The European Investment Bank (EIB) has renewed its long-standing partnership with Sekerbank of Turkey with a EUR 100 million facility to support small and medium sized enterprises (SMEs) and mid-caps in several sectors, such as agribusiness, tourism and trade. The operation was announced this morning at a ceremony in Istanbul attended by representatives of the EIB and Sekerbank.

This loan will increase the availability of affordable long-term funding for SMEs contributing to  economic development and job creation in Turkey. It could also support the country’s progress in its EU accession negotiations as well as strengthening its economic competitiveness and trade opportunities.

Today’s announcement represents the second operation with Sekerbank, a financial intermediary focused on Turkish SMEs and micro companies. It will be structured as a loan substitute: the EIB subscribes to EUR 100 million of covered bonds issued under Sekerbank’s established SME covered bond programme.

This sort of partnership to support Turkey’s SME’s and micro companies can play an important role strengthening Turkey’s economic competitiveness and trade opportunities. The EIB Group has been very active in the Turkish covered bond market since 2011. Our participation in an average of two-three structured operations per year, has contributed to the development of the national financial market and is enabling other institutional and private investors to become more active in this field”, said Pim van Ballekom, the EIB Vice-President responsible for operations in Turkey.

Sekerbank’s Executive Vice President, Zeki Önder, commented: “Sekerbank is the first bank in the world that established an SME-backed Covered Bond programme. EIB was one of the first partners that supported this programme at the initial level back in 2011 with other IFIs and investors. This is a great support for sustainable financing and development of SMEs in Turkey. With its Community Banking strategy, Sekerbank is one of the most committed commercial banks to SMEs. Therefore we are grateful for the support of EIB to Sekerbank’s Covered Bond programme and the SME-Business in Turkey.

The use of covered bonds in Turkey is particularly valuable for a number of reasons:

  • The development of the domestic financial market: “Covered bonds” operations are still at the initial stage in Turkey. However, the participation of financial institutions like EIB and other international investors is highly beneficial for any Turkish commercial bank;
  • The EIB is offering a visible leveraging impact: with co-financing opportunities and more long-term funding will be available as EIB participation is attracting other investors.
  • Enhanced credit quality: the rating of the issue is much higher that the rating of the issuer and of the Republic of Turkey.

The EIB is already familiar with Sekerbank’s programme. In 2011 the EIB subscribed a covered bond issued by Sekerbank for an amount of EUR 50 million also aimed at supporting SMEs.