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FACTORING IN TURKEY

1988

FCI initiates Factoring in Turkey.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1988

First Factoring Operation within a Bank.

1990

First Factoring Company.

1992

First Foreign Investment in Factoring .

“ Heller + IFC+ Yapı Kredi + Interbank joint venture.”

1994

First Factoring Regulation.

Law-empowered Decree-no: 545 and the “Regulation

related to

the Principiles of Establishment and Operations

of factoring

Companies.”

FACTORING IN TURKEY

1995

Establishment of Turkish Factoring Association.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1999

Increasing Export Factoring Volumes.

2002

Turkey becames number two in Export Factoring

among FCI

members.

2003

New Factoring Law?

1995

Growth: Many players in the market.

2002

Turkish Eximbank vs. Export Factoring

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

WORLD FACTORING TURNOVER (in millions of usd)

734

605

555

541

498

787

597

648

575

529

1998

1999

2000

2001

2002

INTERNATIONAL

DOMESTIC

TOTAL

1999

2000

2001

2002

21%

Growth of world factoring volume

FCI STATISTICS 2002

Turkish Factoring
Association

World Bank Factoring Conference, Warsaw October 23-24, 2003

FCI FACTORING TURNOVER (in millions of usd)

28,927

22,614

21,718

19,405

15,769

326,336

262,566

255,404

225,948

203,887

277,122

245,353

285,180

355,263

219,656

1998

1999

2000

2001

2002

INTERNATIONAL

DOMESTIC

TOTAL

1999

2000

2001

2002

12%

13%

25%

Growth of FCI factoring volume

FCI STATISTICS 2002

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

World Bank Factoring Conference, Warsaw October 23-24, 2003

FACTORING TURNOVER OF FCI AND WORLD

(in millions of usd)

355,263

529,515

574,727

596,662

648,175

787,249

285,180

277,122

245,353

219,656

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1998

1999

2000

2001

2002

WORLD FACTORING TURNOVER

FCI FACTORING TURNOVER

FCI STATISTICS
2002

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

            COMPARED FACTORING TURNOVER
                                1998    1999    2000
2001   2002
FCI / WORLD           %41    %43    %46
%44    %45
TURKEY / WORLD  %0.9   %0.9   %1.0
%0.6   %0.6
TURKEY / FCI           %2      %2       %2     %1
     %1

World Bank Factoring Conference, Warsaw October 23-24, 2003

INTERNATIONAL FACTORING TURNOVER OF

FCI AND TURKEY (in millions of usd)

21,718

22,614

19,405

15,769

28,927

750

748

921

990

1,260

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1998

1999

2000

2001

2002

FCI
TURKEY

COMPARED FACTORING TURNOVER

                                           1998    1999    2000
2001   2002
INT. TURKEY /INT. FCI      %5      %4      %4      %4
%4

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

FACTORING TURNOVER IN TURKEY (in millions of usd)

990

5,943

1,260

921

748

750

3,413

2,700

4,518

4,000

5,022

4,673

3,690

4,750

5,266

1998

1999

2000

2001

2002

INTERNATIONAL

DOMESTIC

TOTAL

1999

2000

2001

2002

11%

13%

- 38%

27%

Growth of factoring volume in Turkey

Turkish Factoring Association
Statistics

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

FACTORING TURNOVER IN TURKEY

(in millions of usd)

4,673

3,690

5,943

5,266

4,750

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1998

1999

2000

2001

2002

Turkish Factoring Association
Statistics

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

Country

Total

International International / Total

United Kingdom

168,741

6,363

Italy

141,750

5,250

U.S.A.

113,925

4,200

France

71,400

5,775

J apan

52,899

635

Spain

33,145

742

Portugal

11,918

368

Brazil

11,582

Australia

10,003

Finland

9,520

286

Taiwan

8,988

2,625

29%

Turkey

4,673

1,260

27%

Greece

2,835

210

Cross country comparison in 2002 (in millions of usd)

FCI STATISTICS 2002

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

EXPORT/TOTAL FACTORING VOLUME

30%

COUNTRY

32%

16%

Hong Kong

China

Turkey

Mexico

Comparison of selected countries export factoring turnover with

TURKEY (2002)

Taiwan

27%

FCI STATISTICS 2002

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
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ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE

ESTABLISMENT OF THE TURKISH FACTORING

ASSOCCIATION

1. Preparation of a uniform standart factoring

agreement.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

2. Having factoring risks included in Central Bank Risk

Centralization system.

3. Obtaining Resource Utilization Support Fund (KKDF) exemption

over the foreign funds provided for export funding.

4. Issuance of a declaration about stamp duty, than having the

stamp duty law modified.

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ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE

ESTABLISMENT OF THE TURKISH FACTORING

ASSOCCIATION

5. Issuance of a declaration confirming that factoring companies are

financial institutions, in order not to implement the expense
limitation clauses of corporate tax law. (Corporate tax General
Declaration no: 54, dated:06.12.1996.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

6. Issuance of a declaration ensuring that banks should properly

follow the instructions of factoring companies while issuing F/X
Purchase Certificate. (DAB)

7. Drafting a law concerning factoring companies.

8. Preparation of Uniform Chart of Account.

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ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE

ESTABLISMENT OF THE TURKISH FACTORING

ASSOCCIATION

9. Conducting a publicity advertisement

campaign.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

10. Organizing seminars and symposiums.

11. Organizing training programs.

12. Construction of a web site for the association.

13. Continuous representation of the sector in all government

offices.

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Association

Members

Total Market

Market Share

of T.F.A.

2001 Assets

1.064.533.782

1.522.530.313

70%

2001 Incomes

335.933.964

429.783.428

78%

2002/09 Domestic volume

2.812.099.710

3.335.442.297

84%

2002/09 International volume

1.043.197.260

1.074.790.326

97%

2002/09 Total volume

3.855.296.790

4.410.232.623

87%

Turkish Factoring Association share in the market (in millions of TL)

Turkish Factoring Association
Statistics

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
4

PROBLEMS OF FACTORING SECTOR IN TURKEY

1. Need for new factoring law

Factoring transactions are being carried out within the frame of law-empowered
Decree  No,  545  About  Borrowing  Money  Transactions  and  Regulations  based
upon this decree. This Decree affects the sector negatively from two aspects.

Since,  Decree  No.  545  is  also  arranging  simple  money  lenders,  factoring
transactions  based  upon  account  receivables  sourced  by  invoiced  sales  are
confused with borrowing transactions and as a result of it the factoring image
is negatively influenced.

On the other hand, since factoring is perceived as a borrowing transaction it is
being  defined  in  a  form  weighted  with  a  financial  aspect.  Whereas  function  of
the  service given,  another  words,  services  such  as debt collection, receivables
management, protection against credit risks are the most important feature of
the  factoring  function  have  been  neglected.  As  a  consequence  of  this  special
feature  factoring  is  different  from  simple  money  lending,  for  this  reason  the
name  of  financing  supplied  is  “pre-payment”.  This  situation  shows  that  a  new
definition  is  required  for  factoring  to  include  all  the  functions  contained
wherein.

A new law to be passed for factoring can eliminate all these problems.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

PROBLEMS OF FACTORING SECTOR IN TURKEY

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PROBLEMS OF FACTORING SECTOR IN TURKEY

2. Banking and Insuranc Transaction

Tax

Within  the  current  legal  framework  possible  financing  sources  to  be  used  by
factoring companies consist of their own capitals and loans to be obtained from
domestic and international banks. Factoring companies are paying 5% BITT for
domestic  bank  loans  and  5%  BITT  applies  when  this  source  is  used  by  their
clients.  While  this  situation  increase  financing  cost  from  one  side,  from  the
other  side  an  unfair  competition  arises  because      banks  that  are  allowed  to
make factoring transaction have the opportunity to pay the same tax as 1%. In
order  to  offer  funds  with  more  convenient  cost  to  SME’s  and  foster  their
production,  lowering  BITT  rates  on  bank  loan  transactions  of  factoring
companies, to the rate of 1% as in the loan transactions between banks, will at
least eliminate the existing unfair competition.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
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PROBLEMS OF FACTORING SECTOR IN TURKEY

3. Provisions

One of the most important risks of factoring sector is the situation of late back
payment  or  non-payment  and/or  impossibility  of  indemnifying      guarantees
given for  debtors. There is no  judicial  measure existing to lessen the risk that
the factoring sector encounters.  Banks being together within the finance sector
have the possibility to separate provision for loans unreturned according to the
Banking  Law,  and  to  deduct  these  provisions  from  their  taxable  amount.  For
factoring  companies  making  transactions  of  the  same  nature,  a  new  law,  can
ensure provisions for doubtful receivables to be entered as expense acceptable
by tax laws, which in turn create equality between the institutions.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
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PROBLEMS OF FACTORING SECTOR IN TURKEY

4. Credit Insurance

Domestic Transactions

Credit insurance has recently started in Turkey. But, according to regulation on
this  subject,  factoring  companies  are  not  entitled  to  participate  in  the  credit
insurance  policies  as  third  party.  This  condition  prevents  to  carry  out
guaranteed  domestic  factoring  transactions  (non-recourse).  In  case      this
problem  is  solved,  factoring  companies,  as  in  the  EU  countries,  will  have  the
possibility  to  give  domestic  guaranteed  factoring  services  and  will  lead  to  the
development of the sector.

One  of  the  most  important  legs  of  export  factoring  transactions  is  their
correspondent  abroad  guaranteeing  export  payments.  Correspondents  are
generally factoring companies in the country of the importer. A part of exports
of  Turkey  is  being  done  to  the  countries  where  factoring  techniques  are  not
started  to  apply  yet  such  as  new  Turkic  Republics  of  the  former  Soviet  Union
and  this  situation  impedes  making  export  factoring      to  these  countries.  To
include  factoring  companies  to  Eximbank  export  insurance  will  be  the  only
reasonable solution of this problem.

Credit Insurance
International Transactions

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
8

PROBLEMS OF FACTORING SECTOR IN TURKEY

5. Risk Evaluation

Information regarding bad checks and protested bills are very important   from
the  point  of  financial  risk  evaluation.  Factoring  companies  are  not  able  to
benefit  from  this  information  because  of  the  word  only  “banks”  existing  in
related  laws.  By  changing  related  laws,  to  ensure  factoring  companies,  to
benefit from this information will be useful.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

1
9

PROBLEMS OF FACTORING SECTOR IN TURKEY

6. Invoice

According to today’s legal substructure, the basis of factoring transactions are
current and expected receivables rising from sales of goods and services based
on  invoices  or  other  evidencing  documents.  Within  this  frame,  invoices  and
other  evidencing  documents  are  a  main  document  that  supports  factoring.
However, according to current laws, because of evidencing and proof power of
the  invoice  solely,  from  the  aspect  of  collecting  credit  borne  by  whereof,  at
judicial  authorities,  depends  upon  decision  to  be  given  at  the  end  of  long
lasting  lawsuits,  factoring  companies  are  obliged  to  take  a  bank  check  or
commercial  bond  as  means  of  payment  together  with  invoice  or  other
evidencing  document  upon  which  the  credit  alienated  is  based.  This  situation,
additionally,  causes  factoring  to  be  perceived  as  borrowing  money  to  provide
finance  against  bank  check  and  commercial  bond  and  thus  prevents
development of real factoring. Solution of the problem will be possible by legal
provisions to increase present validity of the invoice and to bring whereof to a
state  holding  a  legal  sanction,  as  in  the  bank  check  and  commercial  bond,  in
case of the debt is not paid. In case that such a legal arrangement is not proper
for all invoices, making the said arrangement only for invoices,  being support
of a credit alienated with the purpose of financing, will convey the problem to a
solution too.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

2
0

PROBLEMS OF FACTORING SECTOR IN TURKEY

7. Uniform Chart of Accounts

There  is  no  uniform  chart  of  accounts  that  is  obligatory  to  apply  to  factoring
companies.  Since  this  situation  prevents  standardization  in  the  sector,
Factoring Association and Independent Audit Association formed a study group
to prepare a uniform chart of accounts for factoring companies and this group
has  formed  a  draft  of  chart  of  accounts  at  the  end  of  a  long  lasting  study.
Through  negotiations  done  with  the  Treasury  Undersecretary  the  problem  is
being tried to reach a solution.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

2
1

PROBLEMS OF FACTORING SECTOR IN TURKEY

8. Benefiting From Interbank

Factoring  companies  are  not  able  to  benefit  from  Interbank  funding  systems.
However,  for  the  said  companies  having  no possibility other than bank loan to
obtain funds within the frame of legal substructure of present days, benefiting
from  Interbank  would  be  an  important  factor  to  support  development  of
factoring.  Additionally,  offering  excess  fund  existing  at  factoring companies  to
the finance market by that way will be useful for the said marked and this is an
issue not to be undervalued at every instant.

World Bank Factoring Conference, Warsaw October 23-24, 2003

Rengin EKMEKÇİOĞLU

Turkish Factoring
Association

Rengin EKMEKÇİOĞLU

2
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