The Beijing-backed Asian Infrastructure Investment Bank (AIIB) said Monday it would lend 70 million euros (TL 612.59 million) to Turkey to help the country deal with the COVID-19 pandemic, shortly after the World Bank approved a loan package for private small- and medium-sized enterprises (SMEs) affected by – or adapting to – the economic impacts of the outbreak.
The AIIB project will be co-financed by the European Bank for Reconstruction and Development (EBRD) and aims to increase public hospital infrastructure capacity, according to a statement by the bank.
The loan is part of the AIIB’s $13 billion (TL 95.48 billion) funding facility to help the public and private sectors fight the pandemic. The bank has previously approved loans totaling $500 million to two development banks in Turkey through the facility.
The World Bank’s Board of Executive Directors approved the $500 million loan for the Turkey Emergency Firm Support Project on Aug. 28, a statement by the bank said at the time.
The statement said that the pandemic had created both supply and demand shocks to firms in Turkey and access to finance had deteriorated for firms – particularly underserved SMEs – that were credit constrained even before the crisis struck.
It said that without adequate and timely support, those firms could face the risk of permanent closure, threatening jobs as well as the prospect of a speedy economic recovery.
Auguste Kouame, World Bank country director for Turkey, whose views were included in the bank’s statement, said: "A key pillar of the World Bank Group’s approach to supporting client countries in mitigating the impact of COVID-19 on their economies, firms and workers entails ensuring sustainable business growth and job creation as countries restructure their economies in the face of COVID-19 and lay the foundation for a resilient recovery."
The project, a critical component in terms of both containing the fallout from the pandemic and preparing for recovery, will be implemented through two public banks.
A $250 million line of credit will be allocated to Turkey's VakıfBank, to be lent directly to eligible SMEs, while a $250 million line of credit to the Development and Investment Bank of Turkey (TKYB), which will be available to commercial banks, leasing companies and factoring companies under a wholesale structure.
"The World Bank financing provided under the project, mostly in the form of working capital sub-loans, will help keep SMEs afloat, maintain employment during the acute phase of the crisis and support their recovery," stated Gunhild Berg, Alper Ahmet Oğuz and David Stephen Knight, the task team leaders of the project.