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guarantees for receivables that arise from unsecured cash-
against-goods sales, monitoring collections, and converting
receivables to cash before their due date. With the addition of
Turk Eximbank export credit insurance to its existing portfolio
of factoring products and services, Turkey’s factoring companies
are now providing service in 238 countries in Africa, the Middle
East, and elsewhere around the world.
Sale-and-leaseback
Sale-and-leaseback (leaseback) is a form of asset financing
in which the owner of a property sells an asset-typically real
estate-to a leasing company under a leasing agreement and
then immediately leases it back from the buyer. The payment
that the former owner receives from the leasing company can
be used as operating capital. The leaseholder subsequently
pays rent on the asset during the lifetime of the agreement, at
the end of which he recovers the asset against payment of a
token value. Businesses that make use of the leaseback method
of asset financing are in effect making use of a long term,
fixed-interest business loan and the rent they pay is really the
repayment of that loan. Leaseback also allows businesses that
value real estate properties shown in their balance sheets at
their historical cost to value them at their current cost instead.
Law no: 6728, which went into effect on 9 August 2016, cleared
up certain uncertainties about leaseback-related tax issues.
Contract Registration System AFI registry for financial
leasing agreements
A government circular requiring all financial leasing agreements
to be registered with the Contract Registration System (CRS)
that went into effect on 9 February 2015 inaugurated a new era
in the Turkish financial leasing industry. With the introduction
of the requirement that all such agreements be registered
in AFI’s CRS registry, it is no longer necessary for them to be
notarized.
Supply-Chain
Finance System
Work continued in 2016 on the development of an electronic platform for supply-chain financing products
and services which, in keeping with practices elsewhere in the world, the Banking Regulation and Supervision
Agency treats as a form of factoring.
Under the new rules, all financial leasing agreements entered
into in Turkey must be registered with or reported to the
AFI CRS registry, which serves as a centralized database that
provides quick and trustworthy access to information about the
agreements and the parties to them.
Created by the Central Registry Agency on AFI’s behalf, this
system is now functioning effectively.
Supply-Chain Finance System
Work continued in 2016 on the development of an electronic
platform for supply-chain financing products and services
which, in keeping with practices elsewhere in the world, the
Banking Regulation and Supervision Agency treats as a form
of factoring. When this new market is added and becomes
operational in the financial system, it is expected that SMEs’
share of the total credit supply will increase from 26% to 35%.
Supply-chain finance is a method that provides financing by
accepting as collateral the commercial receivables of suppliers
(many of whom will be SMEs) who supply goods and services
to large firms (on whose credit-worthiness the system rests)
that deal with a large number of suppliers. In this system,
suppliers whose own access to credit may be limited owing to
the modest dimensions of their operations benefit because they
immediately convert their receivables to cash without having
to wait until the due-date and can use that money to finance
production for new orders. The system also makes it possible
for SME suppliers to benefit from borrowing rates which are
very close to those that are enjoyed by buyers whose own
creditworthiness is high. For buyers, the supply-chain finance
system means that they are spared the operational costs of
having to keep track of payments to a large number of suppliers
and can do it instead through a single financial institution or
perhaps just a few.
The Association of Financial Institutions
Annual Report 2016
45