KfW Research: KfW ifo Credit Constraint Indicator: Access to credit remains difficult for businesses

• Credit constraint indicator fell moderately in final quarter but remains pronounced
• Interest in credit remains subdued

After businesses perceived a record high level of credit constraint in the third quarter, it decreased slightly in the final quarter, according to the current KfW ifo Credit Constraint Indicator. The drop was 2.9 percentage points, with 28.8% of small and medium-sized enterprises (SMEs) reporting that banks were taking a restrictive approach to credit negotiations. Among large enterprises that share fell by a mere 0.9 percentage points to 20.4%.

Businesses experience credit constraint differently depending on the sector they belong to. Credit constraints eased in manufacturing and the main construction industry. Wholesalers, however, were hit particularly hard, with the credit constraint indicator rising by 4.3 percentage points to 33.8% for SMEs and by 9.9 percentage points to 20.8% for large enterprises. The tightening of credit restrictions in both size classes can be attributed to the low wholesale turnover figures.

“Access to credit remained difficult for businesses in the final quarter as well”

, summarised Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“Given the restrictive monetary policy and weak economic outlook, a trend reversal in credit constraint might be a while coming.”

Businesses still have little interest in borrowing. However, despite the sharp increases in credit interest rates, credit demand did not drop any further in the final quarter but remained steady on a low level. The share of large enterprises that were in loan negotiations with their banks stagnated on the previous quarter. Among SMEs, that share has now fallen for the second time after recovering slightly in the spring, slipping by 1.2 percentage points to 19.0%. The persistent restraint in demand is also reflected in the figures on new lending to businesses. Credit volume decreased by around 15% in the third quarter.

The current edition of the KfW ifo Credit Constraint Indicator is available at:

KfW-ifo Credit Constraint Indicator | KfW