Commitments for developing countries and emerging economies remain stable in 2019: KfW allocates EUR 10.6 billion
Press Release from 2020-05-25 / Group, DEG, KfW Development Bank
- Focus on Africa: new commitments totalling EUR 3.1 billion
- KfW Development Bank: another record high of EUR 8.8 billion
- 60 % for climate and environmental protection
- DEG: EUR 1.8 billion for business investments
- Confirmed developmental effectiveness: DEG customers generate EUR 92 billion of local income
- Continuity of support through the coronavirus crisis extremely important
Promotion of developing countries and emerging economies maintained the previous year’s high level of EUR 10.6 billion for 529 projects. EUR 8.8 billion of this amount was accounted for by KfW Development Bank (2018: EUR 8.7 billion) and EUR 1.8 billion by KfW subsidiary DEG (2018: EUR 1.9 billion). Broad support of the Federal Government’s Africa initiatives remains the primary focus. In 2019, the regional focus of both institutions was on Africa, with around 29 % of all commitments, and an amount of more than EUR 3.1 billion. The overall portfolio for Africa totals EUR 21 billion. In addition to the tried-and-tested bilateral cooperation with partner countries in Africa, there are three comprehensive approaches in place: first, the reform partnerships with six countries which have committed to ambitious reform agendas. Second, the training and employment special initiative, AfricaGrow, an umbrella fund to promote over 150 African SMEs and start-ups. Third, Africa Connect, through which DEG helps European companies to enter African markets.
“With its diverse range of instruments for financing governments, development banks and other stakeholders in developing countries, KfW is well positioned to drive Africa’s sustainable development, its ambitions for economic reform, as well as the development of the private sector and of employment. Furthermore, in the current situation we need to provide funds fast to manage the coronavirus pandemic and its consequences. We will be involved in implementing the German Federal Government’s emergency programme and are providing support, including through emergency aid measures for the healthcare sector and food security, additional funds for small and medium-sized enterprises, and liquidity for countries. The socio-economic stability of the affected developing countries and emerging economies is at stake – and with it, development progress over the past few years,” says Professor Joachim Nagel, Member of the Executive Board of KfW Group.
“As a development finance institution, our role is particularly critical in this situation. We want to provide targeted assistance to protect jobs in the companies that we co-finance and act as a prudent partner to our customers through this crisis. To this end, we have developed various Covid response measures,” added Christiane Laibach, Chair of the DEG Management Board.
In 2019, KfW Development Bank was able to slightly increase its commitments in comparison to the previous year and, at EUR 8.8 billion, these have reached record levels once again. EUR 3.5 billion of new commitments went to Africa and the Middle East – corresponding to around 40 % of new commitments. These include six Federal Government reform partnerships with Tunisia, Côte d’Ivoire, Ghana, Senegal, Ethiopia and Morocco. Over the past year, KfW has begun to implement the initiatives as part of the G20 Compact with Africa initiative. A total of around EUR 744 million was committed for this purpose, of which EUR 98 million was earmarked for the new special education and employment initiative set up by the German Ministry for Economic Cooperation and Development (BMZ) and EUR 100 million for the new AfricaGrow umbrella fund. The aim of these initiatives is to promote important economic reforms and create permanent jobs, primarily in the private sector.
EUR 3.8 billion of the commitments are from the German federal budget; EUR 4.5 billion are from KfW funds. The remaining EUR 0.5 billion is being provided by other donors, mainly the European Commission (EUR 435 million). Around 60 % of total commitments in 2019 were earmarked for climate change mitigation and environmental protection projects. As a result of these new commitments, greenhouse gas emissions will be reduced by 8 million tonnes of CO2 equivalents every year. At 41 %, commitments for economic infrastructure (energy, the finance sector, transport) were on a similar scale to those for social infrastructure (education, health, water supply), with 38 %.
The supported projects have an enormous impact: the EUR 1.9 billion of commitments for energy supply in 2019 are enabling over 2 million people to access a modern energy supply for the first time, or are improving their access. Additional installations can generate almost 2,000 megawatts of power from renewable energy sources.
The 2019 commitments will help another 2.53 million farmers and their families to rehabilitate and sustainably farm 298,000 hectares of agricultural land. What is more, around 1 million agricultural operations are now benefitting from access to financial services and working capital. Innovative financing instruments like agricultural and drought insurance schemes are enabling huge progress in adapting to the effects of climate change and ensuring food security.
14 million people are also enjoying either their first access, or improved access, to a supply of drinking water. Some 6 million people have been provided with sanitation and waste water disposal facilities. EUR 512 million has made education possible and improved the quality of education for 6 million pupils.
“We will not relinquish the successes we’ve achieved and will not abandon our partners. We have built up longstanding relationships with many partners in developing countries. In a time of global travel bans, this underlying trust is enormously valuable because in the current situation it allows us to continue our shared involvement via ‘remote management’ through our local offices and using digital communication,” says Professor Nagel.
KfW subsidiary DEG provided companies in developing countries and emerging economies with EUR 1.8 billion of its own funds to finance private investments, thereby continuing the previous year’s positive figure. DEG’s portfolio increased by around 8 % to EUR 9.0 billion. In 2019, DEG provided a total of EUR 691 million to projects which encourage climate and environmental protection (2018: EUR 641 million). This included financing for solar parks in Kenya, Jordan and Bangladesh. From a regional standpoint, Asia accounted for the most financing in 2019, followed by Latin America.
“The development of new business and portfolio in 2019 was particularly pleasing in light of some challenging conditions. The same can be said of the developmental effectiveness of the DEG-financed projects. In the past year, our customers have employed 2.1 million people in developing countries and generated local income of EUR 92 billion, of which EUR 12 billion is comprised of wages and salaries,” said Chair of DEG’s Management Board Christiane Laibach.
In light of the coronavirus pandemic and its effects, DEG is using a variety of measures to provide private companies in developing countries with targeted support to help them cope with the current challenges. Companies which are already financed by DEG can also co-finance coronavirus-related measures through DEG via the Business Support Services advisory service. These include funds for personal protective equipment or food supply to surrounding communities. European companies which are successfully trading in Africa and which urgently require liquidity due to the coronavirus pandemic can apply for bridge loans through the AfricaConnect crisis liquidity financing scheme.