Ukraine—Financial Sector Transformation (FST)

Client: U.S. Agency for International Development

Duration: 2016-2020

Region: Eastern Europe and Central Asia

Country: Ukraine

Solutions: Economic Growth

After years of oligarchic control, the closing of more than 70 banks, and a threefold currency devaluation, the Ukrainian financial sector remains fragile and in need of a massive overhaul. On the commercial side, these pressures have curtailed the growth of small and medium enterprises (SMEs) by making financing less accessible and driving prohibitively high interest rates. Meanwhile, consumers have lost both money and trust in the banking system after the 2009 financial crisis, opting out of using banks altogether and converting their salaries directly to cash on payday. Continued strains such as these have brought the country’s financial sector dangerously close to the point of collapse.

Despite these challenges, reformers within the Ukrainian Parliament and key regulatory bodies look to pass new financial sector legislation that will uphold transparency and accountability, protect businesses and consumers, and confront fraud and abuse, thereby restoring public confidence in the financial system. To capitalize on this momentum, the U.S. Agency for International Development launched the Financial Sector Transformation (FST) Activity to support efforts to reform Ukraine’s non-bank financial institutions. FST is providing flexible and market-focused technical expertise to boost the involvement of consumers and businesses in shaping the reform process, while also working with policymakers to influence the legal changes needed to enable effective and long-lasting change.

At the heart of FST is DAI’s market systems approach to inclusive financial sector programming, which addresses both demand- and supply-side actors as well as seek to improve the wider business enabling environment of the financial sector. By increasing competition within the financial system and broadening service offerings, in particular to meet the needs of women and low-income and marginalized populations, FST is helping to ensure that the benefits of new financial reforms are felt by all Ukrainians.


Sample Activities

  • Support the development and passage of new legislation that addresses consumer protection and ensures that consumer rights are in place for non-bank financial services.

  • Partner with local non-governmental organizations and universities to expand financial literacy among marginalized and hard-to-reach populations by developing educational materials, tools, games, and apps that address new consumer rights and protection laws.

  • Collaborate with leasing and credit union associations to raise awareness of critical business constraints caused by policy and taxation issues, and put forth legislation to facilitate reforms.

  • Support the establishment of a diaspora fund to attract diaspora investment and facilitate access to financing ready SMEs.



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