Private Sector Development
Capital and Financial Market Development
At the heart of all sound and prospering capital markets is well-devised, strong, but not overly burdensome regulation. Capital markets reform should include adoption of clear and sophisticated regulations concerning market activity and participants, credible oversight and enforcement, and the organization of an independent government agency to oversee the
markets. It should also include well-functioning central depositories that facilitate expedient clearance and settlement. Fast reliable settlement is important in reducing systemic risk and market volatility. Improving trading systems enhances price transparency and efficiency. In the absence of adequate issuer transparency, capital markets in any country are inefficient, risky, and extremely costly for issuers. Overall, the goal is to develop markets that are liquid, transparent, and credible and that attract capital investment and grow the economy.
During the last ten years, Pragma has provided extensive technical assistance to USAID- funded capital market projects all over the world. Pragma has helped to strengthen the financial sectors of Armenia, Bosnia, Kazakhstan, Kyrgyzstan, Lithuania, Montenegro, Nicaragua, Russia, and Ukraine. In these countries, Pragma assisted in the establishment of all the main components of a capital market such as stock exchanges or alternative trading systems, securities commissions, and market intermediaries including central depositories, registrars, and broker/dealers. In particular, Pragma assisted market intermediaries with the use of private organizations in performing selected tasks, including broker/dealer organizations, depositories, and registrars and settlements organizations. Moreover, we assisted local jurisdictions in establishing the framework for self-regulatory organizations to oversee capital market activities. Pragma also provided corporate finance assistance to companies to list on the stock
market and perform secondary offerings of shares and private placements; to obtain loans from banks or other financial institutions through the development of business plans; or even to perform debt-restructuring activities.
In Ukraine, Pragma is currently implementing the USAID Access to Credit Initiative (ATCI). The ATCI project is designed to mobilize credit for the use of small and medium businesses, prospective homeowners, farmers, and municipalities. The core components of this project are in the areas of mortgage lending, municipal bonds, and financial leasing. The central activities include the development of an appropriate legal environment; development of training programs to build a knowledgeable cadre of financial professionals, and the development of appropriate financial products to meet the needs of SMEs, agriculture, agricultural entities, and municipalities. As a result of this project, entrepreneurs will be able to borrow against the value of their homes to provide capital for their businesses, a new generation of Ukrainian citizens will be able to own their own homes, farmers will be able to finance their agricultural production, and municipalities will be able to upgrade their infrastructure and services. In addition, Ukrainian banks and non-bank financial institutions will have a greater capacity to make business and home loans.
The Mortgage Lending Component
The objective of the mortgage component is to establish a viable, effective and efficient mortgage lending sector in Ukraine. This will be achieved by removing the constraints to mortgage lending by providing technical, advisory, and training assistance to the National Bank of Ukraine, to commercial banks engaged in or willing to start mortgage lending market operations, and to associations such as the Mortgage Association, the Association of Ukrainian Banks, the Association of Real Estate Brokers, the Associations of Appraisals, and others involved in the mortgage industry.
Municipal Bonds Component
The underlying objective of municipal bond market development is to increase the volume of local capital investment in support of essential municipal infrastructure and services. Our specific objective is that before the end of the contract, with technical assistance from the contractor, a
minimum of five municipalities and/or municipal service companies will have had pilot bond issue plans approved by city councils and the central government and will have issued bonds. A related objective is to build the capacity of municipalities and municipal service companies, as well as the financial sector market participants (broker/dealers, regulators, underwriters, trustee, securities exchange, etc.) to issue bonds on their own,
without donor assistance.
Financial Leasing Component
The objective of this component is to create a supportive environment for modern financial leasing. This will be accomplished in Ukraine by promoting the creation of leasing companies through training and consulting; provision of training for potential lessees, farmers, regulators, and other interested parties, such as vendors and banks; consulting potential foreign investors in the sector; and conducting public awareness efforts.
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