May 27th, 2014

Financial inclusion in Turkey

Research on financial inclusion

• First research project in Turkey comprehensively assessing the

level of financial inclusion

• Funded by MetLife Foundation, the assessment looked at the

dimensions of access and the level of usage of financial services

by individuals and SMEs

• Both international and local sources of data were used

with financial support from

Data availability and quality

• Information about financial services usage levels available

chiefly from international sources - low availability of local data

• Good local sources of information about various aspects of

access, in particular about banking infrastructure, trust and

confidence, and financial capability.

MFC approach to measuring financial inclusion

• Total Financial Inclusion (TFI) Index generates a simple measure of

national financial service use. It captures overall scale of exclusion as well as

by products type.

• Access to Finance Scorecard (AFS) captures

diverse aspects of access and usage issues

from three key perspectives:

- supply

- demand

- policy

RESULTS

Financial inclusion of individuals

Usage – Total Financial Inclusion (TFI) Index

58%

19%

18%

57%

42%

81%

82%

43%

bank account

credit

deposit

insurance

included excluded

Individuals

Key issues:

• Pockets of exclusion – women, youth East Anatolia population, microenterprises

• High credit card penetration – risk of overuse leading to over-indebtedness

• Declining saving rates among individuals

Access to Finance Scorecard - Individuals

+ good variety of financial institutions (various types of banks, post

offices, insurance companies)

- very uneven geographical ATM and branch penetration

Access to Finance Scorecard - Individuals

- low consumer confidence - more pessimists than optimists

regarding economic and financial situation

- low trust in banks and financial system

66%62%

58% 57% 56% 56% 53%49%

40% 37% 36% 36%29%

63%

0%

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20%

30%

40%

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60%

70%

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Access to Finance Scorecard - Individuals

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- low financial education

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RESULTS

Financial inclusion of SMEs

Usage – Total Financial Inclusion (TFI) Index

91%

58%

9%

42%

bank account

credit

deposit

insurance

included excluded

Key issues:

• High use of bank credit, but below trade credit use

• Low use of leasing, factoring or overdraft facilities

• Declining share of SME loans volume in total bank loan

SMEs

Access to Finance Scorecard - SMEs

+ over half of deposit banks and all private participation banks

offer various types of SME credit – cash and non-cash loans, in

addition various bank account facilities

+ leasing and factoring are provided by specialized companies

- only two MFIs serve entrepreneurs with microcredit

- only two public loan funds provide low-interest loans

Access to Finance Scorecard - SMEs

+ government focus is on improving financial inclusion of SMEs

+ Turkey is one of the co-chairs in SME Finance Sub-Group of the

Global Partnership for Financial Inclusion (GPFI).

A number of programs exist to support micro, small and medium-sized enterprises:

• KOSGEB: consultancy, training, technology development, innovation, quality

improvement, export orientation, interest rate subsidies.

• The Turkish Guarantee Fund (KGF) provides guarantees to SMEs applying for

bank credit.

• The SME Venture Capital Investment Trust (KOBI A.S.) is a risk capital

intermediation.

CONCLUSIONS

Conclusions

• Usage - high percentage of the unbanked population, low saving rates

• Good supply of finance, with banking infrastructure, however, uneven

distribution between regions

• On the demand-side - financial education worse than the in ECA countries

• In the policy area - a number of efforts underway to remove barriers and

improve financial inclusion, although effectiveness has not yet been measured

• Reasonably good supply of SME financing, conditions of access seen by SMEs

as improving

• High interest rates are the main limiting factor, mitigated by state-subsidized

credit availability

• On the demand side: lack of information about the level of financial capability

and attitudes

• Policy area: government focus on improving financial inclusion of SMEs

• Data availability: low availability of local data sources regarding the financial

service usage levels

• Data quality: poor disaggregation of data by socio-economic groups, hence little

information about usage and access to financial services by low-income and

vulnerable groups

Microfinance Centre ul. Noakowskiego 10/38

00-666 Warsaw, Poland

Tel/fax.+48 22 622 34 65

microfinance@mfc.org.pl

www.mfc.org.pl

Thank you!