In Ukraine, small and medium-sized businesses (SMBs) have historically faced challenges in accessing financing and financial inclusion. This has been the case for the past decade. Entrepreneurs Kostyantyn Zhukovskyi and Maksym Kushnaryov, who have experience running their businesses, understand these challenges firsthand. They founded Activitis to develop simple and accessible financial products for Ukrainian companies. Over the last five years, Activitis has focused solely on two offerings: factoring and traditional lending.
In 2023, joining forces with fintech expert Yaroslav Smakota, Activitis introduced a «Buy Now, Pay Later» (BNPL) option through its eDilo and WEAGRO products. Supported by the USAID Project «Investment for Business Resilience» (IBR) and the USAID Agro Program, WEAGRO targets the agricultural sector, allowing Ukrainian farmers to purchase goods with deferred payment options. Similarly, eDilo offers installment payments to all SMB sectors, with a cash back option (up to 12% of the B2B transaction amount), making transactions through the service even more attractive. Moreover, sellers using eDilo can access affordable factoring services, thanks to the co-financing from the IBR Project and Activitis, which partially covers the commission costs for these services.
Despite these advancements, factoring remains an underdeveloped market in Ukraine. According to Activitisʼ co-owners, unlike in EU countries where factoring accounts for 11-17% of GDP, in Ukraine, this figure remains around 0.5% as of 2023. To meet the financing needs of Ukrainian SMBs, at least $1 billion in investment is required, Activitisʼ shareholders say. They shared more about this in an interview with Forbes BrandVoice.
FACTORING AS A FINANCING SOLUTION
How is factoring fundamentally different for an entrepreneur from a loan?
Firstly, factoring decisions are made quickly. Unlike large companies with long-term planning, SMBs typically plan over 6-18 months and need immediate access to development capital. With a decade of factoring experience, we understand entrepreneurs – we are a business that understands business. This sets us apart from the existing Ukrainian banking system, which offers low interest rates but often overlooks that speed is more crucial than price for businesses.
We approve funding decisions within 30 minutes; our record is 1 hour and 57 minutes from application submission to fund disbursement.
Are there restrictions on companies wishing to use factoring services?
No, factoring is a universal financial tool for businesses across various sectors, including manufacturing, construction, trade, services, and agriculture. While factoring has been available in Ukraine since the early 1990s, the market is still in its infancy.
THE MARKET POTENTIAL FOR FACTORING IN UKRAINE
As market experts, how do you assess the potential of the factoring market in Ukraine?
According to estimates from the International Finance Corporation (IFC), with whom weʼre in negotiations, the potential is around $18 billion. Small and medium businesses are the backbone of most economies, generating over 70% of jobs. Ukraine should not be an exception in this regard.
Do you have the resources if the demand for factoring services significantly increases?
Thatʼs why weʼre seeking investors. We aim to attract at least $1 billion to meet the financing needs of Activitisʼ clients. Weʼre already negotiating with international financial organizations. We want to make a strong statement, as the Ukrainian market is ready for large investments, and Activitis knows how to put them to good use. With the necessary resources, expertise, and innovative products, our service, eDilo, was the only financial project selected out of 97 for the catalogue presented at this yearʼs Ukraine Recovery Conference in Berlin.
Recognising the marketʼs potential, how does the government support developing factoring services in Ukraine?
Discussions on the growth of factoring began at the state level in 2021. In a year, the Ukrainian Alliance of Trade Finance and Factoring was created under the Independent Association of Banks of Ukraine, and a factoring development roadmap through 2025 was presented. This included legislative changes and the formation of a modern IT structure. According to the government’s sustainable development and digital transformation strategy for SMBs until 2027, the state plans to create a national digital factoring platform. The state factoring program is a critical step in popularizing the service. Still, its focus on banking limits the growth of non-bank financial institutions offering factoring services. This limitation creates a cost imbalance for businesses seeking financial services. We believe effective collaboration across the entire financial sector is essential for ensuring equal access to factoring services for Ukrainian SMBs.
ACTIVITIS AS A RECOGNIZED PLAYER IN THE FACTORING MARKET
What advantages does Activitis have as a fintech company in expanding factoring operations in Ukraine?
As mentioned, we come from the business world and truly understand businesses. This allows us to create solutions that address their challenges rather than applying traditional banking thinking. Thirty-six per cent of our clients using factoring services have never taken a bank loan. From a fintech perspective, we’re almost the only non-bank financial institution offering market-rate factoring solutions for SMBs.
Since the start of the full-scale invasion, Activitis has handled over 8.8 billion UAH in factoring obligations and financed more than 720 million UAH in business activities.
What share of the factoring market does Activitis currently hold?
Activitis currently holds around 20% of the factoring market, as confirmed by audit reports. With a projected market size of $18 billion, we can maintain a similar share. By 2025, Activitis plans to enter international markets.
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