Development financing creates global opportunities for German companies

In the area of development financing, reduced public budgets are currently an important topic for many donor countries. While many observers are concerned about the economic and social impact of these cuts, others argue that development financing is ineffective anyway and amounts to little more than handouts and a waste of public money. However, such misgivings often stem from a lack of understanding about the work of development banks and the positive impact it can have.  

At DEG, we have a clear mission to offer financing and support: we provide loans and capital to finance the investments of private companies that contribute to sustainable development and thus also to the advancement of German interests. We also advise and support our customers in planning their investments. We enable private companies and other investors to invest in areas such as climate action and global health care. And all of this is done using our own funds, not the taxpayer’s money. Our activities are financed using our own capital, which we invest in a profitable and sustainable way in line with our development mandate.  

In-demand financing instruments, investments with impact

This means, for example, that we ensure risk-adjusted returns on our long-term loans. We carefully analyse market developments in the partner countries and assess a financed project’s chances of success. We enable private-sector investments in markets in the Global South that would otherwise not be possible. And we measure ourselves by the effectiveness of our investments – using a monitoring system that we developed specifically for this purpose in alignment with the United Nations Sustainable Development Goals. 

To measure effectiveness, we ask the following questions, for example: does the investment create decent and fair employment and local income? Does it contribute to the development of markets and sectors and to environmentally responsible business? Is it beneficial to local communities? 

We take this process very seriously. Not least because it allows us to ensure that the loans and equity financing we provide are used sustainably – in economic terms, too. The financing we provide should also create long-term success and growth for the investing companies. And thus establish the basis for repayment, so that DEG can use the returns to independently fund new investment projects. 

Planning certainty and opportunities for companies

This strong results orientation makes us an important partner for German companies wishing to do business in countries in the Global South and harness market opportunities there. We not only facilitate investments, but also offer companies support from an early stage by analysing if and how an investment can deliver sustainable success, and we continue to provide support every step of the way. This creates planning certainty, helps with risk management and is more important than ever in these volatile times. 
Export-oriented companies are currently in an ambivalent position: on the one hand, there is a general, widespread reluctance to invest due to geopolitical and geoeconomic uncertainty. In addition, many companies are adopting a risk-averse approach, concentrating on large and established markets in international business, for example. At the same time, the global economy is under pressure to transform. Many companies, including our export-oriented small and medium-sized enterprises, are looking for new growth markets and new partners with which to further develop their business models and supply chains, to make them more resilient and diverse.

Cooperation with experienced local partners

Many developing countries and emerging economies have made significant progress and now offer a wide range of opportunities for such partnerships with the private sector in their countries. It is also clear that local entrepreneurs are in a strong position to engage with partners from industrialised countries. They are usually very well educated and have a good knowledge of current business conditions and challenges.  As such, they approach such arrangements on an equal footing and expect partnerships to generate real added value. Financing solutions and strategic partnerships therefore need to benefit both sides.   

More than ever, DEG’s work therefore focuses on supporting our customers’ transformation journey and enabling them to adapt to new economic and social framework conditions – and this applies to both German and local companies. We do much more than ‘give handouts’ and provide liquidity. We use our own funds to facilitate real, long-term partnerships and investments in the future that reconcile the interests of all stakeholders. Because, in our experience, this is the best way to effectively foster stable, secure and economically successful development: for us in Germany and in our partner countries.