Strengthening Turkey’s Capital Bond Market

July 30, 2015

Turkey is diversifying and deepening its corporate bond market, with the help of the World Bank Group.

The port of Mersin on Turkey’s southern coast is the largest in the country and a key gateway for Turkish trade with the Middle East.

IFC-a member of the WBG exclusively focused on the private sector- recently served as an anchor investor in a multi-million dollar Eurobond that the international port issued. 

The move has encouraged others to invest as well, leading to even more activity at the port, and increased revenue for Turkey.

“We have completed a new major investment that shall now allow the biggest vessels to approach,” says Hamdi Akin, CEO of AKFEN Holding- one of Turkey’s top infrastructure investment holdings.

Mersin Port has “a major role in Turkish economy. It has no alternative in the region, and it's likely to remain so for a long time,” Akin says.

In addition to the port of Mersin, IFC acted as an anchor investor so that Turkey’s Şekerbank could issue covered bonds for small and medium enterprises. It was the first time such bonds had ever been issued to SMEs operating in the country.

“This is a fact around the world that 90-95 percent of the economy is basically composed of small medium sized companies, and they are all over the country and they are the back bone of the economic activities, so our business is to support those, says Şekerbank’s Executive Vice President, Zeki Önder.

“70 percent of our loans are for SMEs, farmers and agri-businesses within this,” he adds.

IFC’s support to Turkey is part of the World Bank Group’s strategy to help the country deepen and diversify its capital markets.

The strategy aims at further developing Turkey’s corporate bond market, by improving financial inclusion and long-term finance through capital markets, and by introducing diversified and financing solutions at the policy and implementation levels.

“One of the main products of these activities is the production of the new capital market’s law,” says Aysegul Eksit, Deputy President of Turkey’s Capital Markets Board.

She says that the new law was “drafted in line with the objectives of Istanbul financial center project with the aim of keeping up our regulations with market development needs and international standards and strengthening the competitiveness of the market and achieving EU harmonization.”

Despite significant financial market deepening over the past decade, Turkey’s banking assets amounted to just 114 percent of GDP by the end of 2014, considered relatively low total for a country of Turkey’s income level.

Economists say this and other challenges, including a limited availability of long-term finance in the country, have yet to be overcome for Turkey to achieve its full economic potential.