Financial cooperation
The Financial Cooperation (FC) is a part of German development cooperation .
The implementing organization for financial cooperation in Germany is KfW (Kreditanstalt für Wiederaufbau). Their main task is to support the partner countries in financing measures and projects that are important for their development - e.g. B. Investments in the education and health system , in infrastructure (such as road construction , water supply , rural electrification), in environmental protection or in agriculture . The projects funded from Financial Cooperation funds are selected by the Federal Government together with the partner countries on the basis of development policy considerations . The funds are pledged within the framework of binding government agreements under international law . KfW supports the project sponsors in the partner country in preparing, reviewing and implementing the projects. After the project has been in operation for a reasonable period of time, a final evaluation is carried out to assess whether the developmental effects have occurred. In order for such investments to lead to a lasting improvement in living conditions and thus have a lasting effect, they should be accompanied by state reform processes (e.g. deregulation ). Financial cooperation therefore often takes place in coordination with other German (e.g. GIZ ) or international (e.g. World Bank , ADB ) donor institutions.
Pure Financial Cooperation Financing
As part of financial cooperation, the partner countries are provided with BMZ funds on a trust basis by KfW. These funds can be made available either as loans or as grants (also: financial contributions). These financing instruments, also known as "pure FC financing", are:
- Grants have been available since 1978 and go primarily to the group of least developed countries . Grants can also be granted outside of this group of countries if the focus is on self-help-oriented projects to combat poverty, social infrastructure projects, environmental and resource protection projects or measures that serve to improve the social position of women.
- Loans are granted to the remaining developing countries (or sectors). They usually have very long terms (30 to 40 years with 10 years off at the same time) and are issued at concessional interest rates (0.75% or 2% per annum). This also these loans meet a minimum grant element (English grant element ) and are called Official Development Assistance recognized (ODA).
FC development loans
In recent years, the funds from the BMZ's federal budget have increasingly been mixed or supplemented with funds refinanced on the capital market by KfW . In this way, higher financing volumes can be realized while maintaining the minimum grant element and a contribution to increasing ODA payments can be made. This type of product is known as FC development loans. The aim of this is to mobilize additional funding for projects that are worthy of development policy. FC development loans are available in three basic types. These are:
Association financing
With this form of financing, the funds from the BMZ are allocated with funds from the KfW in a certain mix ratio, i.e. in a loan agreement. A certain percentage of the KfW funds are secured by a special development-oriented guarantee framework of the Federal Republic of Germany. The conditions of the association financing are slightly above the otherwise usual development aid conditions, but clearly below pure market conditions. In any case, the financing can be counted as ODA. The guidelines of the federal government for this financing instrument have been in force since May 15, 1994.
Mixed financing
Similar to the network financing, there is also a mix of federal and KfW financing. However, since this form of financing is always based on a delivery transaction, the conditions for state export credit insurers (e.g. Euler Hermes credit insurance ) must be complied with in addition to the eligibility for development policy funding . The part of the loan refinanced by KfW is covered by the credit insurer. This financing can also be counted as ODA. Mixed financing has been granted by KfW since the 1960s.
Low interest loans
The low-interest loans are another form of FC development loans. The BMZ's budget funds are used in the form of grants to reduce the interest rate of the financing to a level so that the loan can be counted as ODA. The actual loan is fully refinanced by KfW. This leverage effect is used to try to present the largest possible financing volume on favorable terms. This type of loan has been offered since the end of 2001.