The Asian Infrastructure Investment Bank’s (AIIB) Board of Directors has approved loans totaling USD500 million to two development banks in Türkiye, backed by a government guarantee, to alleviate liquidity constraints faced by Turkish companies in infrastructure and other productive sectors as a result of the COVID-19 pandemic.
Türkiye’s private sector has been severely impacted by the pandemic due to lockdown measures, supply chain disruptions and the global downturn. This is especially the case among small and medium-sized enterprises (SMEs), which employ approximately 74 percent of the country’s workforce. Companies are facing revenue and job losses as well as funding difficulties. The crisis is also expected to aggravate financial institutions’ funding and liquidity vulnerabilities, leaving financing gaps to address the liquidity constraints among businesses.
The Türkiye COVID-19 Credit Line Project, funded by AIIB’s COVID-19 Crisis Recovery Facility (CRF), provides sovereign-backed short-term credit lines to Türkiye Kalkınma ve Yatırım Bankası (TKYB) and Türkiye Sınai Kalkınma Bankası (TSKB). The two borrowers will on-lend the loans to corporates and SMEs in infrastructure sectors, including transport, energy, water, sustainable cities, healthcare, information and communications technologies and other eligible productive sectors. The credit lines will provide liquidity for payment of operating expenses, short-term assets (inventories, trade receivables, etc.) and liabilities.
“By supporting Türkiye’s efforts to supply working capital to the real economy, the project will help increase access to vital liquidity and mitigate distress and supply chain disruptions at this challenging time,” said AIIB Vice President, Investment Operations, Konstantin Limitovskiy. “The financing will improve the resilience of small and medium companies which are the foundation of the Turkish economy and crucial for economic recovery and long-term sustainable development.”
TKYB General Manager İbrahim Öztop said: “We would like to thank AIIB for its support at this time of uncertainty and also for its trust in TKYB, which we highly appreciate. We believe that the additional resources secured by our Bank from development finance institutions like AIIB will contribute towards Türkiye’s domestic efforts to support the country’s production potential and offset the negative effects the COVID-19 outbreak is having on economic activity and employment. This credit line will be extended both to large and small enterprises but will particularly benefit SMEs, which are the backbone of our economy and currently suffer from revenue losses and financial difficulties due to the pandemic.”
TSKB Acting CEO Ms Ece Börü said: “TSKB has been serving under all circumstances for 70 years in order to ensure our country attains its goals in its sustainable development journey. The pandemic has inflicted its effects on our economy, as it has done all over the world. The loan package approved by AIIB is going to make a significant contribution to allowing development banking to create solutions for short-term problems so as not to miss long term targets while increasing resilience. Furthermore, we welcome the exciting opportunity to use this loan facility as a means to intensify our existing cooperation with AIIB in the fields of renewable energy and sustainable infrastructure investments, which has continued since 2018. Inspired by this new loan agreement, we will continue to contribute to the sustainable economic development of our country while supporting the labor force and production supply chain.”
The two short-term loans comprise (1) USD300 million to TKYB covering direct on-lending and Apex on-lending to SME sub-borrowers through partner financial institutions and (2) USD200 million to TSKB covering direct on-lending.
Both TKYB and TSKB are existing AIIB clients. Previous projects are TKYB Renewable Energy and Energy Efficiency On-Lending Facility (2019) and TSKB Sustainable Energy and Infrastructure On-lending Facility (2018). TKYB is a state-owned development bank established in 1975 offering long-term finance for sustainable development and investment banking activities. TSKB is a private development and investment bank in Türkiye established in 1950 offering corporate lending, project finance, investment banking and advisory services to support the country's sustainable development.
The CRF, created as part of the coordinated international response to counter the COVID-19 crisis, has an initial size of USD5-10 billion to support AIIB members’ urgent economic, financial and public health financing needs. As of end-June 2020, AIIB has approved a total of 13 projects amounting to over USD5.5 billion to support 11 members to navigate the challenges caused by these highly uncertain times. AIIB is currently reviewing additional projects from its clients. Projects being proposed under the CRF can be found here.
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia. Headquartered in Beijing, we began operations in January 2016 and have now grown to 102 approved members worldwide. By investing in sustainable infrastructure and other productive sectors in Asia and beyond, we will better connect people, services and markets that over time will impact the lives of billions and build a better future.