34th ADFIAP Annual Meeting April 20 to 23, 2011, North Cyprus “Responding to Global Issues & Trends: The Strategic Role, Resources and Relationships of National Development Finance Institutions” DFIs and SME Finance: Building Capacity for SME Development and Innovative Financing Mechanisms “Advisory Support for SMEs during their Life Cycle” Barbara Schnell, Division Chief Financial and Private Sector Asia

2 Agenda KfW’s Advisory Support for SMEs 4 Finance and Advisory Support during the Life Cycle of SMEs 3 Conclusions 5 KfW Bankengruppe: Overview 1 Global Challenges 2

Years of KfW Financing with a Public Mission ● Promotional bank of the Federal Republic of Germany ● Founded in 1948 as Kreditanstalt für Wiederaufbau ● Shareholders: 80% Federal Republic, 20% federal states ● Headquarters: Frankfurt am Main Branches: Berlin and Bonn ● Representative offices: around 70 offices and representations worldwide ● Balance sheet total at end 2010: EUR 441,8 billion ● Financing Volume 2010: EUR 81.4 billion ● Around 4,530 employees (2010) ● Best rating: AAA/Aaa/AAA

4 A Bank with a Wide Array of Functions Promotion of developing and transition countries International business Promotion of construction of new housing and modernisation as well as education Promotion of SMEs, business founders, start-ups Municipal infrastructure projects and global loans in Germany/Europe Domestic promotion We promote the German economy International project and export finance We ensure internationalisation We promote development Promotion of environmental and climate protection: 25.3 bn Business Area SME Bank Business Area Private Client Bank Business Area Municipal Bank Business Area Export and Project Finance Business Area Promotion of Developing and Transition Countries Funding 2010: 64.3 bn EUR Funding 2010: 5.7 bn EUR Funding 2010: 9.3 bn EUR

5 Agenda KfW’s Advisory Support for SMEs 4 Finance and Advisory Support during the Life Cycle of SMEs 3 Conclusions 5 KfW Bankengruppe: Overview 1 Global Challenges 2

6 Sustainable Economic Growth / Pro-Poor Growth Global Division of Labour Shortage of Resources Population Growth Global Challenges Competitiveness Climate Change Job creation Structural Changes Framework Conditions Good Governance Peace Income Distribution Gender Issues Poverty Reduction Demographic Change

77 Role of DFIs The framework in which promotional banks/ development banks operate is subject to continuous change due to ● New global challenges/ structural changes to be addressed ● The appearance of new areas of market failures ● The evolution of financial markets ● Changes in governmental economic policy Therefore development banks have to engage in a continuous process of re-defining their roles, tasks and products.

8 Agenda KfW’s Advisory Support for SMEs 4 Finance and Advisory Support during the Life Cycle of SMEs 3 Conclusions 5 KfW Bankengruppe: Overview 1 Global Challenges 2

9 Advisory Support for SMEs Consultancy Services Guaranteeing the Success of SME Promotion Advisory Support ● supplements KfW’s financing offers for SMEs. ● helps companies to enhance their performance. ● supports KfW’s strategy of sustainable promotional activities (e.g. economic sustainability of SMEs, job creation, climate protection). KfW offers grants in the crucial stages of companies’ life cycle (start-up phase and crisis) and when companies face special challenges which require detailed know-how.

10 Phases of the Organizational Life Cycle: Need of Special Advisory Support Combination of capital and advisory support (e.g. Venture Capital) Separate advisory support Start up-Companies Business Founders Mature Companies/ Declining Companies Turn around advisory services t Growing Companies/ Established Companies Advisory support for special promotional purposes Start-up Finance Growth Capital Finance for Special Promotional Purposes Profit/ Growth

11 Agenda KfW’s Advisory Support for SMEs 4 Finance and Advisory Support during the Life Cycle of SMEs 3 Conclusions 5 KfW Bankengruppe: Overview 1 Global Challenges 2

12 Loan Financing Global Loans, Securitization Advisory Services Financing of Start-ups Support of young, growing and of established companies Promotional Instruments focussing on SME financing Start-up Loan (“KfW Gründerkredit”) StartGeld / Universal KfW Entrepreneur Loan (Part “A”) ERP Regional Promotion Programme Mezzanine Financing ERP Capital for Start-ups ERP Innovation Programme Equity ERP Start-up Fund ERP Participation Programme KfW Participation in “High-Tech Founder Fund” (PPP) ERP Environmental and Energy Efficiency Programme KfW Entrepreneur Loan (Part “B”)

13 KfW’s Promotional Approach: Companies with a Need of Special Advisory Support Start up-Companies Business Founders Mature Companies/ Declining Companies t Growing Companies/ Established Companies High-Tech Founder Fund (PPP) - Companies up to 1 year - Equity in combination with strong advisory support ERP Start-up Fund for technology-based companies Equity and advisory support through Lead-Investor-Model „Start-up Coaching in Germany“ for business founders/ business start-ups Special promotional purposes: Energy efficiency advice for SMEs Initial advice and/or detailed consulting Round Table for companies experiencing economic difficulties (in cooperation with chambers/ external advisors) “Turn around” advisory services Advice on a company’s economic, financial and organizational questions Profit/ Growth

14 Early Stage (1) High-Tech Start-ups: Combination of Financing and Advisory Support High-Tech Founder Fund Government, KfW, BASF, Zeiss, Daimler, Siemens, Deutsche Telekom Technology Start-up - Risk Capital Founder - Management Support Investor Coach

15 Early Stage (2) Broad-based Initial Advisory Services for SMEs: “Start-up Coaching in Germany” max. for 12 months Special Conditions for starting a business out of unemployment Grant: 50%, 75% or 90% of total costs Consulting Services and Coaching Total costs: up to EUR or EUR up to 5 years after foundation Application via KfW‘s regional partners 2010: ca commitments

16 Special Promotional Purposes: Energy Efficiency Advice for SMEs Detailed consulting Initial Advice Grant: 60 % of costs 1 – 2 days of consulting In-depth energy analysis of energy saving measures and investments, savings potential and cost effectiveness In-depth energy analysis of energy saving measures and investments, savings potential and cost effectiveness Grant: 80% of costs Total consulting costs: up to EUR Total consulting costs: up to EUR Reducing information deficits about energy saving options Reducing information deficits about energy saving options Application via KfW‘s regional partners 2010: ca commitments

17 Established SMEs with Need for Improvement: “Round Table” and “Turn Around“ Advisory Services Round Table„Turn Around“ Advisory Services Target Group Advisory services for SMEs experiencing economic difficulties owing to unexpected economic developments. Advisory services for SMEs in economic difficulties, but with a positive business forecast. Analysis of weak points already completed. Procedure External advisors analyses the weak points and offers proposals for their solution. “Round table” with participation of all lenders. Implementation of measures: External advisor coaches the company to cope with the identified weak points and to improve and restore the capacity and competitiveness of the company. Grant EUR 160 per day of work for advisor/ project monitor (max. 10 days) 50% or 75% of the costs Max. EUR 8,000 Partners Regional partners Chambers of Commerce/ Trade/ Crafts Regional partners Chambers of Commerce/ Trade/ Crafts; Local business development institutions Commitments in 2010 Ca Ca

18 Agenda KfW’s Advisory Support for SMEs 4 Finance and Advisory Support during the Life Cycle of SMEs 3 Conclusions 5 KfW Bankengruppe: Overview 1 Global Challenges 2

19 Conclusions KfW offers advisory support in order ● to increase the prospects of success and growth of start-ups ● to support the efficient implementation of KfW financing programmes ● to encourage SMEs to improve their energy savings capacity ● to support SMEs during a (temporary) time of crisis In addition to pure financing KfW offers a package of advisory services accompanying SMEs through their life cycle.

20 Thank you for your attention! Barbara SchnellKfW Bankengruppe Division ChiefPalmengartenstrasse 5–9 Financial and Private Sector Asia60325 Frankfurt am Main Fon – 2205 Fax – 2944