About hearing to the markets…

All we talk about is banks, all the time… but there are other credit institutions as well, such as Finance Companies, Factoring Companies, Factoring Companies and Leasing Companies. Although they are named “companies”, they are in fact credit institutions and they are governed by private law.

Any laws or regulations on these institutions have been introduced since the foundation of Turkish Republic because of “Banking Lobby” in Turkish parliament. They were operating according to the relevant legislation and plenty of “interpretations”. As banks used to see these institutions as their opponents, they didn’t want them to grow stronger despite the fact that they were senior partner in some of these institutions. However, credit institutions did not yield and proved they had a more competitive nature in many respects when compared to the banks. At last, law on ‘credit institutions’ was enacted a couple of years ago despite the crushing pressure, thus becoming an “Association”. Of course, some people worked very hard to ensure that these institutions could gather under the umbrella of one association. That was how this law was introduced.

Well, it’s better than nothing right? At least, they now have laws and they are on the road to become one of the fastest growing sectors in Turkey.

I’ve been in contact with non-bank financial institutions since the New Year; because I believe that they can better listen to markets than the banks. Here’s my impression: A significant part of financial institutions (without bank capital) will continue to reduce their balance sheets until March 31.Considering the rate of return of low-interest and long-term loans they’ve provided in the past, I’m sure they will be extra careful and picky.

Declaring “We can’t afford to lose even a dime this year”, the executives have already taken actions to restore efficiency, thanks to shrinking markets. It can be seen that they are reducing staff by 10% to 20% while shutting down their ineffective provincial organizations.

Act wisely when it comes to provide loans…”

When considered in the light of funds portfolio composition, banks are popular again because of severe decline in bills and bonds supply and the absence of new “roll-over”. The reason why they are asking about this is that they can be ready to offer more flexible interest rate options if the customers are strong and reliable, and if their export volume or foreign-currency earnings are higher than 50% of their total revenue. However, they seem determined not to offer loans whatsoever or howsoever to companies with collection problems.

As a matter of fact, it can be seen that there are three main reasons why companies are asking for loans: Investment, operating capital, debt-maturity mismatch. Even the most fearless financial institutions prefer to stay away from such companies whose debt-maturity mismatch remains above acceptable level.

In conclusion, I think credit institutions should provide loans in consideration of “national conscience and responsibilities” instead of pursuing profit like they did in the past ‘normal’ days, especially in a period where everyone’s having difficulties in accessing funds.

Companies with strong technological infrastructure that can create value-added while investing in human resources will obviously survive. So, I guess I would not be wrong in saying that these loans should be provided to those “in need” instead of “the needy”.

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