The Sector in

December 2015 Investment Support and Promotion Agency of Turkey 1 Glossary of Terms

Acronym Definition Acronym Definition ATM Insurance Claims Follow-up and HAYMER AUM Assets Under Management Monitoring System BIST Borsa IMF International Monetary Fund BKM Interbank Card Center Banking Regulation and Supervision N/D No Data BRSA Agency NPL Non-Performing CAGR Compound Annual Growth Rate O/N Overnight Organization for Economic Cooperation CAR Capital Adequacy Ratio OECD CBRT Central of the Republic of Turkey and Development CEO Chief Executive Officer Q Quarter CMB Capital Markets Board of Turkey ROA Return on Assets ROE Return on Equity CRD Capital Requirements Directive Health Insurance Information and European Bank of Reconstruction and SAGMER EBRD Monitoring Center Development SME Small and Medium Enterprises EGM Pension Monitoring Center TBB Turkish Bank Association EIU Economist Intelligence Unit TL Turkish Lira EU European Union TSRB Insurance Association of Turkey FCI Factors Chain International The Association of Capital Market TSPAKB FDI Foreign Direct Investment Intermediary Institutions of Turkey FİDER Turkish Leasing Agency GDP Gross Domestic Product Life Insurance Information and Monitoring HATMER Center

Investment Support and Promotion Agency of Turkey 2 Table of Contents

Executive Summary 4 C. Turkey’s Competitive Landscape 55-68

A. Turkish Financial Services 5-49 i. Turkey’s Macroeconomic Outlook

i. An Overview of Turkish Financial Industry ii. Favorable Demographics

ii. The Banking Sector in Turkey iii. Skilled and Cost-Competitive Labor Force

iii. Insurance and Pension Funds in Turkey iv. Investment Environment & Stakeholders

iv. Financial Leasing in Turkey v. Geostrategic Location

v. Factoring in Turkey

vi. Consumer Financing in Turkey

B. An Overview of the Turkish Capital Markets 50-54

i.

ii. Brokerage Firms

Investment Support and Promotion Agency of Turkey 3 Executive Summary

The Turkish financial sector proved resilient during the A key driver of the Turkish financial sector has been global financial turmoil in 2009 as well as the ensuing its robust economy with a bright future. Over the economic crisis thanks to the regulatory reforms and past 13 years, Turkish economy has been growing structural overhaul that the government implemented in with an average annual real GDP growth rate of the wake of the country’s own financial meltdown in the approximately 5 per cent and the growth momentum early 2000’s. In fact, the reforms in the sector boosted is expected to continue. Turkey’s sizeable and investor confidence so much that financial services has diversified economy has achieved remarkable growth become the preferred sector for FDI, attracting over USD and became 17th largest economy in the world as of 48 billion during the past 14 years. 2014. (GDP; PPP) Banking dominates the Turkish financial sector, Turkey’s economic growth has resulted in income accounting for over 70 percent of overall financial growth and a growing robust middle class with services, while insurance services and other financial increasing purchasing power. activities also show significant growth potential. Turkey’s As Turkish economy has expanded, it has integrated banking sector is comprised of 34 deposit , 13 with the global economy with a staggering increase development and investment banks, and 5 participation in its volume of international transactions. Such banks, with 21 of them holding significant foreign capital. developments have further stimulated economic An expanding loan base and favorable liquidity conditions activity, thus expanded financial activities. contribute to the healthy growth of Turkey’s financial Turkey has also set specific economic targets to services. The sector enjoys a leading position in the world achieve by 2023, the centennial of the Republic. One with an ever-growing asset size and strong equity of these targets is to transform Istanbul into a structure protecting it against shocks that may arise from prominent financial center. Turkey’s large and young or turbulent market conditions. population, qualified labor force and rapidly The Turkish insurance market is still underpenetrated developing markets along with its geo-strategic (1.4% of GDP) compared to peer countries and will location makes Istanbul an ideal candidate for a provide significant potential as new insurers set up shop international financial hub. Since, the government and acquire a share of the relatively untapped Turkish launched the project for Istanbul Financial Center, market. Turkey has seen strong economic growth fueled Istanbul has rapidly made progress and is now in part by a young and dynamic population that is considering among emerging financial centers in the increasingly in need of financial products and services. world.

Investment Support and Promotion Agency of Turkey 4 A. Turkish Financial Services

i. Overview of the Turkish Financial Industry ii. The Banking Sector in Turkey iii. Insurance and Pension Funds in Turkey iv. Financial Leasing in Turkey v. Factoring in Turkey vi. Consumer Financing in Turkey

Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 5 Major milestones in Financial Services Industry of Turkey

Milestones of Turkey’s Financial Services Industry

1982-2000 2001-2006 2007-2012 2013-…

Capital Market Law Personal Pension Savings Mortgage Law, Official Establishment of Borsa Istanbul Stock Exchange and Investment System Gazette No. 26454 Istanbul A.Ş. with Law (ISE) Market opens Law Implementation of Basel No. 6362 Banking Regulation And Banking Act, Law No. 5411 II standards in Turkey Implementation of Basel Supervision Agency Regulation on Measurement Record profitability of the III standards in Turkey (BRSA) founded and Evaluation of Capital banking sector in Turkey State-owned banks Consolidation of the Adequacy of Banks Law No. 6361 regarding opened up participation Market from 100 Banks Financial Leasing, banks to 49 Banks Factoring and Financial

Takasbank is Authorized Institutions by CMB as the National Establishment of Numbering Agency of Insurance Information Turkey and Monitoring Center - Start of internet banking TRAMER, SAGMER, services HATMER, HAYMER All local or foreign insurance , reinsurance and pension companies operating in Turkey are members of the Insurance Association of Turkey New Capital Market Law No. 6362 Source: BRSA, CMB

Investment Support and Promotion Agency of Turkey 6 Turkish financial sector, led by banking, has been rapidly growing while attracting tremendous amount of foreign direct investment (FDI)

Asset Size of Turkey’s Financial Sector 3.000 CAGR Share 2.500 CAGR 2008-2014 2014 19% 18% 2.000 Banking 74%

1.500 22% 14% 1.000 Insurance and Private 20% 3% 500 TL Billion Pension 0% 9% 0 Other* 2008 2009 2010 2011 2012 2013 2014

Source: BRSA • Other includes :BIST capitalization, securities, consumer finance, real estate investments, investment trusts, asset management and venture capital investment trust assets, rounded

FDI into Turkish Financial Sector (Cumulative Value of Flows in $ Billion, 2002-2015*) Others** 2,5

TOTAL: $47,8 Billion

Banking: 37,6 Source: CBRT * As of Oct 2015, **Activities of Holding Companies and Other Activities Auxiliary to Financial Services Investment Support and Promotion Agency of Turkey 7 Turkish financial sector has been a magnet attracting significant amount of FDI..

Greenfield FDI projects in Financial Services M&As by foreign companies in Financial Services

1200 20 9000 22

1000 16 18 800 6000 14 12 600 10 8 400 3000 6

200 4 2

0 0 0 -2

Value ($ Million) Number (RHS) Value ($ Million) Number (RHS)

Source: fDi Market Source: E&Y, Deloitte

“Turkey is one of the fastest growing insurance markets “The Turkish banking industry is highly developed and worldwide, supported by a robust economic outlook and a competitive, in our segment in particular. Returns are large, young population. The transaction with Yapı Kredi is important but for us the importance is mainly in its a unique opportunity to move into a market-leading growth potential, the strategic location and export position in one of Europe’s key growth markets which is potential" also an important bridge between Europe and Middle East/Central Asia. This transaction fits perfectly into Allianz’s strategy to use bolt-on acquisitions to strengthen Sipko Schat its position in growth markets.” Executive board member responsible, Commercial banking, Rabobank. Oliver Bäte, Rabobank obtained banking license from Turkish authorities Member of the board of management of Allianz SE. in 2013 with an initial capital investment of $300 million.

Allianz acquired 94% of YapıKredi Sigorta’s shares for USD 880 million and 80% of YapıKredi Bank’s pension business, YapıKredi Emeklilik, in March 2013.

Investment Support and Promotion Agency of Turkey 8 Turkey’s foreign trade in financial & insurance services has significantly increased in recent year..

Turkey’s Foreign Trade in Financial & Insurance Services ($ Billion) 6 5,6 Export Import 4,8 5

4,0 3,9 3,9 4 3,2 3,2 3,2 3 2,4

2

1

0 2006 2007 2008 2009 2010 2011 2012 2013 2014

Turkey’s Foreign Trade in Insurance & Pension Turkey’s Foreign Trade in Financial Services ($ Billion) Services ($ Billion) 3 2,9 Export Import 2,7 3 2,7 Export Import 2,5 2,5 2,2 2,2 2,1 2,2 2,1 1,9 2,0 2 2 1,8 1,6 1,8 1,7 1,5 1,5 1,3 1,2 1,0 1 1 0,8

0,5 0,5

0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 Investment Support and Promotion Agency of Turkey 9 Source: CBRT Insurance and Consumer Banking Leasing Factoring Pension Financing The banking sector’s asset size grew to more than TL 2.2 trillion in June 2015.

Total Asset Size for the Banking Sector in Turkey Banking sector – comparison with Euro Area (2013)

2400 114% 120% 317 EA

2000 100% Turkey 1600 63% 80% 1200 60% 174 177

TL Billion 111 800 40% 67 400 20% 60

0 0% 40 7

Deposits/GDP Housing Loans/GDP Assets/GDP Loans/GDP Total Assets Total Assets/GDP Source: BRSA Source: European Banking Federation, * As of June 2015 • After the crisis in 2001, the Turkish banking sector was Top 5 Turkish Banks by Asset Size strengthened and became one of the strongests in Europe. June 2015* TL Billion

• Turkey enjoys strong asset growth with a stunning CAGR 271 19%,with a remarkable increase in the total assets to GDP ratio from 63% in 2005 to 114% in 2014. Despite that, İş Bank 253 Turkish banking sector is still unsaturated when compared with the Euro Area. Garanti Bank 231 • State-owned bank Ziraat is the leader in terms of total assets 219 with TL 271 billion, followed by İş Bank with TL 253 billion.. YapıKredi Bank 201

Source: TBB 0 100 200 300 * Non-consolidated balance sheet Investment Support and Promotion Agency of Turkey 10 Insurance and Consumer Banking Leasing Factoring Pension Financing The total asset size of participation banks was more than TL 113 billion as of May 2015.

Asset Growth of Participation Banks Lending Growth of Participation Banks

120 5,2% 5% 80 5,40% 6%

100 4% 4,21% 5% 60 80 2,4% 3% 4%

Billion 40 60 2% TL billion 3%

TL 2% 40 1% 20 1% 20 0% 0 0% 0 -1%

Total Loans Participation Bank Asset Size Participation Banks' Asset/Total Assets Participation Banks' Loan/Total Loan

• The first Islamic banking applications in Turkey started in mid 1980’s. Albaraka Türk Finans Kurumu A.Ş. and Faisal Finans Kurumu A.Ş. (known today as Türkiye Finans Katılım Bankası) were the first institutions that followed Islamic banking principles. In 2005, these institutions were named participation banks and were allowed to conduct banking activities under the scope of Islamic principles. Participation bank numbers in Turkey increased to five when Asya Katılım Bank, Kuveyt Türk Katılım Bank and Ziraat started their operations.

• The total asset size of participation banks was more than TL 113 billion in May 2015, growing at an impressive CAGR of 28% since 2005. The share of participation banks in banking sector assets increased from 2.4 % in 2005 to 5.2% in 2015.

Investment Support and Promotion Agency of Turkey Source: TKBB 11 * As of May 2015 Insurance and Consumer Banking Leasing Factoring Pension Financing Through the years, Turkish banking sector has attracted many foreign investors in a marked increase of foreign ownership assets

Distribution of Banking Assets by Ownership 100% 4% 20% • As of September 2015, 32% of the banking assets 80% were owned by public banks, 48% by private banks, 20% by foreign banks. 58% 60% 48% • The share of foreign banks in total assets increased from just 4% in 2004 to 20% in 2015 while the 40% share of state owned bank decreased to 32% from 38%. 20% 38% 32% • As of July 2015, there were 52 banks in Turkey. 0% There are a total of 34 savings banks, 13 2004 Sep-2015 development and investment banks and 5 participation banks. State Private Turkish Shareholders Foreign Shareholders

Type of Banks, July 2015 • 5 of the deposit banks are state owned banks, namely, Ziraat Bankası, Halk Bankası, Vakıflar Bankası, and Birleşik Fon Bankası. Deposit Banks 34

• Additionally, there are 4 state owned development Dev. & Inv Banks 13 and investment banks, namely, İller Bankası, Takasbank, Türkiye İhracat Kredi Bankası and Türkiye Kalkınma Bankası Participation Banks 5

Total 52 52

0 20 40 60 80 100 Investment Support and Promotion Agency of Turkey 12 Source: CBRT, BRSA Insurance and Consumer Banking Leasing Factoring Pension Financing Turkey was effected slightly by the global economic crisis and loan expansion continued to grow.

Banking Sector Loan-Deposit Growth

2.000

Assets Deposits Loans

1.600

1.200 TL Billion

800

400

0 2008 2009 2010 2011 2012 2013 2014

• Turkey’s loan to deposit ratio, which measures the liquidity of banks, has been increasing since 2009 and reached 118% in 2014. • Total loans increased by a stunning CAGR of 22% between 2008 and 2014.

Investment Support and Promotion Agency of Turkey Source: BRSA 13 Insurance and Consumer Banking Leasing Factoring Pension Financing Total loans increased in the double digits surpassing TL 1,625 billion

Development of Non-Cash and Cash Loans in Total SME Loans Turkey 350 1.600

300

250 CAGR 1.200 CAGR 200 24% 23% TL Billion 150 TL Billion 800 100 50 400 0

0

Total Loans Extended to Medium Size Enterprises Cash Loans Non-cash Loans Total Loans Extended to Micro Enterprises Total Loans Extended to Small Enterprises

• Cash and non-cash loans increased at a of CAGR 23% from 2006 to 2014. Non-cash loans surpassed TL 384 billion as of end 2014, while cash loans were more than TL 1,241 billion. • SMEs are the backbone of the Turkish economy. Turkish banks started funding SMEs at an increased rate from 2006. Total SME loan amounts increased at a CAGR of 24% during this period with more than TL 332 billion in 2014.

Investment Support and Promotion Agency of Turkey Source: BRSA, Note: SME is defined by BRSA as an entity that employs less than 250 14 workers and has TL 40 million or less total net sales or balance sheet size Insurance and Consumer Banking Leasing Factoring Pension Financing Banks’ improved risk management decreased the NPL ratio to less than 3%.

Loan Breakdown in Turkey NPL Ratio in Banking

1.400 30% 27% 6% 1.200 5,27% 21% 25% 5% 1.000 20% 4% 800 2,85% 15% 3%

600 billion 10% 2%

TL 400 1% 200 5% 0% 0 0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014

Total Cash Loans SME Loans/ Total Cash Loans Source: BRSA Source: BRSA Note: Non-Performing Loans/Total Loans

• The total percentage of SME loans to total cash loans in Turkish banks increased to 27% in 2014 from 21% in 2009.

• Turkish banks have been affected slightly by the global economic crisis of 2009, and were able to maintain low levels of NPL ratios. The NPL ratio of Turkish banks decreased to 2.85% as of end 2014. The main reason for this decrease was due to the comprehensive risk management framework applied by the banks.

Investment Support and Promotion Agency of Turkey 15 Insurance and Consumer Banking Leasing Factoring Pension Financing New products offered by banks increased the amount of consumer loans.

Consumer Loan Breakdown by Type of Loan 400

350 Vehicle Loans 300

CAGR billion

250 33% TL 200 Risk

150 Consumer & 100 other Loans

50 Mortgage 0 Loans 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: BRSA

• Total consumer loans increased substantially with a CAGR of 33% from 2005 to 2014 exceeding TL 355 billion. • The increase in different loan product categories offered by banks supported the increase in consumer loans. Within this scope, the introduction of mortgage loans, which constitute more than 35% of total consumer loans, reached to more than TL 125 billion with a CAGR of 28% from 2005 to 2014.

Investment Support and Promotion Agency of Turkey 16 Insurance and Consumer Banking Leasing Factoring Pension Financing Turkey is fully committed to Basel III standards…

Total Capital Leverage

• Since July 2012, Turkey has begun fully 10.5% implementing Basel II standard of credit risk Basel III Basel III 3% assessment. • The technical requirements for Basel III are also 250 300 bps significant. The Basel III accords aim to strengthen bps the capital base of the banking sector, enhance risk coverage, introduce an overall leverage ratio and Basel II 8% Basel II 0% global liquidity risk standards and deal with procyclicality. • The new total capital ratio is set at 10.5% consisting of 4.5% for common equity and 6% for 0% 10% 20% 0% 5% 10% Tier 1 capital for Basel III. Source: Deloitte Analysis • After Basel III, banks will maintain cash-like assets Capital Adequacy Ratio in Turkey (%) in the short term to adjust their liquidity ratios. Furthermore, Basel III requires that banks report 28 26 their liquidity metrics on a daily basis. 23,7 24

• The Turkish banking sector has capital adequacy 20 ratios (CAR) above the regulator limits of BRSA, 15,3 which was 12%. Moreover, Turkey’s CAR exceeds 16 that of Basel II, which was 8% and Basel III, which Target: 12% will gradually increase each year and will be set at 12 a total capital ratio of 10.5% by January 2019. 8 Legal Limit: 8% 4

Investment Support and Promotion Agency of Turkey Source: BRSA, * as of Oct 17 Insurance and Consumer Banking Leasing Factoring Pension Financing …and has even implemented a higher CAR than those set by Basel III regulation.

Capital Adequacy Standard Ratio • Savings banks in Turkey had a CAR level of 14.9%, 65% 58,7% while participation banks and development and investment banks had 14.1% and 31.3% capital 55% adequacy ratios, respectively. 45% 31,3% • Despite the global economic crisis and the 35% Eurozone crisis, the high capital adequacy ratio of 25% 17,7% Turkish banks allowed them to achieve strong 14,9% financial statements. Hence, Turkish banks were 15% only slightly effected by both crises. Moreover, 15,1% 5% 14,1% Turkish banks are already prepared to meet the 2010 2011 2012 2013 2014 2015* new capital requirements of Basel III.

Deposit Participation Dev & Inv • The Basel Consensus has a place in the EU legal Source: BRSA, as of March acquis under the scope of financial services. The EU aims to create compliance of the Basel Consensus with the Capital Adequacy IV (CRD-IV) package. The abovementioned package was put into force on 1 January 2014 and consists of 2013/36/EU Directive and (EU) 575/2013 legislation. Turkey is in accordance with the EU regarding the calendar for the implementation of the aforementioned standards.

Investment Support and Promotion Agency of Turkey 18 Insurance and Consumer Banking Leasing Factoring Pension Financing The solid capital structure of Turkish banks allowed the sector to enjoy high profits.

Banking Sector Profit Fees, Commissions and Banking Services 140 30 Income/Total Income (Percentage) 24,6

120 25

100 20,2 14%

TL Billion TL

20

15%

80 14%

15 14% 14%

12%

60 13%

10 13%

TL Billion

40 12% 12%

10% 12% 12% 20 5 0 0 8% 2009 2010 2011 2012 2013 2014 6% Interest Income Interest Expense 4%

Non-Interest Income (Expense)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net Profit (RHS)

• The strong growth in the Turkish banking sector was also reflected in its profits exceeding TL 24 billion in 2014.

• The total interest income, which includes interest received from loans given, interest received from required reserves, interest received from other banks and interest received from money market transactions increased over TL 139 billion.

• The banking sector not only benefits from increased income from interest but also from fees collected from other banking activities. The share from fees, commissions and banking services is around 14%

Source: BRSA

Investment Support and Promotion Agency of Turkey 19 Insurance and Consumer Banking Leasing Factoring Pension Financing The sector grew as a result of its strong asset quality and was able to maintain high profits.

ROA Country Comparison ROE Country Comparison

4% 28% UK

USA 2% 18% France

Poland 1% 8%

Russia

-1% Turkey -2% 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014

Source: IMF Financial Soundness Indicators *The latest data available on France was from December 2013, UK was from June 2014 and for Poland was from September 2014. Note: Numerator was annualized net income before extraordinary items and taxes, from the beginning of the year until the reporting month. Denominator was an average value of total assets (financial and nonfinancial) over the same period.

• The Turkish banking sector’s return on asset (ROA) ratio was stronger than that of banks in major financial centers as well as Eastern European countries. In 2014, ROA was 1.69% in Turkey. • Moreover, return on equity was, again, well above that of the USA and Europe with 14.7% in 2014.

Investment Support and Promotion Agency of Turkey 20 Insurance and Consumer Banking Leasing Factoring Pension Financing Turkey’s growing banking sector also resulted in the increase in the number of bank branches.

Total Number of Bank Branches in Turkey Including Foreign Branches, 2006-2014 • The total number of branches increased at a 11.986 12.000 21 CAGR of 7% between 2006 and 2014. 21 11.000 20,9 20 • The highest number of branches belongs to commercial banks, followed by participation 10.000 20 19 banks and development banks. 9.000 17,9 19 • The per branch employee number decreased as 18 8.000 a result of the increasing trend towards 7.204 18 centralization of branch operations as well as 7.000 17 the increase in automated functions.

2006 2007 2008 2009 2010 2011 2012 2013 2014

# of Branch Employee per Branch (RHS) Source: BRSA Development of Cashpoints (ATMs) in Turkey, 2008-2014 • The development of the banking sector over 50.000 45576 recent years has affected the usage of cashpoints. As of end 2014, there were a total 40.000 of 45,576 ATM cashpoints in Turkey.

30.000 • Between 2008 and 2014, the number of ATMs 21970 grew at a CAGR of 11%. 20.000

10.000

0 2008 2009 2010 2011 2012 2013 2014 Source: BKM

Investment Support and Promotion Agency of Turkey 21 Insurance and Consumer Banking Leasing Factoring Pension Financing Banks also started focusing on alternative technologies that provide low cost and faster transaction services.

Internet Banking Transaction Values Transaction Values

3.000 250 Cash Cash 2.500 Transfers Transfers

200

Investments 2.000 Investments 150 1.500 Payments

Credit Cards TL Million TL Billion 100 1.000 Credit Cards Payments 500 50 Other 0 Other 0 2011 2012 2013 2014

Source: TBB Source: TBB • The internet banking transaction value increased CAGR 22% between 2008 and 2014. Cash transfers had the lions’ share in total internet banking transactions with 70% and increased impressively by a CAGR of 25% from 2008 to 2014. Notwithstanding the large share from cash transfers, the fastest growth was observed in payments with a staggering growth performance. • The mobile banking transaction values tripled annually since 2011 and exceeded 200 billioonin 2014. It is noteworthy to mention the development of mobile phone users and the number of 3G phone subscribers. In 2014, the number of 3G phone subscribers increased by 20% exceeding 58.0 million. According to BMI, this figure is expected to reach 70 million by 2017.

Investment Support and Promotion Agency of Turkey 22 Insurance and Consumer Banking Leasing Factoring Pension Financing Transactions for both credit and debit cards have increased significantly.

Development of Credit Cards and Transaction • Turkey’s vibrant and growing economy had a Volume, 2008-2014 positive impact on the development of credit and

500 60 debit cards, providing significant potential for

Million banks. 400 40 300 Billion • The number of credit cards in Turkey increased at a

200

TL 20 CAGR of 5% between 2008 and 2014. And, a 100 staggering CAGR of 17% was realized during this 0 0 time in transaction volume reaching TL 474 billion 2009 2010 2011 2012 2013 2014 in 2014. Transaction Volume • The rapid development was also observed for debit Total Number of Credit Cards (RHS) cards. In 2014, transaction volume reached TL 418 Source: BKM billion and the CAGR since 2008 was 18%. Development of Debit Cards and Transaction Volume, 2008-2014

500 150

400 Million 100

300 Billion

200 50

TL 100 0 0 2008 2009 2010 2011 2012 2013 2014 Transaction Volume Total Number of Debit Cards (secondary axis) Source: BKM

Investment Support and Promotion Agency of Turkey 23 Insurance and Consumer Banking Leasing Factoring Pension Financing A Success Story: Odea Bank

• Odea Bank started its operations in Turkey in "We hope to become one of the biggest banks in October 2012. Odea Bank is the first bank to Turkey by 2017. Since our entrance into the receive a banking license in Turkey in the last 15 Turkish market in 2012, the Turkish economy years. remained stable and showed significant growth • The bank had a very rapid growth and by end despite the global economic environment. The 2014, Odea Bank’s total assets increased to TL reforms made by the government and the 25.6 billion with 50% annual growth. The bank was Banking Regulation and Supervision Agency ranked 15th among 45 banks (excluding (BRSA) enhanced our performance." participation banks) in Turkey. • 91.4% of the bank’s shares are owned by Bank Hüseyin Özkaya, Director General of Odea Bank, Audi, a Lebanese group, which has banking July 2013 operations in 11 countries in the region.

Source: Odea Bank

Investment Support and Promotion Agency of Turkey 24 Insurance and Consumer Banking Leasing Factoring Pension Financing Financial Services Sector: Selected Players

Iş Bank Garanti Bank Akbank Ziraat Bank • Iş Bank was established in • Founded in 1946, • Established in 1948 in • Homeland Funds, the 1924 and is Turkey’s Garanti is Turkey’s Adana for cotton origin of Ziraat Bank, largest . second largest private growers, Akbank is was founded in 1863 to bank with total assets owned by Sabancı support farmers and • The bank’s shares are held worth TL 231 billion as Holding and other agricultural by the Işbank Pension of March 2015. shareholders development. Fund, the Republican People’s Party and 32% of • Garanti is controlled by • Akbank provides • The Republic of Turkey the shares were open to the Spanish bank BBVA, consumer, commercial, Prime Ministry Under public. with Doğuş Holding SME, corporate and secretariat of the having the minority services Treasury is the sole • Iş Bank’s total assets were shares. as well as foreign owner of Ziraat Bank. TL 253 billion for the first exchange, foreign trade quarter of 2015. • Garanti provides • Ziraat Bank is the financing and treasury integrated financial largest bank in Turkey • Iş Bank’s products and transactions. services in every and has the most services include retail, segment of banking and • The bank’s total assets extensive network. corporate banking and has subsidiaries for reached approximately capital market operations • Ziraat Bank’s total pension, life insurance, TL 220 billion as of and other financial assets reached TL 271 factoring, leasing, March 2015. services such as private billion as of March brokerage and asset pensions, insurance, asset 2015. management on both management, leasing and national and factoring. international levels.

Source: ISO 500

Investment Support and Promotion Agency of Turkey 25 Insurance and Consumer Banking Leasing Factoring Pension Financing Participation Banks: Selected Players

Türkiye Finans Albaraka Kuveyt Türk • Türkiye Finans was established • Established in 1984 by Albaraka • Kuveyt Türk started its activities in in 1991 following the merger of Banking Group, Islamic Development 1989. the companies Family Finans Bank and other investors; it is a • It is owned by Kuwait Finance and Anadolu Finans. pioneer in participation banking in House, the Public Institution for Turkey. • It operates in credit Social Security of Kuwait, the intermediation and related • Albaraka had TL 23.0 billion of total Turkish Directorate General of activities. assets as of end 2014. Foundations and the Islamic Development Bank. • Türkiye Finans had assets worth • Albaraka Türk offers its customers TL 33.5 by the end of 2014. participation accounts, personal and • Kuveyt Türk’s total assets were TL , leasing and 34 billion in 2014. • The bank has retail, commercial project-based and SME banking services for • The bank’s main products are services. both national and international current and participation accounts, customers. investment and saving accounts and leasing.

Source: ISO 500

Investment Support and Promotion Agency of Turkey 26 Insurance and Consumer Banking Leasing Factoring Pension Financing The premiums to GDP ratio in Turkey is low, demonstrating potential for growth in the future years.

Total Premiums as a Percentage of GDP, Country Total Premium Growth as a Percentage of GDP in Comparison, 2014 Turkey

Turkey 1,4% 1,55% 1,50% 1,40% 1,40% 1,33% Ukraine 1,8% 1,29% 1,28%

Bulgaria 2,1% 1,00% China 3,2%

India 3,3% 0,50% Czech Republic 3,5%

Brazil 3,9% 0,00% Spain 5,1% 2009 2010 2011 2012 2013 2014

Germany 6,5%

Italy 8,6%

Source: Swiss Re, Sigma, World Insurance in 2014

• Turkey’s total premiums as a percentage of GDP is 1.4%. • The insurance market is still underpenetrated compared to peer countries and will provide significant potential as new insurers set up shop and acquire a share of the relatively untapped Turkish market. Turkey has seen strong economic growth fueled in part by a young and dynamic population that is increasingly in need of financial products and services.

Investment Support and Promotion Agency of Turkey 27 Insurance and Consumer Banking Leasing Factoring Pension Financing Turkey’s insurance sector asset size grew at a CAGR of 20% between 2008 and 2014.

• There are a total of 63 insurance and retirement • The asset size of non-life insurance increased a pension companies in Turkey of which 38 are non- stunning CAGR 25%, while the asset size of life life insurance companies, 5 life insurance and 19 insurance and pension companies also reported a pension companies and 1 reassurance company as significant increase of a CAGR of 14% during the of 2014. same period.

Asset Size of Turkey’s Insurance Sector Growth of Premiums in Turkey

80 25 CAGR 16% 28 20

60 illion

B 15 24

40 19 TL 10 CAGR 16 12% TL Billion 14 15 51 20 13 5 32 38 21 25 13 17 0 0 Life Non-Life 2008 2009 2010 2011 2012 2013 2014 Non-Life Insurance Companies 2009 2010 2011 2012 2013 2014 Life Insurance and Pension Companies

Source: TSB Source: TSB • Total asset size increased at a CAGR of 20% • Life insurance premiums grew at CAGR of 12% between 2008 and 2014 in the non-life and life between 2009 and 2014 to over TL 3,200 million, insurance sector surpassing TL 79 billion in 2014. while non-life insurance grew at a CAGR of 17% exceeding TL 22,700 million.

Investment Support and Promotion Agency of Turkey 28 Insurance and Consumer Banking Leasing Factoring Pension Financing The premiums grew in every business line of insurance between 2009 and 2014.

Breakdown of Premiums in 2014 Premium Written CAGR Share in Total Premimum (TL Million) (2009-2014)

Land 21% 2,2 2,5 3,0 3,9 5,4 5,5 20% Vehicles Liability* • Premiums grew in every business line in the insurance sector 20% 2,7 3,1 3,8 4,5 5,0 5,1 14% Land Vehicles between 2009 and 2014. The areas of general losses, land General 9% vehicles liability and Losses 0,9 1,0 1,5 1,7 2,2 2,4 21% health grew considerably registering Health 11% CAGRs of 21%, 20% 1,4 1,7 2,0 2,2 2,5 2,9 16% and 16%, respectively.

Fire and 15% Forces of 15% Nature 1,9 2,0 2,3 2,6 3,3 3,8

2009 Life 13% 1,8 2,2 2,7 2,7 3,4 3,3 12% 2010 2011 2012 Other Non- Life** 2013 11% 1,41,6 1,9 2,0 20,8 22,7 15% 2014

Source: TSB *Land vehicles liability insurance is compulsory. **Other non-life insurance includes accident, railway rolling stock, aircraft, maritime, aircraft liability, general liability, credit, suretyship, financial losses, legal protection and assistance.

Investment Support and Promotion Agency of Turkey 29 Insurance and Consumer Banking Leasing Factoring Pension Financing Banks are increasingly considering insurance products for cross-selling opportunities.

Premium Distribution by Sales Channels • Insurance sales in Turkey are conducted via direct sales, agencies, bancassurance and brokers.

100% • Total insurance sales reached about TL 26 billion in 9% 10% 9% 10% 10% 10% 11% 2014. 87% of these sales were non-life insurance sales with more than TL 22.7 billion in sales, while 17% 19% 22% 23% 23% 23% 23% the rest were life insurance sales with a total worth of more than TL 3.3 billion.

50% • Agencies had the biggest share in total sales constituting 60% of total sales with more than TL 65% 62% 60% 59% 60% 60% 60% 15 billion. The significant amount of sales is due to the strong presence of agencies in Turkey. There were more than 16,000 actively operating agencies as of 2014. 8% 10% 9% 8% 0% 7% 6% 6% • Agency sales are followed by bancassurance sales. 2008 2009 2010 2011 2012 2013 2014 Bancassurance grew from 17% to 23% from 2008 Direct Agency Bank assurance Broker to 2014, exceeding TL 5.8 billion in total sales.

Source: TSB

Investment Support and Promotion Agency of Turkey 30 Insurance and Consumer Banking Leasing Factoring Pension Financing Allianz is the market leader in non-life insurance, the life insurance market is dominated by Ziraat.

Non-Life Insurance Market Share, Written Premiums • Allianz was the leader in non- life insurance market in terms of Allianz Sigorta written premiums in 2014 with a 14% Axa Sigorta share of 14.2% after the acquisition of Yapı Kredi Sigorta in 2014. Axa and Anadolu 10% Sigorta followed Allianz with Ak Sigorta 13.5% and 13.2% market 6% shares, respectively. • The large scale non-life YapıKredi Sigorta* insurance companies (the top 5 2% companies) represent 55% of 2008 2009 2010 2011 2012 2013 2014 total market as of December Source: TSRB, * YapıKredi Sigorta and YapıKredi Emeklilik’s majority shares were acquired by Allianz in 2014. 2014.

Life Insurance Market Share, Written Premiums • Ziraat Hayat ve Emeklilik started its operations in the life 30% insurance business in 2009. As of 25% 2010, Ziraat Hayat ve Emeklilik Ziraat became the market leader in 20% terms of life insurance premiums Anadolu and continued to be the leader 15% Garanti thanks to its large retail Allianz (YapıKredi*) 10% customer base and branch Halk Hayat network. Ziraat Hayat ve 5% Emeklilik had a share of 18.5% 0% in 2014, followed by Anadolu 2008 2009 2010 2011 2012 2013 2014 Hayat ve Emeklilik with 11% and Alianz with 10%. Source: TSRB

Investment Support and Promotion Agency of Turkey 31 Insurance and Consumer Banking Leasing Factoring Pension Financing The government will fund 25% of a participant’s monthly contribution in order to promote savings.

• In October 2001, private pension plans were established in Turkey after the enactment of Law No. 4632 - Private Pension Plans Savings and Investment System. The objective of the new pension regulation can be described as follows: • Increase the savings behavior of the population with the new tax and financial incentives • Involve and integrate the non-working population into the system • Decrease the lapse issue within the system Government Grants and Advantages Major Conditions for the Individual Pension Plans

• The government will contribute 25% of the monthly • A minimum 10 years in the system participant contribution into a separate pension • A minimum retirement age of 56 contract. The government’s annual contribution will be up to 25% of the gross annual minimum wage. • No more requirement of minimum 10 years of contribution payment • The participant is eligible for the pension fund with the following terms: • Participants can switch funds 6 times and pension plans 4 times a year • 0-3 years of participation (0% of the fund) • Once the participant retires, he/she can claim the • 3-6 years of participation (15% of the fund) amount via three different means (i.e., total payment of asset under management, installed • 6-10 years of participation (35% of the fund) repayment, and annuity contract) • A contract is signed when the first contribution • 10 years of participation and before the age of amount is transferred into the company’s account. 56 (60% of the fund) • The participant has the right to withdraw the money • 10 years of participation and after the age of 56 in the fund up to 60 days after the contact has been (retirement), death and disability (100% of the signed. fund) • There is gradual tax on net return instead of accumulated value. Pricing is based on the riskiness of the pension fund. Source: EGM

Investment Support and Promotion Agency of Turkey 32 Insurance and Consumer Banking Leasing Factoring Pension Financing In 2014, the size of the Turkish pension funds relative to GDP was doubled over the past 5 years.

Pension Funds Relative to the Size of the Economy Pension Funds Relative to the Size of the Economy (as Percentage of GDP), 2014 (as Percentage of GDP) in Turkey

6% 5,5% France 0,5% 4,9% 5% Hungary 4,1% 3.8% Turkey 5,5% 4%

Germany 6,7% 3% 2.3% 2.2% Czech Republic 8,0% 2% Poland 8,8% 1% Spain 9,5% USA 83,0% 0% 2010 2011 2012 2013 2014 UK 96,0% Source: OECD Netherlands 159,3%

0% 50% 100% 150% 200% Source: OECD • Pension funds in the world’s developed and developing countries play a crucial role in the economy since they provide long term funds to the market. • In 2014, the ratio of pension funds to GDP in Turkey was 5.5%, an increase from 2.3% in 2010. The figure is still significantly lower than major OECD countries. However, there is great potential for the market because of the government’s promotion of savings plans to the general population.

Investment Support and Promotion Agency of Turkey 33 Insurance and Consumer Banking Leasing Factoring Pension Financing Gross national savings make up 14.4% of Turkey’s GDP and is expected to reach about 16% in the short term.

Gross National Savings Percentage of GDP, 2014 Turkey’s Gross National Savings Percentage of GDP Growth

UK 11,9 17% 16,0% Turkey 14,4 16%

Brazil 15,6 15% 14,4% 18,4 Italy 14% 13,3% 13% US 18,8 12% Poland 18,9 11% Spain 20,3 2010 2011 2012 2013 2014 2015f 2016f

France 21,2 Source: IMF f: forecast Germany 26,7 • Gross national savings as a percentage of GDP was India 30,2 14.4% in 2014, which is relatively lower than other countries. Source: IMF Note: Gross national savings is expressed by the IMF as gross disposable income less • The Turkish government is trying to increase final consumption expenditure after taking into account an adjustment for pension savings by enhancing the private pension system funds. For many countries, the estimates of national saving are built up from national accounts data on gross domestic investment and from balance of payments-based data and generally raising awareness and promoting on net foreign investment household savings. Thus, the government aims to increase the savings to 17% by 2018.

Investment Support and Promotion Agency of Turkey 34 Insurance and Consumer Banking Leasing Factoring Pension Financing Both AUM and contribution amounts had rapid growth since 2006 with a CAGR of 37% and 35%, respectively.

Pension Funds (AUM) and Contribution Growth Number of Participants/Contracts in Pension Funds

40 7 1,14 1,16 Assets Under Management (AUM)

6 1,14

30 Accumulated Total Contribution 5 1,12 4 1,10 20

Million 3 1,06 1,08

2 1,06 TL Billion 10 1 1,04 0 1,02 0

Number of Contracts Number of Participants Contract per Participant (RHS)

Source: EGM Source: EGM • The number of participants in Turkey’s pension funds increased at a CAGR of 21% between 2006 and 2014, while total contributions increased at a CAGR of 35% during the same period. • As of 2014, total contributions reached TL 28.3 billion, which is a staggering 30% increase from the previous year. This increase was due to the new pension regulation, in which the government funds 25% of the monthly contribution. • According to the Pension Monitoring Center’s Private Pension Development Report 2014, the total number of contracts increased to 5.8 million with 5.1 million participants. The assets under management exceeded TL 34 billion.

Investment Support and Promotion Agency of Turkey 35 Insurance and Consumer Banking Leasing Factoring Pension Financing

The top 4 pension funds constituted 73% of the market.

Pension Funds (AUM) Share, 2014 Market Share in terms of Number of Participants, 2014

14% Allianz

AvivaSA Allianz 14% 19% Other; 17% Anadolu 27%

AvivaSA; 17% Garanti Emeklilik ve 19% Anadolu Hayat Hayat ve Garanti Emeklilik; 19% Emeklilik; 38% Other 16%

Source: EGM 2014

• Allianz Yaşam ve Emeklilik is the market leader in the pension fund sector in terms of assets under management. However, it is not the market leader in terms of number of participants. • Garanti Emeklilik ve Hayat and Anadolu Hayat ve Emeklilik has the highest share in terms of number of participants with 17% as 2014.

Investment Support and Promotion Agency of Turkey 36 Insurance and Consumer Banking Leasing Factoring Pension Financing Non-Life Insurance Sector: Selected Players

AXA Sigorta Allianz Sigorta Anadolu Sigorta Güneş Sigorta

• French insurance giant • In 1988, the German • Anadolu Sigorta was • Güneş Sigorta was Axa entered the company Allianz along founded in 1925 by İş established in 1957. Turkish insurance with Tokio Marine Bank. • Vakıf Emeklilik owns market in 1995 under Insurance from Japan • 57% of the company is 36% of Güneş Sigorta the name Axa Oyak bought shares of Şark owned by Milli and Groupama, one of Life Insurance. Sigorta operating Reasürans T.A.Ş. and the leading insurance under Koç Holding. • In 2008, AXA bought the rest is publicly companies in France, Oyak’s shares. • Allianz owns 96.2% of listed. owns 36%. The rest of the life insurance the shares are owned • 93% of the shares of • In 2014, Anadolu shares of the company. by the Retirement the company belong to Sigorta’s non-life The other 3.8% is held Foundation of Axa Holding A.Ş., 7% premium equaled TL by Tokio Marine. Vakıfbank’s personnel to Ziraat Bank and the 3.0 billion with a non- and the public. rest to smaller • TL 3.2 billion was made life technical income of stakeholders. by Allianz from non-life TL 2.4 billion. • It had more than TL insurance premiums in 1.2 billion non-life • In 2014, Axa Sigorta’s 2014 and a total non- premiums in 2014. total non-life premium life technical income of Güneş Sigorta’s non- amounted to more more than TL 2.9 life technical income than TL 3.1 billion with billion. exceeded TL 700 a non-life technical million. income of more than • Allianz acquired Yapı TL 2.9 billion. Kredi Sigorta in 2014.

Source: TSB and Company websites

Investment Support and Promotion Agency of Turkey 37 Insurance and Consumer Banking Leasing Factoring Pension Financing Life Insurance Sector: Selected Players

NN HAYAT ve GARANTI EMEKLILIK ANADOLU HAYAT ve AvivaSA Emeklilik ve EMEKLILIK ve HAYAT EMEKLILIK Hayat • Oyak Emeklilik A.Ş., • Garanti Emeklilik ve • • AvivaSA was was founded in 2003. Hayat began its was founded in 1990 established in 2007 with operations in 2002. and is Turkey’s only approximately 50% • Dutch financial services publicly listed insurance percent of its shares group ING acquired the • 85% of Garanti Hayat company. divided between company in 2007. ve Emeklilik’s shares Sabancı Holding and are owned by Garanti • 62% of the company‘s • Oyak Emeklilik’s name Aviva. Bank, the remaining are shares are owned by Iş changed to ING Emeklilik owned by Dutch Bank, 20% by Anadolu • Aviva is a global in 2009. insurance company Sigorta, 17% is open to insurance company • The company was Achmea. public and less than 1% headquartered in Britain renamed NN Emeklilik in is held by Milli with over 50 million • Garanti Emeklilik ve February 2015. Reasürans T.A.Ş. customers. Hayat’s total assets •NN Continental Europe under management was • In 2014, the company’s • AvivaSA had TL 6.5 Holding BV owns the more than TL 5.6 billion asset under billion asset under company in 2014. management totaled TL management in 2014. 6.8 billion. •ING Emeklilik’s total assets under management in 2014 reached TL 1.6 billion.

Source: TSB and Company websites

Investment Support and Promotion Agency of Turkey 38 Insurance and Consumer Banking Leasing Factoring Pension Financing Financial leasing assets grew at a CAGR of 13% between 2007 and 2014.

Financial Leasing Transaction Volume, 2014 Financial Leasing Asset Size Growth in Turkey

80 35% 36 1,2%

70 30% 32

60 25% 28

50 20% 24 0,8% Billion 40 15% 20

30 Billion

USD USD 20 10% 16 TL 10 5% 12 0,4% 0 0% 8 4 0 0,0%

Transaction Volume Penetration (RHS) Leasing Asset Size Leasing Volume/GDP (RHS) Source: FKB Source: FKB

• Turkey’s leasing transaction volume reached USD 7.6 billion in 2014, which is a 10% increase from the previous year. Despite the huge year-over-year growth Turkey’s leasing sector is still underpenetrated but significant upside potential as leasing asset size grows. • The total asset size grew at an impressive CAGR of 13% from 2007 to 2014 to more than TL 32.5 billion. • Furthermore, participation banks in Turkey can also conduct financial leasing operations on tangible items.

Investment Support and Promotion Agency of Turkey 39 Insurance and Consumer Banking Leasing Factoring Pension Financing Real estate had the highest share in financial leasing with 29% in 2014.

Financial Leasing Receivables in Turkey Financial Leasing Investment Amount by Product Type, 2014 Real Estate 24.000 9%

8% Construction Equipment 20.000 7% 16.000 6% Machinery and 16% Equipment 5% 3% TL Million 12.000 Metal Processing 4% 29% 8.000 3% 7% Textile Equipment 2% 4.000 1% 7% Medical Equipment 0 0% Other 2008 2009 2010 2011 2012 2013 2014 20% 18% Leasing Receivables NPL (RHS)

Source: BRSA Source: FİDER, İş Leasing

• The Turkish government promotes financial leasing operations. As of December 2011, it reduced the VAT applied for leasing operations to 1% for leasers that have investment incentive documents. The items that can be leased include steam boilers, steam turbines, concrete pumps and centrifuges among other items. In light of this support, financial leasing receivables steadily increased. • Financial leasing receivables increased at CAGR of 6.6% between 2008 and 2014 exceeding TL 20 billion in 2014. • Leasing of construction equipment had the highest share in terms of investment amount with 29%, followed by machinery and other equipment with 20%.

Investment Support and Promotion Agency of Turkey 40 Insurance and Consumer Banking Leasing Factoring Pension Financing Leasing Sector Operational Figures

Leasing Sector Operational Figures 2010 2011 2012 2013 2014

Number of 16 17 18 32 29 Branches Number of 69 72 75 117 138 Agencies Number of 1,286 1,217 1,258 1,361 1,458 Personnel Number of 50,428 43,294 45,089 46,752 52,041 Clients Number of 10,186 14,648 17,787 19,790 20,302 Contracts

Source: FKB

• The leasing sector in Turkey makes up a significant part of the non-banking sector with 20,302 contracts in 2014. • In 2014, the number of skilled personnel in the leasing sector was 1,458 and the total number of clients was 52,041. • With 138 different agencies all across Turkey, leasing companies provide necessary services to their clients.

Investment Support and Promotion Agency of Turkey 41 Insurance and Consumer Banking Leasing Factoring Pension Financing The leasing sector is a promising one with 20% growth in revenues in 2014 compared to 2013.

Leasing Revenues and Net Profits/Loss, 2008- 2014

2.500 700

600 2.000 • Revenues in the leasing sector in Turkey have been

500 increasing since 2009.

TL MillionTL

1.500 400 • As of 2014, leasing revenues were TL 2,179 million, 300

1.000 which corresponds to a 20% increase compared to

TLMillion the previous year and 170% increase compared to 200 2009. 500 100 • Net profit increased from TL 451 million to TL 526 0 0 million in 2014.

Leasing Revenues Net Profit/Loss (RHS)

Source: FKB, BRSA

Investment Support and Promotion Agency of Turkey 42 Insurance and Consumer Banking Leasing Factoring Pension Financing Leasing Sector: Selected Players

BNP PARIBAS SIEMENS AG GARANTI YATIRIM Leasing Solutions Leasing Leasing Leasing • BNP Paribas Leasing • Siemens Finansal • Garanti Leasing was • Yatırım Leasing was Solutions, a global leader Kiralama A.Ş. was founded in 1990. founded in 1993. It in financial services, established in 1997 by joined TETAŞ Group in • It uses Garanti Bank signed a cooperation Siemens AG Leasing, 2004. The company branches as a distribution agreement with TEB which has offices in offers its clients channel. In 2007, Garanti Leasing in 2005. more than 20 countries. investment services in Leasing founded Garanti different sizes and • In 2009, BNP acquired • Siemens leases printing Fleet. terms and consultancy Fortis Leasing. machines, textile, • Garanti Leasing aims to to promote leasing tourism and office • TEB Leasing and Fortis become the first Turkish activities in Turkey. equipment, transport Leasing then merged leasing company to open vehicles, computers and • Yatırım Leasing under the umbrella of offices overseas. software, cranes and provides financing for BNP Paribas Finansal construction machinery, • Business premises, real capital such as medical Kiralama A.Ş. in 2011. power stations and estate, medical and office and construction • BNP leases medical and communication and equipment, construction, equipment, press and data processing security systems. textile and manufacturing packaging, appliances equipment, energy machinery can be leased for metals and textile

facilities, transport from Garanti Leasing. sectors. vehicles, construction • Garanti Leasing’s total • The company’s total machinery and real assets in 2014 amounted assets were TL 97.770 estate. Its total assets in to TL 4.1 million. million in 2014. 2014 was TL 2.0 million.

Source: Company Websites

Investment Support and Promotion Agency of Turkey 43 Insurance and Consumer Banking Leasing Factoring Pension Financing The assets in the factoring sector in Turkey have been increasing significantly, reaching TL 26.4 billion in 2014.

Total Asset Development of the Factoring Factoring Sector Selected Financial Indicators, Sector in Turkey, 2008-2014 2011-2014

27 CAGR 26,4 TL Billion 2011 2012 2013 2014 23% 22 Receivables 14.2 16.3 20.1 24.7

NPLs (%) 4% 5% 4.9% 4.5%

17

Reserves 0.4 0.7 0.8 0.9

12 Billion 7,8 Banks 0.5 0.7 0.6 0.4 TL 7 Credit 11.5 12.8 15.5 18.4 2 SE Equity 3.4 3.9 4.0 4.4

-3

• In Turkey, factoring was introduced in 1988 to support manufacturers’ export activities. One of the major advantages of factoring is its ability to provide companies with immediate cash flow for their accounts receivable. • The total assets in factoring sector reached TL 26.4 billion in 2014, which accounts for a 21% increase compared to the previous year. • It is also observed that between 2008 and 2014 total assets grew at a staggering CAGR of 23%. • Receivables in the sector grew by 74% compared to 2011 and non-performing loans decreased from 5% in 2012 to 4.5% in 2014.

Investment Support and Promotion Agency of Turkey 44 Source: CBRT

Insurance and Consumer Banking Leasing Factoring Pension Financing Factoring revenues increased by 35% in 2014 demonstrating a vast potential in the sector.

Factoring Revenues and Net Profit, 2008-2014 • The revenue and net profit of the factoring sector have been increasing since 2009.

3,5 3,3 0,7 • Compared to 2009, factoring revenues increased 3 0,6 41% reaching TL 3,270 million in 2014.

2,5 0,5 TL TL

billion • The net profits in factoring reached TL 624 million 2 1,8 0,4 billion in 2014, an increase of 25% compared to the 1,5 0,3

TL previous year.

1 0,2

0,5 0,1

0 0,0

Factoring Revenues Net Profit (RHS)

Source: BRSA

Investment Support and Promotion Agency of Turkey 45 Insurance and Consumer Banking Leasing Factoring Pension Financing The total numbers of clients and contracts have been increasing in the factoring sector demonstrating its high service potential.

Factoring Sector Operational Figures

2009 2010 2011 2012 2013

Number of 26 28 25 62 319 Branches Number of 116 175 218 185 -- Agencies Number of 2,959 3,557 3,819 4,186 4,650 Personnel Number of 40,997 57,094 66,468 67,054 -- Clients Number of 65,952 89,516 91,029 84,769 -- Contracts

Source: BRSA

• The table above provides some of the most crucial operational figures of the factoring sector. The sector continued its growth between 2009 and 2013 in almost every operational activity. • For example, the number of branches in the factoring sector increased from 26 in 2009 to 319 in 2013. This also resulted in the increase of highly skilled personnel in this field reaching a total of 4,650, which is a 57% increase compared to 2009.

Investment Support and Promotion Agency of Turkey 46 Insurance and Consumer Banking Leasing Factoring Pension Financing Factoring Sector: Selected Players

Garanti Factoring YapıKredi Factoring TEB Factoring • Garanti Factoring was • YapıKredi Factoring was • TEB Factoring was established in established in 1990 in order to established in 1999. Turkey in 1997. provide factoring services to • The company provides services to • The company provides factoring industrial and commercial commercial companies and more services domestically and companies. than 90% of its customer base is internationally. • Garanti Factoring open edits small and medium size • Since 1998, TEB Factoring is a shares to the public in 1993 enterprises. member of the Factors Chain and is traded on Borsa Istanbul. • YapıKredi Factoring is an active International. • The company currently has 21 member of both the Factoring • The total assets of TEB Factoring branches in 14 cities of Turkey. Association and Factors Chain in 2014 amounted to TL 1,355 International (FCI). • The total assets of the company million. were TL 2,989 million in 2014. • In 2014, the total assets of YapıKredi Factoring were TL 2,813 million.

Source: Company Websites Investment Support and Promotion Agency of Turkey 47 Insurance and Consumer Banking Leasing Factoring Pension Financing The assets of the consumer financing sector in Turkey have been growing since 2009.

Consumer Financing Sector Asset Development, • One of the main advantages of consumer financing 2009-2014 companies is their ability to provide fast and 25 50% efficient loans for their customers. Most consumer financing companies in Turkey are focused on 40% 20 specific financing fields such as car loans or 30% 15 mortgages, which allow them to serve their 20% customers faster and with a variety of choices 10 targeted to them.

10% TLBillion 5 0% • Also, it is important to note that with the amendment of Law No. 6361 regarding "Leasing, 0 -10% Factoring and Financing Company Law," new 2009 2010 2011 2012 2013 2014 benefits were introduced in the consumer financing Total Assets % Growth (RHS) sector in 2012. • According to the law, financing companies now Consumer Financing Sector Selected Financial have the title of credit institutions and are now Indicators, 2009-2014 allowed to provide cash loan up to 5% of their total TL Billion 2011 2012 2013 2014 assets. • As of 2014, total assets for the consumer financing Receivables 8.4 10.7 14.5 18.1 sector was TL 20.3 billion increasing by 27% compared to the previous year. NPLs (%) 2.9% 2.8% 2.7% 2.7% • Regarding non-performing loans (NPLs), the Reserves 0.1 0.1 0.2 0.2 percentage has decreased significantly since 2009. Banks 0.2 0.5 0.9 0.7 NPLs in 2014 were 2.7%, whereas it was as high as 10% in 2009. Credit 7.1 9.0 12.6 16.4

SE Equity 0.6 0.9 1.2 1.4

Source: BRSA, TCMB

Investment Support and Promotion Agency of Turkey Source: BRSA, CBRT 48 Insurance and Consumer Banking Leasing Factoring Major Players in Consumer Financing Pension Financing Name Web Page What They Do

ALJ Finance was founded in 2011 by Saudi Arabian ALJ car distributors. The company’s https://www.aljfinans.com.tr/ total assets reached TL 626.4 million in 2014. DD Founded in 2006 by Doğan Holding and Deutsche Bank, DD Mortgage had a credit http://www.ddm.com.tr Mortgage portfolio of TL 446 million in 2014. Established in 1999 by Volkswagen and Doğuş Finans, VDF offers 5 types of credit http://www.vdf.com.tr/ covering 15 brands for its customers across Turkey.

Şeker Finans started its operations in 2008 under the name Istanbul Finans and then https://sekerfinans.com.tr/ merged with Şekerbank in 2010. It offers mortgage and renovation work loans. PSA Finance was created in 2010. It is a subsidiary of the French firm, PSA Financial http://psafinansman.com/ Holding. Its total capital is TL 20 billion. In 2014, it provided USD 20.1 billion loans, USD 11.0 billion insurance. Its total financial http://www.eximbank.gov.tr support accounted for 19.7% of Turkey’s exports. As of 2014, it has total assets worth of USD 14.5 billion.

Koçfinans offers its customers car, mortgage and education loans. Since its founding in http://www.kocfinans.com.tr/ 1995, the company has provided credit for more than 3 million customers, approximately USD 2.3 billion worth of loans. Koç Fiat Kredi was founded in 2000 by Koç Holding and Fiat and was later bought by Tofaş https://www.kocfiatkredi.com.tr Türk Otomobil Fabrikaları A.Ş. It is a captive finance company serving 6 brands. In 2014, the company made loans worth of TL 1,199 million. http://www.man-financial- Since it started its operations in 2005, MAN offers consumer credits for MAN vehicles and services.com.tr/ trucks. Orfin has been operating since 2011 and has a financial portfolio of products worth EUR http://www.orfin.com.tr/ 22.5 billion worldwide. In Turkey, the company has TL 93 million shareholders equity and offers its services for the sales of the Renault and Dacia brands. TEB Cetelem was the product of the partnership between TEB Financial Investments A.Ş http://www.tebcetelem.com.tr/ and BNP Paribas , which has been active in Turkey since 1995.

Since 1863 the cooperative has given general purpose loans for agricultural producers http://tarimkredi.org.tr/ including loans for pesticides, fertilizers, animal husbandry, oil, and irrigation up to TL 50,000, which is to be repaid in 1 - 4 years with interest rates varying between 8 or 10%.

http://www.mercedes-benz- Mercedes Benz Finansman was founded in 2008 to lead the brand’s operations in Turkey. finansalhizmetler.com/ As of 2013, it had total assets worth TL 4,529 million.

Investment Support and Promotion Agency of Turkey 49 B. An Overview of the Turkish Capital Markets i. Borsa Istanbul ii. Brokerage Firms

Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 50 Borsa Istanbul has liquidity of 179%, which exceeds emerging market exchanges.

Comparison of Exchanges, 2014 400 180%

300

120%

Billion 200

USD 60% 100

0 0% Budapest Stock Dubai Egyptian Exchange Borsa Istanbul Qatar Stock Exchange Exchange

Market Value Trading Volume Market Value/GDP (RHS) Trading Volume/Market Value (RHS)

• BIST is the Turkish stock exchange located in Istanbul. There are 227 companies that are quoted on Borsa Istanbul. The exchange aims to have 1,000 companies listed from a minimum of 10 different countries by 2023. Thus strengthening its position and ensuring its competitiveness on the global arena. • BIST had a market value of USD 220 billion and a annual trading volume of more than USD 390 billion as of December 2014. • BIST has a higher market value and trading volume from other major peer exchanges in the region. However, compared to developed markets there is considerable growth potential. • BIST’s liquidity was higher with a 179% trading volume to market value ratio.

Investment Support and Promotion Agency of Turkey Source: WFE, IMF 51 BIST-100 yielded a 16% return in 2014, surpassing most of the emerging market stock exchanges.

Index Return Percentages, 2014** • The top 10 highest return yielding exchanges were from emerging markets. Borsa Istanbul’s BIST-100 Index yielded 15,8% in returns in terms of dollars in 2014. India* 35%

Bombay 34% • As BIST has delivered good performance, foreign investors have sustained their high participation in BIST over the past Egypt 28% decade..

Philippines 22% Foreign and Domestic Investors’ Participation as % of BIST Borsa Istanbul 16% Free Float Market Capitalization

-15% Warsaw 28 34 35 32 33 34 38 34 37 36 -38% Athens 48 43 57 -49% Moscow

Source: TSPAKB *National Stock Exchange Of India 72 **Return percentage is calculated in USD terms. 66 65 68 67 66 62 66 63 64 52 57

43

2006 2011 2002 2003 2004 2005 2007 2008 2009 2010 2012 2013 2014

Foreign Domestic

Source: BIST

Investment Support and Promotion Agency of Turkey 52 Case Study: BIST

• In 2014, the economy grew at a slower pace than the previous year, but its performance was stable. • There are many indices on which investors can Growth of BIST-100 trade on BIST such as the sectorial indices, 100.000 BIST-100, BIST-30, TURKDEX, and BIST Dividend Index. • Institutions using and/or willing to use BIST Indices 75.000 for their financial products (including over-the-counter financial products) should sign the "BIST Indices License Agreement (License 50.000 Agreement)". Furthermore, following the reunion of the Organization of Islamic Cooperation (OIC) Member States’ Stock Exchanges Forum parties 25.000 agreed to create a joint Islamic Index. Istanbul 2009 Global Traded Index was introduced with the cooperation Economic Crisis of the Wiener Börse for the trade of 20 companies 0 denominated in Euro, US Dollar and Turkish Lira. Another Sustainability Index was finalized and will soon be introduced by Borsa Istanbul. • Having confidence in Borsa Istanbul’s future, NASDAQ OMX acquired 5% in 2013 and EBRD Source: BIST acquired 10% of its shares in 2015.

• With the new Capital Markets Law coming into effect in 2012, the IMKB, the Istanbul Gold Exchange, TURKDEX merged under BIST. BIST trades various assets such as equities, contracts written on energy and commodities, debt instruments, derivative products and precious metals and gems. • A strategic partnership pre-agreement was signed with NASDAQ OMX on July 2013. The agreement will establish Borsa Istanbul as a part of the global exchanges network. The settlement, risk management and surveillance systems of Borsa Istanbul will be synchronized with the world’s prominent exchanges. It will enable the trading of spot market and various financial instruments denominated in diverse currencies, including derivatives and contracts on commodities and energy.

Investment Support and Promotion Agency of Turkey 53 In Turkey, only brokerage firms are allowed to trade equities.

Brokerage Firms Fact Sheet Total Assets of Brokerage Firms • As of 2014, there are 89 brokerage firms performing in the 7 6,4 6,6 6,5 equity market with a total trading volume of USD 399

billion. 6

• 80% of the total share of the trading volume in the equity 5 4,3 market was generated by domestic individuals, 4 corporations and institutional investors. Foreign 3

corporations and institutional investors each contributed billionUSD 16% and 4%, respectively. 2 • In the derivatives exchange market, 74 brokerage firms 1 were operating as of 2014. The total trading volume of intermediaries was USD 397 billion in 2014. 75% of the 0 trades were made by domestic investors and 25% by 2011 2012 2013 2014 foreign investors. Source : TSPAKB • In December 2014, 2,937 investors made asset management operations in the brokerage sector with a Breakdown of Revenue for Brokerage Firms in portfolio size of USD 2,6 billion. 2014 • As of 2014, the number of branches for brokerage firms is Brokerage 150 and representative offices to 67. The total assets of 17% Commissions brokerage firms in Turkey equaled USD 6,5 billion in 2014. • Total revenue for brokerage firms in 2014 was USD 0,8 Revenues from billion. Approximately 60% of their revenue came from 15% Services commissions collected from transactions. 49% of their 57% commissions were from equities and 37% from forex Proprietary Trading operations. The remaining percentage was made from fixed 11% Profit/Loss income and derivative operations. Other Revenues Source : TSPAKB

Investment Support and Promotion Agency of Turkey 54 C. Turkey’s Competitive Landscape

i. Turkey’s Macroeconomic Outlook

ii. Favorable Demographics

iii. Skilled and Cost-Competitive Labor Force

iv. Investment Environment & Stakeholders

v. Geostrategic Location

Investment Support and Promotion Agency of Turkey ©2014 Deloitte Turkey. Member of Deloitte Touche Tohmatsu Limited 55 Turkey’s sizeable and diversified economy has achieved remarkable growth with a bright future, thus further triggering financial activity.. CAGR ‘01-14 225 th Real GDP Growth 4.8% 17 largest economy (Index: 2001=100) in the world.. (GDP, PPP ‘14) 200 3.8%

3.5% 175 2.4%

150 1.7%

125

f o r e c a s t 100 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2020 2.056 Turkish Economy Production Reform period 548 Contribution to Real GDP Growth in Turkey ‘02-’14 (GDP at PPP, $B) Expenditure

76,4% 390 1.508 Other 26,5% 1.118 Pre-reform period 436 Manufacturing 27% 145 32,1% 31,5%

681 of Period Wholesale & Financial generation reforms generation 537 - retail trade Services

New 13,6% 19%

-1,8%

13,8%

1996 97-'02 2002 03-'08 2008 09-'14 2014 15-'20 2020 Transport, storage & -38,2%

communication

Investment Investment

Exports

Stocks Consumption 56 Imports Source: IMF World Economic Outlook, October 2015, TurkStat Investment Support and Promotion Agency of Turkey As Turkish economy has grown, it has integrated with the global economy with increasing cross-border capital flows..

International Transactions Volume of T u r k e y ($ Billion) Financial Account 559 Income & Expenditure Trade in Goods & Services

134

2002 2004 2006 2008 2010 2012 2014

International Investment Position o f T u r k e y ($ Billion) 671 230 Reserve assets Other investment Other investment Portfolio investment

Portfolio investment

Direct investment Direct investment Assets

62 Liabilities 148

2002 2014 2002 2014 Investment Support and Promotion Agency of Turkey 57 Source: CBRT Turkey’s economic growth has resulted in income growth and a growing robust middle class with increasing purchasing power..

2001 2011 Income per capita ($, PPP) 0.6 million 1.4 million High Income 19.556 10.6 3.9 million Upper-Middle Income million 13.4 25.8 Middle Income 10.324 million million 33.9 43.6 million Low Income million

Poor 2002 2014 2.6 million 1.4 million

Annual House Sales Private Consumption per Stock of Automobiles (million of houses) capita ($, current prices) (million of passenger cars)

7.241 10,4 1,3

4,6 0,4 2.429

2008 2015** 2002 2015* 2002 2015* Source: Turkstat, IMF, World Bank, Pew Research; The poor live on $2 or less daily, low income on $2.01-10, middle income on $10.01-20, upper-middle income on $20.01-50, and high income on more than $50; figures expressed in 2011 purchasing power parities in 2011 prices. * As of Sept 2015 **Annualized as of Oct 2015 58

Investment Support and Promotion Agency of Turkey Turkey has a quite favorable demographic structure with a bright prospect which will further support economic activity in Turkey..

Population Pyramids in 2014 Age Group Age Group ASIA Age Group EUROPE TURKEY 90+ 90+ 90+ 80-84 80-84 80-84 70-74 70-74 70-74 60-64 60-64 60-64 50-54 50-54 50-54 40-44 40-44 40-44 30-34 30-34 30-34 20-24 20-24 20-24 10-14 10-14 10-14 0-4 0-4 0-4 % 5 3 1 1 3 5 5 3 1 1 3 5 5 3 1 1 3 5 Female Male Female Male Female Male

Working Age Population (15-64) Population Population under age 15 (million of people) 18,8 (Index: 2014=100) (million) 120 92 89 84 Turkey 12,2 11,3 110 78 10,6

71 5,7 100

3,1 1,4 1,6 Europe

UK 90

2007 2015 2023 2031 2040

Poland

France

Turkey

2014 2017 2020 2023 2026 2029 2032 2035

Hungary

Romania

Czech R. Czech Germany Investment Support and Promotion Agency of Turkey Source: Turkstat, Eurostat, UN, 2014 Turkey’s labor markets support the financial sector’s human resources need with a cost-competitive labor base..

Employed Population in Turkish Labor Cost per Hour Financial and Insurance Sector (thousand) in Financial & Insurance Sector, 2012 (Euro) 301 78,0

58,7 57,8 53,0 48,4 43,4 40,3 273 39,6

16,8

2009 2014

• Turkey’s labor markets support the financial sector through sizeable employment in the sector which stands at 301 thousands as of 2014.

• Labor cost per hour in the Turkish financial sector is highly cost-competitive, especially when compared with major financial centers..

Investment Support and Promotion Agency of Turkey Source: Eurostat 60 Turkey’s financial ecosystem is further supported by the availability of necessary skills and national education policies..

Availability of Finance Skills, 20141 Availability of IT Skills, 20141 0=Unavailable, 10=Available 0=Unavailable, 10=Available 8,3 8,3 8,0 8,1 7,7 7,6 7,6 7,4 7,1 7,2 7,2 7,0 6,9 6,9 6,5 6,2 6,2 5,8

Availability of Senior Managers with International Number of students enrolled in Tertiary Education by 2 Experience, 20141 field of study, 2013 , (thousand) 0=Unavailable, 10=Available 7,9 Computing 7,2 7,3 111 Maths, 226 Economics 5,8 5,9 5,9 Statistics 5,4 55 4,8 4,3 104

Accounting, Finance, Taxation 171 Banking, Insurance

Investment Support and Promotion Agency of Turkey 61 Source: 1IMD, 2 OECD Turkey’s regulatory environment is highly friendly to foreign direct investment in financial sector.

Foreign Direct Investment (FDI) Law Bilateral Investment Treaties with 75 countries

 National Treatment Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, , Belarus, Belgium, Luxembourg, Bosnia , Bulgaria, China,  No restriction of foreign partnership Croatia, Cuba, Czech R., Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India,  International Arbitration , Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Macedonia, ,  Guarantee of Transfers Malta, Moldova, Mongolia, Morocco, Netherlands, Oman, ,  Purchase of Real Estate Philippines, Poland, Portugal, Qatar, Romania, Russia, , Senegal, Serbia, Singapore, Slovakia, Slovenia, Korea, Spain,  Employment of Expats Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, UAE, UK,US, Uzbekistan, Yemen

Double Taxation Agreements with 80 countries FDI Regulatory Restrictiveness in Financial Services, 2014

Albania, Algeria, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Index:

Belgium, Bosnia, Brazil, Bulgaria, Canada, China, Croatia,

0,513 1=Closed to FDI, 0=Open to FDI Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland,

France, Georgia, Germany, Greece, Hungary, India, 0,432 Indonesia, Iran, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan,

Kuwait, Kyrgyzstan, Latvia, Lebanon, Lithuania, Luxembourg,

Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco,

Netherlands, New Zealand, Norway, Oman, Pakistan, 0,067

0,054

0,042

0,035

0,024

Poland, Portugal, , Romania, , Serbia, 0,018

Qatar Russia, Saudi Arabia 0,009

0,003 0 Montenegro, Singapore, Slovakia, Slovenia, South Africa, Korea, Spain, Sudan, Sweden, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkish Republic of Northern Cyprus, Turkmenistan, Ukraine, UAE, UK, US, Uzbekistan, Yemen

Investment Support and Promotion Agency of Turkey Source: Ministry of Economy, Ministry of Finance, OECD Turkish financial industry is also supported by university & industry collaboration through a finance-oriented technology development zone.

Istanbul Finance Technopark

About Target Groups • Turkey’s first thematic technopark • Companies Operating in the Banking and Finance • Produce technological and financial information Sectors • Make innovation in products • Commercialize technological and financial • SMEs that produce hardware and software for the information financial sector • Create investment opportunities in technology • Start-up Companies operating in the financial, intensive areas through ensuring the money and capital markets and software, cooperation of research companies and information technology and technology sectors organizations with the finance and manufacturing

sectors

Shareholders

Investment Support and Promotion Agency of Turkey 63 Turkey is committed to transform Istanbul into an international financial center..

Istanbul Financial Center Istanbul is converging with top financial centers.. Key Features

Global Financial Center Index Scores • Istanbul Financial Center will house the head offices of 788 796 the Turkey’s financial market governing bodies, state- 774 790 owned and private banks, and related businesses. It will cover 4.2 million square meters of office, residential, 653 retail, conference, hotel and park space.

• The government is working to improve the Turkish tax 442

system, legal and fiscal environment, political and

economic stability and regulatory framework in order to attract financial investments. (47)

• According to the Global Financial Centers Index (GFCI)

London (1) London (1)

Istanbul Istanbul(72) New York New York (2) published in September 2015, İstanbul is a broad and New York (2) deep and established transnational financial center (same category as Geneva, Shangai and Tokyo) 2009 2015 Source: GFCI (Rank)

“Besides regional proximity to our clients, İstanbul “İstanbul satisfies the majority of the criteria of a provides appropriate infrastructure, convenient airport financial center” links, and a good quality of life for our staff.”

Tom Shave, Deloitte Senior Manager Dimitris Tsitsiragos, Vice-President, IFC

Investment Support and Promotion Agency of Turkey 64 Turkey’s financial sector is also strengthened through efficient supervisory and regulatory institutions..

Major Financial Sector Stakeholders

Name Web Page What They Do

Central Bank of the www.tcmb.gov.tr Its purpose is to create efficiency in all the financial sectors of the economy, Republic of Turkey especially money, credit and capital markets as well as determining and implementing policy contributing to financial stability, managing foreign exchange and gold reserves, printing money and overseeing payment systems. www.bddk.org.tr Ensures confidence, stability and competitiveness in financial markets to ensure Banking Regulation effective operation of the credit system, protects the rights and interests of and Supervision investors and takes necessary measures to make institutions subject their supervision steady and secure. Agency The Banking www.tbb.org.tr Contributes to the development of banking sector and its competitiveness, Association of Turkey prevents unfair competition and aims to make Istanbul an international financial center in the world. The Insurance www.tsb.org.tr Specializes in the development of the insurance, reinsurance and private Association of Turkey pension sectors, TSB provides advice to public authorities, monitors developments, conducts research, eliminates unfair competition of its members and produces a code of ethics for practices. Pension Monitoring www.egm.org.tr Since 2007, EGM monitors the pension system on a daily basis, collects data Center and implements licensing exams. Capital Markets Board www.spk.gov.tr Regulatory and supervisory authority in charge of the securities market, of Turkey which makes detailed regulations for organizing the market and developing capital market instruments and institutions. Borsa Istanbul www.borsaistanbul.com Borsa Istanbul A.Ş. was founded in 2012. It trades capital market instruments, foreign currencies, precious metals and gems and other contracts and documents.

Investment Support and Promotion Agency of Turkey 65 Istanbul’s strategic location and its connectivity with the rest of the world has already enabled it to be a regional hub for global companies..

Follow and cover markets in 16 times connects Turkey to 232 zones from New York to Tokyo… international destinations in 111countries (196 out of 232 are from/to Istanbul)

90 countries Global companies 79 countries are managing dozens of countries 67 countries from Istanbul 52 countries

Investment Support and Promotion Agency of Turkey 66 Given Turkey’s strategic location, a significant economic activity is taking place around Turkey. . .

Access to Multiple Markets

EUROPE RUSSIA

GDP: $20.8 trillion GDP – $1.9 trillion 1,5 Billion People Import of Financial Services: Import of $120 billion Financial Services: $2,4 billion Insurance: $45 billion Insurance: $1,7 billion $27 Trillion GDP, Population: 670 million Population: 144 million

around $200 billion trade in Financial & Insurance Services at a 4-hour flight distance

MENA CENTRAL ASIA & CAUCASUS GDP: $3.9 trillion GDP: $0.44 trillion Import of Import of Source: IMF World Economic Outlook and ITCO; GDP, Financial Services: $5,9 billion Financial Services: $200 million Imports and population figures as of 2014 Insurance: $13 billion Insurance: $400 million Population: 703 million Population: 85 million

Investment Support and Promotion Agency of Turkey 67 Investment Support and Promotion Agency of Turkey Worldwide

CANADA SPAIN Murat ÖZDEMİR Yasemen KORUKÇU [email protected] [email protected]

CHINA SAUDI ARABIA Hui ZHAO Mustafa GÖKSU [email protected] [email protected] FRANCE Utku BAYRAMOĞLU UK [email protected] Necmettin KAYMAZ [email protected] GERMANY Kemal KAFADAR USA [email protected] Mustafa ILBEYLI Ole Von BEUST [email protected] Rezzo SCHLAUCH Wolf Ruthart BORN UAE Deniz ACAR [email protected] INDIA Sanjeev KATHPALIA [email protected]

JAPAN Saya ASHIBE [email protected]

For comments on the report and additional information please contact: [email protected] www.invest.gov.tr

Head Office Office

Address: Kavaklıdere Mahallesi Address: Dünya Ticaret Merkezi A1 Akay Caddesi No:5 Blok Kat:8 No:296 Çankaya/ANKARA 06640 Yeşilköy/İSTANBUL 34149

Phone: (+90 312) 413 89 00 Phone: (+90 212) 468 69 00

Investment Support and Promotion Agency of Turkey