• Cisem Dincer

What Drives Turkey to Microfinance

Güncelleme tarihi: 3 May 2020

According to UNDP Human Development Indicators, nearly half of the total 73.640 million population consists of women. Within that number only 24 percent of women participate in the labor force – a rate substantially lower than the global average of 52 percent. While the share of working women has risen since the 1980s in countries with a similar starting point, it has fallen considerably in Turkey – from 34.3 percent in 1988 to 21.6 percent in 2008. By 2006, Turkey had fewer women participating in its economy than any other country in the OECD or the Europe and Central Asia region. Moreover, Turkey is still amongst the lowest scoring countries, 132th out of 135, in terms of women’s economic participation and opportunity according to the 2011 World Economic Forum: The Global Gender Gap Report. If girls above the age of 15 are taken into this calculation, the ratio increases to 25 percent in 2008, however, girls should ideally finish school, rather than work to support their families financially.

Due to Turkey’s socio-economic demographics, 50 percent of women informally work in farms to support their families in the agricultural sector. The other significant portion engage in home-based entrepreneurial activities, mostly small-scale commodity production. Whether it is formal or informal, women make up a significant part of the workforce yet they have very limited access to financial services. Therefore, microfinance could provide the best tool for lifting women out of poverty in Turkey. It offers women access to basic financial services such as small loans, savings accounts, money transfers and insurance products.

By taking advantage of income generating activities through micro lending, disadvantaged households can improve their living conditions, provide a better education to the next generation, improve household nutrition and provide an economic cushion to protect families from those unexpected economic setbacks in life. Over time, when these new microentrepreneurs learn how to manage their savings they could even convert their activities to small businesses. Thus, expanding financial services to women in need is crucial for sustainable economic growth not only in Turkey but also in any nation.

Before microfinance, the term micro credit was first promoted in 1970s as a solution to poverty by Muhammad Yunus the winner of the Nobel Peace Price in 2005. He worked on an action research project to provide credits targeting the poor in rural areas of Bangladesh. The project transformed into an independent bank in 1983 under the name of Grameen Bank Project with a mission to help the poor families to overcome poverty. It was particularly targeted to poor women who make up almost the overall client segment. In the following years the idea and its practices grew tremendously and was accepted primarily as an anti-poverty strategy by the developing world. As a direct channel to the individuals in need, it still creates a unique positive community-driven social impact in the society.

Despite the growing awareness and implementations worldwide, today there is still little knowledge and discussion about the applicability of microfinance in Turkish financial system. The concept, however, has received attention of the policy makers and the government officials in recent years as an alternative model to the traditional banking and lending system. After the declaration of the year 2005 as an “International Year of Micro-Credit” by the United Nations, the first “National Microfinance Committee” meeting was held in Ankara as an effort to adopt an action plan to build a microfinance sector in Turkey. The participants pointed out that the establishment of the microfinance sector would not only improve levels of income, but also contribute to the deepening of the financial markets by providing financial services to the bottom of the pyramid which is otherwise unreachable. Several conferences, workshops and meetings were held in various cities and provinces to develop concrete recommendations to solve the problems of the underserved population who carry enormous economic potential.

However, due to the severe effects of the global financial crisis, the focus shifted to the recovery measures rather than creating a microfinance environment after 2007. In the following years Turkish government focused on policies which could promote growth in the short-term rather than considering new investment alternatives for the long-term development. Whilst maintaining the gradual recovery of the Turkish economy, in September 2011, the governor of the Central Bank of the Republic of Turkey gave a speech at the “Istanbul Finance Summit” in which he emphasized the necessity of introducing microfinance initiatives. He said “There is a very useful financial service called ‘microfinance’ and we hardly know the sector yet”. He also put his finger on the key issue and added “Microfinance is an innovation which helps the poor who have new ideas, willingness and desire to work to run their own businesses. It provides small loans as a start-up capital without any collateral requirement”. Six months later in April 2012, a global microfinance forum was held in Istanbul as well. Obviously, there is much more hope as of 2013 than previously, since policy makers, government officials and businesses are more interested in welcoming microfinance initiatives.


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