Introduction to KfW
KfW is a national development bank, the world’s largest, supported by the German state. It funds projects around the world, from streets in Africa to water systems in Asia. However, a new report raises concerns about the effects of KfW projects overseas, including displacement of villages, pollution of rivers, and human rights violations.
Accusations Against KfW
The report, compiled by a coalition of civil society organizations, accuses KfW of "irresponsible banking transactions" and "hidden damage." It claims that infrastructure projects financed by KfW have led to the relocation of indigenous communities in Indonesia, Mexico, and elsewhere without adequate consultation or compensation. The projects have also caused environmental damage, such as air pollution and water deterioration, with little transparency or accountability.
Environmental and Social Issues
KfW’s environmental and social issues are reportedly "only an add-on" to business deals. The report shows that many KfW-supported projects were launched without prior declaration of consent from local population groups, violating indigenous rights and participatory development. In some cases, communities were not consulted, and the projects led to isolation and breakdown of community bonds.
Lack of Cultural Sensitivity
The report highlights examples of KfW’s lack of cultural sensitivity, such as in Kenya, where Maasai communities were relocated as part of development efforts. The new houses provided to the Maasai were "culturally inappropriate" and did not allow for traditional practices. In Indonesia, members of the indigenous community of Pocoleok faced violent reprisals, including intimidation and physical abuse, after expressing concerns about environmental and cultural damage.
Criticism of KfW’s Complaint Procedure
The report criticizes KfW’s complaint procedure as "slow, opaque, and inaccessible to many affected people." It adds that the lender could not prevent, tackle, and remedy reprisals, and that the effects of its projects were not adequately considered. In one case, KfW initially dismissed a complaint about a project in Uganda until a community member produced a document with the bank’s logo.
Demands for Change
The coalition is calling for KfW to go beyond process reforms and accept structural changes. This includes establishing an independent accountability mechanism, proactive guidelines to prevent reprisals, public access to project documents, and meaningful consultation with affected communities before financing is approved. Other development banks, such as the World Bank and Asian Development Bank, have already taken steps in this direction.
KfW’s Response
In response to the report, KfW defended its practices, stating that human rights and responsible management of environmental and social risks are "a matter of course" for all its international business areas. KfW emphasizes that it employs over 50 specialists and uses internationally recognized standards, such as those of the World Bank and the Equator Principles. However, the coalition argues that KfW’s guidelines and complaint systems are inadequate and leave gaps that can cause harm to communities.
