Annual Report 2020
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Overview of Turk Eximbank’s Activities in 2020

Turk Eximbank supports exporters, export-oriented manufacturers, international contractors and entrepreneurs, and companies engaged in FC-earning services with short, medium- and long-term credit, insurance, and guarantee programs.

In line with our country’s 2023 vision and goals, we continue to steer our activities together with our stakeholders in order to further strengthen our economy and our country.

stronger

Being a specialized bank in export financing, Turk Eximbank has embraced it as a primary goal to achieve its predefined targets associated with export finance rather than maximizing profit. However, care is taken to pursue policies that will safeguard a healthy financial structure in keeping with the responsibility of being a bank.

In line with our country’s 2023 vision and goals, we continue to steer our activities together with our stakeholders in order to further strengthen our economy and our country.

Within the frame of our new strategy, we carry on with our efforts and initiatives commenced in 2020 with the purpose of;

Domestic Loans

Turk Eximbank supports exporters, export-oriented manufacturers, companies exporting FC-earning services, and international contractors/investors with short- and medium-long-term cash credit programs. The financing support that companies will need during the production process is extended both for pre-shipment and post-shipment periods through cash loans.

In 2020, short term loans extended by Turk Eximbank including maturity extensions totaled USD 21.6 billion, and medium-long term domestic loans totaled USD 6.9 billion.

During 2020, 13,102 firms, which together accounted for a significant share of Turkey’s total exports, benefited from Turk Eximbank’s loan programs.

Priority was given to SMEs in lending, and TL credits were predominantly used for SME financing. As a result of the privilege offered for additional resource and credit requests of SMEs, TL 12.7 billion in local currency and USD 1.1 billion in foreign currency were allocated, and total SME credits amounted to USD 2.8 billion. Accordingly, 10% of total loans were disbursed to SMEs.

Logistics and transportation sector took the lead with 23% share in the sectoral distribution of short-term loans. In the distribution of loans by country groups, EU countries led with 45.5% share.

Recent Adjustments and Changes in Domestic Credit Programs

Actualizations on the basis of Domestic Loans Programs (USD billion dollars)

SHORT-TERM DOMESTIC LOANS

21.6

Rediscount Credits Funded by CBRT

19.5

Pre-shipment Export Credits Extended via Commercial and Participation Banks (PSEC) *

1.3

Direct Lending

0.8

MEDIUM-LONG TERM DOMESTIC LOANS

6.9

Rediscount Credits Funded by CBRT

4

Export-Oriented Working Capital and Investment Loans

0.9

TOTAL

28.5
* A minimum portion of 30% of the credit lines allocated to intermediary banks must be disbursed to SMEs; accordingly, PSECs worth USD 1.3 billion were allocated to SMEs during 2020 (83%).

International Loans Programs

In 2020, loans made available for project and trade finance transactions in foreign countries under the International Loans Programs totaled USD 35 million.

35 USD million

International Loans Programs, under which projects undertaken abroad by Turkish contractors and the buyers (public and private) of Turkish goods in foreign countries, are intended to increase Turkey’s exports, diversify the goods and services exported, acquire new markets for export goods, increase the share exporters get from international trade, and provide competitive strength and assurance to Turkish firms in international markets. All supports provided under International Loans are in the nature of “buyer’s credits” and debtors are directly governments, the buyer country’s state-guaranteed public institutions or overseas/domestic banks within the allocated limits.

In 2020, loans made available for project and trade finance transactions in foreign countries under the International Loans Programs totaled USD 35 million.

In an effort to add momentum to International Loans Programs and in turn, to increase exports of Turkish goods and services, revolving loan agreements are made with acceptable banks in foreign countries for overcoming the hardships borrowers experience in getting a state guarantee and for extending support to the private sector’s transactions, as well.

In this context, in line with the target of expanding the network of overseas banks and covered countries, credit lines were allocated to three multinational banks (the African Export-Import Bank, ECOWAS Bank for Investment and Development (EBID), and the Eastern and Southern African Trade and Development Bank) in 2020, and the revolving credit agreements are anticipated to be executed in 2021. The cooperation developed with the multinational banks operating in Africa will allow our Bank to cover a substantial portion of the countries in that continent.

During 2020, 42 Letters of Intent were issued for financing projects and goods exports planned to be undertaken by Turkish companies in a total of 18 countries in Africa, Asia and Europe. If the projects/transactions covered by the letters of intent provided to the firms are actually carried out, exports of goods and services ex-Turkey is anticipated to amount to USD 4 billion.

In addition, our Bank participated in the International Working Group on Export Credits set up to negotiate a new set of international common rules on export credits, and in the meetings of the Environment Practitioners Group, Country Risk Experts Group and Shipbuilding Working Group organized under the OECD, and made contributions for the formation of our country’s position and opinions.

The loans provided for the Japoma Sports Complex in Douala, Cameroon, which has been financed with Turk Eximbank’s funds.reached USD 188.7 million.

188.7 USD million

International Loans Programs Realizations on Project/Transaction Basis

Having taken the whole world in a tight grip as of the first quarter of 2020 and given rise to unprecedented economic outcomes, the COVID-19 pandemic restrained buyer credit demands for overseas contracting works due to the worldwide stagnation and restriction of human movement. Notwithstanding, our support to trade finance was carried on with the Buyer’s Credits Through Domestic Banks and Buyer’s Credits Through Foreign Banks programs.

In this framework, credits in the amount of USD 133 million was allocated for various goods exports ex-Turkey under the credit agreement for the amount of USD 200 million signed in 2018 between the Tunisian Ministry of Development, Investment and International Cooperation and our Bank.

The final disbursement was made in January 2020 for the Japoma Sports Complex in Douala, Cameroon, a multipurpose facility covering a modern stadium seating 50 thousand, Olympic-size swimming pool, indoor gymnasium and other facilities which has been financed with Turk Eximbank’s funds. The loans provided by Turk Eximbank including the final disbursement for the amount of USD 5.5 million in 2020 to the USD 232 million-project reached USD 188.7 million.

Japoma-Douala Sports Complex, Cameroon

In this context, a total of USD 26.7 million financing was provided to 8 transactions for the exports of machinery/equipment and goods in 2020 through Buyer’s Credits Through Foreign Banks. During the reporting period, a total financing of USD 1.8 million was provided to 10 export transactions via İşbank and Ziraat Bank through Buyer’s Credits Through Domestic Banks during the reporting period.

Within the frame of the Debt Service Suspension Initiative (“the Initiative”) launched by the G20 Finance Ministers and Central Bank Governors and the Paris Club in an effort to mitigate the effects of the COVID-19 pandemic on the poorest countries and to free these countries’ resources to be allocated for fighting the pandemic, it was agreed to restructure the debt service of the least developed countries between 01 May 2020 and 31 December 2020 to a total of 4 years with a 1-year grace period, and their debt service between 01 January 2021 and 30 June 2021 to a total of 6 years with a 1-year grace period, preserving the net current value. Under the Initiative, the states of Djibouti, Ethiopia, Cameroon, Congo and Senegal applied for the portion that makes up the majority of our credits extended under state guarantee, and their demands are being evaluated in coordination with the Republic of Turkey Ministry of Treasury and Finance. Despite all these negativities, USD 155 million has been collected from our debtors during 2020.

Receivable Insurance

Through its insurance programs, Turk Eximbank today provides insurance cover for exports to 238 countries against losses arising from the importer firm and importer’s country.

238 countries

Turk Eximbank boasts being the entity that has initiated export receivables insurance in Turkey and that has established awareness of the need for export credit. Initially introduced to cover solely short-term export receivables against commercial and political risks, the export credit insurance system’s scope was broadened in time, and medium- and long-term exports of goods were also included within insurance coverage.

Through its insurance programs, the Bank today provides insurance cover for exports to 238 countries against losses arising from the importer firm and importer’s country. In addition, domestic receivables of exporters are protected against commercial risks also through domestic credit insurance as well as export credit insurance.

Moreover, obtaining a credit from financial institutions is facilitated by putting up credit insurance policies as collateral.

During 2020, shipments with a total worth of USD 17.1 billion were insured under Short-Term Export Credit Insurance, Short-Term Domestic Credit Insurance and Medium-Long Term Export Credit Insurance.

During 2020:

Short-Term Export Credit Insurance

The Short-Term Export Credit Insurance Program provides cover for all shipments of exporters up to 360 days against commercial and political risks.

Offered since 1989 by Turk Eximbank, Short-Term Export Credit Insurance became a service recognized and extensively used by exporters in time. As a result, 4,590 export firms were making use of the service as of 2020 year-end.

Under the program, exports worth USD 15.5 billion was provided with insurance cover in 2020, and premiums in the amount of USD 47.9 million were collected for the insured shipments.

In the sectoral distribution of insured shipments, construction and construction products industry and the food industry jointly took the lead with 9% share each, followed, in order, by the ready-to-wear and garment industry and electrical household appliances with respective shares of 8% and 7%.

The regional distribution, however, is topped by European (European Union and non-EU combined) countries with 67% share, whereas Western and Central Asia ranked second with 10% share and North and Central America ranked third with 8% share.

The number of buyers granted consistent limit under the Short-Term Export Credit Insurance Program is 53,954.

In 2020, Turk Eximbank indemnified USD 31.7 million in losses, which arose from shipments to various countries and the receivables from which could not be collected when due, under the Short-Term Export Credit Insurance Program. In the same period, Turk Eximbank recovered a portion of USD 2 million out of the losses indemnified before. The entirety of the recovered amount is linked to receivables indemnified within the frame of commercial risk.

In the reporting period, the Bank continued to cede 60% of the commercial and political (associated with non-OECD countries) risks underwritten within the scope of the Short-Term Export Credit Insurance Program to overseas reinsurers.

Financing can be obtained against Turk Eximbank insurance policy under the protocols signed with Akbank, Aktif Yatırım Bank, Burganbank, Citibank, Denizbank, Fibabank, Finansbank, HSBC, ING Bank, Kuveyt Türk Participation Bank, Şekerbank, Ziraat Bank, Turkland Bank, Türk Ekonomi Bank, Garanti Bank, İşbank, Vakıf Participation Bank, Vakıfbank and Yapı Kredi Bank. A total credit volume of approximately USD 160 million was created to date, with USD 3.8 million of it generated in 2020.

Short-Term Domestic Credit Insurance

Short-Term Domestic Credit Insurance program for exporters and their group companies is another area of insurance that Turk Eximbank is engaged in.

With this program, receivables of exporters and group companies having a Short-Term Export Credit Insurance Policy from credit-sale shipments up to 360 days, which are associated with their domestic operations, are insured against commercial risks within specified limits.

Under the Short-Term Export Credit Insurance Program, exports worth USD 15.5 billion was provided with insurance cover in 2020.

15.5 USD million

As of year-end 2020, 159 firms’ shipments worth USD 1.6 billion were insured. Premiums in the amount of USD 4.4 million was collected for the shipments insured, while claims paid amounted to USD 294 thousand.

Medium- and Long-Term Export Credit Insurance

Exporters’ receivables arising from shipments born out of a single sales contract with a term of up to 18 years in line with OECD rules are provided coverage with Specific Export Credit Insurance Post-Shipment Risk Program. Under the program, sales through overseas subsidiaries can also be insured besides exports of Turkey-origin investment goods and services of export companies.

On the other hand, direct expenses incurred by the exporters for pre-shipment production under the sales agreement executed by and between the exporter and the buyer are insured against commercial and/or political risks within specified limits under the Specific Export Credit Insurance Pre-Shipment Risk Program. The purpose of the program is to prevent or mitigate the potential loss exporters may suffer in the pre-shipment period.

Insurance support provided under the Specific Export Credit Insurance Programs during 2020 totaled USD 43.2 million. Of this amount, USD 24.6 million was insured within the scope of Specific Export Credit Insurance Post-Shipment Risk Policy, and USD 18.6 million within the scope of Specific Export Credit Insurance Pre-Shipment Risk Policy. On the other hand, total claims paid under the Specific Export Credit Insurance Post-Shipment Risk Policy amounted to USD 671 thousand in 2020.

Insurance support provided under the Specific Export Credit Insurance Programs during 2020 totaled USD 43.2 million.

43.2 USD million

Specific Export Credit Insurance Post-Shipment Policy is accepted as an irrevocable guarantee within the scope of Draft & Letter of Credit Discount Program since 2014, providing exporters with low-cost and convenient financing. The scope of the program was expanded in 2015 so as to include cash against goods shipments as well. Through the program launched under the name “Export Receivables Discount Program”, disbursements continued in 2020.

Under supplementary protocols signed with the banks that have a protocol with our Bank concerning financing of shipments insured under the Short-Term Export Credit Insurance Program, export deals carried out under Medium- and Long-Term Export Credit Insurance Programs can also be financed.

In 2020, the Bank continued to share the risks underwritten within the scope of the medium- and long-term insurance transactions with reinsurers.

Other Insurance Programs

No transactions were realized in 2020 within the scope of the Letter of Credit Confirmation Insurance and Financial Institutions Buyer Credit introduced based on the Board of Directors decisions passed in 2019.

Financing and Treasury

In 2020, Turk Eximbank secured foreign currency funds in the amount of USD 3 billion from international markets.

3 USD billion

In 2020, Turk Eximbank secured foreign currency funds in the amount of USD 3 billion from international markets and kept offering low-cost financing facilities with various maturities from its fund stock maintained at USD 9.5 billion level, excluding CBRT funds. The Bank increased its total fund stock including credits by 2% year-over-year, including CBRT rediscount facility of USD 15.7 billion, and increased it to USD 25.6 billion. On the other hand, principal repayment by the Bank amounted to approximately USD 3.2 billion during the reporting period.

Developments Regarding the Capital

As approved at the Extraordinary General Assembly convened on 12 January 2017, Turk Eximbank switched to the “Registered Capital System” in accordance with the Turkish Commercial Code no. 6102. The decision was registered with the trade registry and promulgated in the Turkish Trade Registry Gazette issue 9252 dated 30 January 2017.

Accordingly, the Bank’s authorized capital was set as TL 10 billion and the Bank’s Board of Directors was authorized to increase the paid-up capital up to the authorized capital in the five-year period until the end of 2021.

Along this line, the Bank’s paid-up capital was raised from TL 7.16 billion to TL 9.27 billion, which was covered by cash capital transfer of TL 750 million from the Treasury and by offsetting profit reserves in the amount of TL 1.36 billion based on the Board of Directors decision passed on 6 October 2020. Hence, the Bank’s robust capital structure has been preserved.

The 11th Development Plan stipulated capital transfer of TL 10 billion to the Bank by the end of 2023.

Borrowing Transactions

Turk Eximbank heavily utilized the promissory note rediscount facility of the Central Bank of the Republic of Turkey in 2020.

15,7 USD billion

TL funds derived within the scope of paid-in capital and interest collections were used for funding almost the entirety of TL loans disbursed in 2020, excluding Rediscount Credits.

The details about the Bank’s borrowings in 2020 are presented below:

Fund Management Activities

Turk Eximbank kept a close eye on national and global developments and the difficulties caused by the pandemic, and paid maximum attention to liquidity, interest rate and exchange rate risks management, taking into account such issues as high volatility in interest and exchange rates, global macroeconomic conjuncture, and return-cost balance in 2020.

As part of liquidity management, funds generated through swap, repo transactions and borrowings from money markets were invested in CBRT, Takasbank Money Market and interbank market, and high interest income was achieved.

The ratio liquidity in total assets managed by the Treasury Department, which was kept within the legal limits set out in the BRSA Regulation Concerning Measurement and Evaluation of Liquidity Adequacy of Banks, averaged 11% throughout 2020, and nearly 46% of it was used in the marketable securities portfolio consisting of treasury bills and government bonds.

In the reporting period, the Bank carried on with short- and long-term swap operations for cash flow management and assets and liabilities harmonization purposes. Turk Eximbank’s swap operations in 2020 aimed at managing the Bank’s FX position and cash flows more effectively and ensuring asset-liability harmony, as well as for arbitrage purposes, were worth USD 37.6 billion, of which USD 37.4 billion was in short-term assets and USD 0.2 billion was kept in long-term assets.

Hedge accounting continued to be implemented in order to prevent fluctuations on the profit and loss statement resulting from interest and cross-currency swaps carried out for harmonizing FC funds secured from overseas markets through bond issuances or other borrowings with the assets composition.

Forwards, options and interest swap transactions were carried on with the purposes of protecting exporters’ competitive strength in global markets, and strengthening the ability to manage the exchange rate risk stemming from FC receivables and FC liabilities and the interest rate risk that might arise from interest rate fluctuations. In order to expand interest and exchange rate risk practices, collateral diversity in derivatives was increased, and work was initiated to offer also options strategies and currency/cross-currency swaps to exporters.

International Relations

Turk Eximbank continued to cooperate closely with export credit and insurance agencies and international financial institutions in 2020.

close cooperation

Turk Eximbank continued to cooperate closely with export credit and insurance agencies and international financial institutions in 2020.

In this context, agreements were signed with the Eastern and Southern African Trade and Development Bank (TDB) and EKF, Denmark’s export credit agency, in 2020. There are over fifty cooperation agreements of various content that Turk Eximbank signed in previous years with the export credit and insurance agencies of more than thirty countries, as well as multilateral financial institutions. During 2020, steps continued to be taken for signing new cooperation agreements between Turk Eximbank and multilateral agencies and credit export agencies of other countries, with a particular focus on agreements that will allow co-financing of projects jointly undertaken by Turkish and foreign companies, especially in third countries.

The list of reinsurance cooperation agreements signed in previous years with USEXIM (USA), UKEF (United Kingdom) and BPIFrance (France) to help Turkish exporters and contractor firms become more competitive in international markets further grew in 2020 with the reinsurance agreement signed with Denmark’s official credit export agency EKF for financing the projects that will be jointly carried out by Turkish and Danish companies in third countries.

Negotiations were held with the related agencies to sign similar agreements with Austria’s OeKB, Sweden’s EKN and Hungary’s MEHIB export credit agencies.

A general cooperation agreement was signed with the Eastern and Southern African Trade and Development Bank (TDB), a multilateral regional development bank, which will pave the way for co-financing of projects/deals to be undertaken by Turkish companies in TDB-member countries or to be jointly undertaken by member-country and Turkish companies in other countries.

Turk Eximbank continued to attend the meetings of OECD Export Credits Group, which was established to facilitate information and opinion exchange between member countries’ related institutions regarding officially supported export credits and of which Turkey became a permanent member in April 1998.

The Bank actively participated in the negotiations for updating the Arrangement on Officially Supported Export Credits which is addressed in the meetings of OECD’s Participants to the Arrangement on Officially Supported Export Credits, within which the Bank acquired “invited participant” (observer) status in 2006 and “participant” status in 2018, and which is important for setting the minimum requirements for export credits to be provided by Participant countries.

The International Working Group on Export Credits (IWG) was set up in 2012 under the leadership of the USA and China to discuss a new international arrangement to which non-OECD emerging countries like Brazil, China, South Africa, India, and Russia that are beginning to get significant shares in export credits would be a party and which would redefine the guidelines and standards pertaining to officially supported export credits, and increase transparency and information sharing in export credit-related issues. Turk Eximbank continued to attend IWG meetings in 2020.

Being a member of the Executive Committee of the Berne Union (the International Union of Credit and Investment Insurers), Turk Eximbank actively participated in the Union’s meetings for setting the future strategy and goals. In addition, the Bank continued to take part in the Union’s Annual Meetings, seminars and workshops in 2020.

Being a permanent Executive Committee member of Aman Union (DHAMAN [The Arab Investment and Export Credit Guarantee Corporation] and Commercial & Non-commercial Risks Insurers & Reinsurers in Member Countries of the Organization of the Islamic Conference), of which our Bank is a founding member, Turk Eximbank actively took part in the Union’s meetings about the Union’s governance and strategic goals, and contributed to its activities. In addition, the Bank continued to take part in the Union’s Annual Meetings, seminars and workshops in 2020.

Our bank has been a permanent member of the Asian Exim Banks Forum since 2017 and currently holds the term presidency. The 2020 Annual Meeting of the Forum, which was planned to be hosted by our Bank, was postponed to 2021 due to the measures adopted against the COVID-19 pandemic, however, the Technical Working Group meeting hosted by our Bank was held online where annual meeting preparations and technical matters associated with the Forum were discussed.

Information Technology

Turk Eximbank gave momentum to electronic transformation processes and gave priority to internal and external process digitalization.

digitalization

Turk Eximbank continues to ensure both speed and productivity and to efficiently use resources by backing its service infrastructure with new technologies in the light of the advances in information technology.

E-Transformation Practices

Turk Eximbank gave momentum to electronic transformation processes and gave priority to internal and external process digitalization.

In addition to online banking services offered in insurance transactions, the Internet Banking platform was rendered compatible with mobile devices and launched, whereby our debtor companies can view detailed information about their credit transactions, export commitments and collaterals, and submit their credit application demands.

Phase 1 of the Insurance Transformation Project developed for revamping the insurance infrastructure and managing it by processes was completed and launched; development and improvement for the Project are ongoing. With the Project, online integrations were established with information suppliers and the process of information receiving was accelerated.

In keeping with the priority assigned to process digitalization of financial analysis and credit information, steps were taken for external company integrations, and preparations began for the infrastructure that will make the basis of early warning and monitoring systems.

Work was initiated for renovating both the technical infrastructure and business processes of the accounting system, which will be rolled out in phases and brought to completion during 2021.

In addition to the above;

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