Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) EUROPE AND CENTRAL ASIA | Turkey | Financial and Private Sector Development Global Practice | IBRD/IDA | Financial Intermediary Loan | FY 2010 | Seq No: 8 | ARCHIVED on 31-Mar-2015 | ISR18572 | Implementing Agencies: Key Dates Key Project Dates Board Approval date:15-Jun-2010 Effectiveness Date:12-Aug-2010 Planned Mid Term Review Date:-- Actual Mid-Term Review Date:-- Original Closing Date:30-Sep-2014 Revised Closing Date:31-Mar-2015 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project's main development objective is to broaden and deepen the access of Turkish small and medium enterprises to medium- and long-term finance, with a view to ultimately contributing to an expansion of productive activities and job creation. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Kalkinma Bank : A US$ 100 million wholesale credit line to Kalkinma Bank to be intermediated through private retail banks/leasing:(Cost $100.00 M) Ziraat Bank: A US$200 million credit line to be intermediated through ZiraatBank as a retail bank directly to SMEs.:(Cost $200.00 M) Vakif Bank: A US$200 million credit line to be intermediated through VakıfBank as a retail bank directly to SMEs.:(Cost $200.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Satisfactory  Satisfactory Overall Implementation Progress (IP)  Moderately Satisfactory  Moderately Satisfactory Overall Risk Rating  Low  Low 3/31/2015 Page 1 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Implementation Status and Key Decisions By March 30, 2015 loan is fully disbursed (US $ 500 million). Kalkinma Bank (TKB) has fully disbursed its US$ 100 million portion in 2012 and TKB Loan Agreement was closed in January 2015 after the end of the grace period. Ziraat Bank and Vakif Bank have fully disbursed their portions (US $ 200 million each) in March 2015. The project has been implemented satisfactorily in terms of development impact and the fiduciary and safeguards perspectives. All the PDO target indicators are met based on available data at the closing date. All the borrowers succeeded in exceeding the regional disbursement ratios. TKB, Vakif Bank and Ziraat Bank has extended 26.2, 20.5 and 16.5 percent of their loan portfolios respectively in the underserved regions against their respective requirements of 25, 15 and 15 percent. In addition, project has provided medium to long-term finance to the beneficiary SMEs. Weighted average maturity is 55 months which is significantly above at least 24 months maturity requirement set in the project. Banks extended loans up to 10 years. Medium to long term maturities is considerably scarce in Turkish financial sector - especially for SMEs. Around 35 percent of all loans has less than 1 year total maturity. 55 months is significantly higher than average loan maturities in Turkish banking sector. Furthermore banks provided both fixed rate and TL, Euro and USD denominated loans in line with SMEs need. Banks managed the interest rate and exchange rate risks in their balance sheets and benefited from swap arrangements (interest rate and currency) provided by the World Bank . Around 27 percent of the loan is extended in Turkish Lira. According to end 2014 progress reports from the borrowers, project has created an estimated 7126 jobs while preserving around 5000 estimated jobs. Similarly sales data of all firms has increased in total. Implementation pace has increased significantly in the recent months after the restructuring in late 2014. 722 SMEs have been financed under the project, with most companies coming from the manufacturing sector. Maturities vary from 24 to 120 months, with an average of 50 months. Sub- loans have been extended both in foreign currency and Turkish Lira (27 percent TL, 18 percent Euro and 55 percent US$). The proceeds for a large proportion of the sub-loans (around 68 percent) are being used for working capital purposes. Disbursements to underserved areas have reached to 20 percent as compared to the project requirement of 17 percent (25 percent for TKB, and 15 percent for Ziraat and Vakif Bank each). All the banks exceeded their respective regional disbursement targets. The project exceeded expectations as measured by the PDO indicator on; (i) number of SMEs financed under the project (722 actual vesus 200 target), (ii) increased or preservation of employment and sales in the beneficiary SMEs, (iii) share of finance provided to underserved regions (20 percent), (iv) quality of portfolio (0.53 % NPL) and (v) number of financial institutions participating in the project (6). A loan restructuring was completed in September 2014 to improve the slow implementation progress, and to give additional time for successful completion of the project. A level 2 loan restructuring was agreed with the borrowers, Ziraat Bank (Loan No 7030-TU) and Vakif Bank (Loan No 7040- TU) to address the slow disbursements mainly due to the issues in disbursing to the underserved regions. By the restructuring following modifications were made to the Loan No 7030-TU and Loan No 7040-TU: (i) Extension of the closing date of both loans by six months from September 30, 2014 to March 31, 2015; (ii) Revision of legal covenants related to the disbursement requirement in priority regions, reducing it from 25 percent of total disbursements to 15 percent; (iii) Cancelation of legal covenants regarding financial requirements for priority regions (debt to equity (D/E) and the debt service coverage ratio (DSCR)), relying instead on the banks’ own financial evaluation and scoring systems. (iv) Revision of the target value of the project development objective level indicator “Share of finance provided to priority regions” in accordance with point (ii) above; and (v) Modification of the disbursement estimates due to extension of the closing date. Risks Systematic Operations Risk-rating Tool 3/31/2015 Page 2 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  Moderate  Moderate Macroeconomic  --  Moderate  Moderate Sector Strategies and Policies  --  Low  Low Technical Design of Project or Program  --  Low  Low Institutional Capacity for Implementation and Sustainability  --  Moderate  Moderate Fiduciary  --  Low  Low Environment and Social  --  Low  Low Stakeholders  --  Low  Low Other  --  --  -- Overall  --  Low  Low Results Project Development Objective Indicators PHINDPDOTBL  Number of Participating Financial Institutions (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 6.00 6.00 5.00 Date 06-Jul-2010 01-Jun-2014 15-Mar-2015 30-Sep-2014 PHINDPDOTBL  Quality of Project Financed Portfolio (NPL Ratio) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1.98 0.53 7.00 Date 06-Jul-2010 01-Jun-2014 15-Mar-2015 31-Mar-2015 Comments End target is <7 PHINDPDOTBL  Share of Finance Provided to Underserved Regions (Percentage, Custom) 3/31/2015 Page 3 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 13.39 20.00 17.00 Date 06-Jul-2010 01-Jun-2014 15-Mar-2015 31-Mar-2015 Comments Share of finance provided to underserved regions was 25 percent for all borrowers originally. A project restructuring in 2014 reduced it to 15 percent for Ziraat Bank and Vakif Bank. TKB has already disbursed around 26 percent of its portfolio in underserved regions and met the target in 2012, therefore no changes made for TKB during the restructuring. On average underserved region disbursement requirement was reduced to 17 percent after the restructuring. PHINDPDOTBL  Increase in Sale in Beneficiary SMEs (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 793658368.00 686915442.00 -- Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 Comments Data is reported annually and comes with a lag. End target is >0 PHINDPDOTBL  Increase in Employment in Beneficiary SMEs (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 8150.00 7126.00 -- Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 Comments Data is reported annually and comes with a lag. End target is >0 PHINDPDOTBL  Number of SME Beneficiaries Financed Under the Project (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 547.00 722.00 200.00 3/31/2015 Page 4 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Date 06-Jul-2010 01-Jun-2014 15-Mar-2015 31-Mar-2015 Overall Comments Intermediate Results Indicators PHINDIRITBL  Return on Assets/Equity (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 1.98 1.20 1.11 -- Date 06-Jul-2010 01-Jun-2014 01-Jun-2014 31-Mar-2015 PHINDIRITBL  Return on Assets/Equity (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 3.10 1.80 1.80 -- Date 06-Jul-2010 20-Jun-2013 31-Dec-2014 31-Mar-2015 PHINDIRITBL  Return on Assets/Equity (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 1.32 1.30 -- Date 06-Jul-2010 20-Jun-2013 31-Dec-2013 31-Mar-2015 3/31/2015 Page 5 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) PHINDIRITBL  Portfolio at Risk - SME (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 6.10 3.90 3.70 -- Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 PHINDIRITBL  Portfolio at Risk - SME (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 2.30 2.20 2.00 -- Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 PHINDIRITBL  Portfolio at Risk - SME (Percentage, Core) Baseline Actual (Previous) Actual (Current) End Target Value 10.80 3.81 3.81 -- Date 06-Jul-2010 01-Jun-2014 01-Jun-2014 31-Mar-2015 PHINDIRITBL  Outstanding SME Loan Portfolio (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 2800000000.00 10769000000.00 11263000000.00 3000000000.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 3/31/2015 Page 6 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) PHINDIRITBL  Outstanding SME Loan Portfolio (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 2358000000.00 16247330796.00 16567000000.00 2558000000.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 PHINDIRITBL  Outstanding SME Loan Portfolio (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 316000000.00 774000000.00 813000000.00 400000000.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 PHINDIRITBL  No of active loan accounts -SME (Number, Core) Baseline Actual (Previous) Actual (Current) End Target Value 40000.00 222509.00 263504.00 40075.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 PHINDIRITBL  No of active loan accounts -SME (Number, Core) Baseline Actual (Previous) Actual (Current) End Target Value 92119.00 1816485.00 1810821.00 92195.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 3/31/2015 Page 7 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) PHINDIRITBL  No of active loan accounts -SME (Number, Core) Baseline Actual (Previous) Actual (Current) End Target Value 530.00 180.00 179.00 580.00 Date 06-Jul-2010 01-Jun-2014 01-Mar-2015 31-Mar-2015 PHINDIRITBL  PFI Performance (Compliance with Prudential Norms) / (a)Garanti Bank, (b)Deniz Bank (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a)compliant, (a)compliant, (a)compliant, Value -- (b)compliant (b)compliant (b)compliant, Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 PHINDIRITBL  Volume of Bank Support: Lines of Credit - SME (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 165.50 200.00 199.50 Date 06-Jul-2010 01-Jun-2014 30-Mar-2015 31-Mar-2015 PHINDIRITBL  Volume of Bank Support: Lines of Credit - SME (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 126.40 200.00 199.50 Date 06-Jul-2010 01-Jun-2014 30-Mar-2015 31-Mar-2015 3/31/2015 Page 8 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) PHINDIRITBL  Volume of Bank Support: Lines of Credit - SME (Amount(USD), Core) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 100.00 100.00 99.75 Date -- 01-Jun-2014 30-Mar-2015 31-Mar-2015 PHINDIRITBL  Volume of Bank Support (%) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 78.40 100.00 100.00 Date 06-Jul-2010 01-Jun-2014 30-Mar-2015 31-Mar-2015 PHINDIRITBL  Borrower Performance (Compliance with Prudential Norms) / (a)Ziraat Bank, (b)Vakif Bank, (c)Kalkinma Bank (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target (a)compliant, (a)compliant, (a)compliant, Value -- (b)compliant, (b)compliant, (b)compliant, (c)compliant (c)compliant (c)compliant Date 06-Jul-2010 01-Jun-2014 31-Dec-2014 31-Mar-2015 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P118308 IBRD-79020 Closed USD 100.00 100.00 0.00 100.00 0.00 100% P118308 IBRD-79030 Effective USD 200.00 200.00 0.00 200.00 0.00 100% P118308 IBRD-79040 Effective USD 200.00 200.00 0.00 200.00 0.00 100% 3/31/2015 Page 9 of 10 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Second Turkey Access to Finance for Small and Medium Enterprises Project (P118308) Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P118308 IBRD-79020 Closed 15-Jun-2010 06-Jul-2010 19-Oct-2010 30-Sep-2014 30-Sep-2014 P118308 IBRD-79030 Effective 15-Jun-2010 06-Jul-2010 12-Aug-2010 30-Sep-2014 31-Mar-2015 P118308 IBRD-79040 Effective 15-Jun-2010 06-Jul-2010 12-Aug-2010 30-Sep-2014 31-Mar-2015 Cumulative Disbursements Restructuring History Level 2 Approved on 16-Sep-2014 Related Project(s) There are no related projects. 3/31/2015 Page 10 of 10 Public Disclosure Copy