KfW Research: Fewer migrants started a new business in 2020

• Migrants founded 21% of new businesses, persons with a migration background started 26% of all new businesses
• Coronavirus pressure is evident despite decline: necessity start-ups were still common, focus on regional business activity intensified
• Growth orientation remained unchanged

The coronavirus crisis appears to have had a particularly severe effect on the entrepreneurial activity of migrants in Germany. Start-ups were already on the decline in 2020, and the number of businesses started by individuals who did not have German citizenship by birth dropped to 110,000, or 21%, down from 26% in the previous year. This is the finding of a special analysis conducted by KfW Research as part of the KfW Entrepreneurship Monitor. Thus, in 2020 the share of migrant start-ups fell below the proportion of migrants in the working-age population (24%) for the first time since 2009. Individuals with a migration background – which also include persons born in Germany with at least one parent who did not have German citizenship by birth – accounted for 26% of start-ups.

The coronavirus crisis also influenced entrepreneurial activity of migrants at structural level. The differences are few but very significant. In all start-up activity in Germany, the share of necessity start-ups decreased last year (down 16% from 23% in 2019). Among migrant entrepreneurs, however, the proportion of necessity start-ups remained a high 35% (2019: 32%). In the same group, the lead time from the idea to the founding of a business fell from an average nine months in 2019 to five months. The lead time in overall start-up activity remained steady at seven months.

In 2020, migrants were much more likely to start a commercial business (93%, 2019: 77%) with a greater focus on consumers (43%, 2019: 26%) and a regional sales area (63%, 2019: 37%). In addition, full-time start-up businesses exhibited a reduced number of hours worked (34h, 2019: 45h), which is essentially attributable to necessity start-ups. They nevertheless remained more growth-oriented than the average (37%, 2019: 34%).

“Start-up activity by migrants decreased more sharply than the average in the coronavirus year. But with a good 20 per cent of all start-ups they remain an important pillar of start-up activity in Germany”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “Unlike general start-up activity, however, they appear to have been under greater pressure to become entrepreneurially active during the pandemic. There continued to be a high share of necessity start-ups for lack of alternative employment opportunities. What is pleasing is that this takes nothing away from their ambition. When migrants venture into self-employment, they are more geared to growth than the average.”

The analysis by KfW Research can be retrieved from
www.kfw.de/kompakt