msme newsletter 11 eng · msme finance facility in turkey introduce and/or further accelerate...

What is Turkey

MSME Finance

Facility?

The EBRD Turkey MSME

Lending Programme

combines long term loans

by the European Bank for

Reconstruction and

Development (EBRD) with

advisory and training

components (Technical

Assistance, TA) to a number

of selected Turkish partner

banks. The TA component

of the programme was

launched in November

2010.

The overall objective of the

Programme is to help

Partner Banks (PBs)

participating in the EBRD

MSME Finance Facility in

Turkey introduce and/or

further accelerate Micro-

Small and Medium Sized

Enterprise (MSME) lending

techniques to the least

economically developed

regions of the country,

thereby increasing funding

to MSME borrowers,

specifically to agricultural

borrowers.

Besides the measures

supporting MSME lending,

the programme consists of

specific technical assistance

measures to increase credit

to the agriculture sector and

enable PBs to lend at stable

levels in the agriculture

market. For the time being,

KKB is the main beneficiary

of the Technical Assistance

programme.

TURKEY

MSME Finance Facility Newsletter

VOLUMEVOLUMEVOLUMEVOLUME

11 OctoberOc toberOc toberOc tober 2016201620162016

The technical assistance

component of the project in Phase

II (May 2012 – October 2013),

Phase III (November 2013 –

December 2015) and Phase IV

(March 2016 – May 2017) is

funded by the European Union.

This project is funded by the

EBRD.


component of the project in Phase I (November 2010 – April 2012)

was funded by the USAID.


component of the project is

provided by Frankfurt School of

Finance & Management.

Phase IV moves ahead after its Phase IV moves ahead after its Phase IV moves ahead after its Phase IV moves ahead after its start in start in start in start in March 2016March 2016March 2016March 2016 Integration of CAP Tool with Credit Registry Bureau of Turkey (KKB) and its data systems under the name of TARDES was completed during the 3rd phase of the EU/EBRD MSME Finance Facility (Nov. 2013 – December 2015). Partner financial institutions continued to receive extensive technical assistance and trainings during the same period. Now we are happy to announce that the 4th phase of the program has been launched with joint support of the European Union and the European Bank for Reconstruction and Development in March 2016. In the 4th phase, the main focus would be improving technical capacity of TARDES to cover all sub-segments of agricultural sector as well as strengthening financial sustainability of the tool.

Since March 2016, technical assistance team has conducted face-to-face interviews with all actors of the value chain i.e. farmers, buyers, processors and input suppliers located in 69 provinces of Turkey. These regional agronomic data have been consolidated for each product in each province by a team of specialists including agronomists and agricultural bankers and transferred to TARDES agronomic database. 92 new agricultural products have been introduced in TARDES and will be opened to the use of member financial institutions soon.

Lending module for mushroom production has been developed and will be launched in November 2016. Additional modules such as goat breeding and beekeeping are expected to be integrated into TARDES around early 2017.

As of September 2016, the number of loan applications processed through TARDES has reached to 143

1

thousand accounting for an approved loan volume of TRY 3.6 billion (approx. EUR 1.1 billion).

PPPPerspectives from the Delegation of the EU to Turkey: erspectives from the Delegation of the EU to Turkey: erspectives from the Delegation of the EU to Turkey: erspectives from the Delegation of the EU to Turkey: Interview with Balazs GargyaInterview with Balazs GargyaInterview with Balazs GargyaInterview with Balazs Gargya In order to explore the perspectives of the European Union on the Turkish agriculture sector, development of MSMEs and the role of MSME Finance Facility, we have conducted an interview with Mr. Balazs Gargya, Counsellor, Head of Trade, Agriculture, Economy and Energy Section at the Delegation of the EU to Turkey.

---- FromFromFromFrom your perspective, what is the importance of MSMEs and agricultural enterprises your perspective, what is the importance of MSMEs and agricultural enterprises your perspective, what is the importance of MSMEs and agricultural enterprises your perspective, what is the importance of MSMEs and agricultural enterprises for economic development in Turkey?for economic development in Turkey?for economic development in Turkey?for economic development in Turkey?

MSMEs constitute the backbone of the Turkish economy, like they do in the EU. They correspond to an overwhelming 99.8 % of enterprises, account for more than half of total value added and provide nearly three in four jobs in the country. As for MSMEs in the agricultural sector, there are about 3 million agricultural enterprises and small farmers in Turkey and the agricultural sector employs 25.9% of the workforce. Although they face several challenges, MSMEs are flexible and dynamic entities, capable of adapting to changing market conditions quickly. SMEs have strongly

The contents of this publication are the sole responsibility of Frankfurt School of Finance & Management and can in no way be taken to reflect the views of the European Union, EBRD or U.S. Agency for International Development.

Agricultural Loan

Evaluation System

(TARDES)

TARDES Tool is a system

establishing the necessary

link between farmers /

agricultural entreprises and

financial institutions. It is

designed as a

comprehensive risk

assessment model, but is

tailor-made from one bank to

another, depending on the

risk appetite and lending

strategies of each bank.

TARDES is a unique agro-

credit assessment tool

designed to support PBs’

staff with little or no

agricultural knowledge in the

decision making process.

TARDES is in the service of

Turkish banks through KKB

and currently used by 6

financial institutions.

TARDES is a dynamic tool;

regularly updated and

improved in accordance with

developments in the

agricultural sector.

MSME Finance

Facility Newsletter

Previous editions of MSME

Finance Facility newsletters

are uploaded to programme

website. You can download

these editions from

www.msmeturkey.com.


2

Farmer Return to Village project, that help Turkish farmers. Such initiatives and support programmes can also be instrumental to reduce regional economic disparities which still exist in Turkey. In a nutshell, MSMEs and agricultural enterprises are as crucial for the sustainable economic development of Turkey as they are in the EU.

---- What do you see as the main benefits for cooperating with the EBRD on this What do you see as the main benefits for cooperating with the EBRD on this What do you see as the main benefits for cooperating with the EBRD on this What do you see as the main benefits for cooperating with the EBRD on this programme?programme?programme?programme?

What makes EBRD programmes special is the combination of long term loans with advisory and training components. Hence, finance comes together with tailor-made technical expertise to financial intermediaries that are used in the programme, which in turn, provide better-focused and higher quality services to their clients on the ground. There are strategical priorities as well, targeting i.e. the least developed regions of the country or female entrepreneurs. This fits well with the European Union’s approach to financial cooperation in Turkey. Instead of financing repetitive, similar and stand-alone projects, the EU is now financing sector programmes in Turkey under the IPA II facility with strategic goals aiming to contribute to Turkey’s own development goals and creating a value added for the Turkish society.

---- How do you think your MSME and agricultural projects help benefiHow do you think your MSME and agricultural projects help benefiHow do you think your MSME and agricultural projects help benefiHow do you think your MSME and agricultural projects help beneficiaries in Turkey in ciaries in Turkey in ciaries in Turkey in ciaries in Turkey in the long run? What are your main goals for funding MSMEs and agricultural the long run? What are your main goals for funding MSMEs and agricultural the long run? What are your main goals for funding MSMEs and agricultural the long run? What are your main goals for funding MSMEs and agricultural enterprises? What is your future plan on MSMEs and specifically on agriculture in enterprises? What is your future plan on MSMEs and specifically on agriculture in enterprises? What is your future plan on MSMEs and specifically on agriculture in enterprises? What is your future plan on MSMEs and specifically on agriculture in Turkey?Turkey?Turkey?Turkey?

Access to finance is always crucial for MSMEs. Yet, this needs to be combined with wise use of resources in order to achieve economically sustainable enterprises as supported by productivity growth. EU funded MSME and agricultural projects would hopefully help in institutionalising a financial assistance culture further in the country which focuses on strategic goals for sustainable and inclusive growth. As for the enterprises themselves, we hope that these programmes will increase their value

Mr. Mr. Mr. Mr. Balazs GARGYABalazs GARGYABalazs GARGYABalazs GARGYA Counsellor,

Head of Trade, Agriculture, Economy and Energy Section

participated in the economic upswing of Turkey in recent years. In 2010-13, SME value added grew by 22% and SME employment by 24%. Still, their contribution to the total value added, which is around 54%, is below the EU average of 57.5 %. We see that the Turkish Government is also attaching a special importance to the development of MSMEs and has initiated several programmes, addressing issues from access to finance to research and innovation, in order to increase the competitiveness of the Turkish MSMEs. As for MSMEs in agriculture, we see now a trend in the Turkish economy where agricultural production and distribution is regaining importance. In addition to large scale programmes such as the EU–funded IPARD, there are several schemes by the Turkish Government, including for example the new Young

added not only in the low–tech segments of production but also in the medium to high-tech segments as time evolves. Turkey is participating in the COSME and Horizon 2020 programmes of the EU. In addition, we have a new framework of funding under the Competitiveness and Innovation component of IPA II which aims to improve business environment in Turkey and strengthen the country’s research, technologic development and innovation capacity. As for agriculture, we have an Agriculture and Rural Development component under IPA II which is already operational. This component aims at contributing to Turkey’s preparations to implement the Common Agricultural Policy (CAP) and align its legislation with the acquis in the areas of food safety, veterinary and phytosanitary policy and fisheries policy. In addition, the ongoing agricultural and rural

Agricultural Sector

Reports

May-June 2016 and July-September 2016 volumes of Agricultural Sector Reports were prepared by the technical assistance team and distributed to banks and project stakeholders.

Reports provide an overview of agricultural developments in Turkey and the world, evolution of agricultural loans and agricultural insurances, yield and price changes, policy developments, climatic events, as well as technical assistance team’s observations in the field for each province visited.

The last editions of

Agriculture Sector Reports as

well as the previous editions

are available on TARDES

and www.msmeturkey.com.

3 The contents of this publication are the sole responsibility of Frankfurt School of Finance & Management and can in no way be taken to reflect the views of the European Union, EBRD or U.S. Agency for International Development.

A joint seminar on TARDES A joint seminar on TARDES A joint seminar on TARDES A joint seminar on TARDES On May 30, 2016, the EBRD, KKB and Technical Assistance Team organized a joint seminar on TARDES at KKB premises in Istanbul. All financial institutions providing agricultural finance in Turkey including banks, leasing companies and Agricultural Credit Cooperative of Turkey were invited to the seminar called “A New Phase for Turkish Agricultural Finance Market: 3S (Speed, Safe, Sustainable) Agricultural Lending with TARDES”.

Following the welcoming speech of Mrs. Aynur Dincer from the EBRD, senior executives of KKB and Technical Assistance Team explained contribution of TARDES into Turkish agricultural finance sector and declared upcoming developments and their vision for the tool. Technical Assistance Team presented data collection, analysis and maintenance process of TARDES in detail together with examples of selected crops, fruits and vegetables. Last part of the seminar was reserved for presentation of TARDES statistics and new properties recently added to TARDES. Through the seminar, both user and non-user banks became familiar with the TARDES agronomic database updating methodology and had the chance to discuss the future of TARDES.

development programme IPARD, with an overall allocation of € 854 mio, remains of high relevance too.

This programme has a wide coverage of the country, also reaching remote areas and a large target group of MSMEs and farmers. Under IPA II, the second rural development programme (IPARD II, 2014-2020), the measures identified ensure a large degree of continuity with the previous programme and add new actions relating to renewable energy, agri-environment measures (preventing soil erosion) and community development activities in rural areas (LEADER). By 2020, we aim at a financial allocation of € 345 mio for Competitiveness and Innovation and € 912 mio for Agriculture and Rural Development for Turkey.

---- How do you assess the success of this program? Are there any particular examples How do you assess the success of this program? Are there any particular examples How do you assess the success of this program? Are there any particular examples How do you assess the success of this program? Are there any particular examples you wish to highlight in terms of MSME and agricultural finance?you wish to highlight in terms of MSME and agricultural finance?you wish to highlight in terms of MSME and agricultural finance?you wish to highlight in terms of MSME and agricultural finance?

We find the MSME Lending Facility highly successful. I participated in a field trip to Kayseri in order to see some beneficiaries on the ground and all were satisfied with the services received. We read the progress reports of the programme with interest as well. We see that the TARDES software used in the evaluation of agricultural loans is really well-developed and is in wide use. There are also examples where financial intermediaries such as İşbank has developed different reach-out tools for specialised agricultural banking services, with a potential for growth. It is indeed great to see increased reach-out and the diversification of tools!

Agricultural

Product Reports

In order to increase agricultural know-how for specific products and support agricultural lending activities of MSME Finance Facility partner banks and TARDES users, the technical assistance team continued producing agricultural product reports and sharing with the banks. As of end-September 2016, 107 product reports were prepared and offered to the use of partner banks as well as TARDES-user banks.

The product reports cover basic information on the respective product; such as the production figures in Turkey and the world, specific cultivation techniques and specificities of the product, production cycle, price elasticity, storage conditions, government subsidies and minimum economic size to cover the living expenses of the producer.

VakıfBVakıfBVakıfBVakıfBankankankank rolls out its AgriCard forrolls out its AgriCard forrolls out its AgriCard forrolls out its AgriCard for farmersfarmersfarmersfarmers VakıfBank, being the only public bank receiving funding and technical assistance under the MSME Finance Facility, rolled out its brand new AgriCard (VakıfBank TarımKart) for farmers involved in any type of agricultural production: crops, vegetables, fruits, cattle, sheep-goat, poultry or beekeeping.

VakıfBank AgriCard offers farmers up to 6 months interest-free input purchase opportunity, e.g. gasoline, fertilizer, pesticides, seed, animal feed etc. from affiliated input suppliers, producer unions, irrigation unions or chambers of agriculture. Farmers can also enjoy maximum 12 months maturity and flexible repayment methods, e.g. bullet payments, flexible/fixed installments in line with their harvest time during their transactions from the suppliers using special AgriCard POS of the bank. VakıfBank AgriCard can also be used for cash withdrawals through ATMs and for automatic payments of social security payments, electricity, phone and water bills. Through AgriCard, farmers would be able to better manage their cash-flows and schedule repayment for the period when they generated income. Farmers can repay earlier or postpone their payment to the next year based on the condition that minimum amount defined by the bank has been repaid. Farmers can easily apply for VakıfBank AgriCard. What they need to do is just to send an SMS to 5724 from any GSM operator mentioning “TARIM” and their national ID numbers.

IsbIsbIsbIsbank was in the field during summerank was in the field during summerank was in the field during summerank was in the field during summer Isbank, with its around 1,400 branches, has the largest branch network among private banks in Turkey and continuously extending coverage. Relying on its broad branch network and to be able to offer dedicated services for the agriculture sector, Isbank has developed a special organization and segmentation for agricultural banking. “Agricultural banking units” established in branches with high agricultural potential offer specialized services for agricultural clients of the bank. Motivated with “sustainable growth” strategy, Isbank is taking all necessary steps towards agricultural finance. TARDES, a joint product of the EU, EBRD and KKB cooperation, is used in all branches for agricultural loan assessment. Thanks to TARDES, Isbank branches can make a quick and reliable evaluation of agricultural loan applications.

Besides Imece Card offering various advantages to farmers for their agricultural input

4 The contents of this publication are the sole responsibility of Frankfurt School of Finance & Management and can in no way be taken to reflect the views of the European Union, EBRD or U.S. Agency for International Development.

purchases from input suppliers, Isbank offers a wide range of loan products for financing both working capital and investment finance needs of agricultural clients in all areas such as crop production, cattle breeding, dairy farming, greenhouse production, tractor and agricultural land purchase. Moreover, the bank developed an Agricultural Installment Loan for farmers which has up

Agriculture Sector

Market Research

Technical assistance team has started to conduct a nationwide agricultural sector market research for the purpose of identifying current problems in agricultural lending from the farmers’ perspective and barriers to access to finance by agricultural MSMEs. The research also aims at revealing opportunities for more effective finance options and instruments based on Turkish realities. Following the consolidation of field surveys conducted in various regions of Turkey, technical assistance team will be sharing the results with partner banks and project stakeholders.

Value Chain Finance Programme

Value chain finance (VCF) for

agriculture is an approach of

growing interest to financial

institutions and to stakeholders

involved in value chains. Value

chain finance can contribute to

meeting the growing need for

agricultural finance and

investment in a structured

manner, responding to the

needs of farmers, suppliers and

producers of processed or

value added products.

If you believe that there is a

potential in your region for the

implementation of Value Chain

Finance scheme, please

contact us.


5

to five years maturity and enables farmers to repay their loan from agricultural income generated in more than one season.

Isbank’s free-of-charge advisory website, İŞ’TE KOBİ includes hundreds of videos, documents, articles and more than 3 thousand news related with agriculture sector. Members could also easily direct their questions to the “Agriculture and Livestock Expert”. Agricultural producers asked more than 400 questions to İŞ’TE KOBİ Agriculture and Livestock Expert last year and received free of

charge consultancy and guidance. Isbank markets its agricultural banking products and services not only through above-the-line mass media options but also with local marketing channels like local agricultural fairs and festivals. On the left, there are pictures of Is Bank staff and farmers met in fairs at Is Bank’s booth.

YapiYapiYapiYapi Kredi makes use of its wide product range to serve Kredi makes use of its wide product range to serve Kredi makes use of its wide product range to serve Kredi makes use of its wide product range to serve agriculagriculagriculagricultural tural tural tural value chainsvalue chainsvalue chainsvalue chains Having in mind the strategic importance of agriculture sector for Turkey, Yapi Kredi Bank continues to provide various solutions to support development of the sector. Currently, the bank has 20 different types of agricultural operating and investment loans, 7 insurance products and 2 special cards for farmers. One of these loan types is IPARD Project Loan targeting farmers who would like to make investment within the framework of IPARD programme with the support of Agriculture and Rural Development Support Institution. Another innovation of Yapi Kredi is Electronic Warehouse Receipts (EWR) Loan where farmers, grain traders or processors can use their EWRs as collateral for their short-term finance requirements. Farmers protect themselves from price fluctuations with help of this loan, while aggregators and processors can access high quality products with reasonable storing costs. Limits, repayment conditions and maturities of all agricultural loan types in Yapi Kredi are designed in line with producers’ production cycle, revenue and harvest time.

There are two special cards of Yapi Kredi for farmers: Verimli Card and TMO Card. Verimli Card provides farmers interest-free input purchase opportunity e.g. seed, feed, fertilizer and gasoline from affiliated input suppliers. Repayment period is determined according to harvesting time of customer. On the other hand, TMO Card is a debit card to transfer grain payments from Turkish Grain Board

(TMO) to farmers TMO Card account automatically following grain delivery to TMO branches. Farmers are able to receive their grain payments 20 days earlier when they use TMO Card.

In 2015, Yapi Kredi started Agricultural Value Chain project, and in 2016 the bank concentrated more on acquiring new value chains through framework agreements which provides different types of advantages to both buyers/processors and farmers. Yapi Kredi establishes a trilateral cooperation between farmer – buyer – bank and provides specialized solutions for different needs of the various parties for a higher quality and more efficient production. The bank is not only mediating cash flow within the chain, but also providing other banking products and services like Verimli Card and agricultural loans with more favorable conditions.

Yapi Kredi has dedicated agricultural banking organization and structure at head office, regional office and branch levels. Thanks to the staff specialized in agricultural banking, the bank could quickly adapt to the changing dynamics of agriculture sector and provide financial consultancy to its agricultural customers as well.

www.msmeturkey.com

Technical Assistance Services:

Frankfurt School of Finance & Management

Mustafa Kemal Mah. 2124. Cadde

Edige Plaza No: 3&4

Çankaya / Ankara / Turkey

Tel: (90) 312 467 44 77

Fax: (90) 312 467 44 76

E-mail: [email protected]

Web: www.msmeturkey.com

www.msmeturkey.com

The technical assistance component of the project in Phase I (November 2010 – April 2012) was funded by the

U.S. Agency for International Development (USAID).

USAID is an independent federal government agency that receives overall foreign policy guidance from the Secretary of

State. USAID works in agriculture, democracy & governance, economic growth, the environment, education, health,

global partnerships, and humanitarian assistance in more than 100 countries to provide a better future for all and

supports long-term and equitable economic growth and advances U.S. foreign policy objectives.

USAID provides assistance in five regions of the world: Sub-Saharan Africa, Asia, Latin America and the Carribean,

Europe and Eurasia and the Middle East. Please visit www.usaid.gov/locations/ europe_eurasia/countries/tr/ for more

details.

The technical assistance services within the project are provided by Frankfurt School of Finance and

Management.

Frankfurt School of Finance & Management (former Bankakademie) is the leading private business school and advisory

institute in Germany with more than 50 years of experience in consulting, qualification and training services in all areas

of banking and finance.

International Advisory Services, operating since 1992, is committed to improving financial markets and increasing

financial access to finance for low-income populations in developing and transition countries and emerging markets.

Please visit www.frankfurt-school.de for more details.

This project is funded by the European Bank of Reconstruction and Development (EBRD).

The EBRD is a multinational institution set up with the specific aim of assisting countries to develop into market-oriented

economies. The shareholders include 61 countries from both the region and the rest of the world, plus the European

Commission and the European Investment Bank.

The EBRD invests and operates in 29 countries from central Europe to central Asia. Investing primarily in private sector

clients whose needs cannot be fully met by the market, the Bank promotes entrepreneurship and fosters transition

towards open and democratic market economies. Please visit www.ebrd.com for more details.

The technical assistance component of the project in Phase II (May 2012 – October 2013), Phase III (November

2013 – December 2015) and Phase IV (March 2016 – May 2017) is funded by the European Union.

The European Union is made up of 28 Member States who have decided to gradually link together their know-how,

resources and destinies. Together, during a period enlargement of 50 years, they have built a zone of stability,

democracy and sustainable development whilst maintaining cultural diversity, tolerance and individual freedoms. The

European Union is committed to sharing its achievements and its values with countries and peoples beyond its borders.

The European Commission is the EU’s executive body.

“This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of Frankfurt School of Finance & Management and can in no way be taken to reflect the views of the European Union."

MSME Finance Facility Newsletter Volume 11 – October 2016

msme newsletter 11 eng · msme finance facility in turkey introduce and/or further accelerate...

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