DEVELOPMENT OF FACTORING MARKET IN TURKEY
by
Rengin Ekmekçioğlu
CEO of Yapı Kredi Faktoring A.Ş.

President of Turkish Faktoring Association

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


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

FACTORING IN TURKEY
1988

FCI initiates Factoring in Turkey.

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.”

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

1

Turkish Factoring Association


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

FACTORING IN TURKEY
1995

Establishment of Turkish Factoring Association.

1995

Growth: Many players in the market.

1999

Increasing Export Factoring Volumes.

2002


Turkey becames number two in Export Factoring among FCI
members.

2002

Turkish Eximbank vs. Export Factoring

2003

New Factoring Law?

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

2

Turkish Factoring Association


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

WORLD FACTORING TURNOVER (in millions of usd)
787

734

498

541


529

33

31
1998

575

555

2000

2001

INTERNATIONAL

2002

DOMESTIC

Growth of world factoring volume
1999
2000
2001
9%
4%
9%


FCI STATISTICS 2002

Rengin EKMEKÇİOĞLU

648

54

43

42

1999

605

597

3

TOTAL

2002
21%

Turkish Factoring Association


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


FCI FACTORING TURNOVER (in millions of usd)

219,656

225,948

203,887

245,353

277,122
255,404

21,718

1998

1999

2000

28,927

2001

INTERNATIONAL
1999
12%

FCI STATISTICS 2002


Rengin EKMEKÇİOĞLU

4

355,263

262,566

22,614

19,405

15,769

285,180

326,336

2002

DOMESTIC

Growth of FCI factoring volume
2000
2001
13%
3%

TOTAL

2002
25%

Turkish Factoring Association

3


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

900,000

FACTORING TURNOVER OF FCI AND WORLD
(in millions of usd)

800,000
787,249

700,000
574,727
600,000

596,662

648,175

529,515

500,000
400,000

300,000

277,122

245,353

285,180

355,263

219,656

200,000
100,000
0
1998

1999

2000

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


Rengin EKMEKÇİOĞLU

5

2001

2002

WORLD FACTORING TURNOVER

2002
%45
%0.6
%1

FCI FACTORING TURNOVER

Turkish Factoring Association


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

INTERNATIONAL FACTORING TURNOVER OF
FCI AND TURKEY (in millions of usd)
35,000

28,927

30,000

25,000

19,405

20,000
15,000
10,000
5,000
0

21,718

FCI

22,614

TURKEY
15,769
750
1998

748

921

990

1999

2000


2001

1,260
2002

COMPARED FACTORING TURNOVER
INT. TURKEY /INT. FCI

Rengin EKMEKÇİOĞLU

1998
%5

1999 2000 2001 2002
%4
%4
%4
%4

6

Turkish Factoring Association


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

FACTORING TURNOVER IN TURKEY (in millions of usd)
5,943


5,266
4,750

4,518

4,673

5,022

4,000

3,690

3,413

2,700

750

921

748

1998

1999

1,260

990


2000

2001

INTERNATIONAL

2002

DOMESTIC

TOTAL

Growth of factoring volume in Turkey
1999
2000
2001
2002
11%
13%
- 38%
27%

Turkish Factoring Association Statistics
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

7

Turkish Factoring Association



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

FACTORING TURNOVER IN TURKEY
(in millions of usd)
7,000
6,000
5,000
4,000

5,943

5,266

4,673

4,750
3,690

3,000
2,000
1,000
0
1998

1999

2000


2001

2002

Turkish Factoring Association Statistics
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

8

Turkish Factoring Association


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

Cross country comparison in 2002 (in millions of usd)
Country
Total
International International / Total
United Kingdom
168,741
6,363
4%
Italy
141,750
5,250
4%
U.S.A.
113,925
4,200

4%
France
71,400
5,775
8%
Japan
52,899
635
1%
Spain
33,145
742
2%
Portugal
11,918
368
3%
Brazil
11,582
32
0%
Australia
10,003
68
1%
Finland
9,520
286
3%
Taiwan

8,988
2,625
29%
Turkey
4,673
1,260
27%
Greece
2,835
210
7%
FCI STATISTICS 2002
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

9

Turkish Factoring Association


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

Comparison of selected countries export factoring turnover with
TURKEY (2002)
COUNTRY
Hong Kong
Taiwan
Turkey
China
Mexico


EXPORT/TOTAL FACTORING VOLUME
32%
30%
27%
16%
3%

FCI STATISTICS 2002
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

10

Turkish Factoring Association


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

ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE
ESTABLISMENT OF THE TURKISH FACTORING ASSOCCIATION
1.

Preparation of a uniform standart factoring agreement.

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

11

Turkish Factoring Association


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

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.

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

12

Turkish Factoring Association


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

ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE
ESTABLISMENT OF THE TURKISH FACTORING ASSOCCIATION
9.

Conducting a publicity advertisement campaign.

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

13

Turkish Factoring Association


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

Turkish Factoring Association share in the market (in millions of TL)
Association
Market Share
Total Market
Members
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 Statistics
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

14

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

15

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

16

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

17


Turkish Factoring Association


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

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 (nonrecourse). 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.

Credit Insurance
International Transactions
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.
Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU


18

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

19

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

20

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

21

Turkish Factoring Association


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

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.

Rengin EKMEKÇİOĞLU

Rengin EKMEKÇİOĞLU

22

Turkish Factoring Association


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

WHAT IS THE
FUTURE OF FACTORING
INDUSTRY
IN
TURKEY?

Rengin EKMEKÇİOĞLU
Rengin EKMEKÇİOĞLU

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Turkish Factoring Association