In the case of development loans, KfW combines budget funds of the German Federal Government with own funds that it raises at favourable terms on the capital market. When our own funds are used, partner countries benefit from the cheap refinancing options available to KfW thanks to its AAA rating and a partial risk assumption by the German Federal Government. The development loans were created in collaboration with the Federal Ministry for Economic Cooperation and Development (BMZ) to increase the funding volume for the projects and programmes in the partner countries. The terms and conditions are structured to ensure that the projects are able to bear the costs and that the loans comply with the international agreements for Official Development Assistance (ODA). Even though the terms of the development loans are higher than pure budget funds, they are significantly below market level.
Development loans are generally structured as reduced-interest loans: only KfW's own funds, which are partially secured by a guarantee line from the German Federal Government, are deployed for the loans. We then lower the loan interest rates with grants from budget funds. The result is that the projects can be financed for the partners and the loans meet the ODA criteria for public development cooperation.
Development loans (German only)(PDF, 72 KB, non-accessible)