Mid-Term Performance Evaluation of the Financial Sector Transformation (FST) Activity

The activity was implemented by DAI in partnership with key Government of Ukraine (GOU) agencies, industry associations, civil society organizations, and the private sector. The original design of FST was built on assumptions about legislative progress coming out of the Comprehensive Program for Financial Sector Development of Ukraine Until 2020, but much of the financial sector reform agenda stalled in Verkhovna Rada. The FST activity focused on several key areas, including increasing public confidence in the financial system, transforming the non-banking financial sector regulatory environment, increasing financial inclusion and expanding digital finance solutions, and establishing a balanced and sustainable pension system. The activity also aimed to affect small and medium enterprises' (SMEs) and marginalized groups' access to finance, change the ways in which financial institutions and financial consumers communicate, and identify unintended effects of the FST activity. The evaluation of the FST activity was conducted by IBI under IDQ No. 7200AA18D00011, Task Order No. 72012119F00002, and was made possible by the support of the American People through the United States Agency for International Development (USAID). The evaluation aimed to assess the contribution of FST to building and advancing confidence in the financial sector, affect SMEs' and marginalized groups' access to finance, change the ways in which financial institutions and financial consumers communicate, and identify unintended effects of the FST activity. The evaluation found that FST contributed to building and advancing confidence in the financial sector, particularly in the areas of increased public confidence in the financial system, transformed non-banking financial sector regulatory environment, and increased financial inclusion and expanded digital finance solutions. However, the evaluation also noted that FST faced challenges in affecting SMEs' and marginalized groups' access to finance, particularly due to equipment costs and limited market access. The evaluation recommended that USAID assistance be continued in areas related to FST's scope, including increasing financial inclusion and expanding digital finance solutions, and establishing a balanced and sustainable pension system. The evaluation also recommended that USAID consider providing additional support to SMEs and marginalized groups to improve their access to finance. The FST activity was implemented over a period of several years, with a focus on building a transparent, fair, and diversified financial system that supports firms and consumers. The activity involved a range of stakeholders, including the Government of Ukraine, industry associations, civil society organizations, and the private sector. The evaluation of the FST activity provided valuable insights into the effectiveness of the activity and identified areas for improvement. The evaluation found that FST had a positive impact on the financial sector in Ukraine, particularly in terms of increasing public confidence in the financial system and transforming the non-banking financial sector regulatory environment. However, the evaluation also noted that FST faced challenges in affecting SMEs' and marginalized groups' access to finance, particularly due to equipment costs and limited market access. The FST activity was implemented in partnership with key Government of Ukraine agencies, industry associations, civil society organizations, and the private sector. The activity involved a range of stakeholders, including the National Bank of Ukraine, the National Securities and Stock Market Commission, the Pension Fund of Ukraine, and the Independent Association of Ukrainian Banks.