Our way of working
The projects and programmes promoted by KfW Development Bank are proposed by the governments of our partner countries; the respective country's development strategies and structures form the basis. On behalf of the German Federal Government, and primarily the Federal Ministry for Economic Cooperation and Development, we check whether the projects and programmes are developmentally sound and eligible for promotion. If so, KfW's experts assist the partners in any way they can and support the projects throughout their entire duration. We are continually building on our global presence to ensure that we can cooperate closely with our partners. In addition to our sites in Frankfurt, Berlin and Brussels, we also have foreign offices in almost 70 countries.
KfW Development Bank supports development programmes and thus future prospects in Africa, Asia, Latin America and Southeast Europe. We help partner countries to create better living conditions, while protecting the climate and the environment at the same time. The range of partner countries is more heterogeneous and dynamic than ever before. We work with developing and emerging economies and we are increasingly active in countries involved in conflict.
Our partners include what are known as the "Least Developed Countries" ("LDCs" for short), where the UN states that the average gross national income per capita is less than USD 992. Although progress has been made in many areas, these countries still have to overcome enormous economic and infrastructural challenges. A growing number of LDCs are even turning into "fragile states", confronted with massive crises, conflicts and political instability. We also work with aspiring emerging economies such as Brazil and India. These exhibit high economic growth rates but still confront major social and ecological challenges in many cases, such as a sustainable energy supply, for which they continue to rely on international support.
Development cooperation with the respective groups of countries calls for a very different approach. KfW adapts to the varied and complex conditions and offers tailored solutions to suit the respective context. This is the only way to guarantee maximum effectiveness.
The Financial Cooperation (FC) implemented by the KfW Development Bank is guided by the country strategies developed by the Federal Ministry for Economic Cooperation and Development and the development strategies created by the partner country. The promoted projects and programmes are proposed during bilateral government negotiations and the German Federal Government decides about the maximum amout of financial funds to be committed.
An intergovernmental agreement is generally concluded on this matter. KfW checks whether the proposed projects are developmentally sound and realisable. Working together with the partner, specialised consulting firms draw up a feasibility study, which provides answers to all of the project's key questions – economic efficiency, developmental impacts and possible risks.
Social, cultural and ecological aspects are taken into account. Once all of the preparatory measures have been taken, the KfW Development Bank concludes a financing agreement with the project-executing agencies. To name but a few examples, this specifies what has to be observed when building a hydro power station or school, or how the operating costs are being covered. The project-executing agency is responsible for the project itself. It puts goods and services to tender and monitors the building phases. The KfW experts assist the clients during these steps and provides the German Federal Government with regular progress reports.
Following completion, the KfW closely examines the project during the final review. The aim here is determine whether or not productivity levels are being reached, whether or not the specifications have been complied with and whether or not the funds have been used as planned. KfW has an independent evaluation department (FZ-E) in order to assess whether projects and programmes will really achieve lasting success. Around five years after completion, FZ-E takes random samples of completed projects and programmes, analyses the impacts achieved during final evaluations, evaluates the costs and compares the two results. In the long-term average, the development bank's projects and programmes have a success rate of around 80 %.
The projects and programmes we finance are put out to tender and implemented by our partners / project-executing agencies. Even before the invitation to tender, we check the documents and give the partner our approval by means of a "no objection" letter. Before a bidder is awarded a contract, the project-executing agency provides us with an evaluation report together with a proposal for contract award and a draft of the contract. Our approval is a prerequisite if the contract is to be signed. We make sure that the invitation to tender and contract award processes take place according to internationally recognised regulations. Invitations to tender and decisions on the award of the contract must be transparent and comprehensible. Favouring or discriminating against individual bidders is not permitted. The contract is awarded to the offer assessed as the most efficient in economic terms. Contracts may only be placed with bidders who have the appropriate expertise and capability. Ultimately, the supported facilities and other project components should meet high ecological and social standards. We remain in constant contact with our partners, giving them advice throughout the project cycle – and in particular during the awarding process.
Consultants are also appointed regularly to support the project-executing agency in various phases of a project. Consultants collect initial data, produce feasibility studies and develop plans and tender documents for the project. Alternatively, they may support the project-executing agency in evaluating bids, managing construction at a later stage or training local specialists. Generally speaking, consulting and other advisory services are also put to international and public tender.
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