Resilience of Ukraine’s Small and Medium Businesses Amid the War: Challenges, Policy, and the Future

With the onset of the full-scale invasion, these businesses found themselves in extraordinarily difficult circumstances: infrastructure destruction, relocation, loss of employees, and declining demand. Despite all this, Ukrainian business has demonstrated remarkable resilience. How has the situation of SMEs evolved between 2022 and 2025? What are the key challenges, and how are the government and international partners responding? Can these enterprises become the driving force of postwar recovery?

The scale of the problem: decline and recovery

According to data from the EBRD and UNDP, in the first months of the invasion (March-April 2022), only about 57% of SMEs were operating. The rest were forced to shut down or suspend their activities.

However, by 2023, the situation began to stabilize, with 84% of enterprises having resumed operations at least partially. In 2024-2025, this figure remained steady at around 85%; businesses adapted to wartime conditions, although production volumes and profitability often fell below prewar levels.

The main challenges for business

According to a series of surveys conducted among small and medium enterprises in 2023-2025, the main challenges for SMEs remain staffing, security, and energy risks, namely:

• Instability of demand and “market uncertainty” (decline in consumer purchasing power);
• Shortage of workers / mobilization / workforce outflow;
• Energy instability and interruptions in electricity, gas, and other supplies;
• Limited access to financing and working capital;
• Infrastructure damage and logistical risks (missile attacks, blockades, supply chain disruptions);
• Regulatory uncertainty and administrative barriers;
• Psychological strain and declining employee productivity.

Legislative and government policy

The foundation for supporting SMEs is Law No. 4618-17 On the Development and State Support of Small and Medium Entrepreneurship, adopted in 2012. The law outlines the primary principles of support, including simplified regulations, access to financing, and participation in state business support programs.

In 2024, the government adopted the SME Development Strategy, which runs until 2027, covering post-war recovery, digitalization, and integration into the European market. The operational plan for implementing this strategy provides for:

• Lending and grants for small businesses:

The government plans to significantly expand SMEs’ access to financial resources. This includes the further development of the 5-7-9% program, which has proven effective during the crisis years: as of mid-2025, Ukrainian entrepreneurs had received over UAH 52.8 billion in preferential loans (17.6 thousand agreements), of which more than UAH 13 billion went to investment projects and about UAH 12 billion to support businesses in regions affected by hostilities. Unfortunately, the Entrepreneurship Development Fund does not publish a breakdown of program participants by enterprise size (in 2022-2023, enterprises of any size could receive preferential loans). Additionally, approximately 10,000 entrepreneurs received grants under the eRobota program to start or expand their businesses – roughly one in five applicants.

• Programs for relocating enterprises from combat zones:

According to the Ministry of Economy, as of 2023, more than 800 enterprises had been relocated from unsafe regions to safer areas, particularly in the western and central parts of the country. The state continues to finance relocation expenses through grants and also provides logistical support. Plans include creating industrial parks for relocated production facilities to reduce the cost of rebuilding infrastructure.

• Training and professional development for entrepreneurs:

Entrepreneurial education has become one of the most dynamic areas of strategy. Under the government’s plan, by 2027, more than 1.7 million people (business owners, managers, and SME employees) are to complete courses in entrepreneurship, digital skills, and export management. The educational programs are implemented in partnership with the OECD, GIZ, USAID, and the European Bank for Reconstruction and Development, which finance business schools and mentoring programs for SMEs. Within the Diia.Business initiative, more than 100 training courses have already been launched, covering financial literacy, marketing, e-commerce, and export activities.

• Digital transformation (electronic services, access to online markets):

One of the strategy’s goals is to reduce the cost of regulatory and tax compliance for SMEs by at least 25% by 2027, through the use of electronic services, automated reporting, and the expanded functionality of Diia.Business platform. The platform already serves more than 1.5 million users and offers over 30 online services, including sole proprietorship (FOP) registration, tax filing, and consultations. According to OECD estimates (2024), digitalization remains one of the key factors strengthening the resilience of Ukrainian SMEs during the war, particularly through the shift of many enterprises to e-commerce and remote work formats.

In particular, Ukrainian SMEs are actively adopting:

• E-commerce (marketplaces, online exports): In 2024, Ukrainians spent UAH 239 billion on online goods and services—25% more than in 2023. The share of e-commerce in total retail sales reached 10%. The number of online shoppers increased to 11 million, resulting in an average of 17 purchases per year.
• Electronic public services (Diia, online business registration, grant applications): The use of digital government services is expanding rapidly. According to the Ministry of Digital Transformation, under the Diia.Business project as of September 2025, 40,000 free consultations for entrepreneurs had been provided across 16 areas. The platform’s finance section now includes over 450 programs and services for businesses. In the first quarter of 2024, 57.665 new individual entrepreneurs (FOPs) were registered through the Diia app or portal (more than in 2023 and 2022). The use of cloud technologies is also expanding: about 28% of Ukrainian companies now utilize cloud services, while another 32% employ data analytics and elements of artificial intelligence to optimize business processes.
• Remote work and outsourcing: In 2025, Ukraine’s outsourcing market is estimated at $1.2 billion. The country accounts for 10.37% of the global software outsourcing market and remains a leader in Eastern Europe.
• Digitalization of payments: 58% of MSMEs accept electronic payments, and more than three-quarters of entrepreneurs report that this has increased their income or customer base.

This reduces dependence on physical infrastructure, helps preserve jobs, and enables access to foreign markets even amid wartime conditions.

International support

SMEs have become one of the key recipients of international assistance. In July 2025 alone, the EU announced new funding of €600 million to support energy, transport, and business resilience, with €230 million allocated to SME support through lending programs administered by banks. The programs are implemented via the European Investment Fund (EIF) and the EBRD.

In addition:

• In 2022-2023, the EBRD invested more than €3 billion in the Ukrainian economy, focusing on business lending, including to SMEs.
• USAID supported enterprise relocation projects and the eRobota program, which provides grants for starting businesses. According to Ukraine’s Ministry of Economy, as of early 2025, more than 22,000 entrepreneurs had received grants to start or grow their businesses, totaling UAH 10.3 billion. In 2024, the USAID Competitive Economy Program for Ukraine tripled its grant support for processing enterprises to $11 million, enabling 75 grants to Ukrainian manufacturers. Under the USAID Economic Resilience Activity (ERA) program, more than 1,100 Ukrainians received grants to develop their own businesses through the eRobota platform – roughly one in ten applicants.
• The UNDP is implementing the Support to the Economic Recovery of Ukraine program, which aims to assist micro, small, and medium-sized enterprises – especially those affected by the war – as well as businesses led by women, youth, and internally displaced persons. The total budget for 2024–2027 is $140 million. The program aims to support at least 100 thousand entrepreneurs. Its main tools include business grants and microloans, entrepreneurship training, support for business infrastructure, and improved access to markets.

This assistance not only partially offsets current losses but also creates conditions for long-term development.

Outlook: potential drivers of recovery

Despite the war, Ukrainian businesses remain viable. EBRD surveys from 2025 indicate that most SMEs are operating in “maintenance mode” (i.e., focused on survival rather than growth), but plan to expand as soon as the situation stabilizes. They see potential in:

• The recovery of domestic demand;
• Integration into EU markets (the ACAA agreement, access to European support programs);
• The development of green technologies and renewable energy;
• Engagement of the diaspora and foreign investors. Such investors can bring not only funding for business development but also modern management practices, technologies, and business connections that can help Ukrainian companies enter foreign markets.

Conclusion

Ukraine’s small and medium enterprises have withstood the extraordinary shock of the full-scale war. They have lost part of their workforce and faced power outages, along with the destruction of warehouses and factories. Yet, they have resumed operations, adapted their business models, and become a symbol of Ukraine’s economic resilience.

Legislative reforms, the SME Development Strategy until 2027, and international programs by the EU, EBRD, UNDP, and OECD are shaping the conditions for recovery. Ukrainian SMEs can become a driving force of EU integration if they adopt European standards of production, management, and reporting and actively expand into the EU market. Through participation in European supply chains and support programs such as EU4Business, COSME, and Horizon Europe, Ukrainian entrepreneurs are already integrating into Europe’s partnership system, attracting investment and technology.