MICROFINANCE
SECTOR DEVELOPMENT
Project name:
Microfinance Sector Development - 00044002
Budget: USD 160,000
Timeline: March
2005-March 2006
What's the situation?
According to the latest 2002 Poverty Assessment carried out
by the State Institution of Statistics, food and non-food
poverty levels in Turkey are estimated as 1.35 % and 27 %
respectively. People who live under the poverty line usually
do not have access to financial services and have limited
access to basic social services. Supply of microfinance services
in Turkey is very limited, both in terms of the numbers of
people served and the range of services offered. The primary
suppliers of microfinance services currently are the state-owned
Banks, Halk Bank and Ziraat Bank. The legacy of directed and
subsidized credit programmes, however, has rationed the delivery
of credit through these channels, and resulted in supply-driven
products and services that do not respond well to the financial
service needs of clients. In contrast to most early stage
microfinance sectors, NGOs are virtually absent from the market
in Turkey. Several are experimenting with microcredit delivery
at this time, such as the Grameen Bank initiative in Diyarbakir
and Maya Enterprise for Microfinance. There is no clear policy
for facilitating the access of the un-banked majority to the
population as well as small business to the formal financial
sector. There is a continued lack of clarity in government
policies regarding microfinance and there is no common understanding
on microfinance among government, NGOs and private sector.
Microfinance type of activities are usually used in Turkey
as a tool for government incentives or a tool for income generating
activities.
Turkey's policy makers
and planners concede that there is still very little knowledge
in Turkey on micro finance and the possibilities micro finance
can provide for poverty reduction by expanding access of the
poor and the un-banked to financial services. Because of this
limited knowledge there has been little discussion or debate
within the government, private sector, and NGOs on microfinance
as an effective mechanism for addressing poverty in Turkey
and there are questions regarding the relevance and applicability
of microfinance in Turkey.
What's our mission?
The UNDP Country Office (CO) in Turkey has commissioned the
United Nations Capital Development Fund (UNCDF) to undertake
a sector assessment on microfinance. The above-referred Microfinance
Sector Assessment Report defines a sector development
approach as deepening the commercial financial system to ensure
sustainable access to financial services by un-banked businesses
and households.
A central feature of
UNDP's presence in Turkey is poverty reduction. UNDP's government
partners recently acknowledged the Assessment of Development
Results recognition of UNDP's programmatic and policy impact
on poverty-related issues. Government partners further supported
UNDP's continued and enhanced role in poverty related programming,
including the small and medium enterprise (SME) programmes
in South Eastern Anatolia and its increased emphasis on engaging
the private sector to achieve the Millenium Development Goals
(MDGs). With this high-level recognition and UNDP's priorities
in line with government priorities, UNDP focuses on achieving
the MDGs and Reducing Human Poverty through local poverty
initiatives, including micro-finance, and pro-poor policies
for achieving the MDGs.
In addition, the United
Nations General Assembly proclaimed the year 2005 as the International
Year of Microcredit to recognize microcredit's contribution
to poverty alleviation, further highlighting that people living
in poverty in rural and urban areas need access to microcredit
and microfinance that enhance their ability to increase income,
build assets, and mitigate vulnerability in times of hardship.
UNDP Turkey therefore starts activities to support dialogue
around microfinance and promote debate on how microfinance
can be used as a tool for poverty reduction.
How are we doing
this?
We will do this through:
1. Recognition
of the Year of Microcredit and
2. Supporting the Virtual Microfinance Information
Center.
The activities around
the Year of Microcredit will be planned and implemented in
cooperation with the National Committee for Microcredit.
Virtual Microfinance
Information Center will compile and disseminate microfinance
related information that is important for Turkish case to
a wide range of stakeholders to agree on a definition of microfinance
and steer a policy dialogue on microfinance as a poverty reduction
tool.
Who are our partners?
The members of the National Committee are the Ministry of Foreign Affairs, State Planning Organization, Banking Regulation and Supervision Agency, Undersecretariat of Treasury, General Directorate of Social Solidarity, two NGO representatives, World Bank, IFC and KfW. Activities will include but not be limited to providing policy advice for the legislation on microfinance in Turkey.
How will Turkey benefit?
By the end of the project period, there will be a common understanding on microfinance among a wide range of stakeholders including policy makers, potential service providers academicians and government institutions. The project also aims to support an enabling environment for microfinance service providers, which will be through policy support for the current Draft Law on Microfinance Institutions.
CONTACT INFORMATION:
Berna Bayazit
Programme Associate, UNDP
Tel: (90-312) 454 1126
E-mail: berna.bayazit@undp.org
Burcu Güvenek
Arasli
Microfinance Sector Development, UNDP
Tel: (90-312) 454 1191
E-mail: burcu.arasli@undp.org
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