Asset Management Companies and Potential Opportunities

Asset Management Companies assist financial institutions, especially banks, to improve their balance sheets by purchasing outstanding receivables. It redeems organisations from the operational burden and carries out activities such as receivables collection, encashing and restructuring assets. As Asset Management Companies Association, we bring together the companies operating in this field in Turkey. The main objectives of our association are to contribute to the development of the asset management companies sector and to the spread of its transactions, to ensure that its activities are carried out in line with international norms and generally accepted principles, to ensure the development of the profession and to improve the quality of service. Currently, all our member companies operate under the license they obtained from the Banking Regulation and Supervision Agency (BRSA) and under the supervision of the BRSA.

Over the years, the asset management sector has played an important role in maintaining stability in the banking sector and in the national economy

As of today, the sector transferred a resource of 5.3 billion TL to the finance sector in return for the non-performing receivables purchased with a principal amount of 62.6 billion TL 1.2 million of the more than 3 million customers whose receivables were transferred to Asset Management Companies were granted their financial freedom. We continue to employ more than 2000 people to create solutions for the problematic receivables of our current 2.1 million customers. 1.9 million of our customers are individual customers, and approximately 250 thousand of them are commercial customers.

In the period from 2008 up until the pandemic, when non-performing debt sales began to be sold to Asset Management Companies, the volume of non-performing receivables grew regularly. However, the growth trend in sales volume was discontinued due to the flexibility brought to the problem of receivables follow-up and the economic uncertainty created amid the pandemic. We project that these flexibilities will return to normal in 2021, and banks will be putting their problematic loans on the market for healthier balance sheets. We expect sales to be at the level of 2019 this year.

Ensuring that the need for funds is met with interest-free principles, the participation finance sector is mainly aimed at a more robust and more productive economic structure, such as Asset Management Companies. Therefore, we can work in cooperation and harmony with a structure that aims to achieve the same purpose as we do.

To turn current challenges into opportunities, we developed a constructive model that all stakeholders have acquired through the world's leading consultancy company PwC to contribute to the community, the economy and the country. We believe that this model, which we have developed by assessing the best practices in the world and which is suitable for our economy, will benefit both the participation finance industry and create potential areas of cooperation between the asset management and participation finance industries.

We expect non-performing debt sales, which slowed down due to the pandemic, to reach the pre-pandemic levels this year

Our model offers both collection and recovery options for non-performing receivables and loans under close monitoring and allows us to invest on a portfolio basis, especially according to the segment preferences that foreign investors place great importance on. We believe that the special segment funds to be created in the participation finance ecosystem will immensely contribute to our economy by offering alternative interest-free options to potential domestic and foreign investors. The proposed fund structure under the model provides flexibility in inflow/outflow. It also protects receivables while enabling banks to issue securities in different risk groups and dispose of late receivables more easily without incurring losses. This allows banks to focus on increasing credit volumes and to improve their efficiency. We expect this to impact unemployment rates positively, as the inclusive resolution of the non-performing receivables issue will allow SMEs and other small commercial enterprises that hold an essential place in the economy to continue their activities. A higher quality of assets (loans) on banks' balance sheets, a relaxed capital, and a higher appetite for funding will also trigger growth in loan supplies. Low-cost rates triggered by increasing credit volume and a more positive economic situation will encourage more investment from institutions. Increased investments, production and consumption, means growth in Gross Domestic Product (GDP). In addition, we believe that the positive economic atmosphere created by the resolution of non-performing receivables will increase the tax revenues of the state, which will also contribute to the public interest.