PowerPoint Sunusu

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DEVELOPMENT OF FACTORING MARKET IN TURKEY
by Rengin Ekmekçioglu CEO of Yapi Kredi
Faktoring A.S.
President of Turkish Faktoring Association
World Bank Faktoring Conference, Warsaw October
23-24,2003
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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 Yapi 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 EKMEKÇIOGLU
Turkish Factoring Association
Rengin EKMEKÇIOGLU
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World Bank Factoring Conference, Warsaw October
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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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
23-24, 2003
FCI STATISTICS 2002
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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FCI STATISTICS 2002
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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
FCI STATISTICS 2002
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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COMPARED FACTORING TURNOVER
1998 1999 2000
2001 2002 INT. TURKEY /INT. FCI 5 4
4 4 4
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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Turkish Factoring Association Statistics
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
23-24, 2003
Turkish Factoring Association Statistics
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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FCI STATISTICS 2002
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
23-24, 2003
FCI STATISTICS 2002
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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ACTIVITIES THAT HAVE BEEN ACCOMPLISHED SINCE THE
ESTABLISMENT OF THE TURKISH FACTORING ASSOCCIATION

• Preparation of a uniform standart factoring
  agreement.

2. Having factoring risks included in Central
Bank Risk Centralization system.

• 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 EKMEKÇIOGLU
Turkish Factoring Association
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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, dated06.12.1996.
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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
23-24, 2003
Turkish Factoring Association Statistics
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Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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PROBLEMS OF FACTORING SECTOR IN TURKEY
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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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 SMEs 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 EKMEKÇIOGLU
Turkish Factoring Association
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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.
Rengin EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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.
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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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PROBLEMS OF FACTORING SECTOR IN TURKEY
6. Invoice
According to todays 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 EKMEKÇIOGLU
Turkish Factoring Association
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World Bank Factoring Conference, Warsaw October
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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 EKMEKÇIOGLU
Turkish Factoring Association
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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.
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Turkish Factoring Association
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WHAT IS THE FUTURE OF FACTORING INDUSTRY IN T
URKEY?
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Turkish Factoring Association
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