SMEs in Turkey & SME Support Mechanism of KOSGEB
Small and medium-sized enterprises (SMEs) play a very important role in Turkish economy owing to their large share in total number of enterprises and in total employment. But, they have some weaknesses such as lack of consciousness of technology, R&D and innovation, low level usage of bank credits, insufficient access to finance, insufficient credit guarantee system, lack of usage of modern marketing techniques, lack of consciousness of quality and trademark concepts, insufficient education level, lack of capital for high technology investments, lack of institutionalization, low level of cooperation, lack of harmonization to global standards, etc.
The government authorities have for many years carried out a variety of programmes to support these enterprises. Therefore, design and implementation of such programmes have received increasing attention. Several institutions have been involved in the formulation and implementation of such programmes.
KOSGEB (Small and Medium Industry Development Organization) is one of the major organizations executing the SME policy in Turkey.
KOSGEB provides supports for SMEs mainly in the following topics:
- Consultancy and Training Supports
- Technology Development and Innovation Supports
- Information Technology Supports
- Quality Improvement Supports
- Market Research and Export Improvement Supports
- Support for Improving International Cooperation
- Regional Development Supports
- Supports for Developing Entrepreneurship
Please follow the link to access more information about KOSGEB supports for SMEs. Also detailed information is provided about the role of SMEs in Turkish economy in the following link.
SME Strategy and Action Plan
SMEs have positive contributions in providing and maintaining balanced economic and social development. They also play an important role in decreasing the level of unemployment and creating new employment opportunities and with their flexible production structure they can follow the changes in the market conditions more effectively. Due to their importance almost all the countries, especially the developed ones, are developing and implementing new policies which will encourage establishing, expanding, developing and protecting the SMEs. In this process, SME policies determined at the national level necessarily come to possess an international dimension as well.
Because of the increasing importance of SMEs, studies have been carried out since 1980s to establish a support system for SMEs. It is crucial to consider and improve these studies especially in the aftermath of the accession to the Customs Union.
SME Strategy and Action Plan has been prepared with the aim of applying the policies on SMEs at the national level and enhancing competitive power of SMEs in the process of harmonization with the EU.
SME Strategy and Action Plan, which formulates a road map for SMEs has been prepared by the SME Study Group, composed of Ministry of Industry and Trade, Undersecretariat of State Planning Organisation (SPO), Undersecretariat of Treasury, Undersecretariat of Foreign Trade (DTM), State Institute of Statistics (SIS), Small and Medium Industry Development Organisation (KOSGEB), Turkish Union of Chambers of Commerce, Industry, Maritime Trade and Commodity Exchanges (TOBB), Confederation of Tradesmen and Artisans of Turkey (TESK) and has been approved by the High Planning Council by its decision dated 10 November 2003.
Please follow the link to achieve the SME Strategy and Action Plan.
Access to Credit Information in Turkey
Developing better credit information on firms helps banks, leasing firms, and factoring firms expand credit to SMEs. Credit bureaus not only provide lenders with information on borrowers' ability to pay, but they also improve borrowers' willingness to pay because a bad credit history will restrict access to credit or at least raise the cost of credit in the future.
For smaller firms in particular, the historical performance of their financial liabilities is of great importance to financial institutions in deciding whether or not to extend credit and at what price. A verifiably good credit history provides confidence that the borrower has both the ability and willingness to honor its obligations. Larger firms have better financial information to document their financial condition, and with their larger loan volumes, it is possible for banks to invest more time in assessing the firms carefully. For SMEs, on the other hand, cheap access to good information is essential.
Turkey has two important credit bureaus, the Credit Bureau of Turkey (KKB) and the Credit Registry at the Central Bank. KKB is owned by 10 major banks in Turkey and shares information among 28 banks and consumer finance institutions. It only disseminates information on individuals for consumer credit purposes, but even that information is of value to small businesses, because their credit quality is closely associated with the credit quality of their owners. The information is effectively delivered and includes both positive and negative information. It covers a large portion of the population relative to the low level of credit to the private sector in Turkey.
The Credit Registry at the Central Bank covers both individuals and firms above a low threshold, and information is collected from both bank and non-bank credit institutions, such as leasing and factoring firms. The information covers both credits and off balance sheet items such as guarantees and commitments, as well as information on delinquencies. Data is provided only for a point in time, so in order for the users to have a time perspective, they must maintain their own database based on information received from the Credit Registry. The information is not available as expediently as the information from KKB and is narrower in scope. The information is shared with the banks in a batch form on a periodic basis, which causes a small delay in getting the information.
In addition to the credit bureaus, the Ministry of Justice maintains records on civil cases for breach of contract, non-payment and bankruptcies, and this information is reportedly cumbersome to obtain. Reforms are underway to enable access to records of the Ministry of Justice via the Internet. Once effectively implemented, these reforms will strengthen lenders' ability to assess firms' credit risks.
Please follow the link to gather more information about Credit Bureau of Turkey.
Access to Finance for SMEs
Access to finance is one of the most important factors for the growth of SMEs. Increased access to finance can help firms fund the necessary investments and improve their innovative capacities. According to the preliminary findings of World Bank Investment Climate Study 2009 Turkey has improved its ability to finance the SMEs in the last few years. Depending on the results of the World Bank enterprise surveys conducted by 1152 firms in April 2008- January 2009, for the Investment Climate Study, the ratio of using bank finance for investment has increased from 18.7% in 2005 to 35.8% in 2008. Also, a larger share of loans requires collateral while the value of collateral itself has decreased. Moreover Turkish firms are more ‘banked' than firms in other ECA countries.
Venture capital and credit guarantee systems are the most important and commonly used systems, for increasing the SME's capability to access the finance. The credit guarantee funds help to provide collateral for the SMEs which have viable projects and need finance for their investments. Credit Guarantee Funds act as intermediary organization and make it possible for the SME'S with the inadequate collaterals to apply for bank credits. The Credit Guarantee Funds also increase the number of customers for the banks and minimize their risks. This does not simply mean an increase of the number of firms who become eligible to obtain bank credits, but also means an increase in the number of medium or long term credits available for SME's and an increase in the limits of credits provided for them.
The only company in the credit guarantee system in Turkey is the Credit Guarantee Fund, which is known as KGF in Turkish abbreviation. The main objective of KGF is defined as "supporting SME's by providing a guarantee for their financing and consequently increasing the credit usage in general". Main priorities of KGF are to support young and woman entrepreneurs, to promote innovative investments, to promote high-tech SME's, to support export, to increase the rate of employment and to contribute regional development.
Please follow the link to gather more information about Credit Guarantee Funds in general and about KGF. Also please follow the link to gather more information about the most widely known venture capital companies in Turkey, İş Private Equity and KOBİ Venture Capital.
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