Türk Eximbank, MIGA Trade Finance Guarantee

Project Description

On August 14, 2024, MIGA signed the Trade Finance Guarantee (TFG) Framework Terms, which became effective on August 16, 2024. Under the TFG Framework Terms, MIGA issued an Individual Guarantee of EUR296.6 million for 1-year in support of five commercial banks—ING Bank, a branch of ING-DiBa AG (ING) of Germany, Standard Chartered Bank (SCB) of the United Kingdom, HSBC Bank Middle East Limited (HSBC) of the United Arab Emirates, BNP Paribas (BNPP) of France, and Credit Europe Bank N.V. (CEB) of the Netherlands—to cover 95 percent of principal and interest related to their EUR300 million short-term trade loan facility provided to Türk Eximbank against the non-payment risk. Upon Türk Eximbank’s request, the TFG Framework Terms may be extended for another 1-year up to twice within the framework period of 3 years at MIGA’s discretion.

The proceeds of the project will be used as short-term (1-year or less) trade loans to Turkish export-oriented companies to provide them with short-term liquidity required for the production of export goods.

Environmental Categorization

The MIGA-covered facility will support Türk Eximbank in covering short-term liquidity needs of Turkish export-oriented companies. These transactions pose minimal environmental and social (E&S) risks and impacts and as such, the overall portfolio risk is considered low. The project has thus been categorized as ‘FI-3’ under MIGA’s Policy on Environmental and Social Sustainability (2013).  The applicable E&S requirement for this project is the MIGA Exclusion List. Türk Eximbank will be responsible for screening the transactions. Türk Eximbank will also be required to comply with the labor standards set forth in MIGA Performance Standard 2: Labor and Working Conditions. 

Development Impact

The MIGA TFG aims to support the 2024-2028 National Development Strategy (NDP) by seeking to reduce the country’s external imbalances, through the provision of favorable trade finance loans to export-oriented firms. Türk Eximbank is the sole export credit agency of Türkiye and a major player supporting the exporters’ access to finance. The MIGA TFG has supported Türk Eximbank by enabling them to raise short-term liquidity at a larger volume and at a lower cost which will then be directed towards export-oriented firms.

The NDP highlights that Türkiye's international competitive position will be strengthened through sustainable, low-emission, high-technology-based production techniques and exports will be improved with a focus on green and digital transformation. In alignment with the NDP, the proceeds of the MIGA-guaranteed facility will focus on servicing export-oriented small, medium-sized enterprises (SMEs), women-inclusive firms, green export companies, and medium-high technology companies. Such loans will mostly be utilized to finance raw material and inputs expenditures needed for production and to provide liquidity to manage time mismatches between the order, shipment, and payment from buyers.

 The project is aligned with the Country Partnership Framework (CPF) FY18-FY23 under its objectives of (i) Enhanced access to finance to underserved segments, and (ii) Increased sustainability of infrastructure assets and natural capital. The project is also aligned with MIGA Strategy and Business Outlook FY22-24 by enhancing the One World Bank and Cascade approach, given the project’s complementary nature against the backdrop of ongoing operations by IBRD and IFC (MIGA supported a short-term trade loan and IBRD supported a long-term loan for Türk Eximbank).

In particular, the project is complementary to IBRD’s Türkiye Green Export Project (signed in May 2024) where IBRD provided a loan guarantee of EUR600 million to enable Türk Eximbank to raise EUR 1 billion of 10-year commercial loan to support Turkish exporters with long-term capital investments for decarbonization of production facilities and working capital required for operational management. The project showcases how cross-institutional guarantee instruments could be implemented for a greater impact via the new World Bank Group Guarantees platform.