KfW Research KfW ifo Credit Constraint Indicator: Access to credit has improved slightly

• Sideways movement for large enterprises
• More than average number of businesses in both size classes still view banks’ behaviour as restrictive
• Share of enterprises negotiating loans rose in both size classes

More than the average of both SMEs and large enterprises continue to view the behaviour of banks in loan negotiations as restrictive. SMEs, however, were able to access bank loans more easily in the past quarter than before. These are the findings of the KfW ifo Credit Constraint Indicator for the first quarter of 2024. The share of small and medium-sized enterprises reporting tough loan negotiations fell by 2.5 percentage points to 26.3 %. That share moved sideways for large enterprises, 20.7 % of which viewed access to credit in the first quarter as restrictive, a similar proportion as in the previous quarter ( + 0.3 percentage points).

There were mixed assessments of credit constraint across the various economic sectors. SME manufacturers (20.3 % / - 6.0 percentage points) and wholesalers (28.9 % / - 4.9 percentage points) reported a noticeable relaxation of lending standards on the previous quarter, which is consistent with the still weak but improved business confidence in both sectors. Retailers, on the other hand, reported a tightening in credit constraint to 34.1 % ( + 6.1 percentage points). Retail in particular is suffering from consumer restraint, which is why banks have likely been more cautious in their lending practices.

At the start of the year, businesses of both size classes applied for more loans again. Among large enterprises, the share of applicants rose by 2.1 percentage points to 32.5 %, marking a return to the average range since 2017 after three years with below-average deman for loans. The increase in demand among small and medium-sized enterprises was slightly lower, rising 1.5 percentage points to 20.5 %.

“Businesses still face challenging loan negotiations, but we see signs that the situation is easing. Credit access conditions for SMEs have improved slightly, and the steep rise in interest rates for corporates has come to an end”,

said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“Interest rates have begun to come down slowly since autumn of 2023. Along with an improving cyclical situation, that should reinforce the interest of businesses in loans in the further course of the year. SMEs in particular are still reluctant to borrow from banks, and only one in five businesses negotiated loans in the first quarter.”

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

KfW ifo Credit Constraint Indicator