Time for reconstruction

Amid the ruins of post-war Germany, low-cost loans provided by KfW are used to reconstruct the energy supply system, and thousands of homes and other buildings damaged in the war are repaired. In 1950, one in ten homes in West Germany is benefiting from KfW funds in this way. Forty years later, the bank is able to make a smooth transition from this first bulk business to supporting reconstruction in the new federal states in eastern Germany.

KfW's clients in its earliest days also include commercial enterprises. Most of these are large undertakings (mining, steel industry and electricity producers) that receive KfW funding for their investment activity. Thanks to the KfW loan programmes, energy supply bottlenecks can be swiftly remedied. In the course of forced post-war mechanisation, agriculture too becomes a major client of KfW – there are times when this sector of the economy accounts for up to twenty percent of the bank's lending commitments.

The fifties are years when the foundations for the future are laid – including KfW's. By the mid-1950s, the post-war years of destitution and hunger are now once and for all a thing of the past. To all intents and purposes reconstruction has been a success – so what is there left for KfW to do? A huge amount, because in the second half of the 1950s the bank takes on new tasks involving the financing of environmental protection and SMEs – which to this day remain a part of KfW's core business.

During the 1950s, the bank not only broadens its business base, but also gains increasing financial clout. When the Marshall Plan expires the ERP Special Fund is turned into a revolving fund in August 1953. This is used to provide long-term investment loans to promote the German economy. In 1958 KfW makes a successful comeback onto the German capital market with a financial innovation (medium-term fixed-rate notes). Alongside the ERP Special Fund the bank now has a further option for refinancing, which is used more and more in the years that follow.

Following some hesitant beginnings, in the second half of the 50s export financing takes off on a huge scale. While commercial banks are offering German exporters only short-term financing, KfW is also making long-term funds available. This enables business to be conducted in which the West German government holds a major foreign policy stake. As the decade draws to a close, KfW starts a new chapter in its promotional activities – Financial Cooperation. One of the bank's first partners as it steps into the developing world is India.