BY BURCU GOKSUZOGLU
Q&A with Ali Emre Balli, Chairman of the Board of Directors of the Association of Financial Institutions (FKB)
HOW DID THIS YEAR’S EXTERNAL AND INTERNAL DEVELOPMENTS AFFECT THE NON˹BANK FINANCIAL SECTOR?
The transaction volume of the non-bank financial sector rose by 63.7% to TRY 99.6bn and the sector’s total assets surged by around 49% to TRY 252.2bn in the first quarter (Q1). The receivables subject to the operation increased by 47.6% and the sector’s equity capital climbed by 26.6% in Q1. 21 companies operate in the leasing sector. They raised their transaction volume by 96.7% to TRY 13.5bn while their asset size rose by 55.5% to TRY 119bn and receivables jumped 51% to TRY 92bn in Q1. The leasing sector had a productive quarter. Our factoring sector consists of 52 firms. Their transaction volume increased by 66% to TRY 69bn and asset size climbed by 57% to TRY 72bn and receivables rose by 60% to TRY 67bn in Q1. 18 financial companies operate in Turkey. Their transaction volume increased by 36.6% to TRY 16.7bn and asset size climbed by 31% to TRY 54.7bn and receivables rose by 27.2% to TRY 46.3bn in Q1. The asset management companies’ growth was slower due to the low level of sales and sales at banks stemmed from the adverse impact of the pandemic. The sector experiences difficulties in this sense. The asset size of asset management companies rose from TRY 4.8bn to TRY 6.4bn and their equity capital increased from TRY 2.2bn to TRY 3.5bn.
WHAT IS THE NON-BANK FINANCIAL SECTOR’S YEAR˹END GROWTH FORECAST FOR 2022?
Because the non-bank financial sector contributed TRY 100bn to the economy, we expect some support from the government for long-term access of the leasing and factoring firms to TRY. We estimate the total transaction volume of the non-bank financial sector to increase. The transaction volume of the leasing sector is expected to reach TRY 4bn and the factoring sector to increase by 30% to TRY 260bn this year. We estimate a receivables sales of TRY 10bn to TRY 15bn on the asset management companies’ side by the end of 2022. Banks hold a considerable receivables stock as the non-performing loans rose by 8.8% to TRY 163bn. The surge stemmed from the increase in loan usage after the access of people to loans have become easier. TRY 8bn of the surge consists of the retail side while SMEs generated TRY 6bn.
DO YOU EXPECT ANY SUPPORT OR MEASURES TO BE IMPLEMENTED BY THE GOVERNMENT FOR THE NON˹BANK FINANCIAL SECTOR?
We expect support on the leasing and factoring sides. There is a system on the leasing and factoring sides exposed to the Resource Utilization Support Fund (RUSF). We expect similar work from the government on the RUSF side. The resource issue is significant in terms of TRY transactions in the leasing sector, which provides nearly 40% of its transaction volume to SMEs. That’s why public support is very important for sustainable investments for medium and longterm resources to the financial leasing companies including the Central Bank’s (CB) rediscount resources. Affordable loans provided by factoring companies from the CB’s resources through Eximbank to exporting companies give important financial support, especially to exporting SMEs. TRY 1.7bn in financial support has been given. Our leasing and factoring companies will serve with more affordable loans to SMEs if we receive further support. 3.0% of the RUSF rate is applied to leasing and factoring companies on short-term funding in the first year they find foreign funding. However, this 3.0% falls to 0.0% when other banks or financial companies find funding. We expect our government to keep the RUSF rate at 0.0% for the funding to be brought from abroad on the factoring and leasing sides. We stated at the recent meeting with leasing and factoring companies at the Association of Financial Institutions (FKB) that USD 4-5bn in foreign funding will be brought to Turkey if the RUSF is brought to zero.
THERE HAS BEEN A REGULATION FOR ASSET MANAGEMENT COMPANIES THROUGH WHICH FOREIGN FIRMS ENTER TURKEY. WHAT’S THE CURRENT STATE OF THIS REGULATION?
Foreign companies already enter Turkey following the regulations of the Banking Regulation and Supervision Agency (BDDK). However, the new regulation, which was made in July 2021, enabled us to launch a fund and to issue and issue securities to foreign investors with this fund. This is an important factor. But we expect asset management companies to sell non-performing loans to the sector. When they do so, banks can focus on providing loans, which is their main business. As the asset management companies sector, we have the possibility to triple our equity capital when SMEs apply to us, or we apply to the banks to take SMEs’ performing loans if SMEs have debt at banks. Thus, we support SMEs in continuing their operations and production and to contribute to the national economy, while we provide them with structure and continue to operate by providing loans and lifeline support. But the most important factor, however, is the sales of receivables by banks to asset management companies. We expect banks to convene with the asset management companies sector and work together to solve the problems of customers, such as SMEs.
IS THE NON˹BANK FINANCIAL SECTOR PLANNING TO LAUNCH NEW PRODUCTS?
We have an invoice register center which has been jointly used by banks and factoring companies. The center, which was established to serve the financing sector, registers invoices of SMEs and prevents the usage of these invoices twice from different places. It prevented 1.4 million risky transactions by the end of May 2022. As the FKB, we’ll also implement the supply chain finance digital platform, which will allow SMEs to access finance at an affordable cost in a rapid and safe environment.
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