KfW Entwicklungsbank boosts innovation and modernisation in SMEs in the Russian Federation

At today's German-Russian government consultations in Ekaterinburg, KfW Entwicklungsbank signed in the presence of Federal Chancellor Angela Merkel and President Dmitry Medvedev an agreement with Vnesheconombank (VEB) worth EUR 100 million. The purpose of the agreement is a strengthening of innovation and modernisation efforts in the SME sector in the Russian Federation. The agreement will be implemented by Russian Bank for Development (RBD), a 100% affiliate of VEB, and KfW Entwicklungsbank in the form of programme loans.

As well as stimulating innovation and modernisation in Russian SMEs, this measure is also expected to generate positive effects on Germany's foreign trade. Evaluations of the KfW's existing SME programmes in the Russian Federation have shown that up to 60% of all the goods and services financed benefit the German economy either directly or indirectly.

'For KfW, signing this loan agreement is a cornerstone on which to extend our promotional programme structures in the Russian Federation, and a further milestone in our close cooperation with our partner the Bank for Development and Foreign Economic Affairs,' said Dr. Lutz-Christian Funke, Director of KfW Bankengruppe, as the agreement was being signed.

This loan to the RBD was extended on the basis of the 'German-Russian Programme for Innovation and Modernisation of Small and Medium-Sized Enterprises', which VEB and KfW had signed in April 2010. The RBD will pass on the KfW funds to various Russian banks.

These will then extend credits to their own SME clients in order to support the willingness of these SMEs to modernise and innovate.

Innovation and modernisation of the Russian economy is currently a major topic of public debate in Russia. Both President Medvedev and Prime Minister Putin have repeatedly called on Russian enterprises to step up their engagement. Thanks to the close cooperation that already existed between VEB and KfW the two development banks were able to swiftly design a programme to promote innovation and the modernisation of Russian small and medium-sized enterprises. In this context KfW was able to draw on its many years of experience in supporting SMEs and providing finance for innovation in Germany.

The German government has been supporting the economic development of the financial and SME sectors in Russia in a variety of ways for years under the TRANSFORM Follow-Up Programme. Mandated by the German Federal Ministry of Economics and Technology and the Federal Ministry of Finance, KfW supports its Russian partners in the spheres of business and policymaking through refinancing programmes (currently approximately EUR 300 million) and targeted advisory and consultancy measures (e.g. concerning legislation, managerial training, SME promotion and financial systems development).