Business Practices and Constraints of SMEs in Turkey

Business Practices and Constraints of SMEs in Turkey

April 07, 2015

Turkey has approximately 3.5 million Small and Medium-Sized Enterprises (SME) which account for 81% of total employment, 62% of investments, 59% of total value added and 56% of exports from the country. Yet, Turkey’s growth story has relied significantly on domestic consumption and portfolio investment, without sufficiently leveraging its prolific SME segment. With President Recep Tayyip Erdoğan and the ruling Justice and Development Party (AKP) having recently established ambitious goals aimed at moving Turkey from the 17th largest economy to the 10th largest by 2023, Turkey now has the sense of urgency needed to capitalize on its SMEs and propel the country to the next level.

Thus, the motivating research question behind this report, “More Than Meets the Evil Eye: Business Practices and Constraints of SMEs in Turkey,” was: What public- and private-sector driven solutions exist or would need to exist to stimulate the growth of key SME segments in Turkey? To answer that question, the research team took a fresh look at the challenges SMEs face and the existing stakeholders and solutions available to assist the segment.

The authors conclude that despite a range of public and private initiatives meant to enrich SMEs, many businesses still face significant challenges in business strategy and planning, attracting talented employees, accessing capital with feasible interest rates and collateral requirements, managing cash flow in a system of post-dated checks, and in understanding their position in an increasingly global and competitive market.

The report offers practical solutions to these challenges which could be adopted by both the private and public sector and range from institutional-level changes to enhanced responsibilities of banks’ relationship managers, to mobilized groups of SME Ambassadors meant to act as role models and mentors for developing SMEs. A combined and coordinated effort, along with its strong, aspirational vision, can propel Turkey into a more competitive and prosperous global position.

The full version of our report is available here.