KfW Förderbank: What is that actually? And what is the funding program 2023?

For a long time, it was relatively quiet around KfW Bank. But as part of the climate goals set by the EU and the federal government, the promotional bank and its programs are once again in high demand. For both business and private customers.

‍

How was KfW Bank created?

The KfW Förderbank was founded in 1948 with the aim of financing the reconstruction of the German economy. The start-up capital came primarily from funds from the European Reconstruction Program (colloquially: Marshall Plan). The goods delivered under the Marshall Plan, in particular cotton, were paid for by KfW and the funds raised in this way could be granted as loans. In the post-war years, KfW financed the reconstruction of the energy supply and houses and apartments destroyed during the war with low-interest loans. In 1950, for example, every tenth apartment in West Germany was financed with funds from KfW.

In the 1960s, KfW expanded its business area to include the promotion of small and medium-sized enterprises (SMEs) and international development aid. As part of this, KfW approved the first foreign loans for Iceland, Sudan and India. In the 1990s, KfW was then restructured into a public limited company, with the federal government remaining the sole owner.

Following German reunification, the promotional bank once again became the focus of public attention due to its extensive tasks in rebuilding the East German economy. In addition, KfW took over the former state bank of the GDR in Berlin in 1994. Since the 2000s, the Kreditanstalt für Wiederaufbau has expanded its portfolio of funding programs, particularly in the areas of renewable energy and climate protection.

As a public institution, 80% owned by the federal government and 20% owned by the federal states, KfW performs a state control function. It is therefore not a “classic” bank, but committed to the tasks of the 1948 Kreditanstalt für Wiederaufbau Act (KfW Act) are fixed. KfW Bank has no branches, does not have customer deposits and refinances its promotional business almost completely via international capital markets. Like the Deutsche Bundesbank, KfW is not a bank within the meaning of the Banking Act.

‍

Which business areas does KfW Bank have?

Today, KfW is a banking group that promotes investments in the areas of environment, energy, housing, education and infrastructure, among other things. It provides cheap loans and subsidies to companies, private individuals and public institutions to facilitate investments and achieve social, political and economic goals. The development bank's areas of activity include:

‍

national

• private customers:

KfW Privatkundenbank bundles funding offers for private customers, housing companies and education financing. Her responsibilities include student loans and real estate offers. Be it for sustainable new buildings, building renovations into an efficiency house or measures to improve burglary protection or reduce barriers.

• SMEs:

Entrepreneurs also have a wide range of different funding programs. The Mittelstandsbank division includes the financing of start-ups, innovations, environmental and climate protection.

• Municipalities:

KfW supports municipalities and municipal companies with infrastructure projects, digitization and social projects.

‍

international

• Development aid:

The KfW banking group is also responsible for financing development aid and international projects. For example, it supports the expansion of renewable energy in developing and emerging countries or the construction of schools and hospitals. The aim is to sustainably improve the economic and social situation of people in developing countries, combat poverty, overcome crises and protect natural resources.

• Exporting:

The “Export and Project Finance” division is aimed at sustainably supporting the German and European economy through project and export financing to maintain and increase competitiveness and internationalization.

‍

KfW funding program “Climate-friendly new building”

In Germany, on March 1, 2023, is the new KfW funding program “Climate-friendly new building” started and has been a topic of discussion ever since. With heavily discounted loans of up to 150,000 euros per unit, the state-owned development bank wants to enable people to enter their own four walls, which has been significantly hampered by the sharp rise in interest rates. As announced by the Ministry of Construction, an effective annual KfW retail interest rate of 0.9 percent is possible with a credit period of 35 years and a fixed interest rate of ten years. Anyone applying for a promotional loan with a short credit period of ten years could receive an effective retail interest rate of 0.01 percent per year.

However, the funding program applies exclusively to new buildings with the Efficiency House 40 standard. This means that the house consumes only 40 percent of the energy required by a legally defined reference house. Applications can be submitted by private individuals, cooperatives, companies and investors. What is new is that there will only be low-interest loans instead of direct payments after the purchase. However, material costs can now also be funded.

However, anyone who wants to take advantage of the new funding must consider a few things. For example, there is no legal entitlement to funding, which is also subject to the availability of the estimated budget funds. In addition to the already higher construction costs for efficiency houses, construction supervision and certification costs in the low five-digit range can also be incurred. This is because the new funding requires an expert to verify compliance with the requirements. Additional funding could be applied for under the old KfW program; not in the revised new construction subsidy.

In addition, not all builders will benefit from the new KfW “Climate-friendly New Building” funding program. Because the new construction costs for the Efficiency House 40 standard are simply too high for many average citizens, even with funding.

‍