Turkiye Garanti Bankasi: Supporting Lending to Small and Women-owned Businesses
Sector: SMEs (small- and medium-sized enterprise) finance
Challenge: As in much of the world, SMEs in Turkey support a large share of jobs in the country but often struggle to access financing, particularly medium-to-long term lending.
Solution: OPIC provided financing to a local Turkish bank to support lending to SMEs, with a portion dedicated to female entrepreneurs.
Impact: Expanded financial support for small businesses and female entrepreneurs.
Like many emerging markets, Turkey has a base of small businesses that provide a key source of employment, but still struggle to access financing. Small and medium-sized enterprises (SMEs), defined in Turkey as those with less than $20 million in revenue, collectively account for about 78% of all employment in Turkey but receive only about a third of all loans.
In 2012, OPIC provided $400 million in financing to Turkiye Garanti Bankasi A.S., in collaboration with MBIA Inc. of New York, to support lending to SMEs in general and female entrepreneurs in particular. Garanti, through its Women’s Entrepreneurship Support Package, seeks to fund women-run businesses with products and services such as training that are tailored to support them in growing their business. The deal was a follow-on transaction to a successful 2009 facility of $100 million to Garanti for the same purpose.
SMEs in Turkey, broadly defined as enterprises with less than 250 employees and less than $20 million in revenue or total assets, account for approximately 99% of all enterprises, 78% of employment, 50% of total investments, 59% of exports, and up to 55% of total value added in the economy. However, SME loans only make up approximately one-third of all loans in Turkey. As SMEs are usually too small to access bond and equity markets, bank finance remains their only option.
Despite significant growth in SME lending in the banking sector over the past five years, the SME segment remains underserved, and constrained access to finance is perceived as the single largest obstacle to growth by SMEs. The problem has been exacerbated by the global financial and economic crisis as SMEs and entrepreneurs have suffered both a significant drop in demand for goods and services and a tightening in credit terms, which has affected severely their cash flows.
OPIC’s loans are enabling the Turkish bank to provide longer term and more competitive loans to more clients across a range of sectors including manufacturing, tourism, services and construction, enabling entrepreneurs to gain better access to local and global markets.
Garanti, Turkey’s second-largest privately-owned commercial bank, has received multiple international awards during the last several years including “Best Bank in Turkey” by Global Finance, and was twice recognized by Euromoney as the “Best Managed Company in the Central and Eastern Europe.”
(This project was profiled in 2012)