A framework agreement between Nefco and Ukraine provides a legal framework for our operations in Ukraine. The agreement, which was signed in 2009 and came into effect in 2010, grants Nefco local privileges and immunities as an International Financial Institution and enables us to provide financing to municipalities and carry out projects in an efficient way. This supports Ukraine’s transition to a green economy, strengthens its alignment with EU regulations and benefits people and communities in Ukraine.
Funding is essential for rebuilding Ukraine
When the full-scale war began in 2022, Ukraine lost access to new credit, and Nefco – like other IFIs – had to halt disbursements of municipal project funding. Many projects stalled, though some later resumed with grant funding.
Since the start of the full-scale invasion, municipalities in Ukraine have not been able to access credit financing, even as the need to secure water, heat and other essential services has grown. Grant funding has therefore been – and remains – critical to keep recovery projects moving, but with guarantees under the EU’s Ukraine Investment Framework Facility (UIF), we plan to gradually restart lending.
Joint effort for green recovery
Our Green Recovery Programme for Ukraine is a multi-donor initiative made up of individual funds and projects entrusted to us. With long experience in environmental investments and a hands‑on approach in high‑risk environments, we have worked with more than 100 Ukrainian municipalities and follow the highest financial and governance standards.
Integrity and ethics in all our projects
Nefco applies strict rules on how funds are to be used and monitored. To mitigate the risk of misconduct and other prohibited practices, we have clear guidelines for internal processes, cooperation partners and beneficiaries.
All entities receiving financing from Nefco must go through our checks and controls. For all entities and individuals to be aware of these – including customers, beneficiaries and partners – we have published a special document, presenting in brief the compliance and ethics requirements in Nefco-financed projects.
As an International Financial Institution (IFI), we can apply our own procurement policy and procedures to the municipal projects we finance. These policies apply to all projects and include integrity, ethics and compliance checks throughout the project cycle. Transparency and competitiveness are central principles, designed to mitigate corruption risks.
To further mitigate risks, Nefco engages independent consultancies to monitor procurement procedures and project implementation. Our procurement and integrity standards align with other IFIs in Ukraine – such as EBRD, EIB and CEB – and are developed to ensure best practices among development banks.
Municipal projects in Ukraine
The following chart illustrates the key integrity and compliance checks through the project cycle of Nefco-managed municipal projects in Ukraine:
Clear rules and procedures are in place for each step of the project cycle, outlining what is required, and where mandatory integrity checks are to be carried out. These are some of the main steps and requirements:
- Project proposal: The beneficiary (usually a municipality) presents a project proposal. Subject to availability of funds and the proposal being aligned with Nefco’s requirements, Nefco procures a feasibility study, carried out by a third-party consultant, to assess the proposal, needs and impact, considering programme and donor requirements.
- Agreement: Most projects are based on a Grant Agreement between Nefco and the local municipality, financed by a donor, such as the Nordic countries or the EU.
- Procurement: Procurement is made according to Nefco’s procurement Policy and Procedures that provide possibilities adaptable to the individual project’s nature and timeline. The beneficiary appoints a Tender Evaluation Committee. Third-party consultants monitor and act as advisers to ensure compliance with laws and regulations, but do not make any decisions. Nefco provides procurement guidance through Standard Tender Documentation and other guiding material. An Integrity Due Diligence (IDD) check is performed on bidders, and on other suppliers if relevant. Read more: Nefco’s procurement: Applying good practices
- Contracting: The beneficiary is responsible for contracting suppliers and contractors.
- Implementation: The beneficiary is responsible for project implementation. A local Project Implementation Unit (PIU) is established, by the beneficiary, for project management and technical supervision. Nefco contracts an independent consultancy (PIU support consultant) to advise the PIU, provide technical supervision, and ensure procurement procedures are followed, contractual obligations fulfilled and required implementation procedures followed.
- Disbursements: Funds are disbursed at different stages, with the final instalment typically paid after project completion. No grant funds pass through municipalities or other parties, but go directly from Nefco to the contractors, selected through procurement, once Nefco has received satisfactory documentation, including evidence that specific milestones have been met.
Complaints and allegations
No form of Prohibited Practices is tolerated in Nefco’s activities. Anyone who suspects a case of misconduct in activities related to Nefco is encouraged to report this to our Ethics and Compliance function by submitting a report of misconduct and corruption.
All allegations are addressed and thoroughly investigated in line with our Policy on Anticorruption and Compliance.
Read more:
Environment and sustainability in focus
Nefco’s Environmental and Sustainability Policy and Guidelines define the principles we apply when assessing project proposals to ensure they meet our environmental and sustainability standards.
Beneficiaries monitor and report achieved results annually based on Nefco’s impact indicators. This annual and final monitoring enables us to track operational performance and gather lessons learned. Read more under our impact section.
For more information, see: