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KfW banking group is a German government-owned development bank formed in 1948 after World War II as part of the Marshall Plan.

It is owned by the Federal Republic of Germany (80%) and the States of Germany (20%). It is led by a five-member Managing Board, which in turn reports to 37-member Supervisory Board.

KfW banking group covers over 90% of its borrowing needs in the capital markets, mainly through bonds that are guaranteed by the federal government. This allows KfW to raise funds at advantageous conditions. Together with its exemption from corporate taxes due to its legal status as a public agency and unremunerated equity provided by its public shareholders, this allows KfW to provide loans for purposes prescribed by the KfW law at lower rates than commercial banks.

KfW is not allowed to compete with commercial banks, but it facilitates their business in areas within its mandate. Typically, KfW does not lend directly to enterprises or individuals, but it provides commercial banks with liquidity at low rates and long maturities, as well as with instruments to transfer risk.

KfW banking group has three business units with distinct functions, as well as several subsidiaries. Lending by KfW group’s two main business units, accounting for more than 90% of total lending, is in Germany and – to a more limited extent – in other European countries. However, its largest subsidiary, KfW IPEX Bank GmbH, independent since 2008, lends predominantly internationally (main sectors of activity : airports, roads, bridges, tunnels, railways, ships, planes, telecommunications, energy).

The subsidiaries German Investment Corporation (DEG) and KfW development bank are exclusively active in the international arena : DEG takes minority equity stakes and provides loans to private companies investing in developing countries (imain sectors of activity : banking, renewable energy, telecommunications and manufacturing).

KfW Förderbank is especially active in promoting energy-efficient housing. Concerning environmental protection, it promotes, among others, photovoltaic energy. It also invests in municipal infrastructure such as public transport through KfW Kommunalbank. More recently, it has also engaged in education where it provides student loans.

KfW Mittelstandsbank provides assistance to German SMEs including individual entrepreneurs and start-ups. In addition to loans it also provides equity and mezzanine financing.

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