Domestic government bonds as an investment instrument in Ukraine (Inna Demchenko)

 According to the statistics of National Bank depository, since the beginning of the war, Ukraine has raised about UAH 150 billion (about USD 4 billion in equivalent) through the sale of government bonds, which indicates a high level of trust in
the state and faith in its future. 

Domestic government bonds are securities issued by the Ministry of Finance. In essence, a client who invests in bonds lends funds to the state, which undertakes to return them at a certain time together with accrued interest. 

Domestic government bonds are an alternative to deposits, as they allow to receive up to 16% per annum in hryvnia, 4.5% per annum in US dollars, while the yield on them is not taxed, unlike term deposits. Domestic government bonds are a reliable investment
instrument for legal entities and individuals, as the repayment of the bond and payment of accrued interest upon maturity is fully guaranteed by the state. The only risk that exists with this type of investment is a complete default of the country, but such
a scenario is unlikely today. 

A special type of government bonds are military bonds issued by the Government of Ukraine to support the Armed Forces and the economy during the war. By purchasing this type of bonds, citizens fill the state budget, help ensure the stability of the economy,
bring victory closer, support the country’s defense capability and contribute to the de-occupation of cities. 

Despite the fact that the state is doing everything possible to provide access to the purchase of bonds to the widest possible range of citizens, for some time this process remained complicated and unclear for average consumers. 

Buying domestic government bonds required applying to special banks that are primary dealers and provide such services or to intermediary brokerage companies that could charge additional commissions when purchasing bonds. In addition, banks often sold bonds
only from a certain amount (for example, from UAH 100 thousand), which was too high for individuals or did not provide such a service to individuals at all. Also, without special knowledge it was not easy to understand the nominal value of the bond, its actual
value and projected yield at maturity. 

 Since October, it has become possible to buy military bonds for individuals online in just a few clicks using the state mobile application “Diia”. To date, Diia is used by more than 18 million Ukrainian citizens, it displays electronic documents of the
user and a menu through which you can remotely receive administrative services. Thus, every adult citizen who is authorized in Diia can purchase military  bonds remotely using a simple, intuitive interface. Herewith, the minimum value of a bond that can be
purchased is UAH 1000  and the number of bonds that can be purchased is unlimited.

Diia is an intermediary between banks that sell government bonds and customers, so the user can choose a bank from the available list when buying and immediately compare the yield on each of the proposed positions, choosing the best option for himself. Next
client need to sign a contract for opening a securities account using an electronic digital signature and pay for the purchase. After that, user must choose the account to which the funds will be credited after the redemption of the bond. 

 Only on the first day after the launch, bonds for UAH 25 million were purchased using this functionality. Thus, increasing the availability of financial services and their digitalization in this case play a significant role, as they provide consumers with
the opportunity to save and increase funds, and the state – to fill the budget when it is really necessary.