OPERATING PRINCIPLES

National Development Institution (Successor to the Business Development Fund): Mission, Role, and Institutional Development

Mission

The National Development Institution (NDI), the legal successor to the Business Development Fund (BDF), is a state-owned financial institution whose mission is to support the financing of micro, small, and medium-sized enterprises (MSMEs) in Ukraine on affordable terms.

NDI ensures entrepreneurs’ access to financial resources, related services, and programmatic support, thereby fostering private sector growth, job creation, and enhanced competitiveness of Ukraine’s economy.

Strategic Role

NDI operates as a second-tier financial institution and conducts its activities exclusively through partner banks and non-bank financial institutions. Its key areas of focus include:

• Support for MSME financing – providing affordable access to finance through a combination of financial instruments, including concessional loans, credit guarantees, interest rate subsidies, and grant support to compensate investment costs;
• Support for the banking sector – building a sustainable infrastructure for long-term business financing;
• Entrepreneur capacity development – training and enhancement of financial literacy;
• Cooperation with international partners – mobilization of financial and technical resources for the implementation of MSME support programs.

Institutional Development

The approval of the Charter of the National Development Institution by the Ministry of Finance finalizes the institutional transformation of the Business Development Fund into the National Development Institution. From this point forward, NDI operates as a state development finance institution.

Strategic Priorities of NDI

The National Development Institution focuses on:

• supporting micro, small, and medium-sized enterprises;
• implementing state financial programs, including during periods of martial law;
• attracting donor and international funding;
• strengthening partnerships with international and private institutions;
• preparing for direct access to European Union financing.

History and Legal Status

• The establishment of the Business Development Fund dates back to 1996, following the signing of a grant agreement between Ukraine and the Government of Germany. Grant funds were used to launch a microcredit program and establish the German-Ukrainian Fund under the German Federal Government’s TRANSFORM program.
• In 1999, in accordance with the grant agreement, the German-Ukrainian Fund (GUF) was established with the participation of KfW Development Bank, the Ministry of Finance of Ukraine, and the National Bank of Ukraine.
• In 2020, with the launch of the state program “Affordable Loans 5-7-9%”, the German-Ukrainian Fund was renamed the Business Development Fund, while retaining full legal succession of all rights and obligations.
• The sole participant of the BDF is the Government of Ukraine, represented by the Ministry of Finance of Ukraine.
• The BDF has non-profit status: all funds are reinvested into further lending and the development of MSME support programs.

As of 1 January 2026, the National Development Institution (NDI) commenced operations in Ukraine as a state financial institution established on the basis of the Business Development Fund. These changes are enshrined in the Law of Ukraine “On the National Development Institution” No. 4622-IX of 8 October 2025, which entered into force on 29 October 2025.

Operating Model and Status of NDI

The operating model of the National Development Institution aligns with leading European practices, particularly the approach of KfW, combining institutional autonomy with strategic partnership with the Government.

NDI operates as a financial institution with a special status, following the second-tier institution model and without a profit-making objective. The adoption of the Law on NDI resulted not only in the transformation of the institution itself, but also in the evolution of Ukraine’s banking system from a two-tier to a three-tier model. Within this framework, the National Bank of Ukraine implements monetary policy, while NDI ensures access to financing for priority sectors of the economy through Ukrainian banks.

The core mission of NDI is to provide MSMEs with access to concessional financing through partner banks. The Institution features autonomous governance, tailored regulation by the National Bank of Ukraine, and authority to administer state business support programs.

Financial Instruments and Programs

NDI implements lending and entrepreneurship support programs based on the principle of revolving funds. Key instruments include:

• MSME lending programs implemented through partner banks;
• interest rate compensation programs;
• specialized products to support innovative, environmentally sustainable, and socially significant projects.

These programs cover all regions of Ukraine through a network of partner banks and financial institutions.

Governance and Management

• Collegial governing bodies: the General Meeting of Participants and the NDI Council;
• Chief executive officer: Chair of the Management Board;
• Independent Supervisory Board: established in 2025 as part of the institutional reform with the support of international partners. The Board comprises three independent international experts and two state representatives. It ensures strategic oversight, effectiveness and transparency of operations, and performs risk management functions.

Licenses and Permits

• License to provide financial services (including financial lending);
• General license of the National Bank of Ukraine for conducting foreign exchange operations.