Evaluation Insights: Strengthening Ukrainian SME Competitiveness Under Wartime Conditions

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Series Evaluation Insights for Policy and Programming

ReACT4UA / EU4Business — Central Project Evaluation
GIZ, Commissioned by BMZ | Co-financed by the EU and Norad | Ukraine | 2020–2025

Context

Ukraine’s path toward EU accession has unfolded against the backdrop of one of the most severe crises in contemporary European history. The ReACT4UA / EU4Business project operated in an environment shaped by three successive shocks: the COVID-19 pandemic from 2020 onward, and then overwhelmingly the full-scale Russian invasion beginning in February 2022. Ukraine’s GDP contracted by over 30% in 2022. By 2024, targeted attacks on energy infrastructure had destroyed or damaged more than half of the country’s electricity generation capacity, triggering recurring nationwide blackouts that paralysed business continuity, disrupted supply chains, and destabilised the banking sector through a surge in non-performing loans.

MSMEs — the backbone of Ukraine’s private economy — bore the brunt. Hundreds of thousands relocated to western and central Ukraine, pivoted to crisis-essential products, or invested in off-grid energy solutions. At the same time, large-scale conscription shifted economic participation dramatically, with women increasingly taking on entrepreneurial and managerial roles, often alongside uncompensated family care responsibilities. The project operated at the intersection of these crises, addressing both the immediate survival of Ukrainian businesses and the longer-term structural requirements for EU market integration.

Intervention Overview

The project, formally titled Utilization and Implementation of the Association Agreement between the EU and Ukraine in the Field of Trade, ran from April 2020 to July 2025, with a total budget of EUR 68.1 million. Financing was provided by Germany’s Federal Ministry for Economic Cooperation and Development (BMZ), the European Union (EUR 25.5 million co-financing), and the Norwegian Agency for Development Cooperation (Norad, EUR 2.1 million). Implementation was led by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

The project’s overarching objective was to improve the competitiveness and resilience of Ukrainian enterprises, particularly in view of the country’s EU accession ambitions. It operated across three levels simultaneously:

  • Macro level: Technical and policy support to the Ministry of Economy (MoE) for developing the National Export Strategy and transposing EU trade legislation (Free Movement of Goods, Technical Regulation, Consumer Protection).
  • Meso level: Strengthening Business Intermediary Organisations (BIOs), cluster ecosystems, and local governments across nine pilot cities, including via the SME Resilience Alliance, a multi-donor coordination mechanism for which GIZ served as secretariat.
  • Micro level: Direct grants (micro, small, medium, and investment), loan subsidies, training, and export promotion support, including trade missions and EU exhibition participation,  targeted at war-affected MSMEs, internally displaced businesses (IDBs), and women-led enterprises.

A defining feature of the project was its capacity for strategic repurposing: after February 2022, it pivoted rapidly from long-term competitiveness programming toward acute crisis response, redirecting savings into additional micro grants and energy resilience solutions such as generators, solar panels, and storage systems.

Evidence: What Worked

The evaluation rated the project overall as successful (87/100) across all OECD DAC criteria. The strongest results were recorded in coherence (96/100, highly successful) and relevance (91/100).

Business stabilisation and export partnerships were the two areas of most striking overperformance. Against a target of 40% of network-engaged companies establishing cooperative relationships with European firms, 68% did so — and formal business partnerships reached 19% against a 10% target. Of the 1,875 supported companies, 70% confirmed business stabilisation after the support ended, achieving the target precisely. These results were achieved despite massive wartime disruption, and contribution analysis confirmed that financial tools (loan subsidies, micro grants) and consulting services played a decisive causal role.

EU regulatory alignment advanced with tangible results. Six trade-related reform submissions to the Ukrainian Government were achieved, surpassing the target by 17 percentage points. Technical capacity building allowed the Ministry of Economy to maintain its functions during EU screening processes, even as parliamentary procedures were delayed by the conflict.

Women’s economic leadership was an important unintended gain. Conscription-related workforce shifts increased female entrepreneurship and management participation. The project monitored and addressed the associated double burden through targeted advisory support and leadership development, and the share of women-owned or managed firms among supported enterprises reached 35% — above the 20% target.

Local infrastructure was tangibly improved. Innovation hubs, co-working spaces, and business support centres were established in pilot cities. Municipal grants built durable infrastructure, and local trust between governments and businesses was measurably strengthened — a prerequisite for sustainable local economic development.

Evidence: What Did Not Work

Two of the five objective indicators were not fully achieved.

Local business environment perception (Indicator 4) fell significantly short: only 48% of surveyed companies in target cities rated local SME support as improved, against a target of 75%. The evaluation attributes this to pre-war-designed targets that did not account for the scale of wartime systemic constraints, as well as the inherently slow pace of institutional change at municipal level. Structural gaps in local government capacity persisted despite project support.

Regulatory perception among cluster companies (Indicator 2) also underperformed: 34% of cluster firms rated EU trade conditions favourably, against a 60% target. Survey methodology contributed to this result, respondents conflated general economic pessimism with specific regulatory assessments, but real regulatory obstacles also persisted. A revised survey methodology was planned but not yet implemented.

Sustainability of institutional capacities emerged as the most significant systemic failure. Key ministry staff suffered from low salaries, high turnover, and chronic understaffing  threatening the durability of legislative progress on EU acquis transposition. Financial dependence on external donors remained high among public-sector advisory bodies and Business Support Organisations (BSOs).

Market distortion risks arose from the provision of free consulting services. Sustained donor-funded advisory support risks crowding out commercially viable local BSOs, undermining the very advisory ecosystem that business resilience ultimately depends on.

Administrative friction was a persistent drain on project efficiency. Delayed grant disbursements — from both GIZ and municipal State Treasury systems — disrupted cash flows critical to SME operations. Post-award bureaucracy and short grant durations limited the time available for substantive activities.

Lessons Learned

The evaluation surfaces a central tension that defines crisis programming in fragile contexts: high internal management agility can produce outstanding short-term results, while external systemic weaknesses fundamentally constrain structural durability. The project excelled at the former and was constrained by the latter.

Several specific lessons stand out:

Strategic flexibility is a core competency, not a contingency. The project’s most significant results came from its ability to pivot quickly — repurposing from development programming to crisis response, redirecting savings into immediate micro grants, and reconfiguring activities around energy resilience. Future programmes in conflict-affected settings should design this flexibility in from the outset, with explicit change-offer mechanisms and pre-cleared budget reallocation authority.

Grant instruments have limits. As the war extended, traditional small grants increasingly became, in the words of beneficiaries, “pleasant bonuses” rather than decisive catalysts. The critical barriers shifted to military risk and foreign market distrust — neither of which grants address. Programming must evolve toward war risk insurance, export guarantees, and sophisticated risk mitigation products to remain relevant to growth-oriented SMEs.

Free services distort markets. The sustained provision of donor-funded consulting without co-payment requirements risks creating dependency and undermining local commercial advisory markets. A transition to co-payment models is structurally necessary for long-term ecosystem health.

EU accession is a powerful reform anchor. The political momentum of Ukraine’s EU candidacy — negotiations formally began in June 2024 — provided a stable external framework that sustained reform commitment even under wartime conditions. Programming aligned with EU accession benchmarks proved more durable than purely domestic reform objectives.

Communication channels matter. The Diia Business portal was identified as the most effective outreach channel for reaching Ukrainian SMEs. Formal business associations, by contrast, proved largely ineffective. Digital-first communication strategies should be standard in future programmes.

Implications for Policy and Programming

The evaluation generates concrete guidance for policymakers, donors, and implementing agencies designing the next phase of support to Ukraine’s private sector:

Invest in institutional human capital at the Ministry of Economy. The chronic human capital crisis — low public salaries driving high turnover among officials responsible for EU acquis transposition — is the single greatest threat to sustaining policy gains. Embedding long-term, externally-funded technical experts within critical MoE units (especially Consumer Protection) is a practical near-term mitigation measure. The successor project, STEP IN 2 EU (PN 2024.2122.0), should include this as an explicit component.

Reform public export promotion and BSO funding models. Mandatory co-payment mechanisms for business advisory services should replace fully subsidised models. This structural reform would counteract market distortion and improve the long-term financial viability of Ukraine’s business support ecosystem.

Develop integrated risk mitigation packages for growth-oriented SMEs. Future programming should combine war risk insurance, export guarantee mechanisms, and targeted technical assistance on EU market access and certification (REACH, CE marking, technical file preparation). The financial barriers to scaling are now primarily risk-related, not capital-related.

Streamline grant administration. For small grants, simplified trust-based procedures with reduced post-award reporting are essential. For infrastructure and large equipment, direct funding to contractors (the NEFCO model) should be standardised to bypass slow municipal Treasury systems entirely, eliminating the financial gridlock that repeatedly undermined project timeliness.

Centralise communication on Diia Business. All support programmes should be announced comprehensively and consistently through this portal. Reliance on formal associations as communication intermediaries has proven ineffective and should be discontinued.

Potential for Scaling and Transferability

Several components of the ReACT4UA model carry strong potential for scaling and adaptation:

The multi-level architecture combining macro policy dialogue, meso institutional strengthening, and micro direct support proved robust even under extreme conditions. This integrated approach is transferable to other fragile or conflict-affected contexts where business resilience and market integration objectives coexist.

The SME Resilience Alliance model — a GIZ-led multi-donor coordination platform — demonstrated clear additive value in avoiding duplication and aligning international resources with national priorities. This coordination architecture could be replicated or scaled as a model for future crisis programming environments.

Micro grant delivery through digitalised, paperless processes — using Ukraine’s existing state systems and the Diia Business portal — is a scalable, low-overhead model that strengthened both efficiency and anti-corruption safeguards.

However, scalability is contingent on resolving the institutional sustainability problem. Scaling advisory and capacity-building services without addressing the human capital crisis in state institutions would amplify existing fragilities rather than resolve them. Any scaling strategy must include an institutional reform component as a prerequisite.

Methodological Notes

The evaluation was conducted by Karsten Weitzenegger and Iryna Nehrieieva (Combeo Consult GmbH), commissioned by GIZ’s Corporate Unit Evaluation, and published in February 2026. It applied the OECD DAC evaluation criteria relevance, coherence, effectiveness, impact, efficiency, and sustainability as its core framework.

The primary methodological approach was contribution analysis, which aimed to demonstrate plausible causal linkages between project interventions and observed results, rather than attempting direct attribution in a complex multi-actor environment. This was combined with a mixed-methods design: semi-structured key informant interviews, focus group discussions (FGDs) with beneficiaries, document analysis, and quantitative analysis drawing on large-scale commissioned studies, including a rigorous micro grant effectiveness study (IfM 2024; GBRW 2024) based on 2,500 applicants and 670 control companies.

A key methodological limitation is the absence of reliable pre-war baselines. Since the project was redesigned post-invasion without a prior needs assessment, meaningful comparison with pre-2022 conditions is not possible. Wartime data collection constraints — disrupted communications, security restrictions, limited access to affected regions, further affected data availability and reliability. The evaluation was conducted entirely remotely. All data was disaggregated by gender and vulnerable groups (IDPs, women, veterans, people with disabilities) to the extent data availability permitted.

Stakeholder Perspectives

Ukrainian government officials described the project’s support as essential for national economic survival — a level of appreciation that goes beyond standard programme endorsement and reflects the genuinely existential stakes of the intervention context.

SME beneficiaries consistently valued the practical applicability of consulting services — particularly in technical regulation, lean management, and EU market navigation. Focus Group Discussions (FGDs) revealed sustained demand for continued support in understanding EU trade regulations and practical export advisory. Beneficiaries of the micro grant programme showed strong ownership of results and motivation to maintain gains independently.

Local governments in pilot cities acknowledged the durable value of infrastructure investments (innovation hubs, co-working spaces), though sustainability was noted as dependent on leadership continuity. The EU Delegation raised concerns about competition between Ukrainian policy institutions.  particularly regarding the long-term viability of the Ukrainian Entrepreneurship and Export Agency (EEPO), and its effects on the sustainability of policy ownership.

International partners (EU, Norad, UNDP, UNIDO) confirmed that GIZ’s coordination role within the SME Resilience Alliance prevented duplication and amplified collective impact, a view consistent with the evaluation’s strong coherence rating.

Further Resources and Links

Implementing Organisation

Evaluating Firm

Commissioning Party / Co-Financiers

  • German Federal Ministry for Economic Cooperation and Development (BMZ): bmz.de
  • European Union — EU4Business: eu4business.eu
  • Norwegian Agency for Development Cooperation (Norad): norad.no

Partner Institutions

Knowledge Platforms and Related Programmes

Report Citation

Weitzenegger, Karsten, and Iryna Nehrieieva. Central project evaluation – Utilisation and implementation of the Association Agreement between the EU and Ukraine in the field of trade. Evaluation Report, Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Bonn: GIZ, 2026. giz-2026-0934en-utilisation-and-implementation-of-the-trade-association-agreement-ukraine.pdf. Accessed 20 May 2026.

Disclaimer: The author participated in this evaluation. The opinions expressed are solely those of the author and cannot be attributed to any affiliated organizations. Portions of the text and images were supported by artificial intelligence.