During Ukraine's famously harsh winters, what Stefania Klimko, a pensioner living in Lviv, needs most is reliable hot water. To finally get it, she recently became head of her building's homeowners' association -- a decision that has begun to reshape her life.
Now she's part of an emerging group spearheading the modernization of Ukraine’s residential sector. New legislation drafted by IFC experts and endorsed by the government is set to change service-provider relations for millions of families in Ukraine, replacing the outdated Soviet system with market-driven relations.
"A couple years ago we staged a strike and stood there with our children, freezing for hours to block a highway," said Stefania. "We did it because the boiler station to heat our district had been shut down indefinitely for unknown reasons. Then we realized we had to take care of our house ourselves. We went to the municipality for help, but it was futile. Then IFC helped set up the homeowners' association resource center and we learned about financing opportunities.”
With a $5,000 loan from a local Lviv-based bank, Klimko and her neighbors are now implementing energy efficiency changes, modernizing the building's heating system. And Stefania is now a successful entrepreneur, managing three houses and two employees.
Two-thirds of Ukraine’s 70,000 multi-family buildings require modernization and at least 80 percent of the upgrades are related to energy saving or energy distribution. The sector represents one of the best opportunities for energy savings in a country that has had to import more than half of its energy from Russia. Investments can result in savings of 30 to 40 percent of heat energy and help reduce gas consumption by 25 to 30 percent. Yet the sector has seen little investment.
To turn this around, IFC and the government of Switzerland have been implementing a Residential Energy Efficiency Advisory project in Ukraine since 2010. The project is being implemented in two cities, Vinnytsa and Lviv, working with government and parliament to pass the required laws and with banks to unlock financing for residents.
“This is the first loan we've given to the homeowners' association,” said Andriy Zakharevich, a loan officer from Bank Lviv. “It was a joint effort by the bank, Lviv’s resource center, and IFC consultants, along with donor support.”
The centers in central and western Ukraine serve as key meeting points to train bank officials and representatives of homeowners' associations and municipalities on a regular basis. Thus far, over 2,000 people have been trained. Once parliament approves the legislation, every house will be able to hire a company to provide the services.
IFC’s Advisory team is also working with five Ukrainian banks to unlock commercial lending and introduce multi-family housing finance products to help over 13,000 homeowners' associations gain access to finance and save on energy. Demand should be high as Ukraine has more than 220,000 multi-family buildings.
-- September 2014