KOSGEB President Hasan Basri KURT described the entrepreneurship ecosystem in TÜRKİYE, KOSGEB's work and the role of participation banking in the ecosystem and its potential to Katılım Finans.
WHAT WOULD YOU SAY ABOUT THE RECENT ENTREPRENEURIAL PERFORMANCE OF SMEs ECOSYSTEM OF TÜRKİYE ?
As it is known, 99.8% of the enterprises operating in our country are SMEs. In this respect, SMEs are the backbone of the economy. The elements of the entrepreneurship ecosystem in TÜRKİYE are entrepreneurs, universities, supportive and regulatory public institutions, angel investors, mentors, R&D and entrepreneurship-based foundations, incubation centres, foundations, associations, NGOs, crowdfunding platforms operating in this field, and structures such as the fund of funds for entrepreneurship.
The potential of the entrepreneurship ecosystem in TÜRKİYE continues to increase daily. Despite the ongoing pandemic, the interest of investors in our country's entrepreneurs in technology and digital services are growing significantly. Especially digital technologies became the field of initiative that carried TÜRKİYE to the top in the global league. In 2021, the number of Turcorns increased to 5. In addition, more than 300 startups in TÜRKİYE broke an all-time record by receiving a total investment of more than 1.5 billion dollars. In our industry and technology strategy, there is a target of producing at least 10 Turcorns in our country by 2023. However, according to the GEM Global Entrepreneurship.
Monitor 2019 Report, which KOSGEB carried out with the academic support of Yeditepe University and sponsorship of Halkbank, TÜRKİYE ranks third among 18 European economies, after Poland and the Netherlands, in terms of seeing entrepreneurship as a career option. It ranks first in Europe regarding the rate of early-stage entrepreneurs with growth potential. KOSGEB, with the e-Academy it established in 2019, offered entrepreneurship trainings to all our citizens, with an online training method, free of charge and 24/7 access. To date, 57% of those who have received entrepreneurship training are young entrepreneurs, and 45% are women entrepreneurs. We provide various supports to entrepreneurs who have started their own business by completing the said online trainings by KOSGEB. Since 2012, we have provided 3.7 billion TL support to more than 128 thousand entrepreneurs.
HOW DO YOU SEE PARTICIPATION BANKS' CURRENT/POTENTIAL ROLE IN SMEs INITIATIVES?
One of our primary goals is to provide resource diversity in SMEs' access to finance. Today, our country's dominant instrument in financing is cash financing in the banking system. We have set it as one of our most significant goals to develop and expand the existing tools so that our SMEs can obtain financing on favourable terms. In doing so, we wish to establish mechanisms through which they can receive commercial advice.
From this point of view, we see participation banks as structurally more SMEs-friendly due to their banking approach that appeals to the real sector and the real economy by taking part in profit/loss, providing production support and providing funds through financial leasing. The most important indicator supporting our view is that the share of SMEs financing in total financing is higher in participation banks than in deposit banks. The share of SMEs financing in the total financing of deposit banks is 22.5% for 2021. This situation differs in favour of SMEs in participation banks. As of the end of 2021, the share of SMEs financing among the funds provided by participation banks was approximately 30%.
We want to concentrate more on cooperation with participation banks in the upcoming period. We integrate financial leasing, one of the products of participation banks, into our support programs in favour of our SMEs. In this way, we want to both relieve our SMEs and strengthen the role of participation banks in the country's economy.
WHAT CAN BE THE ALTERNATIVE TOOLS FOR FINANCING SMEs?
We believe that increasing the competitiveness of our SMEs has vital effects on our country's macroeconomic indicators, employment, added value and social welfare. To do this effectively, efficiently, and on a wide scale, we believe that the global economic conditions require to ensure that they can obtain long-term and favourable terms for all their activities. As KOSGEB, we are aware of our responsibility to diversify alternative financing instruments and expand their use in this context. We are sensitive to creating alternative financing instruments, attach great importance, and consider it one of our main priorities. Our Presidency contributes to all the studies carried out within alternative financial instruments in SMEs financing within the budgetary possibilities. It will continue its activities in this field from now on.
In this context, we have subsidiaries such as the KOBI Venture Capital Investment Trust Company (KOBİ A.Ş), which is a venture capital partnership of our Presidency, and the Turkish Investment Initiative (TII), which was established to fund the funds. In addition, we are among the partners of the Credit Guarantee Fund (KGF), which we believe to be important in terms of financing. As KOSGEB, we have made significant contributions to the efforts to establish a credit guarantee system in our country for the collateral problems of our SMEs. KGF is an affiliate of which we are partners with a rate of 28%, and whose development we have put a lot of effort into. At the point reached today, KGF has become the life jacket of the private sector, especially in times of crisis.
We attach importance to methods such as mudarabah, musharakah, murabahah and ijarah, which are among the methods of participation banks’ funding to diversify existing products and see them as an essential alternative for businesses. We see the mudarabah system, which is used by participation banks to finance entrepreneurs and which largely overlaps with the venture capital financing method, as an important alternative for our innovative SMEs. However, although they are an essential alternative in world practices, we think the share of mudarabah investments in our country's participation financing should be increased. If the mudarabah financing method is used more widely and effectively, it will become an essential alternative to the funding of entrepreneurs.
It is clear that the ijarah method (financial leasing), widely used among the fund allocation methods of participation finance, will positively impact SMEs with high growth potential and sectors with high competitive power. In this context, we will integrate financial leasing, which we believe in having many advantages in the upcoming period, with our support processes. In this way, we aim to provide financing support up to 100% in the investment projects of SMEs. In addition, we will offer the opportunity to invest in our SMEs with the 1% VAT rate specific to leasing.
WHAT DO YOU THINK ABOUT THE CURRENT AND FUTURE COOPERATION OF KOSGEB AND THE PARTICIPATION FINANCE SECTOR?
Considering that the participation finance sector is in a supportive structure that opens the channels to provide the financial resources needed by SMEs, which form the basis of the economy, our Presidency will be able to cooperate with participation banks on models based on risk-sharing and profit-loss sharing. These models, which bring together labour and capital, entrepreneurs and investors, are crucial in a healthy financing structure. Cooperation with participation banks to be developed in this way offers important opportunities for us to direct the capital to production through efficient projects and increase welfare. In addition, we think that the real sector and financial actors will have a healthy integration in this way.
In this context, we recently contributed 100 million TL to the Informatics Valley Venture Capital Investment Fund, which was established by Albaraka Türk, Vakıf Katılım and Bilişim Vadisi and is managed by Albaraka Portföy Yönetimi A.Ş. We also participated in the Regional Development Fund, the sub-fund of the Turkish Development Fund, which was established by the Development and Investment Bank A.Ş in the upper fund structure, with 100 million TL.
ANY ADDITIONAL COMMENTS YOU WOULD LIKE TO SAY?
I think that the participation banking system in TÜRKİYE is robust. Those who follow this sector closely will also acknowledge that our participation banks are highly innovative and market-friendly. We believe that the strength of our SMEs, which are the backbone of our country's economy, means that our country's economy is upright. Participation banks must be included in the processes so that our SMEs can be financed correctly and fairly.
Hasan Basri Kurt
KOSGEB President
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