Turkish Treasury Injects TL 1 billion (approx. 680m USD) to Boost Small Companies

Istanbul, Turkey | October 19, 2009 by D-8 Secretariat

Turkish Small and medium-sized enterprises (SMEs) suffering from financing difficulties due to the global financial crisis will be able to ameliorate their situation with a new TL 1 billion contribution from the Treasury.

A protocol between the Turkish Treasury and the Loan Insurance Fund (KGF) governing the transfer of TL 1 billion was signed last week at the TOBB University of Economics and Technology with the attendance of Economy Minister Ali Babacan, Industry and Trade Minister Nihat Ergün, Turkish Union of Chambers and Commodity Exchanges Chairman Rifat Hisarcıklıoğlu and Treasury Undersecretary İbrahim Halil Çanakçı.

Turkish Small and medium-sized enterprises (SMEs) suffering from financing difficulties due to the global financial crisis will be able to ameliorate their situation with a new TL 1 billion contribution from the Treasury.

KGF executive board president Faik Yavuz, explaining that they had found the opportunity to extend over TL 11 billion in loans to SMEs, said the fund had achieved capital equivalent to that of a medium-sized bank. Drawing attention to the importance of a TL 1 billion fund transfer from the Treasury, Yavuz said in an exclusive interview with Turkish leading newspaper, Today’s Zaman: “The Treasury’s TL 1 billion fund transfer has been the greatest support lent to SMEs with a single stroke of a pen. This measure of support for SMEs, the first of such magnitude, is very important to us.”

The global financial crisis has had a negative albeit indirect effect on SMEs’ access to loans, Yavuz said, noting that the KGF had increased their capital from TL 60 million to TL 240 million by boosting the number of partners in the fund to be able to create TL 1.5 billion in loans. “A year ago, before the crisis, we offered our SMEs loans with limited options, and only TL 500,000 security. … With the protocol that we are going to sign today [Monday] and the Treasury’s TL 1 billion in resources, our total loan creation ability exceeds TL 11 billion. This will create great opportunities for our SMEs, for the employment problem and for our farmers,” Yavuz said.

A protocol between the Treasury and the KGF governing the transfer of TL 1 billion was signed yesterday at the Turkish Union of Chambers and Commodity Exchanges (TOBB) University of Economics and Technology with the attendance of Economy Minister Ali Babacan. It gives the opportunity for SMEs to more easily emerge from the financial crisis following a period of narrowed bank loan capacities and resultant difficulties obtaining financing for SMEs.

The protocol signing ceremony was hosted by TOBB President Rıfat Hisarcıkoğlu and was also attended by Minister of Industry and Commerce Nihat Ergün and a number of Treasury officials.

Meetings lasted six months

The project to ensure easy loan access to SMEs as part of the government’s package to minimize crisis damage emerged at the end of a six-month string of meetings. Recalling that the ruling Justice and Development Party (AK Party) had committed to an expansion of the loan insurance program in its election platform, Yavuz told Today’s Zaman: “When the global crisis came about, it became even more difficult for SMEs to obtain already-not-easy-to-achieve financing, and they began to have troubles with securities. We met with the administration and reminded them of their election promises. We said we could solve the guarantee issues through the KGF. But we said that in order for this to happen, we needed funding.”

Meetings over the issue continued for six or seven months, Yavuz said. “When Prime Minister [Recep Tayyip] Erdoğan gave his approval to the maturity plan, a law was prepared for the appropriation of TL 1 billion in funds, which passed in Parliament in June. Since the passing of the bill, studies had been ongoing to find sources for the fund. During these meetings the government also requested that we strengthen our capital. At the time the KGF had capital of TL 60 million. … We increased our number of partners and upped our capital by four times to TL 240 million,” he explained.

Turkey to regain rapid growth rate

In the year ahead Turkey will start growing again thanks to its dynamic economy, International Monetary Fund (IMF) First Deputy Managing Director John Lipsky said to Turkish media.

Speaking to the Anatolia news agency, Lipsky noted that like other developing countries, Turkey was also negatively affected by the global financial crisis. The Turkish economy shrank due to the adverse impact of the crisis, and the country’s exports have contracted due to a decline in external demand, he stated, asserting that the negative effects of the crisis would continue to influence the Turkish economy for the rest of this year.

In line with the recovery from the global financial crisis that is being seen throughout the world, Lipsky said Turkey will also enter a phase of recovery from the crisis and will subsequently start to rapidly grow again in the year ahead thanks to its dynamic economy. Lipsky noted that like all other developing countries, Turkey will also have to deal with the unemployment issue. He emphasized the importance of short and long-term economic measures in overcoming this problem. Turkey should first assure its economic growth in order to reduce its high levels of unemployment, Lipsky underlined.

Lipsky noted that economic growth in Turkey could be achieved in the short run with the help of an effective financial sector, sound economic policies, low levels of inflation and sustainable public finance. In the long run, he added, an educated workforce which will ensure competitiveness in the international arena is a must for economic growth.

According to the IMF’s latest “World Economic Outlook,” released in early October, Turkey’s economy is expected to grow by 3.7 percent in 2010 after the global recession caused the country’s economy to contract by an estimated 6.5 percent this year. The inflation rate in the country is expected to stand at 6.2 percent this year before increasing to 6.8 percent in 2010. The report estimated that Turkey’s current account deficit to gross domestic product (GDP) ratio would increase from 1.9 percent this year to 3.7 percent in 2010. The reason behind this increase is reported to be due to an anticipated increase in average crude oil prices in line with the recovery from the global financial crisis. Furthermore, Turkey’s quota in the IMF is expected to increase to more than 1 percent. Analysts also note that the Turkish economy will be the fastest growing in Europe in 2010 in the event that the country manages to raise its foreign trade volume and reach its goal to grow by about 5 percent in the year 2010.

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