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To be an indispensable financial support institution for Turkey that enables credit access for all SMEs and non-SME businesses. KGF does this by means of its national and international cooperation
Making strategic contributions to Turkey’s growth and development by easing the access to finance of all businesses, primarily the most promising ones
When Was KGF Founded? What Does It Do? Why Was It Founded ?
KGF was founded by the Council of Ministers Decree dated 14 July 1993 and no. 93/4496. It began its activities by providing its first guarantee in 1994. As a corporate guarantee institution, KGF enables Small and Medium-sized Enterprises (SMEs) and non-SME businesses that are unable to make use of various borrowing and support opportunities due to a lack of guarantee to access finance. KGF does this in its capacity as a joint guarantor.
What Is an Sme?
SMEs are defined in the provisions of the “Regulation on the Definition, Qualifications, and Classification of Small and Medium-sized Enterprises” dated 19.10.2005 and no. 2005/9617, as amended by Council of Ministers Decree dated 30.04.2018 and no. 2018/11828 and Council of Ministers Decree dated 10.09.2012 and no. 2012/3834 as small and medium-sized enterprises engaged in any kind of economic and commercial activity regardless of their legal status. Generally, businesses with fewer than 250 year-round employees and less than 125 million TL in annual net sales or any of the financial balance sheet items.
Is KGF A GOVERNMENT ENTITY?
KGF is a joint-stock company incorporated under the Turkish Commercial Code. KGF’s government entity shareholders and shareholders that have public institution status are as follows: KOSGEB (Small and Medium-sized Enterprises Development Organization), TOBB (Union of Chambers and Commodity Exchanges of Turkey), TESK (Confederation of Turkish Tradesmen and Craftsmen) and Eximbank, Halkbank, Vakıfbank, Vakıf Participation Bank, Ziraat Bank, and Ziraat Participation Bank. Its other shareholders are Akbank, Albaraka Türk Participation Bank, Alternatifbank, Anadolubank, Burgan Bank, Denizbank, Fibabanka, Garanti Bank, HSBC, ING Bank, İş Bankası, Kuveyt Türk Participation Bank, Nurol Investment Bank, Odea Bank, QNB Finansbank, Şekerbank, Turkland Bank, Türk Ekonomi Bankası (Turkish Economy Bank), Türkiye Finans Participation Bank, Türkiye Sınai Kalkınma Bankası (Turkish Industrial Development Bank), Yapı ve Kredi Bankası,Türkiye Emlak Katılım Bankası(Turkish Investment Bank),PASHA Yatırım Bankası(PASHA Investment Bank) Foundation for Supporting Vocational Training and Small Industry (MEKSA), and the Turkish Foundation for Small and Medium-sized Enterprises, the Self-Employed, and Managers (TOSYÖV).
Are There Any Other Institutions In Turkey Like Kgf?
Having been founded following the example of European guarantee institutions, KGF is the only institution in Turkey that provides guarantees to ease SME and non-SME access to finance.
Does Kgf Itself Provide Loans?
KGF is a guarantee institution. Its activities do not extend to providing loans. However, it eases use of bank loans by acting as a guarantor for businesses. Furthermore, is shares the credit risk with the banks so that a healthier guarantee structure is in place. It engages in providing different types of guarantees based on the grants and funds it provides from different organizations.
For Which Loans Does Kgf Provide Guarantees?
KGF provides guarantees for all cash and non-cash loans businesses need for purposes of operation and investment, except for personal loans, consumer loans, cheque-book loans, and company credit cards. KGF also provides guarantees for TL and/or foreign currency denominated cash and non-cash loans that banks will extend for the first time or additionally, renew, reschedule, or restructure and the funds provided by financing companies for the purposes of financial leasing and investment financing in accordance with the Law no. 6361.
Does Kgf Guarantee The Whole Loan Amount?
KGF works with banks on the basis of a risk sharing principle and therefore can guarantee the loan to a certain extent. In providing guarantees for bank loans, KGF first takes into consideration the bank’s evaluation of the creditworthiness of the business and makes sure that the bank assumes a portion of the credit risk.
With respect to Treasury-backed guarantees, KGF can provide guarantees up to 100% for the loan requests from Eximbank or TL/foreign currency denominated loans from banks for businesses engaged in exports or foreign currency-earning activities.
What Are The Types Of Guarantees Kgf Provides?
Alongside the guarantee schemes it provides from its equity capital, KGF also provides guarantees based on the grants and funds provided by other organizations such as the Undersecretariat of Treasury, the Turkish Section of Baku-Tbilisi-Ceyhan Pipeline Company (BTC Co.), and European Investment Fund (EIF).
Is There Any State Support Provided For KGF?
As can be seen in other examples around the world, guarantee institutions are supported by states since the services they provide are for the public good. Hence, KGF is exempt from stamp duty, corporate tax, and certain other fees and charges. Furthermore, to fend off the negative impact on the SMEs of the 2008 global economic crisis, funds amounting to 1 billion TL have been provided by the Undersecretariat of Treasury for KGF by Council of Ministers Decree no. 2009/15197, which constitutes significant state support. Said funds were increased to 2 billion TL by the “Law on Amendments to Certain Laws and Decrees” dated 27.03.2015 and no. 6637. Council of Ministers Decree no. 2016/9538 set out that the amount committed to KGF would remain 2 billion TL and the guarantee amount that can be provided by KGF was increased to 20 billion TL. With the “Decree on Amendments to Treasury Contribution to Credit Guarantee Institutions”, the amount of support committed by the Treasury was increased to 25 billion TL, and the guarantee amount that can be provided by KGF was brought up to 250 billion TL.
Can Tradesmen And Craftsmen, The Self-Employed, And Farmers Benefit From Kgf Guarantees?
As all businesses having SME status, tradesmen, craftsmen, the self-employed, agricultural businesses, and farmers can benefit from KGF guarantees.
Does KGF Grant Guarantees To Cooperatives?
KGF provides guarantees for associations and association-affiliated cooperatives with the exclusion of construction, land plot, and building cooperatives.
How Do You Apply To Kgf? Kgf Provides Guarantees For Loans Extended By Which Banks?
There is no difference between equity-backed and Treasury-backed guarantees. It would be enough for businesses wishing to benefit from KGF guarantees to apply to one of the Creditors that are shareholders of KGF for the loans they will use from Creditors. In addition, for the financing to be obtained from financial leasing and financing companies where Banks holding shares in KGF are the controlling shareholder or which are otherwise shareholders of KGF, businesses can simply apply to any of such organizations.
How Does The Creditworthiness Evaluation Of Kgf Work? How Does The Guarantee Assignment Process Work?
Guarantee evaluation processes are as follows:
1. Shared Risk Guarantee (via Creditors);
• Portfolio Guarantee System (PGS)
• Portfolio Limit System (PLS)
2. Direct Guarantee (Eximbank, KOSGEB, TÜBİTAK (Scientific and Technological Research Council of Turkey), TTGV (Technology Development Foundation of Turkey), Ministry of Science, Industry, and Technology)
1. Shared Risk Guarantees (via Creditors);
• Portfolio Guarantee System (PGS)
• Portfolio Limit System (PLS)
KGF does not carry out a separate financial evaluation process from the banks as regards guarantees provided thanks to the Undersecretariat of Treasury support. KGF examines the guarantee requests through banks in terms of creditworthiness and makes its decision on that basis. On the other hand, for KGF equity-backed guarantees, KGF investigates the creditworthiness of the applying businesses by means of its experts and the credit rating system (KOBİS) in addition to the process followed by the Creditors.
What Is The Portfolio Limit System (Pls)?
The Portfolio Limit System works as follows:
Based on the credit limits assigned to Creditors by KGF;
a. in the Treasury-backed Guarantee System, Creditors’ credit ratings are matched with their KOBİS model ratings, and the guarantee is provided within a certain compensation upper limit on the amount of the guarantee.
b. in the equity-backed guarantee system, KGF evaluates the creditworthiness of the beneficiary by means of KOBİS and does not impose a compensation upper-limit.
What Is The Portfolio Guarantee System (Pgs)?
In the PGS, a guarantee is provided subject to the guarantee limit that KGF assigns the Creditors and with no KGF evaluation of the beneficiary. In this system, the internal evaluation ratings of the Creditors are taken into account and the guarantee is provided subject to a cap rate on the guarantee amount provided for the portfolio.
Can A Business Use Both A Kgf Equity-Backed Guarantee And A Treasury-Backed Guarantee?
Based on its creditworthiness, a business can make use of both a KGF equity-backed guarantee and a Treasury-backed guarantee separately, subject to the limits specified.
Can A Business Owner Having More Than One Business Make Use Of Kgf Limits Separately For Each Business They Own?
In accordance with the Banking Law, businesses in a certain risk group can make use of different guarantee limits provided that they make separate guarantee requests. However, the total amount of guarantee that the businesses in a risk group can make use of are limited. While it is possible for the risk group to use loans from more than one Creditor under KGF guarantee all of the loans extended under KGF guarantee are taken into account in calculating the guarantee limits.
Are There Any Other Institutions/Organizations Than Banks That Kgf Provides Guarantees For?
We have a guarantee protocol with KOSGEB, TTGV, TÜBİTAK, and the Ministry of Science, Industry, and Technology.