Interview with EBRD

 Hello everyone,

First of all, thank you for giving me this opportunity.

Allow me to introduce myself to you. 

My name is Murat Cakir, and I am working as a senior expert in the Central Bank Structural Economic Research Department. I have worked for 19 years in the Sectoral Assessment Division and the Real Sector Data Division of the Statistics Department before transferring to this department in 2017. Sectoral Assessment Division, which was a part of the Credits Department, when I started working at the central bank, was later attached to the Statistics Department after the CBRT ceased its credit-granting activity just before the CBRT's establishment of the Statistics Department. 

For the majority of these 19 years at the Statistics Department, my work has involved dealing with many different issues from various fields: collecting, processing, analysis, reporting, and interpretation of financial and economic data of mainly the real sector,  banking, and stock markets, along with their credit relations, and developing policy recommendations. I also actively worked in the design, management, and implementation of related IT projects of the department. 

During those years, the main report we have produced has been the Company Accounts. Within the framework of the central bank's financial stability target, the banking and real sector credit relationship, in particular, has been one of the most significant motives focused on and was the preeminent design attribute of the Company Accounts. 

Since our focus was then different, though known to all of us, financing problems of the SMEs were not our primary concern. Instead, it was the credit risk of the firms borne by the banks and whether they would be able to pay back loans, given their financials. When I was working on a special report featuring transition or migration tables between the size groups using the loan balances, I realized that there was indeed a vast discrepancy between the funds granted between groups. That was valid for the geographical classifications too. So this got me interested, and I decided to go deeper into the details about the hardships SMEs were facing in financing issues. 

My research revealed that the local resources were roughly inadequate. Thus, I started to examine the resources provided by the international organizations to SMEs. I studied the 210 individual projects administered by the World Bank until then. I discovered the share of SMEs in the total was around 14 %.  SMEs used only 3 % of this amount directly. In summary, I have confirmed that SMEs do not have a financing opportunity parallel to their importance in the economy. 

Since the analysis was only a determination and a confirmation of the current situation, I started to focus on and search for ways about "how the problem could be solved" with a more proactive perspective. 

Would it be possible to redistribute the financial resources more efficiently across the economy and find a Pareto-optimal solution? 

Could the firms be helped generate enough cash and make a profit more efficiently? 

Could the credit risks be reduced? 

While contemplating all these and similar questions, I realized that the credit relationship with each firm, regardless of its scale, is an individual one. Thus, the risks are high, and the funds are not distributed properly due to this particular characteristic. 

What if concepts like cooperation, business partnership, and diversification, known to improve the efficiencies,  could be introduced into the analysis of SME financing?

After a long thought process and a thorough examination and research, I realized that the "integration" concept was what I needed. 

So what do I mean by 'integration' in this context? Essentially, it means the endeavor through which the loan takers act together voluntarily, integrated over a set of 'dimensions.' 

What is the aim of this? I propose that there is practically a quite reasonable potential for improvement through integration, at least conceptually:

• It may solve the issue of channeling the funds to their intended uses through incentives directing the loan takers to work together, and

• It may save funds to an extent lower than the total of when two or more entities take loans individually.

What is a dimension?