Financing SMEs and Entrepreneurs 2022

45. Turkey

Key facts on SME financing

SME lending grew steadily over the whole 2007-2020 period, with the exception of a minor decline of 1.6% in 2009. SME loans grew by 37.9% in 2020. The share of SME loans in total business loans remained broadly stable, at 30.8%, slightly below the Scoreboard median (38%).

Venture and private equity investments show an erratic pattern. After reaching a peak in 2011, investments remained subdued in the following years until 2017, when new investments surpassed 2011 levels for the first time. A similar pattern was also observed between 2018 and 2020. In 2020, there was a new peak in venture and private equity investments, which experienced a 506% increase from 2019. This large increase can be explained by the change of the legal framework in order to support entrepreneurship in Turkey. Similarly, tax incentives for investors who invest in venture capital and private equity funds also supported the growth of the VC industry. `

The share of non-performing loans (NPLs) for both total business loans and SME loans decreased significantly in 2020, to 4.69% and 6.44%, respectively. This was mostly the result of some temporary regulation changes in the definition of NPLs and of the increase in the total amount of SME loans.

The number of bankruptcies decreased from 97 in 2019 to 68 in 2020. Company closures, including sole proprietorships, totalled 51 088 enterprises in 2020, up from 48 086 enterprises in 2019, highlighting that (due to lengthy legal proceedings) bankruptcies (upon court verdict) constitute a relatively uncommon phenomenon in Turkey.

In 2012, the Turkish Government enacted a law to stimulate the development of the business angel industry. A secondary legislation came into force in 2013. The purpose of the law and the secondary legislation was the establishment of a legal framework and the provision of generous tax incentives for licensed angel investors.

In 2014, the government introduced a law regarding funds of funds, which enables the Ministry of Treasury and Finance to transfer capital to a fund of funds under certain conditions. In 2017, this law was changed to enable the Ministry of Treasury and Finance to invest not only in funds of funds but also in venture capital funds. Secondary legislation of Direct Investment in Venture Capital Funds came into force on 5 June 2018.

KOSGEB is the main body for executing SME policies in Turkey. It provides 13 different support programmes and supports collateral costs for SMEs with considerable outreach throughout Turkey.

In 2018, KOSGEB made some changes in its support programmes with a view to giving priority to SMEs that produce innovative, technological and high value-added products and that are export-oriented. In this direction, KOSGEB introduced innovations in its support models in order to extend the technology to the base through SMEs, strengthen the manufacturing industry, support domestic and national production of imported products, increase internationalisation and enable large and small business cooperation. Additionally, in the field of entrepreneurship, KOSGEB has established a new entrepreneurship model with a focus on medium-high and high-tech fields.

At the end of 2018, KOSGEB introduced a new loan interest support programme. The new model provides resource efficiency, facilitates access to finance for enterprises in high value added sectors and is easily accessible throughout the year. SMEs can be classified as Entrepreneurial Enterprises, Project-Oriented Enterprises, Technology-Based Enterprises and Enterprises in Strategic Priority Sectors. Classified SMEs can benefit from investment, working capital, export and emergency support loan types with subsidised interest rates.

In 2016, Turkey passed a bill on the use of movable collateral in commercial transactions. The goal of the reform was to increase access to finance through the pledge of valuable tangible and intangibles assets, such as receivables, machinery, inventory and stock, which comprise 78% of SMEs' total assets. This reform led to the creation of 26 200 security rights from 2017 to 2019 and 12 581 in 2020. The amount of security deposits was TRY 708 billion from 2017 to 2019 (i.e. about USD 59 billion or EUR 44 billion) and TRY 64 billion in 2020 (i.e. about USD 14 billion and EUR 10 billion). Actual financial amount for 2020 was TRY 18 billion, USD 283 million, and EUR 276 million. The most used assets have been receivables, machines and inventories.

Table 45.1. Scoreboard for Turkey

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Debt
Outstanding business loans, SMEs	TRY billion	76.5	84.6	83.3	125.5	162.8	199.7	271.4	333.3	388.7	420.5	513.2	611.3	615.3	848.8
Outstanding business loans, total	TRY billion	190.6	250.3	262.7	353.2	459.0	528.8	715.5	884.6	1 100	1 314	1 610	1 890	2 070	2756
Share of SME outstanding loans	% of total outstanding business loans	40.14	33.80	31.70	35.52	35.47	37.77	37.94	37.67	35.34	32.00	31.88	32.34	29.72	30.8
Government loan guarantees, SMEs	TRY million	72.7	236	500.6	707.5	901.6	973.2	996.1	1 261	1 950	4 205	142 019	55 796	51 523	124 300**
Government guaranteed loans, SMEs	TRY million	113.8	340.8	670.2	981.9	1 250	1 312	1 303	1 622	2 513	5 250	157 587	63 809	64 018	155200**
Direct government loans, SMEs	USD million	552	842	997	855	1 174	928	2 632	1 709	1 764	1 749	284.5.	457	200
Non-performing loans, total	% of all business loans	3.8	3.7	4.91	3.43	2.61	2.82	2.69	2.64	2.68	2.9	2.81	4.01	5.96	4.7
Non-performing loans, SMEs	% of all SME loans	3.62	4.79	7.64	4.49	3.1	3.17	3.12	3.27	3.92	4.9	4.71	6.69	9.21	6.4
Non-bank finance
Venture and growth capital*	TRY million	13.7	0.9	6.3	47.6	373.2	110.1	335.5	124.4	135.3	343.2	435.1	904	600	3640
Venture and growth capital (growth rate)*	%, year-on-year growth rate	..	-93.76	639.58	652.9	684.82	-70.5	204.78	-62.93	8.77	153.64	26.79	108	-33.55	506.2
Leasing and hire purchases	TRY billion	11.7	14.4	11.1	10.7	15.1	17.2	25.0	29.5	36.7	44.0	52.0	60.7	48.7	57.3
Factoring and invoice discounting	TRY billion	6.2	5.6	8.4	12.4	14.2	16.3	20.1	24.7	25.0	31.0	41.6	31.4	34.0	44.6
Other indicators
Bankruptcies, total	Number	52	47	50	68	72	141	69	99	108	222	130	105	97	68
Bankruptcies, Total (growth rate)	%, year-on-year growth rate	..	-9.6	6.4	36.0	5.9	95.8	-51.1	43.5	9.1	105.6	-41.44	-19.23	-7.62	-29.8

Notes: * The data presented in this section do not refer to outstanding values but show the new investments each year.

** The data in this section (2020) refers only to the data on the guarantees and loans used under the Treasury-Backed Guarantee System, which does not include the data that is related to KGF equity guarantees.

SMEs in the national economy

In Turkey, an enterprise is a legal unit or a combination of legal units. The Turkish SME definition has been prepared in line with the EU definition, even though the financial thresholds applied are lower (see Box 45.1). As illustrated in Table 45.2 micro-enterprises accounted for more than 92.3% of all firms in 2019, whereas only 0.2% of all enterprises employ more than 250.

Table 45.2. Distribution of firms in Turkey, 2019

Firm size (employees)	Number of firms	%
All enterprises	3 228 421	100
SMEs (0–249)	3 221 233	99.8
Micro (0-9)	2 979 417	92.3
Small (10-49)	207 634	6.4
Medium (50 -249)	34 182	1.1
Large (250+)	7 188	0.2

Note: Data excludes financial and insurance enterprises. Non-employer enterprises are included. The figures have been measured by the Annual Industry and Service Statistics, 2019 through administrative records and include data such as income generated, purchases, gross value added and employment costs of businesses within this part of the economy.

Source: Turkish Statistical Institute, Small And Medium Size Enterprises Statistics, 2019. https://data.tuik.gov.tr/Bulten/Index?p=Small-and-Medium-Sized-Enterprises-Statistics-2019-37548

SME lending

Total outstanding business loans and SME loans increased by 294% and 218% respectively over the period of 2007-18, considering inflation-adjusted figures. In 2020, outstanding SME loans increased by 37.9% compared to 2019, reaching TRY 848.8 billion. This is mainly because of TRY basis new lending such that TRY 727.6 billion of the mentioned amount is comprised of TRY loans while TRY 121.2 billion is comprised of FX loans when compared to previous years’ amounts which realized TRY 492.8 billion is comprised of TRY loans and TRY 122.5 billion is comprised of FX loans. In addition, other type of loans (business and consumer loans) had a significant increase in 2020. The increase in the loans could be related to decrease in interest rates and some credit support packages which can be used under the Treasury-Backed Guarantee System. In 2020, the growth in SME loans was higher than the growth in total business loans. Total business loans grew by 33%, reaching TRY 2.755 billion. Therefore, the share of SME loans in total business loans increased as well, from 29.7% in 2019 to 30.8% in 2020.

Alternative sources of SME financing

The data provided in Table 45.1 includes information on venture capital, private equity investments by venture capital and private equity investment companies, and venture capital and private equity portfolio management companies, which are managers of VC&PE Investment Funds reporting to the Capital Markets Board (SPK Comparing the years 2019 and 2020, new investments in venture capital and private equity companies and venture capital investment funds increased significantly by 506% in 2020, amounting to TRY 3.6 billion. This large increase can be explained by the change of the legal framework in order to support entrepreneurship in Turkey. Similarly, tax incentives for investors who invest in venture capital and private equity funds also supported the growth of the VC industry. `

After the enactment of the new Capital Markets Law in December 2012, secondary legislation regarding venture capital/private equity investment companies was passed in October 2013, and the secondary legislation regarding venture capital/private equity investment funds entered into force on 1 July 2014 in the Official Gazette. Currently, 38 VC&PE Investment Funds have a total of TRY 3,2 billion worth of investments in 2020.

Within the scope of Share-based Crowdfunding which was legalized in 2017 and secondary legislation was published by the Capital Markets Board in 2019, two companies obtained licences from the CMB. Thus a new access to finance tool for SMEs was emerged in Turkey. The government foresee a lot of potential for early stage ventures and start-ups to access finance from a multitude of investors and with less administrative burden. As of November 2021, five companies obtained licence to operate as equity-based crowdfunding platforms and as of December 2021, 15 campaigns are conducted and funded successfully.

Average increase of factoring receivables in 2020 was approximately 30%. Looking at the evolution in 2020, the growth rate was seen mainly in second quarter of 2020 when pandemic restrictions relatively eased. In this period, interest rates declined which could have boosted the use of short-term factoring finance from companies.

Other indicators

The share of SME non-performing loans out of total SME loans stood at 3.6% in 2007, peaked at 7.6% in 2009, but then rapidly declined to 3.1% in 2011. The NPL ratio for SME loans remained roughly constant between 2011 and 2014, but began to rise after 2014. The rise in NPL ratio was relatively small in 2015 and rose sharply in 2016, reaching 4.9% for SME loans, and 2.9% for all business loans. The increase in NPL ratio can be explained by both SMEs having difficulties to repay their debts and the amount of new SME loans granted in 2016 having decreased considerably compared to 2015. NPL ratio for SMEs leapt to 9.2% in 2019, the highest level between the period 2007-2020. In 2020, the NPL ratio declined sharply because of some temporary regulation changes about NPL definition and the increase in the amount of SME loans. Due to the pandemic conditions between March 2020 and September 2021, the past due days criteria was changed from 90 days to 180 days for categorizing a loan as non-performing. Also, the past due days criteria was changed from 30 days to 90 days for categorizing a loan as Stage 2.

Bankruptcies are declared in a number of ways in Turkey. A debtor firm or its creditors can directly apply to a commercial court to start bankruptcy procedures. When the liabilities exceed the assets, the authorised representatives or the managers of capitalised companies and cooperatives are obliged to inform a commercial court. A creditor can request the commercial court to begin proceedings if the creditor has been sent a payment order which has not been paid. The court can then resend the payment order to the debtor and it should be paid within five days, along with the court costs. If there are no objections, the payment order becomes final. However, the debtor can object and the proceedings are then halted. In addition, the creditor can also file a bankruptcy case with the commercial court. These legal proceedings can be lengthy, resulting in a low number of bankruptcies. Article 35 of the Turkish Code of Commerce orders amendments to the trade registry to be published in the Turkish Trade Registry Gazette, including announcements on bankrupted firms. According to the Turkish Trade Registry Gazette database, there were a total of 68 firms ruled as bankrupt in 2020. Since there are extraordinary circumstances in which the financing balances were disrupted during the pandemic, and to make the payment plan for the debtor's repayments to creditors in a healthy and realistic way, a provisional article was put in place to suspended/postponed the deadlines given to the borrower. With this article of law; it is aimed to keep the debtor in his business during the extended period, thereby reducing the risk of the debtor going bankrupt.

A more detailed look at company closures illustrates that bankruptcies constitute an uncommon way to close companies in Turkey. The closing of companies in Turkey takes place in three ways; liquidation (voluntary), dissolving without liquidation (mergers-demerges) and liquidation due to bankruptcy (upon court verdict). The number of closed commercial companies in Turkey in 2020 amounted to 16 219, while 34 869 sole proprietorships were also closed in the same year, amounting to 51 088 companies in total. This is a 6.2 percent increase from 2019 (see Table 45.3).

Table 45.3. Number of company closures in Turkey

	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2019-2020 (%)
Joint Stock Company	1 399	1 624	1 822	1 713	1 603	2 277	2 322	2436	2 556	2 832	10.7
Limited Company	11 548	12 433	13 645	12 187	10 309	8 700	11 127	10067	10 584	12 743	20.3
Unlimited Liability Company	147	132	74	130	89	82	65	57	55	60	9
Commandite Company	10	6	3	8	6	4	3	4	2	1	-50
Cooperative Company	1 896	1 899	1 866	1 841	1 632	1 297	1 184	1029	853	583	-31,6
Sole Proprietorships	41 129	31 906	65 298	71 526	42 960	29 537	28 197	25105	34 036	34 869	2,4
TOTAL	56 129	48 000	82 708	87 405	56 599	41 897	42 898	38698	48 086	51088	6,2

Source: The Union of Chambers and Commodity exchanges of Turkey.

Government policy response

KOSGEB

In Turkey, KOSGEB, the organisation affiliated to the Ministry of Industry and Technology, is the main body for executing the policies regulating SMEs. For this duty KOSGEB is implementing the “Regulation Concerning Support Programmes of KOSGEB”. The purpose of the Regulation is to set out the principles of works and proceedings related to support programmes to be implemented by KOSGEB. These programmes aim at improving SMEs productivity, competitiveness, achieve integration in the industry in accordance with economic development, increase their share of exports, promote research and development, innovation, production of high value added products, product development and cooperation activities and develop entrepreneurship culture and support establishing successful enterprises to meet the economic and social needs of the country.

The Regulation includes the code of practice for the support programmes. Thirteen different support programmes (generally project based) are offered to SMEs by KOSGEB:

1. R&D Innovation and Product Development Support Programme

2. Advanced Entrepreneurship Support Programme

3. Traditional Entrepreneurship Support Programme

4. ISGEM/TEKMER Support Programme

5. Business Plan Reward Support Programme

6. Cooperation Support Programme

7. SME Development Support Programme

8. KOBİGEL-SME Development Support Programme

9. International Incubator and Accelerator Incentive Support Programme

10. New Loan Interest Support Programme

11. SME Technological Product Investment Support Programme

12. Strategic Product Support Programme and

13. International Market Support Programme

These programmes are designed to take into consideration the basic needs of SMEs, with the goal of disseminating a culture of entrepreneurship in society.

From the above programmes of KOSGEB the most recent programmes are classed with respect to their considerable supporting amounts;

• R&D, Innovation and Product Development Support Programme: KOSGEB provides support for R&D, innovation projects of entrepreneurs and SMEs and also provides support product development projects only SMEs up to TRY 750.000 (up to TRY 6.000.000 under via calls for specified sectors).

• International Incubator and Accelerator Incentive Support Programme: KOSGEB supports establishment of international incubator up to USD 3.850.000 under International Incubation Centre Program. KOSGEB also supports to joining accelerators up to USD 60.000 under the International Accelerator Support Programme.

• SME Technological Product Investment Support Programme: KOSGEB supports SMEs’ technological investments based on research activities in order to create added value up to TRY 6.000.000. Grant ratio is 60 % and maximum project duration is 36 months.

• Strategic Product Support Programme: KOSGEB supports investment projects of enterprises to increase production of high value-added products in medium-high and high technology sectors and the products with high importance for development of this sectors through Strategic Product Support Programme up to TRY 6.000.000. The programme offers 60% grant ratio for projects up to 36 months aiming production of the privileged products mentioned in the calls for proposals of Technology Oriented Industry Action Program (a special programme carried out by Ministry of Industry and Technology, KOSGEB and TUBITAK). Machinery-equipment, software, personnel, reference sample, knowledge transfer, test, analysis, calibration, training-consultancy, design and other service procurement costs are eligible for granted projects of SMEs.

• ISGEM/TEKMER Support Programme: Within the scope of ISGEM/TEKMER Support Programme, KOSGEB supports the establishment and activities of ISGEM and TEKMERs which is incubators in Turkey up to TRY 3.800.000.

449 534 SMEs had been directly supported by KOSGEB between 2007 and 2020 via different incentive schemes, for a total amount of TRY 7 571 million (excluding credit interest support payments by KOSGEB).

KOSGEB’s services are accessible across the whole country. It provides its services to SMEs and entrepreneurs via different kinds of KOSGEB Directorates. At the end of 2020, there were 88 KOSGEB Directorates in 81 provinces of Turkey, 4 Technology Development Centres in 15 provinces, 141 R&D Innovation Cooperations, 3 New TEKMERs and 104 representatives in 35 provinces.

As of July 2018, a unit responsible for monitoring and evaluating of support programmes was established in KOSGEB. This unit has established a support programme monitoring and evaluation (M&E) system by building the legislative and technological infrastructure. After the M&E system was put into use, 4 evaluation studies were carried out in KOSGEB in 2020. As a consequence of evaluating all support programmes systematically, from now on it is possible to improve those programmes.

Preparations for the tendency survey have been initiated in order to determine the opinions of SMEs operating in the manufacturing industry on the developments in the economy, to measure the effects of the economic policies put into practice on SMEs. In the KOSGEB Manufacturing Industry Quarterly Tendency Survey study, it was decided to use the non-probability sampling method in which the enterprises participated voluntarily and to send it to the manufacturing industry SMEs in the KOSGEB database every three months. The first tendency survey applied was based on the fourth quarter of 2019 and was sent to manufacturing industry SMEs. In the following period, it was applied five more times in 2020 April, July, October and 2021 January and April, and the analysis of the survey results was presented to the senior management in reports.

In 2019, using the data received within the scope of its legislation from institutions and organizations, KOSGEB started Enterprise Assessment Report service. The service provides businesses auto-generated reports that include general rankings, human resources, R&D, innovation, and branding, productivity, exportations, and finance sections with multi-year comparative analyses of the businesses, their sectors, and statistical regions. Reports are renewed annually.

The Turkish Government considers access to finance as one of the major priorities for Turkey’s SME policy. To overcome the banking system’s apparent inability to provide funds to support SMEs and related infrastructure investments, a number of targeted investment credit interest support programmes have been introduced by KOSGEB since 2003. These programmes were identified in accordance with the main priorities in the respective areas where gaps are thought to exist.

Within these programmes, KOSGEB pays loan interests of SMEs that obtain loans from banks contractual with KOSGEB, allowing SMEs to access and utilise bank loans at more favourable conditions. Approximately 522 000 SMEs have benefited from KOSGEB’s credit interest support programmes and used TRY 21,3 billion worth of credits between 2003 and 2020 from banks, both public and private, who signed protocols with KOSGEB.

KOSGEB continued to support SMEs accessing bank credits through a new finance support programme to increase the production, quality and standards of SMEs by providing financial support in order to solve the their financing problems

This program is:

• open to SMEs’ access continuously

• contribute to the interest/profit share rate beared by the SMEs

• interest / profit share expenses of the loans provided by banks and financial institutions to SMEs are covered.

Table 45.4. The KOSGEB credit interest support programme in Turkey

Year	Number of beneficiary firms	Total amount of allocated credit (in TRY)
2003	556	45 579 000
2004	2 840	295 475 443
2005	3 753	450 951 799
2006	2 787	322 390 819
2007	9 679	1 009 566 062
2008	23 886	1 789 439 498
2009	69 264	2 798 700 882
2010	43 310	1 912 626 776
2011	48 218	2 602 782 136
2012	7 408	467 122 038
2013	343	29 999 500
2014	3 143	137 552 267
2015	593	28 447 750
2016	1 060	146 000 265
2017	290 303	7 787 559 922
2018	160	51 472 109
2019	71	92 290 311
2020	14 621	1 329 464 534 ,52
Total	521 924	21 297 421 111,52

Source: KOSGEB, Activity Report, 2020.

KOSGEB is also making efforts to increase the effectiveness of financial and stock market instruments, both individually and through other endeavours and partnerships. In this context, KOSGEB built partnerships with financial structures such as the Credit Guarantee Fund (KGF), the KOBI Venture Capital Investment Trust Inc. Co. (KOBI VCIT) and the Turkish Investment Initiative (TII).

Treasury Backed Guarantee System

With the Treasury backed Credit Guarantee System launched in 2009, it is aimed to facilitate and improve the access opportunities of enterprises with limited access to finance due to lack of collateral, especially SMEs.

The Credit Guarantee Fund (KGF) was founded in July 1991. As a non-profit guarantee institution, KGF provides access to finance for SMEs that cannot benefit from - bank loans and leasing finances due to insufficient collateral. Its shareholders include KOSGEB (28.3%), TOBB - The Union of Chambers and Commodity Exchanges - (28.3%), TESK - The Confederation of Turkish Craftsmen and Tradesmen - (0.1%), and 29 banks with equal shares of 1.5%. Those 29 banks represent almost the whole Turkish banking sector in terms of loan volume (99%).

Along with the guarantees backed with its own equities, the Ministry of Treasury and Finance (MoTF) provides counter-guarantees for KGF. In return, KGF issues guarantees for banks which provide loans to SMEs. Moreover, the KGF benefits from counter-guarantees of foreign institutions, such as the European Investment Fund (EIF). KGF’s cooperation with the EIF has been productive, with projects such as the Instrument for Pre-Accession (IPA), the Competitiveness and Innovation Programme (CIP), the Multiannual programme for enterprises and entrepreneurship (MAP), Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) focusing in particular on small and medium-sized enterprises.

During the pandemic, the MoTF rolled out extensive support programmes, which are operated by KGF, through putting pre-established Treasury Backed Guarantee System (System) into use with tailor-made and pinpoint solutions to help SMEs to overcome economic impacts of the crisis.

The first programme was the Business Continuity Support that offered guaranteed loans to cover working capital needs in return for meeting the requirement of maintaining current employment levels. The guarantee covers 80% of a loan of maximum TRY 125 million. The maximum maturity was 3 years with half a year grace period option.

Secondly, within the System, the MoTF offered the Operating Expenses Support programme. The maximum term of a guarantee under this scheme was 1 year with a maximum of 3 months grace period. The coverage rate was 80% and the maximum loan amount TRY 62.5 million. There has been a strict control over the use of loans borrowed to ensure that beneficiaries indeed spent to cover their operating expenses.

The third programme carried into action has been the Cheque Repayment Support, resembling the first two programmes in terms of loan amounts and maturities but specifically conditioning that the loans to be spent on covering already issued business cheques of the beneficiaries.

Whereas all the above programmes target SMEs and non-SMEs, the Micro SMEs Lifeline Loan exclusively targeted SMEs. It is aimed to finance the working capital needs of the firms, to reduce the negative economic effects of the pandemic and to maintain their current employment levels. The 80% guaranteed loans of maximum TRY 25.000 had a maximum term of 3 years with a grace period of 6 months. For these loans, KGF did not seek any additional collateral other than the collaterals required by the bank.

Bigger tickets could be guaranteed under the Turkey Investment and Development Bank Credit Support Package where the maximum loan amount was TRY 312.5 million Business loans had a maximum duration of 5 years, with a maximum grace period of 1 year. The maturity of investment loans was a maximum of 10 years, with a maximum grace period of 3 years

A total of 11 separate precautionary support programmes, including the above detailed, have been implemented collectively during 2020 under the general policy of the government namely “Economic Stability Shield”. Owing to its ongoing scheme which includes 30 banks representing 99% of the banking sector in Turkey, the MoTF has been able to structure and initiate pandemic support programmes promptly through KGF guarantees.

The Tourism Support Programme was the last one launched in 2020 which is also open for applications currently. It aims to ensure coverage of all fixed expenses and cash needs of enterprises operating in the tourism sector, especially the wages and rent payments and thus to reduce the negative impact of the pandemic on cash flows and to protect their production and employment capacities. Under this scheme, loans with a maximum amount of TRY 40 million can be covered at a rate of 80%. The maximum guarantee term is 3 years with a grace period of 1 year, provided that it does not exceed 1st November 2021.

All the programmes presented above are financed in virtue of doubling of the national budget spared for Treasury Backed Credit Guarantee System from TRY 25 billion to TRY 50 billion and increasing the guarantee portfolio volume from TRY 250 billion to TRY 500 billion by the same token.

Table 45.5. KGF guarantees and credit volumes in Turkey

Year	No. enterprises	No. guarantees	Guaranteed amount (in TRY million)	Credit volume (in TRY million)
2007	249	305	52.9	75.4
2008	914	1 138	284.5	402.5
2009	1 905	2 605	565.3	790.6
2010	1 933	3 090	938.9	1 302
2011	2 256	3 207	1 123	1 622
2012	5 012	5 517	1 114	1 553
2013	2 462	2 760	1 061	1 467
2014	4 233	5 262	1 392	1 888
2015	6 015	6 667	2 446	3 324
2016	23 365	26 595	7 375	9 580
2017	314 239	390 905	238 774	264 982
2018	123 931	216 171	95 010	108 469
2019	124 556	180 090	66 002	81 977
2020	318 098	489 375	179 997	224 567

Note: Above figures represent approved KGF equity backed and KGF Treasury backed guarantees.

Source: KGF.

In addition, international financial organisations such as the World Bank, the European Commission, the European Investment Bank and the Council of Europe’s Development Bank provided direct loans to SMEs, which were guaranteed by the Turkish Treasury.

Table 45.6. International financial institutions’ direct loans with treasury guarantee in Turkey

In USD million

	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Direct loans	552	842	997	855	1 174	928	2 632	1 709	1 764	1 749	284.5	457

Source: Turkish Treasury.

Support for start-ups

Start-ups in Turkey have very limited access to start-up capital since they lack financial records and collaterals required by banks.

In early 2019, KOSGEB has radically changed the model of supporting entrepreneurs via 4 different support programmes and also enriched the start-up trainings offered for entrepreneur candidates.

Start-up trainings are digitalized and specialized for the entrepreneurs according to the general scope of the business idea of an entrepreneur, such as entrepreneurs whose business idea is based on production and software-based or on service and commerce area. Therefore, there are 8 modules on Traditional Entrepreneurship Training for whose business idea is based on service and commerce sectors; and plus this baseline training extra 8 modules added for Advanced Entrepreneurship Training for whose business idea is based on production and software sectors according to NACE codes of the business idea. This digitalized, strengthened, by interactive video animations enriched trainings could be reached 7/24 online (lms.kosgeb.gov.tr) via any electronic devices and also free for all entrepreneur candidates. Commendably, most of the university students are also given homework to finish these trainings by universities and this is also a great opportunity for Turkey who has a great share in young demographics. While the start-up trainings were B2B between 2010-2018 period, more that 1.5 million entrepreneurs has attended these trainings, but now, after 2019 almost half million entrepreneur has attended to these online trainings even in this short period. An entrepreneur ought to finish the related training before applying to the related support programme.

By Traditional Entrepreneurship Support Programme, KOSGEB provides up to TRY 65.000 for the Establishment Support, Performance Support and Certificate Support. By Advanced Entrepreneurship Support Programme, not only the same support items on Traditional Entrepreneurship Support Programme are provided but also extra Machinery, Equipment and Software Support related with the technology level and Mentoring, Coaching & Consultancy Support are provided, whose upper limit of this programme is TRY 375.000. An entrepreneur who is young (>30 years old), female, disabled, veteran or first-degree relative of the martyr is specially supported in both programmes.

While these two support programmes are related with establishing and sustainability of a start-up, the other two support programmes are more likely for boosting entrepreneurship ecosystem. Such as ISGEM/TEKMER Support Programme; that aim to promote entrepreneurship by supporting the foundation of Technology/Business Incubators in order to develop entrepreneurship culture and bringing actors together in entrepreneurship ecosystem, therefore KOSGEB provides TRY 2.8 million grant and TRY 1 million loan for establishment and operating of an incubator.

Energy efficient electric motors replacement support

With this support, it is aimed for businesses to use energy efficient electric motors. For the enterprises operating in various organized industrial zones selected as pilots within the scope of the project to promote energy efficient engines in Turkey (TEVMOT), to use energy efficient engines support is provided within the framework of the protocol. In total 3 companies benefited from the support of TRY 69 596.

COSME

KOSGEB is also responsible for the national coordination of the European Commission’s Programme for the Competitiveness of Enterprises and SMEs (COSME). One of COSME’s main objectives is to provide enhanced access to finance for SMEs in different phases of their lifecycle: creation, expansion or business transfer. In order to achieve this objective, the EU will mobilise loans and equity investments for SMEs:

• Through the Loan Guarantee Facility: the programme will provide guarantees and counter-guarantees to financial institutions (e.g. guarantee societies, banks, leasing companies) so that they can provide more loans and leases to SMEs.

• Through the Equity Facility for Growth, the programme will provide risk capital to equity funds investing in SMEs mainly in the expansion and growth-stage phases.

As a result of KOSGEB’s coordination activities such as guidance, leading and publicizing regarding the access to finance component of COSME, QNB Finansbank and EIF signed guarantee agreements which will allow QNB Finansbank to provide TRY 750 million (ca. EUR 228 million) of loans to over 37 000 small businesses in Turkey over three years.

In addition, KGF applied to Credit Guarantee Support within the scope of COSME Programme. As a result of the application, a two phased counter-guarantee agreement was signed with the European Investment Fund, of which includes counter-guarantee amounts of EUR 19,6 million and EUR 18,3 million respectively. With this support provided according to the agreement, each SME would be able to use a credit of up to TRY 1 million with a term of 60 months and with a guarantee period of 12 months. With this project, SMEs are expected to use approximately TRY 7.5 billion.

Turkish Investment Initiative (TII)

Entrepreneurs in Turkey have great difficulties in obtaining the financial resources they require for putting their business ideas into practice. In addition to financing the companies in which they invest, venture capital funds offer managerial and strategic support, which in turn make a significant contribution to the funded company’s growth perspective.

For this purpose, TII was founded in 2007. TII is Turkey’s first and only dedicated Fund of Funds, which brings together a selected group of investors to capitalise on Turkish risk capital opportunities by providing access to finance to new, established and experienced funds.

The flexibility of the structure chosen (an umbrella structure) allows sub-funds to be conveniently added.

TII consists in two sub-funds;

• Sub Fund A: Istanbul Venture Capital Initiative (iVCi);

• Sub Fund B: Turkish Growth and Innovation Fund (TGIF)

Sub Fund A: Istanbul Venture Capital Initiative (iVCi)

KOSGEB and EIF are the two main investors of iVCi, with EUR 50 million worth of commitments. The remaining investors are the Technology Development Foundation of Turkey (TTGV), the Development and Investment Bank of Turkey (TKYB), Garanti Bank and the National Bank of Greece Group (NBG), amounting to a total commitment of EUR 160 million. EIF is the advisor to iVCi.

Total funds raised by iVCi portfolio funds reached EUR 1.5 billion. Investments under iVCi are the product of a disciplined, multi-step due diligence process. The Investment Committee relies on the Advisor’s team to conduct a rigorous qualitative and quantitative analysis in making investment decisions. The final decision as to whether or not to make a commitment is taken by the Investment Committee, acting independently.

KOSGEB has had a considerable impact on the market. When iVCi was established, there were only two independently managed VC/PE funds on the Turkish market. iVCi stimulated the market and enabled several first-time teams to establish funds. In addition to the capital, these funds are crucial in maintaining financial discipline and efficient corporate governance within SMEs, two key traits for international competitiveness.

iVCi has signed ten commitments including a co-investment amounting to EUR 160 million. y December 2020, iVCi’s net aggregate investments reached EUR 145 million, targeting 78 companies. Most of the iVCi committed funds goes to innovative and early stage firms including 44 SMEs and 12 hydro, wind and biomass small-scale clean energy projects. By December 2020, iVCi’s net aggregate investments in SMEs reached EUR 71 million, leveraging EUR 623 million of investment of the portfolio funds into these SMEs.

According to the investment guidelines of iVCi on SMEs, “funds which iVCi commits to shall undertake investments in SMEs to an amount of at least two times iVCi’s initial investment in the Fund”. The portfolio funds under iVCi had already invested 10 times more than iVCi investments in SMEs.

Sub-fund B: Turkish Growth and Innovation Fund (TGIF)

Debt financing is not the most suitable source of finance for innovation-driven fast growing firms. Given the higher risk/return profile of these enterprises, their growth crucially depends on the well-functioning of growth capital markets and less on the conditions of the credit market.

For that reason, it is critical to continue supporting the Turkish venture capital market during its evolution from a nascent market. KOSGEB and EIF indicated early on their commitment to this end with EUR 60 million each for the next fund-of-funds initiative. In parallel, by undertaking legislative measures to enable investments in fund-of-funds, the Ministry of Treasury and Finance also underlined its strong commitment towards supporting equity investments. All these efforts and collaboration among the three institutions resulted in announcement of iVCi’s successor and Turkey’s next generation fund-of-funds, the Turkish Growth and Innovation Fund (TGIF), in October 2015 with a strong private partner, the Industrial Development Bank of Turkey (TSKB).

Following this announcement, TGIF was established as sub-fund B under TII in March 2016 and held its first closing in May 2016 with EUR 200 million total commitments by KOSGEB (EUR 60 million), the Ministry of Treasury and Finance (EUR 60 million), EIF (EUR 60 million) and TSKB (EUR 20 million).

In line with market needs, TGIF, as the next generation fund-of-funds, is expected to dedicate 40% of its investment to funds focusing on early stage and start-up businesses, suitable technology transfer accelerators or investments involving business angels. Due to the developing nature of the Turkish market, TGIF is expected to continue supporting growth investments.

As it is still developing, TGIF has signed ten commitments since its establishment, and there is still little investment in TGIF. The amount invested by the underlying funds reached EUR 46 million as of the end of 2020, through 42 investments.

TGIF will further advance the vision of iVCi for Istanbul to become a crossroads location for the venture capital industry in South East Europe and Central Asia by 2020, and contribute to the broader project of the government to make Istanbul an international financial centre while fostering growth and innovation in Turkish enterprises.

KOBI Venture Capital Investment Trust Inc. Co. (KOBI VCIT)

KOBI VCIT is a venture capital company which was jointly established with the commitments of TOBB, Halkbank, KOSGEB, TESK and 16 Chambers of Commerce and Industry to meet the financing and management needs of innovative SMEs. KOBI VCIT is subject to the provisions set by the Capital Markets Board, namely the Communique Serial III No. 48-1., and is operating within the regulations of this Communique.

KOBI VCIT tries to invest in innovative SMEs with promising market potential. Companies who possess an advantageous and creative position, as well a strong upwards potential compared to their market peers may receive an investment from KOBI VCIT in in the form of capital and managerial support.

To this day, with the support of its shareholders, KOBI VCIT has successfully made several investments in Turkish SMEs. It has built a top-performing track record and has proven that the Turkish SMEs market has lot to offer and is very investable. Along with increasing the sales and profit margins of some of its SME subsidiaries, KOBI VCIT has also made profitable exits from other investments. KOBI VCIT, along with its public and private partners, has made considerable contributions to the establishment of rules and regulations within the venture capital market. As a result, the SME and investment ecosystem of Turkey has prospered. KOBI VCIT has proven to other funds and sector players that investing in the Turkish SMEs market is profitable and yields profitable results.

With its local partners, KOBI VCIT is consistently seeking to invest in new promising Turkish SMEs with the intention of adding value and increasing the size of these companies, thus contributing to the growth of the Turkish economy. KOBI VCIT is looking to invest between USD 0.5 and 5 million, by obtaining a minority share in the related companies. During the partnership, which might last for an average of 5 years, KOBI VCIT plans to grow the companies faster, stronger and also in a much more efficient and transparent fashion.

Technology and Innovation Fund

One of the most important problems in the entrepreneurship ecosystem is the problem of access to finance. In order to solve this problem, besides traditional financing models, many alternative financing models are applied in many regions of the world. The most prominent of alternative financing sources are angel investment and venture capital.

Venture capital activities are supported by various programs by The Ministry of Industry and Technology. In order to strengthen the financing of entrepreneurship, the Technology and Innovation Fund has been established to transfer funds from the budget of the Ministry of Industry and Technology. Through this fund, investments that will provide a solution to the problem of access to finance for entrepreneurs in our country will be made.

With the Technology and Innovation Fund, venture capital support is provided to companies that carry out technology and innovation-based activities and need financing. The Technology and Innovation Fund can work with the "fund of funds" mechanism as well as the "co-investment" mechanism. With this mechanism, which is called the "fund of funds" structure, it is aimed to invest in funds that provide venture capital funds to enterprises; with the “co-investment” mechanism, it is aimed to directly invest in ventures in the ecosystem together with a venture capital fund.

Ministry of Industry and Technology is is the main investor of Technology and Innovation Fund and Ministry's funding commitment to this fund is TRY 350 million.

As stated in the 2023 Industry and Technology Strategy Document, the annual investment in technology-based businesses in Turkey is aimed to reach 5 billion Turkish Liras until 2023. Investments to be made through the Technology and Innovation Fund will also be able to serve this goal.

TÜBİTAK Technology and Innovation Programmes for SMEs

TÜBİTAK-Technology and Innovation Funding Programmes Department (TEYDEB) runs support programmes which focus on allocating resources to private sector R&D. They also support cooperation between firms, between firms and universities or research institutions, and the development of scientific and technological know-how, which is considered to be the most important source of transforming economic development into social benefits. The allocation of resources to innovation based on R&D is promoted through incentives. Through its 13 support programmes, TEYDEB maintains its position as the centre of R&D, innovation and entrepreneurship funding requirements of the private sector, from the individual entrepreneurs to SMEs and to major Turkish companies. Some of these programmes support technological projects while some of them support the entrepreneurial ecosystem of Turkey.

Projects which apply to funding programmes managed by TEYDEB are evaluated and approved through six Technology Groups of TEYDEB:

• Machinery, Manufacturing Technologies Group (MAKITEG)

• Materials, Metallurgical and Chemical Technologies Group (METATEG)

• Electrical, Electronic Technologies Group (ELOTEG)

• Information Technologies Group (BILTEG)

• Biotechnology, Agriculture, Environment and Food Technologies Group (BIYOTEG)

• Transportation, Defence, Energy and Textile Technologies Group (USETEG)

All technological projects that are supported by the programmes under Technology Groups aim to:

• Develop or improve new products,

• Develop new techniques to diminish the cost and/or raise the quality and standard of a product,

• Develop new production technologies.

TEYDEB also has four Support Groups dealing with programmes for the development of Turkish entrepreneurship ecosystem projects:

• Entrepreneurship Support Group (GIRISIMDES)

• Technology Transfer Mechanisms Support Group (TEMEG)

• Venture Capital Support Group (GISDEG)

• Priority Areas Support Group (ONDEG)

1501 – Industrial R&D Projects Grant Program

1501 is TEYDEB’s main support programme. The programme allows applications with two calls in a year from the companies in all sectors. The maximum support period for each project is 36 months. There is no budgetary limit. The objective of the programme is to support companies’ R&D activities in order to increase their capacity for research and for the development of technology, to promote a culture of innovation and to and to foster the competitiveness of companies established in Turkey. The programme originally targeted small and medium-size enterprises (SMEs) as well as large enterprises. However, since July 2019, only SME’s can apply to the programme. SME companies can benefit from the grant with a ratio of 75% of approved expenses. Eligible costs are personnel, travel, machinery and equipment, material, software and hardware purchase expenses, consulting and other service procurement, and so forth.

1507 – SME RDI (Research, Development & Innovation) Grant Program

1507 is a similar programme to 1501, with a smaller scope. The programme aims that SMEs become more competitive by developing their technology and innovative sides and their capacity to run systematic projects. It also encourages the development of research and technology, the development of high quality products, and activity in national and international projects. The maximum amount of support is TRY 600 000. SME companies benefit from the grant with the ratio of 75% of approved expenses. Eligible costs are the same as for 1501. The applications to the programme is accepted with two calls in a year.

1509- International Industrial R&D Projects Grant Program:

The programme supports Turkish companies that conduct R&D activities. It aims to increase technical quality and knowledge in Turkey, to improve companies’ access to technological knowledge at the international level, to help them with technology transfer processes and to contribute to the participation of Turkish companies in international markets. Under this programme, international collaborative R&D projects which have been submitted to EUREKA is supported. SME’s benefit from the grant with a ratio of 75 % of a project’s approved expenses. Large enterprises benefit from a ratio of 60 %.

1511- Research Technology Development and Innovation Projects in Priority Areas Grant Program

The objective of the programme is to support and coordinate result-oriented, observable, national R&D and innovation projects that are well-matched with priority fields. SME companies benefit from the grant with a ratio of 75%; large enterprises benefit from a ratio of 60% of the project’s approved expenses. Eligible costs are the same as for 1501.

Technology Focused Industrial Movement Program (HAMLE) is a special program that the purpose of increasing the value-added production in Turkey, the support and incentives provided by the T.R. Ministry of Industry and Technology, TUBITAK and KOSGEB medium-high and high-tech to focused the level of the industry. This Program is targeted towards investments aiming to produce high-value added products in high-technology or medium-high-technology sectors.

Within the scope of the program, the aim is to increase the production capacity in the critical and high future potential products for Turkey. It is aimed to realize the investment projects that will contribute to the technological development that our country needs, with an end-to-end governance and support model.

If R&D is required for the eligible investment projects, TUBİTAK will support the R&D part of the projects. R&D expenditure items will be supported by TUBİTAK within the context of the 1511 Priority Areas Research, Technology Development and Innovation Program by 75 percent for SMEs and 60 percent for large enterprises.

First pilot call for the Machinery Sector has been announced in 2019. Within the scope of this call, there are 52 investment projects whose applications were approved and evaluated. As a result of the evaluations made regarding these projects, it was decided to support 20 projects.

Priority Product List Announcement was updated within the scope of 2021 calls. Priority products for all sectors in the scope have been determined. At the same time, information regarding the calls expected to be opened in 2021 was published. Mobility Call and Structural Transformation Calls in Production were opened from the 2021 calls and applications are being received.

1707- Order-Based R&D Call

The 1707 Order-Based R&D Calls aim to transform solutions that meet the needs of customers into commercializable outputs by SMEs through R&D. Projects that might quickly turn into products and have high commercialization potential are supported. There is no subject or sector limitation. In 1707 calls, the project output will be commercialized by the Customer Organization and/or Supplier Organization. R&D process of the project is carried out by the Supplier Organization. The Customer Organization and TÜBİTAK contribute to the project’s R&D costs. As SMEs carries out the project, the Client Organization monitors whether the project is progressing in the targeted direction. The Customer Organization pays 40% of the expense declared in the period report to the Supplier Organization. TÜBİTAK evaluates the expenses and grants the 40% of the "accepted expenditure amount" to the Supplier Organization. The remaining part shall be covered by the Supplier Organization itself. The project duration consists of two phases: 1. Product/process development and 2. Commercialization. The duration of the project will be a maximum of 36 months in total. The product/process development phase lasts for a maximum of 24 months. Commercialization stage is required to be at least 12 months.

By 1707 calls; knowledge will be shared and quickly transformed into a product. Also collaboration in project development will become widespread. First 1707 call opened in 2020 and 105 applications were made. 79 projects succeeded to have support by TÜBİTAK. The second call opened in the first half of 2021 and evaluation process continues.

In July 2021, 3 calls of which 2 are new have opened within the scope of 1707 calls.

• SME Support Call for 1707 Order-Based R&D Projects 2021-2 (1707 Order-Based R&D 2021-2)

• 1707 SME Support Call for Export Oriented Order-Based R&D Projects 2021 (1707 Order-Based R&D-i 2021)

• 1707 SME Support Call for Order-Based R&D Projects with BIGG Partners 2021 (1707 Order-Based R&D-b 2021)

With the 1707 Order-Based R&D-i 2021, it is aimed to transform the solution proposals that meet the customer needs into commercial outputs by SMEs through R&D and to contribute to the export of these outputs. In addition, it will contribute to the development of foreign cooperation of domestic companies. In this way, it is expected that organizations will have positive effects on the import/export balance of our country by increasing their market shares abroad for a certain product/process.

With the 1707 Order-Based R&D-b 2021 call, it is aimed to transform the solution proposals that meet the customer's requirements into tradeable outputs through R&D by entrepreneur SMEs who have received BIGG support. Within the scope of the 1707 Order-Based R&D-b 2021 call, it is possible to make prepayments to the supplier organization that received BIGG support. Also 10% overhead support will be given to that organization.

1702-Patent Based Technology Transfer Support Call

The 1702 Patent Based Technology Transfer Calls aim to transfer of patent-based technologies emerged as a result of research, development and innovation projects carried out by higher education institutions, research infrastructures, public research institutions and early-stage technology companies to capital companies located in Turkey through the way of licensing and know-how transfer. The Calls provide the companies benefit from the knowledge and technology produced in the higher education institutions, research infrastructures, public research institutions and early-stage technology companies. The Calls develop holistic solutions needed by the industry by combining research, development and innovation projects carried out by different stakeholders with public resources and emerging technologies. The duration of a project will be a maximum of 60 months. The upper limit of a project is TRY 2.000.000. Both SME’s and big companies can apply the calls. TÜBİTAK supports minimum %40 of project budget if the customers is a SME while TÜBİTAK supports minimum %25 of project budget if the customer is a big company.

The first call was opened in 2020 and 20 projects were applied to the call in which 14 projects were supported. The second call was opened in 2021 and 18 project are supported over 21 applications. The third call has opened in July 2021.

1512- Techno Entrepreneurship Programme (BiGG)

The purpose of the programme is to support individual entrepreneurs’ activities from the business idea to the market in order to allow them to turn their technology and innovation-focused business ideas into enterprises with high potential for creating added value and qualified employment. The programme includes entrepreneurship training and technical, commercial and administrative support from coaches with industry knowledge. Firm are provided with TRY 200 000 seed capital, aiming at technology validation of the proposed idea within 18 months. Eligible costs are the same as for 1501.

Establishment and Execution of Mentoring Mechanisms (BiGG+)

As a part of BİGG programme, a call named “Call for Establishment and Execution of Mentoring Mechanisms for Increasing Business Development and Innovation Capacities of SMEs” was opened under the 1601 Capacity Building for Innovation and Entrepreneurship Grant Programme in 2019. The aim of this call is to increase the competitiveness of SMEs by introducing innovative products to the market with a qualified mentoring mechanism.

SMEs receiving mentoring services are expected to develop in the following areas:

• Increase in turnover

• Increase in current market share

• Introduction to new markets

• Increase in exports.

• Mentoring is expected to have a two-dimensional impact on SMEs:

• Increase in commercial maturity of SMEs

• Increase in R&D and innovation capacity of SMEs.

The upper limit of the project budget is TRY 750 000 (100% grants). Eligible costs are personnel, travel, machinery-equipment, material, software and hardware purchase expenses, consulting and other service procurement, and so forth.

Within the scope of the call, 11 interface organizations have been providing mentoring to 326 SMEs.

Industrial Innovation Networks Mechanism (SAYEM)

Within the scope of one of the funding mechanism called as Industrial Innovation Networks (SAYEM), private sector firms, especially those that contain an R&D and product design centre, will form a network with other firms that take place in the value chain of the targeted technology-based product together with end-users, technology development zones, public research institutes and universities. As a whole, the network will have the opportunity to take centre stage in the innovation system for co-creating high value-added products and technologies for the market. The programme purposes to provide commercialization of the high tech products by means of collaboration of private sector firms, universities and public research institutes that forms innovation networks and targets high TRL products (TRL 5-9).

The networks have been established in two phases. In the first phase, the support grant has been directed to establishing models of cooperation and networks based on a “product/commercialisation roadmap” that includes a business model. In the second phase, the support grant has been provided to implementing the R&D and innovation activities that take place in the product/commercialisation roadmap based on the strategic milestones that have been put forth by the actors who are involved in the network for co-creating high value-added products. The targeted Technology Readiness Level will be between TRL 5 or 6 and 9, thereby targeting technological innovation that is closer to the market.

The SAYEM Phase 1 call, which was opened for the first time in 2018, covers the subjects of NACE 21-Manufacture of basic pharmaceutical products and pharmaceutical materials, NACE 26- Manufacture of computers, electronic and optical products and NACE 30 (30.3)-Manufacture of other transportation vehicles, which are classified as high technology. Networks targeting these issues include technology groups engaged in inter, multi, and transdisciplinary research.

23 consortia were supported in the SAYEM phase 1 call, which was opened for the first time in 2018, and 5 of them were eligible to apply for the SAYEM Phase 2 call opened in 2020. The evaluations of these 5 consortia are being done at the moment.

In the second SAYEM call, which is planning to be open in 2021, in addition to these interdisciplinary topics, green deal issues and NACE 61-Telecommunications, NACE 62-Computer programming, consultancy and related activities and NACE 63-Information service activities are predicted to be included.

1514-Tech-InvesTR Venture Capital Support Programme

The Tech-InvesTR Venture Capital Support Programme was established in order to create a sustainable venture capital ecosystem that will provide resources for early-stage technology-based initiatives. With Tech-InvesTR Program, it aims to i) create a high value-added production environment through the commercialization of R&D and innovation products of early-stage technology-based enterprises ii) create a sustainable venture capital ecosystem to support early-stage technology-based initiatives iii) Provide experience and resources in venture capital in Technology Transfer Offices (TTOs), Technology Development Zones (TDZs) and the qualified Research Infrastructure (RIs).

The programme will be carried out in cooperation with the Ministry of Treasury and Finance to encourage university TTOs, TDZs and RIs to participate in venture capital funds which invests to early stage technology based firms. TTOs, TDZs and RIs will participate as limited partners of venture capital funds. These venture capital funds will invest in early-stage technology-based enterprises in order to support commercialisation. 50% of the contributed capitals of TTOs, TDZs, and RIs for the funds' investments to early-stage technology-based Turkey resident enterprises will be supported by TÜBİTAK as grants. In addition, TTOs, TDZs, and RIs will be provided with general expense support up to 10% of their contribution.

Within the scope of Tech-InvesTR Program, The Ministry of Treasury and Finance negotiated with 5 funds for the protocol and signed fund participation protocols between 4 venture capital funds as of June 2021. These 4 funds were established. Project agreements have been signed between 4 TDZs and 1 TTO participating in the funds and TUBITAK. It is aimed that the funds to be established with domestic and foreign sources will reach 1.7 Billion TL final target size. It is expected to allocate approximately 27 million TL by TÜBİTAK and approximately 330 million TL by the Ministry of Treasury and Finance to the funds established within the scope of Tech-InvesTR Program. Along with the amounts committed by national and international investors participating in the funds, the program will mobilize a resource of 1.7 billion TL to invest in technology-based initiatives in Turkey. It is aimed that this amount will return to 150 early stage technology-based initiatives in Turkey in the next 5 years. The Fund term will be 12 years, with an investment period for the first five years. The remaining period will be the exit period. Funds will be managed by independent fund managers as General Partner (GP).

The 4 funds established have invested approximately 134.5 million TL in 22 start-ups as of June 2021. The 5th fund is expected to start investments by signing a protocol with the Ministry of Treasury and Finance in the near future.

Considering the TÜBİTAK-TEYDEB programmes mentioned, the total amount of grants for SME’s provided by TÜBİTAK TEYDEB has reached over EUR 903.2 million during the 2007-2020 period (Table 45.7).

Table 45.7. TÜBİTAK – TEYDEB Supports* for SMEs

Year*	Number of beneficiary firms	Funds allocated in the given year (in EUR million)
2007	401	33.9
2008	539	37.7
2009	1 033	67.9
2010	1 016	59.4
2011	1 044	54.4
2012	1 099	59.9
2013	1 458	77.5
2014	1 707	91.8
2015	1 823	99.1
2016	1 715	63.7
2017	1 783	66.9
2018	2 009	66.6
2019	1939	65.7
2020	1881	58.7

Note: * For 1501, 1507, 1509, 1511, 1512 and SAYEM programmes.

Angel investments regulations

The law regarding the regulation and promotion of business angel investments was enacted in 2012, and secondary legislation came into force on 25 February 2013, authorising the Ministry of Treasury and Finance to implement policies on the matter. This legal framework provides a mechanism for licensing business angels, which will ease access to finance for entrepreneurs, increase professionalism and improve business culture and ethics in the angel investment market. In this respect, the licensing mechanism provides a new instrument for those enterprises which have funding difficulties with conventional financing in their early stages. Furthermore, it makes business angel investments an institutionalised and trustworthy financial market and eligible for state support.

Licensed business angel investors can deduct from their annual income tax base 75% of the capital they invest in innovative and high growth SMEs whose shares are not traded at the stock market. The 75% deduction rate will be increased to 100% for those investors investing in SMEs whose projects were supported by the Ministry of Industry and Technology, the Scientific and Technological Research Council of Turkey (TÜBİTAK) and the Small and Medium Enterprises Development Organisation (KOSGEB) in the last five years. The issued licenses will be valid for five years and the tax deduction will be applied until 2022 with the option to extend it for another five years.

Moreover, the acquired shares must be held by investors for at least two years in order to benefit from the tax incentive. The maximum annual amount which can be deducted from the income tax base is TRY 1 million. SMEs must meet certain criteria set by the Ministry of Treasury and Finance to be eligible to receive business angel investment, such as having maximum annual net sales of TRY 5 million and not having more than 50 employees.

Between February 2013 and December 2020, 597 business angels have been licensed, and 40 investments amounting to approximately TRY 14.7 million have been approved by the Ministry of Treasury and Finance for tax support.

As a general problem of the global entrepreneurship ecosystem, insufficient data regarding business angel investment is a critical issue at both the national and international level. Licensing will improve data collection regarding business angel operations due to the fact that the Ministry of Treasury and Finance has a database which aggregates the data.

Regulation regarding fund of funds

The law regarding capital contribution of the Ministry of Treasury and Finance to funds of venture capital funds (fund of funds) was enacted by the Parliament on April, 3rd 2013. A secondary legislation came into force on 14 March 2014. The purpose of the secondary legislation is to regulate the selection criteria, investment areas, auditing, the upper limits of all fees and expenses pertaining to the resources committed, and other related issues regarding received resources from the Ministry of Treasury and Finance.

The fund of funds are structured to support venture capital funds and other legal persons providing financing to full-fledged taxpayer companies in Turkey through equity injections via sub-funds formed under this fund of funds as well as co-investment funds, which provide co-financing to target companies along with angel investors.

The Ministry of Treasury and Finance will commit funds to a fund of funds under several conditions:

• The amount committed to the fund of funds by the Ministry of Treasury and Finance shall not exceed 70% of the total amount committed to the fund of funds.

• The amount committed to a venture capital fund approved by a fund of funds funded by the Ministry of Treasury and Finance, shall not exceed 20% of the total amount committed to the fund of funds.

• A venture capital fund requesting resources from the fund of funds is obliged to find at least twice the amount that is committed to it by the fund of funds.

• The total amount of the resources committed to the fund of funds by the Ministry of Treasury and Finance until the end of 2018 shall not exceed TRY 500 million, excluding charges and fees to be paid to the fund of funds. The Ministry of Treasury and Finance may pay this amount at once or in instalments.

The total amount to be injected into the financial ecosystem according to the above stipulations is expected to exceed TRY 2 billion. The law aims to strengthen the financial ecosystem together with the funds of venture capital funds and the business angel programme. Moreover, as a new financial instrument, the fund of funds programme aims to improve the ecosystem via co-investments with angel investors, as co-investment funds will invest together with the angel investors into early-stage companies. In that respect, a substantial increase in the volume of venture capital and angel investments can be expected, which would eventually support early stage companies not only financially but also in terms of institutionalisation and corporate governance. These mechanisms are expected to accelerate the establishment of innovative start-ups, increase the dynamism of the economy and contribute to stronger and more sustainable economic growth. Furthermore, the fund of funds mechanism is expected to attract foreign investors, as well as ease the exit process of angel investments.

In addition, the Ministry of Treasury and Finance committed EUR 60 million to the Turkish Growth and Innovation Fund (a “fund of funds” that was established by European Investment Fund in May, 2016). This is expected to create approximately EUR 400 million of investment by venture capital funds, mostly by foreign funds investing in Turkey and also directly by venture capital firms founded in Turkey with business angels via co-investment funds investing in Turkey.

Regulation regarding Direct Investment to Funds

The law regarding direct investment to venture capital funds from the Ministry of Treasury and Finance was published in the Official Gazette on 5 December 2017, and the secondary legislation came into force on 5 June 2018. The purpose of secondary legislation is to regulate the selection criteria, investment areas, auditing, the upper limits of all fees and expenses pertaining to the resources committed, and other related issues regarding received resources from the Ministry of Treasury and Finance.

As a result, it is expected that foreign investment funds will be encouraged to invest in Turkey. Additionally, a new fund is planned to be established with participating banks, with the aim to encourage the access to alternative financing instruments. For the purpose of funding early stage companies which exist in the structure of Technology Transfer Offices (TTO), Incubator Centers and Accelerators located in the Universities, the government will support the establishment of a seed fund. In this system, the seed fund will be put into place by universities, while the Ministry of Treasury and Finance and other public institutions will commit to provide resources.

These funds will have to fulfil specific conditions:

• The amount committed to the funds by the Ministry of Treasury and Finance shall not exceed 30% of the total amount.

• For new funds, the amount committed by the Ministry of Treasury and Finance shall not exceed 50% of the total amount committed. The Minister may increase these ratios by at most 50%.

• The total amount of the resources committed to the funds by the Ministry of Treasury and Finance until 12/31/2023, shall not exceed TRY 2 billion, excluding charges and fees to be paid to the funds.

The law aims to strengthen the financial ecosystem together with the fund of venture capital funds and the business angel programme. Moreover, as a new financial instrument, the Direct Investment to Funds programme aims to improve the ecosystem via Banks, Chambers Of Commerce, Participation Banks and the Government institution: the Scientific and Technological Research Council of Turkey (TÜBİTAK).

In that respect, a first project has been started with TÜBİTAK named “Tech – InvesTR”. A partnership agreement was signed between the two institutions on June 14. This agreement is set to encourage early-stage technology-based projects, R&D and innovation-oriented initiatives that have the potential to develop and produce innovative products, processes, information and technology that can provide added value to the country's economy and encourage the creation of venture capital funds. On January 14th, 2019 the Ministry of Treasury and Finance issued a press release on resource transfers to venture capital funds within Tech-InvesTR programme which is executed in cooperation with TÜBİTAK. With this press release it has been announced that Ministry may invest maximum of TRY 400 million within next 5 years to the funds which are found eligible as a result of due diligence process of the Ministry.

Borsa Istanbul Private Market Platform

Borsa Istanbul’s Private Market is a web-based platform initiated in November 2014, which brings together companies and investors in order to buy or sell shares without going public. It offers liquidity for company partners intending to sell their shares and offers investors the chance to find buyers to liquidate their investments.

Development agencies

26 Development Agencies (DAs) operating under the coordination of Ministry of Industry and Technology (MoIT), are designed as coordinating, organising and catalyst bodies that support regional development, ensure its sustainability and help reduce intra- as well as interregional development disparities in accordance with the principles and policies set out in the National Development Plans and Programmes.

Revenues of DAs come from various resources, mainly from central budget and transfers from the budgets of local partners such as special provincial administrations, municipalities, chambers of commerce and industry. DAs are in charge of planning, programming and managing support schemes that are similar to the EU type of implementation. Each DA has prepared regional plans for its region with the active participation of regional and local actors. Furthermore, DAs have been implementing Result Oriented Programs (ROPs) to achieve development results in a particular sector, theme or location to meet strategically determined development goals in each region. ROPs are prepared in cooperation with relevant institutions for the medium term (preferably three years) with measurable results and output targets, which include sub-programs and projects, based on a qualified analysis.

In accordance with the priorities in their regional plans and ROPs, DAs have provided financial grants and technical support to the private sector, public institutions, local authorities, universities, and NGOs in their regions. In addition to direct financial grants to SMEs, DAs are providing supports for managing consulting activities to SMEs to improve capacity and institutionalization of them. DAs are also guiding investors, investigating new investment areas in their regions and preparing project pipelines.

Development Agencies Support Entrepreneurship

DAs provide various financial and technical supports in order to develop the entrepreneurship infrastructure and entrepreneurship culture in Turkey. These supports include the establishment of entrepreneurship centres, incubators and accelerators, strengthening the institutional capacity of these structures, providing training and mentoring services to entrepreneurs, providing consultancy on issues such as preparing business plans, internationalization, marketing or access to finance. In this sense, all stages of entrepreneurship are supported by the DAs. Some DAs provide entrepreneurship training to primary or secondary school students in order to develop entrepreneurial talent and culture at an early age. The aim of these trainings is to encourage the young and dynamic entrepreneur candidates in their entrepreneurial experience by providing all kinds of support they may need. One more issue that DAs will focus on in the coming period is the support of angel investment and angel investment networks. In this context, necessary awareness-raising and capacity building activities will be carried out for the enhancement of angel investor culture, existing angel investor networks will be promoted, and creation of new networks will be supported by the DAs.

Istanbul International Entrepreneurship Program

Strengthening the entrepreneurship ecosystem is among one of the main priority areas of MoIT. There was a specific policy emphasized in the 11th Development Plan covering 2019-2023 period and the 2021 Presidential Annual Program, which was “Istanbul will be made one of the regional and then global entrepreneurship centers. In this context, the International Istanbul Entrepreneurship Program will be launched with support and arrangements that will make it attractive for ventures, entrepreneurs and ecosystem actors to come to our country from abroad”. In this direction, a participatory preparation study is carried out under the coordination of Istanbul Development Agency (ISTKA), which takes entrepreneurship as an ecosystem approach with all its actors and partners. Within the scope of this study, a strategy and action plan are preparing with the active participation of all relevant partners. With the action plan, the actions to be taken to improve the entrepreneurship ecosystem of Turkey in the coming period will be listed and these actions will be carried out in coordination with the relevant institutions and organizations. It is planned that the strategy and the action plan will be published and put into effect in 2021.

Regional Development Fund

In order to strengthen the entrepreneurship ecosystem in Turkey, MoIT establish a venture capital fund to provide finance to companies with growth and innovation potential. In this context; MoIT established the Regional Development Fund in coordination with Turkey Development and Investment Bank. The fund has total 400 million TL capital in a 5-year period. The Regional Development Fund aims to support enterprises in need of finance in 26 NUTS 2 regions of Turkey. The Regional Development Fund, which is a private equity fund, will provide investment support to companies with high added value and introducing new ideas and new technologies. MoIT, DAs and fund management team continue to work in order to increase the growth of and enhance the competitiveness by investing in promising companies.

ISTKA Regional Venture Capital Program

ISTKA launched Regional Venture Capital Program to provide financial support to start-ups having high growth potential and creating high value added in İstanbul. With this program venture capital funds will be supported with a total of 250 million TL budget. Through these funds, it is aimed to strengthen the entrepreneurship and innovation ecosystem in Istanbul by increasing access of companies and technology-oriented start-ups to finance. This program, which is still under evaluation phase, is expected to make a significant contribution to the strengthening of the entrepreneurship ecosystem of Istanbul.

The total amount of grants for SME’s provided by Development Agencies has reached over TRY 1.38 billion during the 2008-20 period, through 5 379 projects. As Table 45.8 below shows, the total volume of resources devoted to regions has exceeded TRY 2.94 billion, up to the end of 2020, including co-financing.

Table 45.8. Development Agencies’ Support to SMEs in Turkey

Year	2008	2009	2010	2011	2012	2013	2014	2015	2016	2018	2019	2020*	Total
Number of Supported Projects	133	224	895	941	479	430	874	570	284	228	216	105	5 379
Amount of Support (TRY thousand)	31 220	51 386	199 806	218 820	126 672	88 080	247 268	155 057	77 840	76 055	96 969	16 468	1 385 641
Total amount with co-financing (TRY thousand)	74 302	117 918	446 038	463 997	266 938	183 263	514 988	323 369	160 354	159 369	200 511	32 289	2 943 336

Note: * There was no Financial Support Programme for SMEs in 2017

Source: Ministry of Industry and Technology

Leasing, Factoring and Financing Companies Law

The parliament enacted a new Leasing, Factoring and Financing Companies Law in November 2012 which streamlines previous leasing, factoring and financing company regulation. This new law is expected to help the non-banking financial sector growth and improve SMEs’ access to finance, especially by expanding the variety and size of the leasing instruments available to them.

This law supports two secondary regulations which entered into force in late 2013, namely the “Regulation on Establishment and Activities of Leasing, Factoring and Financing Companies”, and the “Regulation on the Provision and Accounting Practices of Leasing, Factoring and Financing Companies and the Format and Content of Financial Statements Disclosed to Public”. The former sets the principles and conditions for establishment and operations of the companies at hand and the latter sets the principles of accounting, financial statements to be disclosed and provisioning requirements.

Claims from leasing transactions increased significantly over the last eight years, indicating progress achieved since the law was enacted. Leasing companies’ claims from leasing transactions reached TRY 60.7 billion from TRY 17.2 billion, with a 254% increase in the 2012-2018 period. Although claims had a relatively sharp fall in 2019 (decreased to TRY 48.7 billion), it was mostly recovered in 2020, reaching TRY 57.3 billion, second highest amount since 2012. On the other hand, in the same period factoring companies’ claims from factoring transactions increased from TRY 16.3 billion to TRY 44.6 billion, with a 273% increase in the 2012-2020 period.

Box 45.1. SMEs in Turkey

The regulation on the SME definition entered into force on 18 November 2005 and was amended on 24 June 2018. According to that regulation, an SME is an economic entity employing less than 250 persons and having an annual turnover or an annual balance sheet that does not exceed TRY 125 million. The characteristics of micro, small and medium enterprises are illustrated below.

Table 45.9. Definition of SMEs used in Turkey's scoreboard

	Micro Enterprise	Small Enterprise	Medium Enterprise
Employees	< 10	< 50	< 250
Annual turnover	= TRY 3 million	= TRY 25 million	= TRY 125 million
Annual balance sheet	= TRY 3million	= TRY 25 million	= TRY 125 million

Source: Regulation on the SME definition, 24 June 2018

Figure 45.1. Trends in SME and entrepreneurship finance in Turkey

Source: See Table 45.10.

Statlink

Table 45.10. Definitions and sources of indicators for Turkey’s scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	Bank and financial institution loans to SMEs, amount outstanding (stocks) at the end of period; by firm size using the national definition of SME. Includes non-employer firm data, overdrafts, business mortgages and business cards. Excludes lines of credit, leasing and factoring.	Supply side data from financial institutions, consolidated data from Turkish Banking Regulation and Supervision Agency (BDDK)
Outstanding business loans, total	Bank and financial institution business loans to all non-financial enterprises, amount outstanding (stocks).	Supply side data, consolidated data from Turkish Banking Regulation and Supervision Agency (BDDK)
Government loan guarantees, SMEs	Guarantees available to banks and financial institutions, outstanding.	Supply side data, consolidated data from Credit Guarantee Fund (KGF) and Ministry of Treasury and Finance
Government guaranteed loans, SMEs	Credit volume supported by loan guarantees.	Credit Guarantee Fund (KGF) and Ministry of Treasury and Finance
Direct government loans, SMEs	The amount of loans acquired from international financial institutions (IFIs) under Treasury guarantee which are transferred by state banks to the SMEs for investment financing.	Supply side data, consolidated data from Ministry of Treasury and Finance and KGF.
Non-performing loans, total	Loans that are overdue by more than 90 days out of total loans.	Supply side data, consolidated data from Turkish Banking Regulation and Supervision Agency (BDDK)
Non-performing loans, SMEs	SME non-performing loans out of total SME loans.	Supply side data, consolidated data from Turkish Banking Regulation and Supervision Agency (BDDK)
Equity
Venture and growth capital	Seed, start up, early stage and expansion capital (including buy outs, turnarounds and replacements of venture capital investment companies).	Administrative data from Capital Markets Board of Turkey (SPK)
Leasing and hire purchases	Claims of leasing institutions	Turkish Banking Regulation and Supervision Agency (BDDK)
Factoring and invoicing	Claims of factoring institutions	Turkish Banking Regulation and Supervision Agency (BDDK)
Other
Bankruptcies, total	Number of enterprises ruled bankrupt. All enterprises.	The Union of Chambers and Commodity Exchanges of Turkey (TOBB)

References

Capital Market Law, Official Gazette, No: 28513, 30.12.2012, http://www.cmb.gov.tr/Sayfa/Dosya/87.Decree of the Council of Ministers on Transferring Resources to the Fund of Funds, Official Gazette, Number: 28941, 14.03.2014.

KOSGEB Activity Report (2020), KOSGEB

Regulation Regarding Angel Investment, Official Gazette, Number: 28560, 15.02.2013.

Regulation Regarding Venture Capital/ Private Equity Investment Companies (III-48.3), Official Gazette, Number: 28790, 09.10.2013.

Regulation Regarding Venture Capital/ Private Equity Funds (III-52.4), Official Gazette, Number: 28870, 02.01.2014.

TOBB, The Union of Chambers and Commodity exchanges of Turkey, Company Establishment and Liquidation Statistics.