMC NSSMC, PFU, DGF financial sector regulators Trainings on communications conducted for PFU, NSSMC, DGF 4. Support PFU in outreach efforts about Press conferences in the regions web-portal e-services for the workforce PFU conducted and pensioners
D. Financial Inclusion 1. Mystery Shopping Survey in Retail Survey Report presented NBU, Banks Lending Data for DCT collected and analyzed 2. Conduct Public Opinion Survey on Financial Literacy and Financial Inclusion Survey Report produced NBU to measure the progress and report Public presentation conducted results (MEP) Publication on trends in FinTech in Ukraine 3. Support for digital finance innovations, Seminar on Central Bank digital market communications currency Possible personal finance application 2-3 study tours conducted 3. Support financial sector regulators in Concept for the NBU Information and their financial literacy and financial NBU, DGF, PFU Education Center for Financial Literacy inclusion activities developed Financial Inclusion Forum
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