1. Finanzgruppe
EuropaService
German Sparkassen provide small credits for entrepreneurs and local development
ESBG/EMN Microcredit Conference, Brussels,
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
We see so-called „microcredits“ as a local business and as part of our contribution to local/regional economic development
German Sparkassen have the widest client base (between 2007 and 2010 the share of company clients with a Sparkasse as 1st „house bank“ rose by 2 percentage points to 44 %, due to the Sparkassen being prepared to provide credit during crisis), source: Financial Market Data Survey FMDS
Bertram Reddig
10 May 2011

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
Two basic alternatives of keeping handling costs low (economies of scale):
Specialisation on „microcredits“ and (nation)wide pooling
Pooling of „microcredits“ on the local level with other similar credits
Supply not limited, but quality of demand
Projects targeted for finance should be able to earn enough to repay the credit for them (and subsistence of entrepreneur and profit)
Vs. Reliance on repayment ability of credit beneficiary (from whatever source)
Bertram Reddig
10 May 2011

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: bn EUR
 Average amount: 5,100 EUR
Average of 5,100 EUR is low within the bracket of 0 to 10,000 EUR
Company view (e.g. craft companies): „we care more about the provision of credit than the communication about it“
(„action speaks louder than words“)
Bertram Reddig
10 May 2011

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: mn / mn EUR (+ 33 %)
Average amount: 30,700 / 30,600 EUR
2009
„CIP loans“ specifically for start-ups and young enterprises
Bracket up to 50,000 EUR
KfW-StartGeld offers to (savings) banks the same risk sharing as Mikrokreditfonds Deutschland offers to MFIs (80%)
Ability to bear the remaining 20 % of risk? (Sparkassen in 2007 insisted on the 20%)
Financing examples (5,000, 7,000, 25,000 EUR)
Bertram Reddig
10 May 2011

6. Adding value to CIP grant money effectively
European Commission provides grants from the CIP programme
EU level
European Investment Fund converts grants into a guarantee (SME Guarantee Facility)
KfW-Mittelstandsbank uses the guarantee in promotional loan programme (KfW-StartGeld)
Good practice example of efficient cooperation
German level
Savings Banks – and other banks – make „KfW-StartGeld“ accessible all over Germany
Bertram Reddig
10 May 2011

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
Government action changed options for Sparkassen in early 2010 (not being providers of „microcredits“ any longer)
Image of „microcredit“ changes from being a commercial product to being a government funded subsidy (government trying to find ways of public sources bearing 100 % of the risk; even thoughts of taking all risk away from the beneficiary – no own funds)
Bertram Reddig
10 May 2011

8. Thank you for your attention!
Dr. Bertram Reddig
Head of „EuropaService / Promotional Finance“
Deutscher Sparkassen- und Giroverband
Charlottenstrasse 47, Berlin
Tel.: , Fax:
Internet:
Bertram Reddig
10 May 2011