German Sparkassen provide small credits for entrepreneurs and local development

1. Finanzgruppe EuropaService German Sparkassen provide small credits for entrepreneurs and local development ESBG/EMN Microcredit Conference, Brussels, 10-5-2011 Bertram Reddig (EuropaService, Sparkassen-Finanzgruppe, Berlin)

2. Sparkassen: proximity banks with local decision power • 429 Sparkassen () - savings banks - cover all of Germany with 15,600 branches • oriented towards the public welfare • channelling local money into the local economy • financial partner no. 1 for SMEs in Germany • three out of four enterprises are clients of the savings banks financial group Bertram Reddig

3. Small credits in the business model of Sparkassen • The business model of Sparkassen includes the provision of credits to any feasible entrepreneurial project in the local business area • Being deeply rooted in the local business area and proximity to customers both allow and require dealing with smaller financing projects (by microentrepreneurs, or „microcredits“) • Including „microcredits“ in the pool of normal credits to company and private customers allows keeping handling costs low • Some clients need extra support for qualitative improvement of the project and/or its initiator (planning, coaching, monitoring, etc.) • Sparkassen are encouraged to cooperate with local partners for client support – including microcredit institutions where available Bertram Reddig

4. Availability of figures on „microcredit“ is restricted • For Sparkassen „microcredits“ are an important, but non-specific segment of overall credits • no regular statistics explicitly on the segment are collected • in order to keep administrative burden and costs low • Survey on investment and working capital loans up to 10,000 EUR each for business purposes (outstanding June 30, 2009):  Number: 420,000  Volume: 2.142 bn EUR  Average amount: 5,100 EUR Bertram Reddig

5. „CIP loans“ for start-ups (KfW-StartGeld): market shares 2010 • KfW-StartGeld: • up to 50,000 EUR each for start-ups and young enterprises • the most successfully implemented CIP financial instrument • Sparkassen use KfW-StartGeld for some 10 % of small start-ups • Loans committed 2010 / 2009: • Number: 7,166 / 5,502 (+ 30 %) • Volume: 220.3 mn/165.4 mn EUR (+ 33 %) • Average amount: 30,700 / 30,600 EUR 2009 Bertram Reddig

6. Adding value to CIP grant money effectively European Commission provides grants from the CIP programme EU level European Investment Fund converts grantsinto a guarantee (SME Guarantee Facility) KfW-Mittelstandsbank uses the guarantee in promotional loan programme (KfW-StartGeld) German level Savings Banks – and other banks – make „KfW-StartGeld“ accessible all over Germany Bertram Reddig

7. „On top“: cooperating with microcredit institutions • Some clients need preparation for „bankability“ by specialised institutions (with staff partly paid from public sources) – due to quality gap of project and/or initiator, not to low size of loan • German government microcredit scheme new in 2010 requires centralised loan provision by a national cooperative bank (excluding Sparkassen from providing the loans as before) • Regional microcredit institutions need risk funds for 20 % of their portfolio, which may be provided by Sparkassen (by sponsoring or on commercial terms) – examples Offenbach, Leipzig, Duisburg … • Sparkasse Offenbach is mentioned as longstanding good practice in Sparkassen start-up guidelines (Jan 2010) – first successful transfers of microcredit clients to Sparkasse for follow-up loans Bertram Reddig

8. Thank you for your attention! Dr. Bertram Reddig Head of „EuropaService / Promotional Finance“ Deutscher Sparkassen- und Giroverband Charlottenstrasse 47, 10117 Berlin Tel.: +4930 20225-5798, Fax: +4930 20225-5799 E-Mail: europaservice@dsgv.de, bertram.reddig@dsgv.de Internet: http://europaservice.dsgv.de Bertram Reddig