„ KfW‘s Experience in Funding Business Start-Ups“ Barbara Schnell, Division Chief

1. ADFIAP CEO Forum VIINovember 17 – 19, 2010, CambodiaSustainable SMEs through Value Chain Financing „KfW‘s Experience in Funding Business Start-Ups“ Barbara Schnell, Division Chief Financial and Private Sector Asia

2. KfW Bankengruppe: Overview Start-up Activity in Germany: Current Developments 1 2 KfW‘s Promotional Approach in Financing Start-ups 3 Conclusions 5 Agenda Examples: StartGeld and ERP Start Fund 4

3. 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 • Zero-weight under Basel II

4. A bank with a wide array of functions Domestic promotion International business We promote development We ensure internationalisation We promote Germany Business Area Promotion of Developing and Transition Countries Promotion of SMEs, business founders, start-ups Promotion of construction of new housing and modernisation as well as education Financing municipal infrastructure projects and global loans in Germany/Europe agency business for Federal Government International project and export finance Promotion of developing and transition countries Business Area Mittelstandsbank Business Area Privatkundenbank Business Area Kommunalbank Business AreaExport and Project Finance Promotion of environmental and climate protection 2 2

5. Start-up activity in GermanyCurrent developments Political importance of start-ups • Start-ups important for job creation/poverty alleviation – Social Aspect • In addition: visible number of start-ups necessary to foster economic ability to innovate/modernize – Economic/Competitiveness Aspect Start-up activity in 2009 • Situation largely affected by financial and economic crisis • Downward trend prevailing since 2004 reversed; no. of new start-ups +10% YOY (EUR 0.8 mn) • 45% of these were full-time businesses (+20% YOY) • Percentage of former unemployed persons: 30% of full-time businesses • High portion of micro-enterprises: Total financing needs up to EUR 10.000 (68%) or up to EUR 25.000 (79%) KfW’s start-up finance in 2009 • Promotion of 25.000 founders / Volume: approx. 3,6 bn EUR

6. Recession: • More market entry barriers • Fewer options for small start-ups • Labour Market: • Uncertainty for Employees • Higher unemployment • Fewer open positions Economic Pull Mechanisms Labour Market Push Mechanisms 2009 Total Net Effect: Increase Full-Time Net Effect: Increase Part-Time Net Effect: Unchanged + - - + Macroeconomic Push/Pull Factors for Starting Businesses Macro-Economic Push/Pull Factors in the Economic Crisis

7. KfW‘s Promotional Approach in Financing Start-ups (1) Germany’s banking sector is the most crucial pillar in funding business start-ups with the MFI’s role almost insignificant

8. KfW‘s Promotional Approach in Financing Start-ups (2) Conceptual Aspects of KfW’s Start-up Programmes • Financing Programmes:- Commercial approach regarding risk assessment; bankable clients/projects- Cooperation with market partners using their distribution channels/ market expertise • Supplementary consultancy services (e.g. start-up coaching) • Coordination with governmental politics/measures(e.g. assistance for formerly unemployed business founders)

9. Example 1:KfW-StartGeld Maximum loan amountEUR 50,000 Term: up to 10 years Fixed interest rate Working capitalup to EUR 20,000 Relaxation of collateral requirements Promotion up to 3 years after initial founding Redemption in equal monthly instalments Second application possible Prepayment in full or in part ispossible at no charge Exemption of liability for on-lending bank: 80 %

10. Neutrality through on-lending principle in loan businessNo separate branch network Customer Customer'sbank File loan application with their regular bank before start of investment If approved, customer‘s bank forwards application to KfW Private individuals Enterprises Enter into the loan agreement and disburse the loan refinances the loanat favourable refinancing interest rates Publicinstitutions 10 10

11. KfW / ERP Special Fund Example 2:Co-Investment Scheme – ERP Start Fund Goal:Leverage of private investment capital Principle: Provision of matching funds to a Lead Investor /pari passu approach Start-up Lead Investor - Risk Capital - Management Support - Cooperation Agreement/Compensation

12. Conclusions Global Trends / Central development topics • Sustainable economic growth • Poverty reduction / Job creation • Structural changes and innovation Crucial factors in financing founders / start-ups • Finance and consultancy services • Coordinated measures and programmes (government/welfare policy, chambers of commerce and industry, banks/financial intermediaries etc.) • Existence of credit bureaus General features • Standardized and transparent financing instruments • Measures with a broad impact / outreach are important • Package of instruments accompanying enterprises through their lifecycle

13. Contact Barbara Schnell KfW Bankengruppe Division Chief Palmengartenstrasse 5–9 Private and Financial Sector Asia 60325 Frankfurt am Main Fon +49 69 7431 – 2205 Fax +49 69 7431 – 2944barbara.schnell@kfw.de 13 13