Strengthening Wartime Business Resilience:

The full-scale invasion of Ukraine by Russia – which commenced in February 2022 – and the ensuing war has left many entrepreneurs in Western Ukraine uncertain of the future of their businesses. The war has severely disrupted supply chains, leading to resource shortages and increased costs for MSMEs (micro, small, and medium-sized enterprises). Additionally, this uncertainty and security risks have hindered business growth, forcing many to scale down operations or close entirely.

The Oxfam Business Grant Program, implemented in partnership with Bank Lviv from September 2022 to December 2023, supported 33 MSMEs in Western Ukraine. The program aimed to both support MSMEs financially to continue operations, relocate, recover, and expand their provision of essential goods and services, while also encouraging the employment of 104 internally displaced persons (IDPs) and other vulnerable groups.

Humanitarian Aid and Recovering Operations

During the program, there were two complimentary approaches. The first approach consisted of providing critical humanitarian services through MSMEs, including shelter, food and healthcare. The second approach focused on stabilizing and recovering operations for the MSMEs, such as equipment upgrades and workforce stabilization. Overall, the program focused on filling urgent financial gaps that many MSMEs faced due to limited access to conventional or governmental financing which rely on stringent criteria and high-interest costs. In the end of 2024, an external evaluation of the second approach was concluded. In this evaluation, the results of 12 MSMEs supported were assessed, and concluded an overall positive impact of the grant program on improvements related to their business practices, such as expanding workforce or repair operations, which are outlined in the next sections.

Business Stabilization and Recovery

Since the outbreak of the war, MSMEs in Western Ukraine across various sectors faced serious financial strain, with inflation, labor shortages, and increased operational costs often leading to temporary suspensions, loss of customers and reduced workforce. For half of the MSMEs, the grant conducted in partnership between Bank Lviv and Oxfam was their only source of financial support in the past year. As one business owner described: “We had zero finances at the time of applying for the grant. Our business was completely inactive for months, and we desperately needed both financial support and new equipment to restart production.” The evaluator concluded that the grant had less rigid eligibility criteria compared to alternative options. However, a meticulous selection process and a selection committee with independent members were still in place to ascertain quality. Its flexibility allowed for a broader range of applicants, particularly those who might not have qualified for traditional financing due to financial instability or asset loss. This inclusive approach made the grant accessible to businesses that would otherwise struggle to secure funding.

Dual Focus on Economic and Social Resilience

A key component of the program was its focus on both economic and social resilience. The program emphasized the employment of IDPs and other vulnerable groups, with 10 out of 12 MSMEs from Phase II hiring IDPs, helping address labor shortages, contributing to local workforce stabilization and support in labor integration.

The program also facilitated investments that enabled businesses to enhance their production capacity and meet market demand. In most cases, the grant contributed to increased profitability of the businesses and in all cases the grant contributed to restoring or maintaining operational continuity. There were also some positive ripple effects on the suppliers of the MSMEs, suggesting a potential contribution of the grant in the broader economic recovery.

Sovita’s Strategic Growth

Sovita, a mushroom production company, highlights how MSMEs can leverage external expertise for strategic growth. The company secured a partnership with a major wholesaler and worked with consultants specializing in exotic mushroom cultivation. These experts helped Sovita design a second farm that met European production standards, positioning it to secure contracts with large retail chains like Metro. The grant funded essential infrastructure upgrades for the new greenhouse, such as roof replacements, and supported workforce expansion. This case demonstrates that MSMEs can achieve strategic growth by integrating specialized knowledge and adapting to emerging market opportunities, making it a valuable example for other businesses aiming to scale effectively.

LLC Mazhura’s Resilience Amid Bombings

LLC Mazhura, a manufacturing MSME in the town of Drohobych, faced significant setbacks when its premises were bombed multiple times. Initially, the company had planned to launch a new production line, but instead, it had to address extensive damage. The business owner turned to Bank Lviv, which directed them to the grant through the Bank Lviv and Oxfam partnership.

The business owner stresses: “The first bombing came as a huge shock, and when I turned to Bank Lviv, asking what to do since the premises were under their line, they directed me to the Oxfam grant. I applied and received help after the first bombing. That grant was the ‘helping hand’ I desperately needed. The funds kept my business sustainable, ensuring we had the necessary workspace and resources to continue production and preserve jobs. Without the grant, the financial burden from repairs would have left me with far fewer products and significantly reduced my workforce. The grant helped partially cover the costs of restoring the business, for example by replacing damaged equipment and hereby enabling the business to resume operations. […] It allowed us to repair damaged premises, retain employees, and continue production, providing a much-needed buffer that prevented us from pulling critical funds out of our business turnover.”

All in all, the grant – combined with flexible terms from a retail partner – allowed LLC Mazhura to continue functioning. The client continued to use its own working capital, but in a smaller amount. This case highlights the importance of flexible financial support in overcoming unforeseen challenges.

Stabilizing Businesses Together: Successes and Lessons Learned

The partnership between Oxfam and Bank Lviv was central to the program’s success. Bank Lviv’s economic and financial expertise and Oxfam’s experience in humanitarian and development work allowed for targeted support and strategic guidance, ensuring that MSMEs received the financial resources and expert advice needed to recover and grow. This collaboration enabled a more tailored and effective approach to strengthening MSMEs' resilience in a rapidly changing economic environment.

While the program was successful in stabilizing businesses, there were areas for further development. Many MSMEs, especially smaller or relocated businesses, faced gaps in financial management, strategic planning, and operational resilience. Although Bank Lviv offered substantial support in financial oversight, the depth of this assistance varied depending on the MSMEs' existing capacities and engagement levels. MSMEs actively hired IDPs and persons with disabilities (PWDs). Still, challenges regarding skill mismatches, work force integration and housing needs still occasionally occurred within the program. However, these were addressed as much as possible through training and on-boarding processes for new employees.

To strengthen long-term resilience, future programs should incorporate capacity-sharing and strengthening components, such as financial literacy, budgeting, and risk management. Additionally, future programs that have a focus on IDP employment should address skill mismatches and housing needs in their design. Bundling grants with training programs would enhance MSMEs’ self-sufficiency and help them become more adaptable in an uncertain economic environment.

Enhancing Financial Stability

To conclude, the Bank Lviv and Oxfam Business Grant Program has been vital in supporting MSMEs in Western Ukraine during challenging war times. By focusing on both economic and social resilience, the program helped businesses continue operations, create jobs, and strengthen their market position. The cases of Sovita and LLC Mazhura demonstrate the positive impact of targeted yet flexible financial support. Moving forward, expanding the focus on capacity-sharing and strengthening, and inclusive employment support will further enhance MSMEs' long-term stability and contribute to Ukraine’s broader recovery.