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ABSTRACT
As in many other cases in the global South, creating more aware financial consumers is a prominent goal of the financial inclusion process in Turkey. The Turkish case has two peculiarities: the non-commercial character of the microcredit sector, which is partly organised by the state; and the state’s proactive role in Turkey’s financial transformation. This article analyses how the global financial inclusion agenda has been adapted for the Turkish context. The strength of Turkey’s financial infrastructure motivated policy-makers to focus on financial consumers, with the state intervening to spread further the financial modes of calculation. The article argues that the financial integration of large segments of Turkish society creates conundrums which cannot be easily overcome.
Acknowledgements
Earlier versions of this study were presented at the 13th National Social Science Congress organised by Turkish Social Sciences Association and Historical Materialism Conference at New York in 2015. The author thanks Susanne Soederberg, Sümercan Bozkurt Güngen, Berkay Ayhan, Can Cemgil and Mert Karabıyıkoğlu for their comments.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on the contributor
Ali Rıza Güngen is a political scientist working on debt management, financialisation and financial inclusion with specific focus on Turkey. His articles appeared in The Journal of Peasant Studies, Praksis and Amme İdaresi Dergisi.
Notes
1. The financial architecture in the US attempted to integrate the poor into the formal financial system without prudential supervision mechanisms. It enabled the increasing use of the financial services by ethnic minorities and low-income segments after the Financial Services Modernization Act of 1999. Increasing loan defaults of the wage-earning strata and disadvantaged sections contributed to the financial crisis of 2007–9.
2. Processes of financial inclusion reveal differences between countries like Turkey with a solid banking system dominating the provision of financial services and countries like Kenya, where half of the money transfers contributing to the GDP are made via mobile phones (Lanchester Citation2016), or Haiti, where depositing money in a bank can take half a day and where only 15 per cent of the population benefit from banking services (Taylor et al. Citation2011). Despite variations in the global South, the portrayal of financial inclusion as a remedy to development finance gained ground in various forms in a synchronised manner in the aftermath of the international financial crisis of 2007–9.
3. The founder of Grameen Bank, Muhammed Yunus, advocated the idea from the 1970s onwards. Commercialisation of microcredit, however, appeared in the last two decades when structured finance gained ground. The related idea of the ‘democratisation of finance’, rather than attempting to convert the poor into entrepreneurs, pushed them, in countries such as the USA, in the absence of public provisions, to rely on costly private financial services (see Soederberg Citation2013, Citation2014).
4. A comprehensive discussion of the term financialisation goes beyond the scope of the study. Suffice it to say that I attempt to use financialisation in relation to the inequalities and power relations constitutive of capitalist accumulation and the profitable use of financial channels for both capitalist production and social reproduction. Otherwise, it tends to turn into an ambiguous term with an unclear reference to the growing power of finance.
5. The state’s role was also critical for the initial path of financialisation in Turkey (Güngen Citation2015).
6. On the practicality of soft law and guidelines, see Soederberg (Citation2014), also AFI (Citation2011).
7. In the infamous cases of microcredit crises, most of the borrowers lacking sufficient funds to meet repayments, failing in the expansion of enterprises due to market saturation and/or using the funds for consumption, defaulted on their debt. The extension of loans (restructuring with a new payment plan), lending additional funds and expansion of the MFIs through these mechanisms led to a microcredit bubble that inevitably burst. In Andhra Pradesh in India, around fifty microcredit borrowers took their own lives in 2010 as a result of pressures from the MFIs (see Taylor et al. Citation2012). Actions taken by the state against forcible recovery of the money borrowed and restrictions on extending multiple loans generated a wave of defaults leading to a financial crisis (Ghosh Citation2013). In Bosnia Herzegovina, the internationally acclaimed activities of the MFIs for post-conflict recovery of the economy reached 15 per cent of the population within a few years, but ended up with over-indebted households, 28 per cent of whose monthly payments exceeded their disposable income (Bateman et al. Citation2012).
8. From the perspective of the international financial institutions, inclusion is a strategy and a set of policy tools of utmost importance for creating welfare for the community, composed of entrepreneurial individuals and financially conscious households (WB Citation2008, Citation2014, CGAP Citation2009). Reminiscent of classical modernisation theory, which suggested that political reform, education and the will of modernising elites sets a country on the path of development, the financial inclusion agenda assumes that increased opportunities for credit use are a precondition for take-off. It also extends its reach to the democracy and development debate in a manner reminiscent of the trope of ‘democratisation of finance’ in Anglo-American economies (Aitken Citation2013), and is based on the belief that wider access to financial services will make individuals seize opportunities.
9. Inclusive growth developed out of the pro-poor growth framework popular at the turn of the twenty-first century. See Saad-Filho (Citation2007) for a review of the debates.
10. After growth slowed further in 2015–16, instalment limits were abandoned in September 2016. As domestic demand and expenditure are major contributors to economic growth in Turkey, conservative circles pushed the CBRT to reduce interest rates further, notably in 2014–16.
11. The FSC was founded as an ad hoc committee by a decree-by-law. Comprising the heads of the Treasury, the CBRT, the BRSA, the Savings Deposit and Insurance Fund, and the Capital Market Board, it works under the Minister of Economy. Despite its irregular meetings, it encourages coordination and has consolidated its role due to the need for oversight of international financial markets and joint action for increased financial inclusion in Turkey.
12. The Turkish Treasury became a member of the GPFI in 2010, assuming on behalf of the Republic of Turkey the role of co-presidency on the Small and Medium Enterprises Finance Group (one of four GPFI sub-groups, which works on new policy initiatives for increasing financial access for SMEs in developing countries). The institution also became a member, on behalf of Turkey, of the Alliance for Financial Inclusion in November 2013. The institution officially declared the preparation of Turkey’s FIS as a criterion for its performance in late 2013 (UT Citation2013).
13. I am very grateful to Berkay Ayhan, who underlined this argument in our correspondence. For an etnographic study of financial literacy campaigns in Turkey, see Ayhan (Citation2017).
14. The discussion on high interest rates and their detrimental impact on economy does not amount to questioning the service quality of commercial banks and the high cost of financial services. This discussion was re-triggered by the President in August 2016, who called for a renewal of housing loans campaigns. This was a preemptive strike, given the contraction of the economy in the third quarter of 2016, right after the coup attempt of the mid-2016. In September 2016, many of the BRSA and CBRT’s policy measures to slow credit expansion back in 2010–13, were reversed by the Council of Minister decisions.
15. See Roberts (Citation2013) for a discussion on sexism and racism in reproducing the inequalities in terms of access to credit in the USA.
16. To give an example, 90 per cent of self-employed women in Turkey work in the informal sector (Gökşen et al. Citation2015).
17. Examples of collaborations abound and the number is increasing. TEB’s Family Academy has been one of the comprehensive campaigns. Started in 2012, the campaign joined efforts with NGOs, such as the Financial Literacy Association, to reach 160,000 individuals in three years. The Family Education Program (FEP) of the Ministry of Family and Social Policy, which started in 2011, also collaborated with TEB as its financial partner, with TEB staff joining the FEP in 2013 (available from: http://www.fo-der.org/teb-aile-akademisi-projesi/, accessed 3 April 2015). Another campaign has been the recently launched Social and Financial Education through Art, organised by TEB, the Ministry of National Education and UNICEF, targeting children aged 6–14 (available from: http://www.blogteb.com/teb-ve-foder-isbirligiyle-2-turkiye-finansal-okuryazarlik-ve-erisim-zirvesi-duzenlendi/ accessed 4 April 2015).
18. The data can be accessed via databank.worldbank.org. The sharp increase in mortgages and the radical decline in credit card use within three years contradict the ordinary course of life. However, this might be explained by slight changes in the definition of indicators in the 2014 data as the mortgage indicator was redefined to include land in addition to house and apartments, boosting the figures. The definition of the credit card indicator was also changed to ‘use in the last 12 months’.
19. The household savings ratio presented here uses the old Turkstat series (1998 base year). This ratio will jump in 2017, thanks to a recent law (Law no. 6740) which made it compulsory for formal workers to be a client of pension funds. Workers can only withdraw their money and escape the system after two months. It will only become possible to estimate the impact of this latest state intervention in the pension market after late 2017. In addition, the recent revision in Turkstat data (Turkey switched to ESA 2010 standards and declared revised GDP series in December 2016) modified the ratio of savings to GDP. The ratio of total savings to GDP was 14.6 per cent according to the old Turkstat series (1998 base year), while it jumped to 24.8 per cent in the new calculations. The jump remains questionable, as attempts to increase total savings are intact. It is also ironic that the IMF’s (Citation2017) Article IV consultation report referred to the need to raise private savings without mentioning the 70 per cent increase on paper.
20. According to Turkstat data, the poverty threshold for households (50 per cent of equivalised household disposable income) was 4069 Turkish liras in 2011. 42.9 per cent of consumer loan borrowers had incomes less than 1000 Turkish liras while 25.8 per cent had incomes between 1000 and 2000 Turkish liras. Karaçimen (Citation2014a) highlights the heavy use of consumer loans by low-income groups since 2001.
21. Following a legal change in 2005, ‘provision of microcredit’ became one of the responsibilities of Provincial Administrations. Some scholars have labelled this change and subsequent regulations by the Ministry of Interior Affairs as a legal framework (Gökşen et al. Citation2015).
22. Another institution, the Foundation for the Support of Women’s Work, formally launched a microcredit programme in 2002, though they have offered small loans focused on low-income women since the mid-1990s (Dincer Citation2014). TISVA, however, has the largest share and dominates analyses of the Turkish microcredit sector.
23. See the news piece 'Girişimci kadınlar 375 milyon liralık kredi kullandı' (CNNTurk Citation2015).
24. The credit volume declared in TISVA (Citation2012) is converted into USD by using the CBRT’s official exchange rate of December 30, 2011.
25. A notable exception is Dincer (Citation2014), who points out the opportunities for the financial sector.