The Collateral Problem in Participation Finance Is Being Solved: Access to Financing Will Become Easier with KFK

How will the Katılım Finans Kefalet Company, whose establishment was recently announced, contribute to the participation finance sector? Stating that the collateral problem will be eliminated with the company to be established, TKBB Chairman of the Board Osman Çelik said that SMEs' access to financing will become easier with the new company.

 

 

The participation finance sector entered 2023 at a fast pace. The Presidential Decision on the Treasury's Participation in Katılım Finans Kefalet AŞ entered into force upon publication in the Official Gazette. Accordingly, the Treasury will become a shareholder of Katılım Finans Kefalet AŞ, which is to be established, with a 4% stake corresponding to TL 24 million. Businesses operating in accordance with participation principles will be able to meet their collateral needs from the Katılım Finans Kefalet Company in the process of accessing financing.

Access to financing will become easier. The collateral problem is one of the biggest problems SMEs face in accessing financing. Businesses that cannot use financing because they cannot provide collateral despite their good creditworthiness are supported through the Treasury-backed guarantee system. With the Katılım Finans Kefalet company to be established, the aim is to eliminate the collateral problem for businesses with participation finance sensitivities as well.

How will the company to be established affect the participation finance sector, which closed 2022 with a market share of 8.3%? Speaking exclusively to DÜNYA, Osman Çelik, Chairman of the Board of the Participation Banks Association of Türkiye (TKBB), said that the Katılım Finans Kefalet company to be established emerged as a result of efforts to create the institutions and instruments the sector needs. Çelik said: “The company is important in terms of supporting its own ecosystem and customers.

The Katılım Finans Kefalet Company, in which our Ministry of Treasury and Finance will hold a 4% stake, will provide a solution through a guarantee mechanism to the problem of access to the collateral that participation finance sector customers need for production, trade and exports. With both its own equity and the support to be provided by the Treasury, our company will facilitate access to the financing needed especially by SMEs, in line with its purpose and strategy.”

Emphasizing that the company will accelerate the contributions of participation finance institutions to the real sector, TKBB Chairman Çelik said: “In this context, with an establishment capital of TL 600 million, we have taken an action in line with our growth strategy. We think it will also make an important contribution to the development of the newly established digital participation banks. We can say that the company will make an important contribution to the participation finance sector's market share reaching 15% in 2025.”

Stating that the participation finance system, which has a 40-year history in Türkiye, is on the verge of a major breakthrough for the coming period, Osman Çelik recalled that the Participation Finance Strategy Document was prepared in the last quarter of last year to accelerate this momentum. Çelik said: “With the implementation of the action plans in this strategy document, we foresee that it will reach a significant market share and that, on this occasion, our country will become the regional center of the participation finance ecosystem.”

2023 market share target in participation finance: 10.6%

Stating that as TKBB they acted in 2022 with the awareness that the development of the sector would make an important contribution to the national economy, TKBB Chairman Çelik said: “Our market share in the sector, which was 5% in 2017, reached 8.3% as of the end of 2022. With the increase in our market share, our total assets increased by 65.6% over the past year, approaching TL 1.2 trillion.

As of last year, our total number of branches increased by 5.2% to 1,379. Our number of employees increased by 4.2% to 17,868. While our share of the number of branches in the banking sector reached 12.5%, our share of the number of employees rose to 8.7%. In 2022, we again achieved growth above the sector. With digital participation banks joining the system, we aim to increase our market share to 10.6% next year.”

With IFC, Istanbul will become the participation finance center of the region

Stating that they believe the Istanbul Finance Center (IFC) will become a regional center in the short term and a global center in the medium term, Çelik said: “IFC will play an important role in increasing the share of participation finance in the sector. By bringing together impact investments, alternative finance areas such as social finance and green finance, and financial technologies within the participation finance sector, IFC will accelerate Istanbul's process of becoming a global participation finance center.

IFC will offer a unique platform that brings together all players in the financial sector, including international regulatory institutions, for participation banks and their customers seeking to seize opportunities in the rapidly growing interest-free finance needs. IFC will be a center of attraction for Islamic finance.”

 

Source: Dünya Newspaper, Birol Bozkurt