World Bank Supports Export Finance in Turkey

The World Bank yesterday approved a US$305 Million equivalent (US$201.05 Million and Euro 80.41 Million) Export Finance Intermediation Loan (EFIL III) for Turkey. This loan is the third of its kind to Turkey.

The project’s main objective is to follow through on the achievement of the predecessor EFIL II project and continue to serve as a catalyst to support export and real sector growth in Turkey during the EFIL III implementation period (2005-2010) and beyond, using the EFIL II and EFIL III reflows. To this end, the project will provide medium and long-term working capital and investment finance to Turkish private exporting enterprises, at a time when the economy is showing strong signs of growth, and export performance is on the rise–thus increasing the demand for longer term credit, while the financial sector is still unable to support these trends with very much needed longer term funds at a reasonable cost.

The secondary objective of the loan is further improvement in the ability of the Turkish financial sector to provide financial resources to the enterprise sector, through further development of intermediation by private financial institutions, including banks and leasing companies. The project, through inclusion of leasing companies in addition to banks as participating financial
institutions, will enable the Bank to continue a dialogue with the leasing sector in Turkey, provide an opportunity to gain more insight into the sector, and enable the Bank to further support its development.

In view of the record short time that the predecessor EFIL II loan was committed about one year the Government’s request for the EFIL III credit line for exporters is very timely, said Andrew Vorkink, Country Director for Turkey. The project will support the current strong growth in exports, which is good news for both the economy and for job creation.

The EFIL III will have a single component, a credit line for exporters, and will provide the medium and long-term funds to exporters through two distinct channels: (i) US$165 million and EUR65 million through commercial banks in the form of investment or working capital loans, and (ii) US$35 million and EUR15
million through leasing companies in the form of lease finance for acquisition of productive assets (vehicles, machinery and/or equipment). The credit line will be provided to Turkish Industrial Development Bank- Turkiye Sinai ve Kalkinma Bankasi (TSKB), with a government guarantee.

The lending instrument for the EFIL III project is the World Bank’s Fixed Spread Loan (FSL) in two currencies (US Dollar and Euro) with a 16-year maturity, including a 6-year grace period. The instrument will have a fixed spread over the benchmark (6-month US Dollar Libor and Euribor), and is planned as a loan with a long maturity both for the Bank loan to the Borrower (TSKB),
and for the subsidiary loans from the Borrower to participating financial intermediaries.

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