ZEW analysis confirms positive impact of KfW's ERP loan for digitalization and innovation
An evaluation by ZEW confirms that KfW's ERP loan program, co-funded by the German Ministry for Economic Affairs and Energy, has effectively stimulated digitalization and innovation among German SMEs.
KfW, Germany's state-owned development bank, has released positive findings from an external evaluation of its ERP Digitalisation and Innovation Loan program. Conducted by the Leibniz Centre for European Economic Research (ZEW), the analysis covers the period from the program's inception to late 2019, focusing on its impact on small and medium-sized enterprises (SMEs).
The ZEW analysis concludes that the loan program has successfully translated SME innovation potential into economic growth and demonstrates an efficient use of public funds. Between 2017 and 2019, the program facilitated 1,603 loans totaling EUR 3.58 billion. Approximately 45% of these funds were allocated to digitalization projects, 43% to innovative companies, and 12% to innovation projects.
ZEW's comprehensive study, which included company surveys and causal analysis, indicated significant positive effects on participating SMEs. The program is credited with mobilizing an additional EUR 1.2 billion in innovation expenditure and EUR 1.9 billion in tangible asset investments. Furthermore, an estimated 14,500 additional jobs were created, and annual turnover increased by an additional EUR 1.9 billion. Compared to a control group, supported companies saw an 8.1 percentage point greater increase in employee numbers and a 9.7 percentage point rise in turnover over a two-year period.
Ingrid Hengster, Member of KfW Executive Board, stated that the evaluation confirms the loan's importance for German innovation. "The public funds we deployed are having the intended positive impact, ensuring that German SMEs can invest in digitalization and innovation," Hengster said. "This is essential for Germany's structural change, digital transformation, and international competitiveness."
The evaluation found that 15% of supported SMEs believed KfW's support was essential for project implementation. Nearly half reported that the funding contributed to higher technological standards or greater novelty. The supported activities enhanced companies' competitiveness, particularly through increased efficiency, improved product quality, and cost savings. The majority of companies were initially encouraged to apply for the loan through their regular banks, indicating an effective distribution channel.