Tip: Activate javascript to be able to use all functions of our website

Press Release from 2022-02-02 / Group

KfW ifo Credit Constraint Indicator: Credit demand from SMEs has grown slightly but remains below average

  • In the fourth quarter, 19.3% of small and medium-sized enterprises were in loan negotiations
  • No sign of clear trend reversal in credit demand
  • Credit constraints have fallen marginally for SMEs and sharply for large enterprises

After five consecutive declines, more small and medium-sized enterprises were again negotiating loans with banks and savings banks in the final quarter of 2021. The current KfW ifo Credit Constraint Indicator shows that the share of SMEs requesting bank loans rose by 1.6 percentage points to 19.3% on the previous quarter. However, that rate continues to be well below the longer-term average of 26.3%. Credit demand from large enterprises remained stagnant on a low level, with 27.8% of businesses in loan talks with banks (+0.2 percentage points).

“The ongoing weakness in credit demand is in line with expectations. Supply bottlenecks and the new Omicron variant have disrupted economic activity and are weighing on investment sentiment. On the other hand, higher prices for materials, inputs and investment projects are driving businesses’ financing requirements, as are new pandemic-induced liquidity gaps. Still, these effects are too small for a clear trend reversal in credit demand”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

Barriers to credit access for businesses have reduced in the final quarter despite the escalation of the pandemic situation. For SMEs, however, the KfW ifo Credit Constraint Indicator decreased only minimally. The share of SMEs reporting a restrictive response from banks was 18.9% (-1.2 percentage points). Easier credit access was reported particularly by small and medium-sized services businesses, although this group continues to be the one facing the highest credit constraints (-3.5 percentage points to 23.4%). Banks have relaxed their lending policy significantly for larger enterprises. The credit constraint for this size class fell by more than twice the average quarterly variation (-4.9 percentage points to 8.0%). Fewer than one in ten large enterprises thus reported difficulties accessing credit in the final quarter of 2021.

The current edition of the KfW ifo Credit Constraint Indicator is available at:
KfW ifo Credit Constraint Indicator