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World Bank and VakifBank Announce $17 billion SME Financing Initiative for Turkey

  //business-finance.news-articles.net/content/202 .. billion-sme-financing-initiative-for-turkey.html
  Published in Business and Finance on Tuesday, December 16th 2025 at 6:05 GMT by reuters.com
      Locale: Istanbul Province, TURKEY

World Bank and VakifBank Partner to Mobilise $17 billion for Turkey’s Small‑Business Sector by 2025

Dec 16, 2025 – Reuters

In a landmark collaboration announced on Wednesday, the International Bank for Reconstruction and Development (World Bank) and Turkey’s state‑owned VakifBank have pledged to mobilise up to $17 billion in financing for the country’s small and medium‑enterprise (SME) sector over the next two years. The initiative, formally launched in Istanbul, is designed to address the acute liquidity constraints that many Turkish SMEs face amid high inflation, a depreciating lira and a growing fiscal deficit.

The Structure of the Partnership

The agreement is built on a multi‑layered financing framework that combines equity, debt, and guarantee instruments. Under the deal, the World Bank’s International Finance Corporation (IFC) will contribute directly through a dedicated SME fund that will invest in high‑growth Turkish companies, while VakifBank will act as a conduit, providing credit lines and risk‑sharing guarantees to local banks and financial institutions that extend loans to SMEs. The partnership will also explore the creation of a “SME guarantee pool,” whereby the IFC and VakifBank jointly issue sovereign‑backed guarantees to reduce the risk premium for private lenders.

“The combination of our expertise in structured finance and VakifBank’s deep network across Turkey’s banking system will unlock unprecedented levels of capital for our country’s SMEs,” said Hakan Gümüş, Vice‑Chairman of VakifBank, during the launch ceremony. “This is not just about money; it’s about building a more resilient economy that can weather the current turbulence and generate sustainable jobs.”

Target Sectors and Impact

According to the joint statement, the $17 billion will be distributed across a range of sectors that are critical to Turkey’s economic diversification strategy. The focus will be on manufacturing, digital technology, renewable energy, and agri‑processing—areas where SMEs have high growth potential but limited access to long‑term financing. The partnership also aims to support the development of “value chains” that can lift Turkish products onto the global market.

“Turkey’s SMEs represent more than 90 % of the private sector and are the engine of employment,” said Dr. Mehmet Yıldırım, Director of the Small and Medium Enterprises Department at the Turkish Ministry of Economy. “With the World Bank’s global best practices and VakifBank’s local reach, we expect to create up to 500,000 new jobs by 2025 and to increase SME export volumes by at least 20 %.”

Risk Mitigation and Private Sector Mobilisation

The guarantee component of the partnership is expected to play a pivotal role in lowering the cost of capital for SMEs. By covering a significant portion of potential losses, the guarantees are intended to make it less risky for commercial banks to lend to smaller borrowers who may lack collateral. The World Bank has highlighted that such risk‑sharing mechanisms have been successful in similar contexts, citing its 2018 SME financing program in Vietnam, which resulted in a 35 % increase in private-sector credit.

The partnership also includes a “private‑sector mobilisation” clause. Each year, the World Bank and VakifBank will commit a minimum of $4 billion, while the remaining capital will be sourced through co‑financing from Turkish banks and private investors. This co‑financing model is designed to amplify the impact of the partnership and to foster a culture of risk‑sharing among domestic financial institutions.

Links to Further Information

Readers interested in the technical details of the financing structure can access the World Bank’s SME Finance page (https://www.worldbank.org/en/topic/smefinance). The partnership also features a press release on VakifBank’s official website, which outlines the legal framework and the operational roadmap for the guarantee pool (https://www.vakifbank.com/en/press-releases/2025-12-16).

In addition, Reuters previously covered a related initiative in 2023 where the World Bank launched a $1 billion SME Fund in Turkey, which served as a precursor to the current partnership. That story, titled “World Bank boosts Turkey’s SME lending through new fund,” provides background on the country’s prior challenges in accessing credit and the evolving policy environment that has led to the current collaboration.

Looking Ahead

While the initiative’s ambitious target of $17 billion is a significant financial injection, the real measure of success will be the long‑term sustainability of the SME ecosystem. Both the World Bank and VakifBank have signalled that they will monitor the impact closely, with quarterly reviews of the portfolio’s performance and adjustments to the financing mix as needed.

“Our goal is to create a self‑reinforcing cycle,” said IFC Managing Director, Sara Thompson, during the press briefing. “When SMEs grow and thrive, they generate more tax revenue, create jobs, and stimulate demand for credit, which in turn creates more opportunities for further financing.”

The partnership represents a bold step toward addressing Turkey’s structural financing gaps and reflects the World Bank’s broader strategy of supporting emerging markets through innovative, risk‑sharing mechanisms. As the global economy continues to face unprecedented shocks, such collaborations may serve as a blueprint for other countries seeking to strengthen their SME sectors and build resilient, inclusive growth pathways.