By Anastasiya Baklan
The war in Ukraine has been especially difficult for small businesses in the conflict-affected regions, despite a ceasefire agreed to in February 2015. According to the data of the State Statistics Service of Ukraine, communities in Luhansk, Donetsk, Kharkiv, Dnipropetrovsk and Zaporizhia suffer from a severe economic crisis, which is especially stressful for small and medium business owners.
Analysis of business owners’ attitudes in the Donbas region shows that the stressful situation provokes a fear of investing in illiquid assets such as real estate and land. So entrepreneurs in the region are revising their business models, leasing assets where possible and limiting immobile capital investment.
With the goal of assisting SMEs affected most by the economic downturn, as well as those businesses displaced by the conflict, CIPE recently supported at-risk entrepreneurs in six towns (Berdyansk, Pershotravensk, Slavyansk, Lozova, Svatovo and Kreminna) through a business training and mentoring program for 119 people. The USAID-funded project was based on strategies that promote specific business sectors in each of the target communities, which business owners are now beginning to operationalize.
Given the dire economic situation in Donbas, CIPE was pleasantly surprised to encounter several social impact business models. For example, Oleksandr Gadenko from the village of Osypenko near Berdiansk, has a business concept that will extend the public water supply to the villagers who suffer from a complete lack of water.
The business would bring fresh running water to residents of 800 housing units, which currently have no access to water at all. The novel business financing model, involving a mixture of state investment, private funding, and donor support, will allow villagers to access running water while earning a modest rate of return for the business owner.