12,000 Schlecker employees will lose their jobs before the end of March after the chain filed for bankruptcy in January.
Insolvency administrator Arndt Geiwitz had wanted to establish a transfer company for the former workers to ease the transition into other employment. For this, the firm would need a sum of €70 million, the Welt reported.
The German Economics Ministry has already made it clear to Geiwitz that finance from the KfW is intended for small and medium businesses and that Schlecker does not fulfill these criteria, according to the report.
Meanwhile, a Gewitz spokesman told press on Friday that interim financial help from the KfW would be vital to assure liquid assets for a transfer company.
The insolvency team is currently negotiating a redundancy plan together with the Ver.di trade union and Schlecker works councils.
Several hundred Schlecker workers demonstrated in Frankfurt on Saturday over the loss of their jobs. According to the Ver.di union, Green, Social Democrat and Left party politicians were also present.