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Our History - 60 Years of KfW
Germany's economy and society are marked by constant change. KfW's transformation into a banking group with worldwide operations reflects this change.
With the aid of the Marshall Plan the reconstruction of Germany and Europe succeeds from 1947/48 (Photo: Federal Archives, Poster 005-002-008)
Germany still lay largely in ruins when, on 16 December 1948, KfW - still called Kreditanstalt für Wiederaufbau at the time - took up its work. With equity of one million Deutschmarks and funds from the Marshall Plan, a handful of staff were to join the "founding fathers" Dr Otto Schniewind and the legendary Dr hc Hermann Josef Abs in solving a monumental task: supporting the reconstruction of the German economy while simultaneously integrating millions of refugees.
The small team took on this challenge self-confidently, and its efforts were highly efficient from the start. Within only a few months after the starting shot sounded, West Germany's energy supply was being rebuilt with the help of low-interest KfW loans. 60 years after its foundation, KfW has become Europe's largest promotional bank. Through today the development of its promotional activities is a mirror of the changes permeating the German economy and society.
The "founding fathers" of the KfW: Dr hc Hermann-Josef Abs, Member of the Board of Managing Directors and Dr Otto Schniewind, Chairman of the Board of Supervisory Directors (Photo: KfW photo archives)
Regarding housing construction, for instance: in the early days of the Federal Republic of Germany, reconstruction also meant supporting the construction of homes. Up to 90 per cent of the apartments in German cities had been destroyed, and millions of expelled persons and refugees had fled into the West. By 1950 twelve per cent of KfW's financing was flowing into homebuilding.
It would take the bank 40 years to reattain the same high percentage in this financing segment, when Germany's unification put home construction back in the focus of promotional activity. Between 1990 and 1997 the Home Construction and Modernisation Programme helped to modernise 3.2 million apartments in the new Länder - nearly half of all apartments available in the former German Democratic Republic at the beginning of the 1990s.
SMES GAINING IMPORTANCE
KfW provided an enormous amount of funds for the start-up boom in the years following the fall of the Berlin Wall (Photo: Archives BStU, Collection Uwe Gerig, No 4909)
KfW's support for small and medium-sized enterprises (SMEs) also underwent a change after unification. In the ensuing years it concentrated on building up an SME sector in the new eastern states. KfW provided an enormous amount of funds for the start-up boom in the years following the fall of the Berlin Wall. Tens of thousands of prospective business bosses benefited from the bank's promotional programmes. In this year marking KfW's 60th anniversary, 99 per cent of all enterprises in eastern Germany are SMEs.
The unification of Germany is a good example of how KfW's promotional instruments advance economic and social change. KfW also adapts its instruments to a business world that is in constant flux. To account for globalisation, for example. As changing requirements of banks render the financing situation of German SMEs increasingly difficult, KfW is designing innovative financing instruments in order to optimise the overall financing conditions for the SME sector. Global loans, promotion of the private equity market, reduction in lending costs and securitisation of SME loans have become new priorities.
Finally, as a result of the merger of Deutsche Ausgleichsbank (DtA) into KfW in the year 2003, both institutions pooled their products under the brand names of KfW Mittelstandsbank and KfW Förderbank (now KfW Privatkundenbank/KfW Kommunalbank) and expanded their offers by adding extensive advisory services. In reaction to declining start-up figures and the special difficulties facing small enterprises, in 2007 KfW Mittelstandsbank launched its "Small SMEs" initiative.
EXPORTS ON THE RISE
KfW IPEX-Bank GmbH is one of the leading financiers in international project and export finance (Photo: KfW photo archives)
In addition to SME finance, export finance is another main pillar of KfW's promotional business. In the early 1950s the export of industrial plants and equipment was considered worthy of support for economic reasons because companies were encountering problems with obtaining financing. KfW responded by offering more reliable financing at lower interest rates for export transactions and other cross-border investments. The commitment volume in this area grew rapidly, reaching DEM 5.6 billion by the end of the 1980s.
On 1 January 2008 these business activities were transferred to a legally independent subsidiary, KfW IPEX-Bank GmbH, as agreed with the EU Commission. KfW IPEX-Bank has over 50 years of experience and a portfolio of more than EUR 60 billion, making it one of the leading financiers in international project and export finance. Its earnings play a key role in helping KfW Bankengruppe fulfil its official mission to provide support.
FINANCING DEVELOPMENT
KfW Entwicklungsbank is committed to the primary goal of German development cooperation, namely to sustainably improve the economic and social conditions of the people in developing countries (Photo: KfW photo archives/photothek.net)
A new business area opened up at the beginning of the 1960s, namely capital assistance for developing countries. KfW supports developing countries on behalf of the German Government. Initially the focus was on major infrastructure projects in the fields of energy supply, transport and irrigation. Local development banks were also supplied with credit lines to enable them to support the investment projects of their customers. Starting in 1970 development assistance began focusing more on helping the people in developing countries to sustainably improve their living conditions both socially and economically, such as by building schools or health stations.
After the turn of the millennium the share of funds for microfinance began to grow. Microfinance gives also the poorest people an opportunity to build a secure livelihood on their own initiative. Today, the work of KfW Entwicklungsbank is tailored to the specific needs of its partner countries and their local population. To achieve this, KfW is increasingly adding funds it raises itself in the capital markets to enable people to make long-lasting improvements.
FOCUS ON ENVIRONMENTAL FINANCE
Air and water purification as well as waste disposal are in the main focus of the environmental finance of the KfW (Photo: KfW photo archives/Photografer: Thomas Klewar)
Just how much KfW mirrors the changes that are going on while at the same time expediting these changes can be seen in the development of its financing activities in the field of environmental and climate protection. Back in the 1950s and 1960s - long before ecological action attained its current level of importance - KfW was already financing measures to dispose of sewage and to prevent water and air pollution. After unification the bank provided considerable funds to reverse the environmental damage in the chemical and lignite mining districts in the new Länder. As environmental awareness and sustainable action are becoming increasingly dominant issues for economic stakeholders and private citizens alike, KfW responded with its first environmental programme that specifically caters to small and medium-sized businesses.
SUPPORTING PILLAR
KfW, on behalf of the German Government, launched the "Housing, Environment, Growth" initiative, which primarily funds building rehabilitation measures that lead to energy savings and the construction of new, low-energy homes (Photo: KfW photo archives/Photografer: Thomas Klewar)
Along the way, supporting environmental and climate protection has, over time, become a new priority for KfW. In fact, the sustainability approach has since been introduced in all of the bank's promotional areas. In 2004, for instance, KfW's Carbon Fund set a milestone for dovetailing efficient, ecological action and ecological necessity. Further programmes encourage the use of renewable energies.
In 2006 KfW, on behalf of the German Government, launched the "Housing, Environment, Growth" initiative, which primarily funds building rehabilitation measures that lead to energy savings and the construction of new, low-energy homes. The initiative was highly popular from the start. In the years 2006 and 2007 promotional loans totalling EUR 32.9 billion were granted for such modernisation measures. CO2 emissions were able to be reduced permanently by 1.6 million tonnes annually solely through the investments sparked under this initiative.
Yet promotional measures targeting environmental and climate protection are top priorities not only for Germany: currently KfW is investing 20 per cent of its entire financing volume in national and international environmental projects. And in developing countries, KfW Entwicklungsbank has since become one of the largest investors in renewable energies.
With its innovative products and promising promotional and advisory activities, KfW has long since become one of the pillars supporting the German economy - first and foremost the SME sector. The volume of its commitments to boost the economy both in Germany and beyond its borders will remain at a high level in the years to come. With a refinancing volume of around EUR 75 billion - more than ever before - on its 60th anniversary KfW counts as one of the heavyweights in the international capital markets.
NEW CHALLENGE
KfW headquarters in Frankfurt (Photo: KfW photo archives/Photografer: Thomas Klewar)
In the future, too, KfW will continue to confront new challenges with innovative products. In doing so, it is consistently fulfilling its legal mandate to initiate economic and social change with the possibilities available to a promotional bank, with a great deal of commitment and with forward-looking solutions.
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You will obtain further information on the history of the KfW from the KfW Group's archives at the Berlin Branch
