Türk Eximbank, MIGA Trade Finance Guarantee

Project Description 

This summary describes a proposed investment by financial institutions yet to be identified (the Guarantee Holders) which intend to provide short-term, revolving trade loans to Türk Eximbank, a Turkish export credit agency solely owned by the Ministry of Treasury and Finance, to help the state-owned bank extend export credits to local companies to facilitate their exports (the Project). The MIGA Trade Finance Guarantee (TFG) is requested for up to EUR 304 million of trade loan principal, future interest, and potentially MIGA premium, against the risk of non-payment by Türk Eximbank of its financial obligations relating to the trade finance transaction with a framework period of 3 years, within which underlying transactions will have a maximum tenor of 1 year.  

The proceeds of the trade loan will be used to fill the time gap between orders, shipments, and payments, which is equivalent to providing a short-term liquidity that covers front-end expenditures for production of export goods.  

Environmental Categorization 

The MIGA TFG facility will support short-term trade loans. Trade-related transactions typically pose minimal Environmental and Social (E&S) risks and impacts. The Project has thus been categorized as ‘FI-3’ under MIGA’s Policy on Environmental and Social Sustainability (2013). The applicable E&S requirements for this project will be the MIGA Exclusion List and applicable E&S laws in Türkiye.  

Türk Eximbank is an existing MIGA client; the bank has an E&S risk management system that meets the requirements of Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts and the bank’s labor practices are in line with Performance Standard 2: Labor and Working Conditions. The E&S risk management system applies to all lending activities at Türk Eximbank; in line with the existing procedures, all eligible trade transactions will be screened against the MIGA Exclusion List and applicable E&S laws in Türkiye.   

Development Impact 

The Project is expected to support the government development strategy by seeking to reduce the country’s external imbalances, through the provision of favorable trade finance loans to export oriented firms. Türk Eximbank is the sole export credit agency of Türkiye and a major player in support of exporters’ access to finance. The national development strategy highlights that Türkiye's international competitive position will be strengthened through sustainable, low-emission, high-technology-based production techniques and exports will be improved with a focus on green and digital transformation. In alignment with the strategy, the proceeds of the facility will focus on servicing export-oriented small and medium enterprises (SMEs), women-inclusive companies, green export companies, and medium to high technology companies. Such loans will mostly be utilized to finance raw material and inputs expenditures for production and to provide liquidity to manage time mismatches between the order, shipment, and payment from the buyers.  

The Project aims to promote private sector-led growth by supporting the exporters in Türkiye through increased access to trade finance. As such, the proposed Project is aligned with the focus areas identified in the Country Partnership Framework (CPF) FY18-FY23 under its objectives of (i) Enhanced access to finance to underserved segments and (ii) Increased sustainability of infrastructure assets and natural capital. The Project is aligned with MIGA Strategy and Business Outlook FY22-24 by enhancing One World Bank and Cascade approach, given the Project’s complementarity future and ongoing operations by IBRD and IFC. The Project also aligns with MIGA’s ambition to innovate products and product allocations by implementing TFGs and responding to global challenges such as climate change and gender inequality.