Targeted refinancing of banks as a tool for economic development

Abstract

Background. In order to stimulate lending, central banks use targeted refinancing operations, which allows lowering interest rates and increase the liquidity of the banking system. Taking the current state of bank lending in Ukraine, the development and implementation of effective lending stimulation program, namely targeted refinancing operations, is a crucial for further economic development.
The aim of the article is to conduct a comparative analysis of lending programs in some developed countries, identify the shortcomings of the current lending stimulation program in Ukraine and develop a concept of a mechanism to stimulate lending by monetary policy measures in Ukraine.
Materials and methods. The basis for the research is general and special scientific methods. Analysis, synthesis and systematization were used to assess targeted lending approaches in some countries, identification of shortcomings of the current lending stimulation program and further development of a concept for a targeted long-term refinancing mechanism in Ukraine. Methods of analytical and logical generalizations were also used for the research.
Results. Targeted refinancing operations are widely used for lending stimulation in different countries. Depending on the final goals and the state of economy, these operations may differ in their conditions. Nonetheless, the most of the countries prefer monetary policy as a main driver for lending stimulation. In spite of that, currently in Ukraine the fiscal policy was selected as a driver for lending stimulation. The paper proposes to change this approach in view of its shortcomings and to use targeted refinancing of banks instead.
Conclusion. The implementation of targeted refinancing in Ukraine will help to reduce the cost of lending and stimulate the development of prioritized sectors of the economy and decrease the dollarization of the economy. Considering the bearing risks, it is proposed to limit the total amount of targeted lending operations; limit the banks allowed to participate in targeted lending; extend the list of appropriate collateral against target refinancing.