New Type of “Financial Inclusion Banks” Proposed in Ukraine

Below are the key details surrounding this potential initiative.

1. About the Proposed Bill

• Bill No. 13018-d
  The Finance, Tax, and Customs Policy Committee of the Verkhovna Rada has recommended the adoption of this legislation. Committee head Danylo Hetmantsev (“Servant of the People”) announced that the bill seeks to authorize “financial inclusion banks” under a simplified banking license.

• Scope of New Banks
  These specialized banks would focus on:

  1. Clients from front-line areas, where standard financial services are disrupted by ongoing hostilities.
  2. Remote or sparsely populated regions, far from existing bank branch networks.
  3. Socially disadvantaged groups, ensuring equitable access to basic financial tools like deposits, withdrawals, and microcredit.

2. Why the Need for Inclusion Banks?

Ukraine’s banking sector has been downsizing physical branches for several reasons:

1. Branch Closures

   • In 2024, Ukrainian banks reduced their branch networks by 127 units, complicating access to standard banking for many citizens.
   • While some large banks (e.g., Oschadbank, PrivatBank, and Credit Agricole) have closed branches, the fifth largest bank continues to expand in certain regions.

2. Impact of War and Economic Shifts

   • Ongoing conflict has left many remote or front-line communities with limited or no banking services.
   • Digital financial technologies and strategic optimization have prompted banks to reduce physical footprints.

3. Financial Inclusion Statistics

   • According to the World Bank, 84% of Ukrainians had some level of access to financial services in 2021. Compared to a global average of around 95%, there remains a significant 11-point gap.
   • Areas near combat zones, as well as remote rural regions, are particularly affected, lacking consistent bank branch coverage.

3. How Financial Inclusion Banks Will Work

• Partial / Simplified Banking License
  The legislation envisions a limited operating license that allows these banks to offer core financial services (such as deposits, withdrawals, and small loans), without requiring the entire range of a traditional bank’s operations.

• Community-Focused Services
  Priority service targets would be front-line areas and small/micro-enterprises, ensuring local commerce can continue where regular banks have withdrawn.

• Potential for Public-Private Partnerships
  Given that the bill aims to reduce financial exclusion, government support (for instance, through subsidy programs or partnership agreements) may bolster or incentivize these specialized banks in underserved regions.

4. Broader Context: Branch Reductions and Loan Growth

• Branch Network Trends

  • Oschadbank remains the leader with 1,150 branches, followed by PrivatBank with 1,107 outlets, collectively holding about 45% of the brick-and-mortar presence.
  • Economic factors, war-related challenges, and a shift to digital banking have accelerated the closure of physical bank offices.

• Consumer Lending Growth
  Despite branch closures, credit volumes (loans to individuals) rose by 39.6% in 2024, reaching UAH 222.4 billion as of June 1, 2025. PrivatBank remains a frontrunner in issuing loans, highlighting continued demand for financial services even amid branch downsizing.

5. Expected Outcomes

• Greater Access to Financial Services
  If approved, the creation of financial inclusion banks could significantly mitigate the negative impact of branch closures by bringing essential banking closer to vulnerable and underserved communities.

• Potential Spur to Local Economies
  By enabling small businesses and individuals in conflict-affected or remote areas to access credit and deposit facilities, these specialized banks could help revitalize local commerce.

• Complementary Role
  Rather than replacing traditional banks, financial inclusion banks would function in tandem with existing institutions—filling gaps created by closures or insufficient digital infrastructure.

Conclusion

The proposal for financial inclusion banks in Ukraine reflects a concerted effort to provide basic financial services to those in remote regions, war-torn areas, and among disadvantaged groups. Through a simplified banking license, these new institutions will aim to ensure equitable financial access, bolster the local economy, and maintain overall social stability despite the ongoing conflict. If approved and effectively implemented, they could become a vital pillar in Ukraine’s evolving financial infrastructure, bridging the gap for millions of people currently facing limited banking options.