The World Bank’s Board of Executive Directors has approved a partial credit guarantee in the amount of 250 million euros (around $273 million) to the Export Credit Bank of Turkey (Türk Eximbank) as part of the Turkey Long-Term Export Finance Guarantee Project, according to a statement.
The project aims to improve access to longer-term finance for export-oriented small- and medium-sized and mid-cap enterprises. Under the project standards, firms with less than 250 employees are defined as SMEs, and firms having between 250 and 1,500 people on the payroll are accepted as mid-cap.
At least 70 percent of the guaranteed loan amounts will be used for sub-loans to the SMEs, and at least 10 percent of the guaranteed loan amounts will be earmarked for lending for women-inclusive firms, said the World Bank statement.
“The partial credit guarantee will enable Turkey’s Eximbank to raise up to 500 million euros in long-term funding from commercial lenders, which will allow it to provide working capital and investment sub-loans to private exporting enterprises,” it said.
“It will also assist Eximbank to achieve longer maturity and lower all-in cost than are currently achievable without a guarantee. The market finance raised with the support the guarantee will also allow Eximbank to extend sub-loans to eligible SME and mid-cap exporters,” it added.
“In the short term, it is essential to preserve the export capacity of Turkey as its firms have severely been affected by the onset of COVID-19 crisis, so that they will be able to survive and contribute to the future recovery,” said Auguste Kouame, World Bank Country Director for Turkey.
“This project will contribute to providing uninterrupted and improved access to finance to viable exporting firms during these difficult times. It will therefore help preserve Turkey’s participation in global value chains,” he said.
Turkish firms receiving the credit from Eximbank under the project will be the main direct beneficiaries. Another project beneficiary will be Eximbank itself and the broader universe of Turkish exporters served by it, insofar as the project is expected to strengthen Eximbank’s capacity to raise long-term funding in international markets, and to channel this funding into longer-term loans to exporting enterprises, including SMEs and women-inclusive firms.
Prior to COVID-19, access to long term finance was identified as a major constraint to Turkish firms’ export performance. COVID-19 has intensified this constraint.
“Access to finance is particularly constrained for SMEs who account for 73 percent of total employment, 62 percent of total revenue, 58.3 percent of total investment, 55.4 percent of total exports, and represent 99 percent of all firms in Turkey,” remarked Alper Oğuz, task team leader of the project.
“Financing the technology upgrading and productivity improvement of SMEs is vital for Turkey to reach its ambitious export growth goals,” he added.
IFC supports digital startups
The International Finance Corporation (IFC), a member of the World Bank Group, is committing 15 million euros to Revo Capital Fund II (Revo II) to support digital startups and ensure their continued growth and success during the COVID-19 pandemic. The fund aims to support development of a more dynamic digital economy in Turkey and Central and Eastern Europe. Revo Capital will use IFC’s financing to invest in startups that provide technology-based solutions to consumers and to SMEs to help them increase productivity and connectivity.
“Their support is a significant sign of trust in both Revo Capital and the Turkish startup ecosystem,” said Cenk Bayrakdar, managing director of Revo Capital.
Revo II will focus on the same geography as the first fund, allocating 65 percent of its commitments to Turkey, and the remaining to other countries.
IFC is also establishing a 15-million-euro envelope for potential co-investment opportunities alongside funds managed by Revo Capital.
“This funding addresses a critical gap in access to early-stage equity, which is scarce in Turkey and other CEE countries,” said Arnaud Dupoizat, IFC country manager for Turkey.
“The investment is essential to ensure that the region’s digital startups across various sectors – including software, fintech, and health tech – are able to scale up their operations and help SMEs grow and provide more jobs.”
The IFC has supported private sector development in Turkey for over 50 years, with a committed exposure of over $4 billion in the country as of June 2019.
Hurriyet Daily News