Uman NUH | today: 04/12/2024

Features of development and functioning of the credit market in Ukraine

Author(s) Nepochatenko Olena O., Doctor of Economics, Professor, Rector of Uman National University of Horticulture, Head of Department, Uman National University of Horticulture
Bechko P.K., Candidate of Economics, , Uman National University of Horticulture, Ukraine
Barabash L.V., , , Uman National University of Horticulture, Ukraine
Category Economics
year 2017 issue Issue № 91. Part 2
pages 22-32 index UDK 336. (477)
Abstract Effectiveness of state functioning, in particular its financial and economic sphere, is significantly determined by the effectiveness of the credit component. Namely, the credit market is a kind of regulator of the economical state and its development, as well as the success of implementing the newest projects, introduction of innovative trends and formation of the investment component. At the same time, the rational use of credit market instruments can adjust the economical state to an established mechanism and promote the development of not only large enterprises and organizations but also medium and small businesses which are known to be the driving force of any state. The credit market of Ukraine began to develop since the state gained independence, under complicated and ambiguous conditions. In general, there were six stages of the development. The first stage, characterized as origin and development, lasted from 1991 to 1993 and its sign differences were the creation of the NBU and the currency exchange; adoption of laws “On Banks and Banking”, “On Credit Communities”; formation of a two-tier banking system, as well as the first economic crisis and hyperinflation processes in the economy. At the second stage (1994-1996) there was the activation of the process of creating new banks. Also, in the market there were banks with foreign capital; the number of credit institutions increased; the national currency, hryvnia, was introduced into circulation, as well as there was another economic crisis. The third stage of development (1997-1999) was marked by bankruptcy and liquidation of a significant number of banks, growth in the number of problem loans and volumes of inter-bank lending, as well as the adoption of the law “On the National Bank of Ukraine”. During the fourth stage (2000-2008) The Deposit Guarantee Fund for Individuals and the State Commission for Regulation of Financial Services Markets of Ukraine were created, the regulatory and legal framework was improved, the range of banking services and branch networks was expanded, as well as there was the State Register of Financial Institutions. The fifth stage (2008-2010) was influenced by the second economic crisis and its determining sign was the loss of public confidence in financial and credit institutions. This resulted in the reduction in the volume of issuance and an increase in the cost of loans, as well as the activation of non-bank financial and credit institutions. The sixth stage (restoration) began in 2008 and is still ongoing. Now, there is a slight decrease in the cost of credit resources, activation of non-bank lending, as well as narrowing the package of existing banking services. Throughout the entire period of activities the growth of the share of banks with 100% foreign capital is characteristic for the credit market in Ukraine. Their appearance had a number of positive moments (strengthening the competitiveness of domestic banks, increasing the share of foreign investment in the banking sector, lower interest rates) and the growing dependence of the financial and credit sphere on the needs of investors, raising the level of capitalization of foreign banks and their speculative activities. Thus, in addition to the growth of the desired investment resources, the domestic credit market actually loses its authenticity and is forced to adapt to the needs and expectations of foreign partners. The negative trends identified above provoked a fall in the profitability of banks, increasing in the share of problem loans and a fall in the national currency rate. It is possible to solve these problems at the expense of increasing the population’s confidence in the domestic banking sector by strengthening state control over activities of commercial banks and stabilizing the exchange rate of the national currency. In addition, it is necessary to introduce specialization of commercial banks by the main types of services that they provide. But first of all, it is necessary to develop a clear concept for the development of the domestic credit market.
Key words credit market, banking institution, foreign capital, national currency, foreign currency, problem loans.
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