The Credit Guarantee Fund (CGF), a Turkish Treasury-backed credit system that does not ask for collateral and aims to support the growth of small and medium-sized enterprises (SMEs), has guaranteed TL 350 billion in loans for enterprises so far, according to the CGF's general manager.
These loans were provided to some 750,000 enterprises, with 34 percent to manufacturing and exporting companies, almost TL 55 billion to exporters, and 76 percent to SMEs, İsmet Gergerli told the Turkish language daily, Hürriyet.
"We know that the CGF system contributes almost 3 percent to growth. We are the world's largest credit guarantee fund," Gergerli was cited as saying. "The average of loans guaranteed is around TL 500,000. As of today, one-third of the loans provided have been closed."
Emphasizing that almost 11 percent of loans in Turkey is provided through the CGF mechanism, Gergerli said they gave 90 percent in guarantee to SMEs, 80 percent to non-SMEs and 100 percent to exporters in the credit package of TL 200 billion granted in 2017. According to Gergerli, these rates were reduced to 75 percent for non-SMEs and to 80 percent for SMEs. Also, in the latest package, an 80 percent guarantee was given to all the companies.
Explaining that the Turkish banking system is robust in risk management and capital, he said according to the January 2017-August 2017 data released by the Social Security Institution (SGK), approximately 245,000 enterprises used CGF loans. "We have seen that the total employment in these enterprises from January to August increased by 235,000, pointing to a rise of 11 percent. A structure that supports the enterprise enables them to boost production and employment. In 2017, we saw that this contributed directly to the growth of the economy. We know that the CGF system contributes almost three percent to growth. We are the world's largest credit guarantee fund. We assess incoming requests in 24 hours. We have an advanced technological infrastructure and a good rating system," he stressed.
Referring to his book titled "The Secret Power of the Japanese Economy - Credit Guarantee Institutions," Gergerli said that the guarantee system in Turkey dates back to the 1990s and was based on the German model. Stating that a more solution-oriented system was introduced in 2015. "We have made an effort to change the model and studied good examples such as South Korea and Japan. SMEs are crucial in the Japanese economy as seen in the outstanding case of Sony. While the company was a SME, it became a global brand thanks to the credit guarantee system. Again, in South Korea, Samsung and LG are among the SMEs that have grown with the guarantee system," he said.
He highlighted that the guaranteed rate in Japan during the 2008 financial crisis soared to 100 percent and this rate continued until 2013, Gergerli stated that the rate was reduced to 80 percent as a result of normalization.
Gergerli said the loan size surged to $330 billion from $240 billion in the 2008-2013 period. "The government could increase the guaranteed rate for companies to survive in extraordinary situations such as tsunami and earthquake. In Japan, the non-performing loan (NPL) ratio in the banking system is 1.2 percent and just above the guarantee system at 1.5 percent," he added.
He pointed out that guarantee was requested by SMEs in Japan by the 2000s. "When the value of collateral rapidly fell in the Asian crisis, it was understood that it did not work well and was no way to relieve the banks. The idea of the better evaluation of the companies emerged in order to solve the problem. With an unencumbered model, access to credit was made easier. A company was established and rating modeling was introduced. At present, 90 percent of loans in Japan are disbursed with ratings and no collateral is requested."
Underlining that the guarantee system can be used in periods such as earthquake, tsunami and financial crisis or in normal periods, Gergerli noted: "Even in the most stable period, the banking system prefers big companies to SMEs as the former is measurable. Japan's credit system played an important role in overcoming the 2008 crisis."