A research on the factors affecting SME credits in the Turkish participation banking sector

The development of the financial sector is an important driving force for economic growth and development. Both in developed and developing countries where the financial sector is predominantly banking, the banking sector has a great impact on economic growth. The financial sector in Turkey is predominantly banking and the banking sector consists of a triple structure that includes deposit banks, development and investment banks and participation banks. Participation banks, which started their activities as private finance institutions in Turkey, became involved in the banking sector by taking the name of participation banks with the Banking Law No. 5411. Participation banks, as a complementary element of the Turkish banking sector, have been growing strongly in recent years and are increasing their position and importance in the financial sector. Small and medium-sized enterprises, which are the underpin of the economy, constitute a large part of industry and trade in Turkey and increasing the financial access opportunities of SMEs is a necessity for Turkey's economic growth. In this context, the aim of the study is to analyze the factors affecting the SME credits provided by participation banks operating in Turkey using quarterly data for the 2008-2019 period. As a result of the analysis, it has been determined that the SME loan volume of participation banks is affected by banking-specific factors consisting of loan deposit ratio, NPL ratio in SME loans and ratio of profit/loss before tax to total assets; macroeconomic factors including real effective exchange rate and consumer price index.