Lending to the domestic private sector

Almost 85% of the loans extended by German banks to domestic non-banks go to the private sector. Around 45% of these are loans to individuals who are not self-employed. Just over three-quarters of loans to individuals are property loans. The demand in Germany for consumer loans, on the other hand, remains limited.

When enterprises and the self-employed take out a loan, in contrast, it is normally to finance investments or running costs. Enterprises finance a far higher proportion of their spending through borrowing than do households. With the exception of real-estate companies, they also have much less need for housing loans.

Lending to the domestic private sector     Year-end 2004   Change since year-end 1999       € bn   as % of balance sheet total   € bn   % p.a.   By category of borrower                   Loans to enterprises and self-employed persons   1,211.6   18.2   + 1.9   + 0.0   Loans to individuals   999.4   15.0   + 118.4   + 2.6   Loans to non-profit institutions   13.2   0.2   - 0.5   - 0.8   By type of loan                   Housing loans to enterprises and self-employed individuals   320.4   4.8   - 5.3   - 0.3   Housing loans to individuals   762.4   11.4   + 112.7   + 3.2   Commercial loans   891.2   13.4   + 7.2   + 0.2   Consumer loans   237.0   3.6   + 5.8   + 0.6

Source: Deutsche Bundesbank

Lending to domestic non-banks has risen only slightly in recent years. Only housing loans to individuals have seen a modest increase. The main reason for the stagnation in other types of lending is Germany’s continued lack of economic growth. In times of low investment there is little demand for loans and fears of joblessness have curbed people’s willingness to take on debt. The declining importance of the traditional commercial loan can also be explained by the fact that enterprises are increasingly raising finance by other means, on the capital markets or abroad, for instance.