Growing SME credits may pose payback risks

ISTANBUL- Hürriyet Daily News

Workers assemble CDs at a small medium sized enterprise in Istanbul. Loan volumes to small players have yet to reach their potential, but could come with payback issues. DAILY NEWS photo, Hasan ALTINIŞIK

A rise in loans received by small and medium sized enterprises (SMEs) makes risk management more crucial for banks, according to Cenker Özhelvacı, regional general manager of Experian, a global firm providing services on the issue.

This matches the Turkish Bank’s Union’s (TBB) report this week warning about the global economic risks and hardships which are facing European lenders.

‘Loans in Turkey growing’
Loans in Turkey are growing steadily and the same goes for credits granted to SMEs, Özhelvacı told the Hürriyet Daily News. However, the loan volumes to these smaller players has yet to reach its potential, which poses growth opportunities. However, this also brings payback problems,” Özhelvacı said.

“Problems in SME loans are on the rise recently. The average remainder of SME credits is also increasing.”

The executive divides SMEs into three sections: micro, small and medium-sized companies.

The remainder of loans per company in these areas is 43,000 Turkish Liras, 160,000 liras and 580,000 liras, respectively. The number of micro sized loan-receivers constitutes 76 percent of the total.

The share of loans provided by participation banks in total credits granted to SMEs is also on the rise, Özhelvacı said.

The share of the SME credits granted by participation banks hit 9.4 percent in March 2012 from around 6 percent three years ago, according to Experian figures.

The growth of such banks, which promise services within Islamic rules, is also above the sector average. This includes the number of branches, teller machines and staff.

Looking at the increasing investments by the participation banks, Özhelvacı thinks they will become more active in the near future.

Experian, which is publicly traded on the London Stock Exchange’s FTSE 100 index, provides information, analytic tools and marketing services to sector companies and institutions in more than 80 countries.

Özhelvacı says the Turkey office provides services to eight out of 10 large banks in Turkey, three mobile and one landline operator, as well as the Credit Bureau (KKB), which helps banks share information about their customers.

The Turkey office and the affiliated Dubai bureau manages operations in 17 Middle East countries.
The total volume of SME credits in Turkey stands at around 175 billion liras.