BNPL AS A DEMAND-SIDE INVESTMENT INSTRUMENT FOR THE SUSTAINABLE DEVELOPMENT OF MICRO-ENTERPRISES IN UKRAINE

Abstract

This article examines investment instruments that can accelerate sustainable development of micro-enterprises in Ukraine and argues for a state-financed Buy-Now-Pay-Later (BNPL) mechanism as a demand-side investment tool. Building on institutional and behavioral economics, it explains why concessional credit and grants often yield weak or slow effects for micro-firms: they insufficiently ease demand and liquidity constraints, impose high transaction and cognitive costs, and misfit short cash-flow cycles. The study combines a review of international and Ukrainian sources with a comparative appraisal of programs and develops a two-level taxonomy: (1) legal classification of financial/investment tools; (2) functional classification by role in the micro-enterprise cycle (activating demand, smoothing working capital, renewing fixed assets, transferring risk). Within this frame the paper compares the 5-7-9% concessional lending program, national cashback, grant schemes and a public BNPL mechanism using common criteria–targeting/outreach to micro-firms, speed/liquidity impact, transaction/cognitive costs, behavioral fit, risk allocation/budget efficiency–and provides a SWOT analysis of BNPL. Findings indicate that public BNPL directly addresses core frictions by coupling immediate cash inflow to sellers with deferred household payments, expanding effective demand and smoothing cash gaps, while leveraging existing payment infrastructure and reducing screening burdens. It complements asset-oriented credit and public-good grants by mobilizing demand and working capital. With clear eligibility rules, standardized disclosure of the cost of installments, prudent assessment of repayment capacity and safeguards against over-indebtedness, BNPL achieves broad outreach and measurable effects on turnover, employment and taxes at relatively low fiscal cost. Conceptually, BNPL is treated as a financial technology that functions as an investment instrument within the micro-enterprise reproduction cycle, channeling publicly supported capital to activate demand, stabilize operating cash flows and formalize transactions–strengthening market access, financial inclusion and the resilience of Ukrainian micro-entrepreneurship during recovery.