Dr Ingrid Hengster
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Competitive through innovation

The EU and KfW support start-ups and established entrepreneurs — also when it comes to digitalisation. Together they are working to implement the Juncker Plan in Germany. Member of the Executive Board, Dr Ingrid Hengster, explains in an interview how KfW promotes innovation.

About Mrs Hengster
Dr Ingrid Hengster

Dr Ingrid Hengster is a lawyer and has been a member of KfW's Executive Board since 2014. Her focus area is domestic promotional business.

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Dr Hengster, how important is innovation for Germany as a business location?

Germany is export-driven and highly developed but has few natural resources. Which is the very reason Germany can only sustain its prosperity if it sets itself apart from its competitors by offering high-quality, innovative goods and services that give customers new and more advanced solutions to their problems. Entrepreneurs are especially innovative, digital entrepreneurs are doubly innovative. But digitalisation is increasingly becoming the most important factor for the future, also for established companies. Many companies have only taken small steps in this direction to date, and larger projects with high financing requirements are still to come.

And what does KfW offer these companies?

We have looked closely at the needs of these companies and launched a new programme. This facilitates the implementation of typical digitalisation projects, which usually lack the collateral for "traditional bank loans". However, digitalisation projects of this kind are precisely what form the basis for fundamental changes in business models. Supported by a guarantee from EU funds, we are offering to cover 70 per cent of the financing risks for established companies to our financing partners. This allows KfW to provide considerable relief for the regular banks with regard to default risk, which often makes it possible to grant loans in the first place. This programme is part of what is known as the Juncker Plan, which promotes investment in Europe.

Who benefits from the programme?

The ERP innovation financing is a broadly applicable credit programme for innovation and digitalisation. Funding can be used for new product development and digitalisation projects such as app development or data security concepts.

Entrepreneurs also often have trouble finding suitable financing...

Start-up financing is generally not a profitable business for regular banks. The risk is high, a lot of time and effort is involved, and the yield is relatively low. However, there is a need: according to the KfW start-up monitor, a representative survey of business start-ups in Germany, entrepreneurs are using more and more external funds to start their businesses. Since 2013, the percentage of business founders who have raised more than EUR 25,000 from external investors has doubled.

What does KfW offer entrepreneurs?

Here too, our approach is to facilitate access to credit. When start-ups apply for a loan through our "ERP Start-up Loan — StartGeld programme", KfW bears 80 per cent of the default risk. It is supported by the European Investment Fund (EIF). The risk is distributed as follows: 20 per cent is assumed by the regular bank, 40 per cent by KfW and 40 per cent by the EIF. Start-ups are thus eligible to receive up to EUR 100,000.

What impact does this programme have on start-ups?

I was able to convince myself of the effectiveness of this funding approach in direct discussions with entrepreneurs during my recent project trips. In total, the EIF guarantee covers commitments of EUR 1 billion. Over the next few years, it will be possible to provide support for more than 15,000 start-ups throughout Germany. Incidentally, this was KfW's first contribution to the Juncker Plan, which we have been implementing in Germany since December 2015.

Last updated: Friday, 28 September 2018