A cooperation agreement led by Borsa İstanbul signed to facilitate SMEs’ access to finance

As part of the Coordination Council for the Improvement of Investment Environment’s action plan to allow SMEs to benefit from capital markets instruments, a signing ceremony was held at Borsa İstanbul campus

In order to facilitate access to finance by Small and Medium Sized Enterprises (SME), a protocol was signed for the collective bond issue by SMEs for the first time in Turkey and Europe in cooperation with Turkish Capital Markets Association (TSPB), Ziraat Portföy Yönetimi A.Ş., T.C. Ziraat Bankası A.Ş., Ak Portföy Yönetimi A.Ş., Akbank T.A.Ş., Finans Portföy Yönetimi A.Ş. and Finansbank A.Ş. under the leadership of Borsa İstanbul.

Small and Medium Enterprises Development Organization (KOSGEB) and Credit Guarantee Fund (KGF) are working to be a part of the project. The signing ceremony for the cooperation protocol by the above mentioned banks, portfolio management companies and Turkish Capital Markets Association under Borsa İstanbul’s lead was held with the participation of Borsa İstanbul CEO Tuncay Dinç at Borsa İstanbul’s campus.

As part of the Coordination Council for the Improvement of Investment Environment’s action plan to allow SMEs to benefit from capital markets instruments, the bonds to be issued by SMEs that have been independently audited and rated as investable will be acquired by venture capital funds to be founded by portfolio investment companies.

In the first offering planned for 2015, approximately 100 SMEs are expected to raise funds of TL 300 to 500 million with a maturity of longer than one year, in addition to bank credit lines and without showing any guarantee.

Following the signing ceremony held with the participation of the top management of Borsa İstanbul and stakeholders, Borsa İstanbul Executive Vice President Dr. Mustafa Kemal Yılmaz said that they will ensure that each portfolio management company will bring together 50 to 100 SMEs and issue collective bonds.

Reminding the audience that Borsa İstanbul Debt Securities Market private sector bonds have boomed recently, Yılmaz said, “Despite the total amount of issues reaching nearly TL 30 billion last year, there were no SMEs among those issuers. The issues were minimum TL 50 to 100 million”.

Emphasizing that SMEs are in need of finance and want to use private sector bonds as well, Yılmaz said there are cost and investor interest issues for small sized offerings by SMEs.

Yılmaz said that, with this mechanism, portfolio management companies will bring together small sized private sector companies intending to issue bonds in a portfolio of around TL 300 to 500 million, and ensure raising finance on venture capital funds.

"Each SME will be able to offer bonds of TL 1 to 5 million"

Borsa İstanbul Listing and Private Market Group Manager Sertac Fuad Karaağaoğlu said that the signatories to the protocol will have the relevant SMEs independently audited and direct them to the Capital Markets Board and Borsa İstanbul through portfolio management companies.

Karaağaoğlu said that each SME will be able to issue bonds of TL 1 to 5 million, and that approved SMEs will realize the issues through the brokerage houses included in the project, venture capital investment funds will buy all the bonds issued, and fund participation certificates will be sold to qualified investors.

Karaağaoğlu added,

"There are four features that make the bonds attractive. First; all the SMEs are included in a single pool, therefore minimizing the risk of investing in the pool. Second; only SMEs that have received a positive grade from the independent auditor and qualified as investable can be included in the portfolio pool. Third, as you know, Credit Guarantee Fund (KGF) is working to be included in the project, and if KGF guarantees the whole portfolio, investor’s principal risk is revoked. And finally, Small and Medium Enterprises Development Organization (KOSGEB) is also working to take part in the project, which will minimize SMEs costs if KOSGEB compensates for independent audit, rating, brokerage, and the fees charged by the Capital Markets Board, Borsa İstanbul and MKK for registration.

Akbank Executive Vice President for SME banking Bülent Oğuz, Ziraat Portföy CEO Hakan Eryılmaz, Ak Portföy CEO Alp Keler, Finansbank Executive Vice President Metin Karabiber, Finansbank Vice President Erkin Aydın, Finansinvest CEO Özgür Güneri, Finans Portföy CEO Tunç Erdal, Ziraat Bankası Financial Markets Group Head Bilge Levent, Turkish Capital Markets Association (TSPB) Secretary General İlkay Arıkan and Assistant Secretary General İlker Savuran attended the meeting.