Technology and innovation: KfW promotes new solutions to support developing countries

• Annual report for KfW and DEG records commitments of EUR 6.2 billion to developing and emerging countries
• KfW: EUR 2.8 billion (57%) towards protecting the climate and the environment
• DEG: EUR 578 million (44%) for investments to address climate change

The KfW Development Bank business area and the KfW subsidiary DEG (Deutsche Investitions- und Entwicklungsgesellschaft mbH) provide assistance to developing and emerging countries on behalf of the German Federal Government. They are increasing the support they deliver in the use of innovative technologies. Now more than ever before, innovation and technology are playing a key role in combating global challenges such as poverty, climate change, and scarcity of resources. The two financing institutions committed a total of EUR 6.2 billion to projects around the world in 2012 - some EUR 0.5 billion more than in the previous year.

KfW Executive Board member Dr Norbert Kloppenburg and Bruno Wenn, Chairman of the DEG Management Board, reported these figures in Frankfurt am Main today during the presentation of the Annual Report 2012 on Cooperation with Developing Countries, entitled “Innovation works – Technology for Development”. The Report offers examples of how KfW helps partner countries to manage the far-reaching changes of the 21st Century by using technical advances and a spirit of innovation.

“In today’s world, sustainable development can no longer be achieved without the use of innovation and technology”, said Dr Kloppenburg. “Technological solutions have a crucial role to play when it comes to meeting basic human needs, creating employment and protecting the climate.”

In 2012, the commitments made towards projects whose aim was to foster innovation, or even to enable great technological leaps forward, covered a wide range of sectors and a multitude of countries. For example, KfW used USD 70.7 million of funding from the German Federal Ministry for Economic Cooperation and Development (BMZ) to co-finance, together with other donors, 10,000 kilometres of fibre optic cable, thereby accelerating internet speeds in 27 African countries. Working on behalf of the Federal Ministry of Education and Research (BMBF), the bank also provided EUR 20 million of support to product development partnerships for research and development into medicines and vaccines to counter illnesses that have been neglected to date, such as sleeping sickness. DEG supported a Stadtwerke Mainz biomass power plant in Senegal that generates electricity for more than 1,200 people using peanut shells and millet stalks as fuel.

Said DEG Chairman Wenn: “For local populations, innovations and modern technologies create prospects for the future which are sustainable from both an economic and a social perspective. At the same time, they can help ramp up companies’ productivity and provide them with access to new markets.

“We need a technological revolution to create a transition to a ‘Green Economy’ that uses fewer resources and produces lower emissions. The potential for energy efficiency in developing and emerging countries is often high and can be achieved at reasonable cost, and these countries frequently possess renewable sources of energy such as wind, water, biomass, solar and geothermal. We are choosing new solutions in order to exploit this potential using modern technology”, said Dr Kloppenburg.

DEG Chairman Wenn explained the role of private enterprise in introducing new technologies: “Those companies from developing and emerging countries which are creative and prepared to take risks play a decisive role when it comes to building competitiveness and creating jobs. DEG provides finance for innovative companies like these, and collaborates with them to achieve technological progress.”

The KfW Development Bank business area again increased its commitment volumes, allocating roughly EUR 4.9 billion to development programmes around the world in 2012 (compared with EUR 4.5 billion in 2011). Alongside budget funds, which mostly originate from the BMZ, KfW deployed EUR 3.1 billion of its own funds, once again raising the level of support it provides. In doing so, the Development Bank gave the Federal Government substantial support in meeting its international development financing obligations. 57% of all commitments (EUR 2.8 billion) were allocated to climate and environmental protection initiatives.

Out of the new commitments made by KfW Development Bank, EUR 1.6 billion went towards projects and programmes in Asia and Oceania. A further EUR 1.1 billion went to the Europe/Caucasus region, and EUR 870 million to sub-Saharan Africa. Roughly EUR 686 million was allocated to North Africa and the Near East, and EUR 396 million to Latin America.

These commitments are linked to far-reaching developmental effects: in the climate and environment area, some 16 million tonnes of carbon dioxide emissions will be saved annually over the years to come. Roughly 40 million people will benefit from improved water supplies and better sanitation. Educational programmes will reach about 4.1 million individuals, most of them young people.

In 2012, the fiftieth year of its existence, DEG also expanded its new business, committing some EUR 1.3 billion to finance private investment in developing and emerging countries (compared with EUR 1.2 billion in 2011), of which EUR 578 million was for initiatives to address climate change.

The largest proportion of DEG commitments by region (just under EUR 497 million) went towards projects in Latin America; this was followed by Asia, with EUR 388 million. The majority of the funding for Africa, EUR 204 million, went to projects in sub-Saharan Africa, and a total of EUR 31 million was assigned to North Africa. The Europe/Caucasus region received a total of EUR 205 million.