Access to Finance for SMEs

Restructuring Forum: The Impact of Financial Investors on Enterprises

Brussels, 6 July 2010

Frank LangKfW Liaison office to the EU

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60 years of KfWFinancing with a public mission

● Promotional bank of the Federal Republic of Germany

● Founded in 1948 asKreditanstalt für Wiederaufbau

● Shareholders: 80% Federal Republic,20% federal states

● Headquarters: Frankfurt am MainBranches: Berlin and Bonn

● Representative offices: around 60 offices and representations worldwide

● Balance sheet total at end-2009: EUR 400 billion● Around 4,200 employees (2009)● Best rating: AAA/Aaa/AAA

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KfW in comparison

0

500

1000

1500

2000

Deutsch

e Bank

Commerzbank

LBBW

KfW DZ

HVB

WestLB

0

100

200

300

400

KfW (D

)

EIB (E

U)

CDB (China

)

CDC (F)

CDP (I)IA

DB (Ameri

cas)

Balance sheet total vs commercial banksEUR in billions (2009)

Balance sheet total vs promotional banksEUR in billions (2008)

444

A bank with a wide array of functions

Domestic promotional business

Promotion ofhousing, education,infrastructure and

social development

Promotion ofSMEs, entrepreneurs,

environmental and climate protectionbusiness start-ups

Financing of municipal

infrastructure projects and promotion in

Europe

Promotion ofdeveloping and

transition countries

Internationalproject and

export finance

555

Neutrality through on-lending principle in loan businessNo branch network of our own

File loan applicationwith their regular bank

before start of investment

Enter into the loanagreement and

disburse the loan

If approved, customer‘sbank forwards

application to KfW

refinances the loanat favourablerefinancing

interest rates

Customer'sbank

Customer

Private individuals

Enterprises

Publicinstitutions

666

Domestic promotional businessBusiness area KfW Mittelstandsbank

● Classic promotional loans

● Mezzanine financing

● Private equity

● Advisory services

Target group

Financing products

Enterprises

777

Domestic promotional businessBusiness area KfW Mittelstandsbank

● Access to finance (including growth)

● Business founding

● Innovation

● Environment and Climate protection

● Internationalisation

Target group

Supported areas

Enterprises

8

ALMI Sweden AWS Austria BDB Bulgaria Finnvera Finland Hipoteku Banka Latvia

HBOR Croatia ICO Spain KfW Germany KredEx Estonia UniCredit Italy

MFB Hungary OSEO France SID Slovenia SNCI Luxembourg SZRB Slovakia

Financial IntermediariesThe Network of Financial Institutions for SMEs (NEFI)

999

Access to Finance for SMEsThe European Commission’s approach

E n tre p re n e u r, f r ie n d s , fa m ily

B u s in e s s a n g e ls

F o rm a l V e n tu re C a p ita l F u n d s

P u b lic s to c k m a rk e ts

H IG H E R R IS K L O W E R R IS K

B a n k lo a n s a n d g u a ra n te e s

Ente

rpris

e’s

reve

nue

E n te rp r is e ’s d e v e lo p m e n t s ta g e

E U f in a n c ia l in s tr u m e n ts

V a lle y o f D e a th

S e e d /e a r ly s ta g e V C F u n d s

S e e d p h a s e S ta r t -u p p h a s e E m e rg in g g ro w th D e v e lo p m e n t

E U p o lic y d e v e lo p m e n t

H ig h G ro w th In n o v a t iv eS M E S c h e m e (G IF )- V C fu n d s• s e e d & s ta rt -u p• e a r ly e x p a n s io n s ta g e- B u s in e s s a n g e ls

R is k c a p ita l

B u s in e s s A n g e ls

E a r ly s ta g e s - In te lle c tu a l p ro p e r ty- T e c h n o lo g y tra n s fe r- S e e d fin a n c e- In v e s tm e n t re a d in e s s

D e b t f in a n c in g & g u a r a n te e s

S M E G u a ra n te e s- L o a n- M ic ro c re d it- E q u ity & m e z z a n in e- S e c u r it is a t io n

R o u n d ta b le o f b a n k e rs & S M E s

M ic ro fin a n c e

T h e f in a n c ia l e n v iro n m e n t : E U p o lic ie s a n d f in a n c ia l in s tru m e n ts u n d e r C IP

B e tte r g o v e rn a n c e

C a p a c ity b u ild in g

Pre-seed phase

101010

Loans● Business founding (KfW StartGeld)● Business growth (KfW Unternehmerkredit)● Safeguarding access to finance in the crisis (KfW Sonderprogramm)

Mezzanine (subordinated loans)● Business founding (ERP Kapital für Gründung)● Business growth (KfW Kapital für Arbeit und Investitionen)● Innovation (ERP Innovationsprogramm)

Equity● Venture Capital (ERP Startfonds)● Equity for SMEs (ERP Beteiligungsprogramm; and others)

Advice● Business founding (Gründercoaching)● Round Table● others (e.g. networking; energy efficiency advice)

Environment and Climate Protection● Loans and advice for environment protection and energy efficiency measures● Renewable Energies● others (e.g. demonstration projects)

Access to Finance for SMEsMeasures of finance from a national promotional bank –the KfW example

11

promotionalbank

e.g. NEFI members

capitalmarkets

EIB / EIF

commercialbank SME

debt

debt

debt

debt

debtequity

guarantees

guarantees

guarantees

Access to Finance for SMEsDebt financing and guarantees

12

publicinvestors

e.g. NEFI members

institutionalinvestors

EIF

VC fund SMEequityequity

equity

equity

Access to Finance for SMEsRisk capital / VC funds

131313

Turn around consulting

● SMEs that need a turn around owing to an unexpected development in their business although their market perspectives are good

● Grants for consulting services● Supported by the European Social Fund● Applicable only in case of a positive forecast for future business development

● Identification of weaknesses● Setting up an action plan● Implementation of measures

Access to Finance for SMEsSpecial example

141414

KfW Special Programme (KfW Sonderprogramm)

● Part of the German federal government’s crisis response package● Quick and flexible response

due to the SME financing experience of the national promotional institution

● includes ● Investment capital and working capital● SMEs and other enterprises● Project finance

Access to Finance for SMEsSpecial example II

151515

Cooperation of EU and national level to support SMEsAdvantages and examples

Combination of the EU and national level ● Leverage of national/regional/private funds● Risk sharing EU and national level helps reaching more final beneficiaries ⇒Involvement of EU institutions guarantees a European added value

National/regional level is crucial for the success of EU SME policies● A “one size fits all approach” is not suitable for 27 different member states● National/Regional institutions know their respective markets and clients● National/Regional institutions have well-established financing programmes and

distribution channels

Examples● KfW StartGeld Programme for business founders and young enterprises.● KfW-StartGeld is supported by a guarantee funded under the EU Competitiveness and

Innovation Framework Programme (CIP)● Example from French OSEO: Range offering Guaranty + Mezzanine to help and co-

finance Innovation, Investment and Internationalization to grow up SMEs

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Key challenges for SME policy in the EU and best practice answers by national promotional institutions

● Climate protection● EU 20 20 20 goals for climate protection⇒ Strengthening the contribution of SMEs for climate protection,

e.g. ERP Environmental and Energy Efficiency Programme● Innovation

● EU innovation and research strategy plan⇒ Financing programmes to support the innovation of SMEs,

e.g. ERP Innovation Programme; KfW StartGeld● Access to Finance

● EU recovery plan to safeguard access to finance for SMEs during and after crisis⇒ special programmes for SMEs,

e.g. KfW Sonderprogramm● Internationalisation

● Enhancing the role of European SMEs in international trade⇒ Financing foreign investments of SMEs; services for the internationalisation of

SMEs

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Supporting SMEs via cooperation of EU and national level:Some proposals from national promotional instutions

EU 2020 strategy as a basis for the support of the competitiveness of SMEs● Improving the general environment for SMEs● Strengthening the internal market● Adaptation of state aid measures ● Improving the access to finance● Risk sharing approaches● EU support for national financing programmes for SMEs● Cooperation of European Commission, EIB and other long-term investors

Special measures to support the internationalisation of SMEs● Accompanying SMEs in their internationalisation process● Training banks and investors (→ working with intermediaries: Training in fields

where they don’t have experience: innovation, internationalisation, … )

© KfW • Thema der Präsentation • Ort • Datum

Thank you for your attention

Frank LangKfW Liaison Office to the EU

Square de Meeûs 37B – 1000 BrusselsTel.: ++32 2 2333851frank.lang@kfw.dewww.kfw.de