Turkish Banks at the Forefront of MSME Lending, but Gaps Remain

In Turkey almost all businesses are micro, small or medium-sized enterprises (MSME), and only 0.1 percent of businesses are large firms. MSME lending constitutes a significant share of banks’ lending – it was 26% of the total banks’ portfolio in 2013, including 7% extended to microenterprises, despite the naturally much smaller average loan amounts. There are several barriers preventing Turkish banks from increasing their lending to microenterprises, despite an interest in reaching further down market. One such barrier is the high level of informality and semi-formality in the micro-segment of the Turkish MSME sector. Turkey has no dedicated microfinance sector of a significant scale.