Onur Terzi is Agricultural Banking Marketing and Business Development Senior Manager at TEB. He tells Qorus more about what the Turkish bank does and plans to do for the farmers.
Could you briefly provide information about the agricultural banking landscape in your region, highlighting any unique challenges the sector needs to deal with?
Since 2021, Turkey has been grappling with high inflation, which has had a substantial impact on the agricultural sector, periodically causing financial difficulties for farmers. While inflation is expected to decrease in 2025, the financial challenges faced by farmers persist due to ongoing inflation around 40%. High inflation gives rise to three primary issues:
• High and unpredictable agricultural input prices
• Price increase in agricultural product prices lower than the inflation rate
• Increase in financing costs due to high interest rates
The three factors mentioned above directly affect the agricultural loans market. Farmers whose profitability decreases are forced to invest less. The high cost of financing reduces the demand for loans for input purchases, resulting in production with insufficient inputs or high debt risk.
A decline in farmers' profitability can result in a reduction in credit limits and repayment difficulties. In Turkey, the agricultural financing market is dominated by state-owned banks, which provide subsidized loans with zero interest rates, helping farmers to partially close the financing gap more cheaply. However, since these loans are limited, farmers often turn to private banks like us for additional financing. Consequently, farmers strive to maintain a balanced financial situation.
According to official figures, Turkey has 2.1 million registered farmers, the majority of whom utilize banking services. However, challenges related to credit access persist, often due to high interest rates and inadequate collateral. Notwithstanding these difficulties, the adoption of mobile banking among farmers is growing rapidly. Concurrently, there has been an emergence of a preference for advanced technology, as evidenced by the proliferation of applications such as drone spraying in large fields and IoT-based pesticide control systems. These developments present novel credit opportunities.
Empowering smallholder farmers: How financial institutions lead the way towards sustainable agriculture
How does TEB support the adoption of sustainable and environmentally friendly practices among farmers through financial incentives, guidance or education?
Our bank does not have a direct financial incentive or training program in this field. However, TEB has a very strong plan on sustainability. Within the framework of this plan, we aim to plan some awareness-raising activities for the agricultural sector in the coming period.
Does TEB establish or build partnerships with agricultural associations and government bodies to promote sustainable growth in the agricultural sector?
We work in partnership with many of Turkey's agricultural cooperatives and unions. The most prominent farmer organizations in terms of sustainability are undoubtedly the irrigation unions, which supply water in the basins where they operate. We provide financing to the irrigation unions we cooperate with in these regions, both for their investments and for the credit needs of the farmers receiving services from the irrigation unions. Furthermore, we are pleased to announce the launch of new loan products under the title of 'Agricultural Technology Loans' for pressurized and drip irrigation systems, offered to our valued customers.
In addition to supporting farmers, how does TEB address and support the broader digital agricultural ecosystem, including food and agriculture supply chain companies and agtech firms?
In Turkey, the digital ecosystem for the agriculture sector is not yet sufficiently developed, and competitors are addressing this issue with mobile applications. However, this must be integrated with sustainability and value chain financing. In this regard, we are working on a platform that can offer a wide range of services to farmers and will have world-class quality. We will bring together very different functions such as banking, embedded financing and fast application. We anticipate the provision of these services through this ecosystem by 2026, leveraging its functionality, particularly in areas where we lack physical presence. Additionally, we aim to offer crucial sustainability-related services to farmers through this ecosystem.
Could you share examples of successful innovative projects or initiatives implemented by your bank?
Over the past five years, we have implemented projects in a variety of areas, with a particular focus on incorporating agricultural banking into the mobile banking application. We have introduced features such as immediate access to pre-approved credit limits from the mobile branch and the capability for farmers to transfer funds to their accounts without visiting the branch. Currently, we are developing loan and limit increase applications from the mobile branch.
Another project involved establishing an intermediary system for product payments made by agricultural cooperatives to farmers. We adapted the infrastructure of the 'Collective Payment System', through which we had already automated the monthly payment operations of many dairy cooperatives, to agricultural banking.
Another project involved obtaining remote GDPR permissions of the partners of agricultural co-operatives, a project we carried out in collaboration with an agri-fintech. This collaboration enabled us to work with 60 different cooperatives, collectively establishing credit limits for members. We are currently planning an experiment involving a fully AI agent within the digital ecosystem platform we are designing. We are diligently working to determine the application of both the large language model and regenerative artificial intelligence in this field.
Another significant product is the 'My Life is Safe' insurance product, which offers specialized services to farmers and has already begun to provide numerous services to facilitate rural life free of charge.
What are your bank's key priorities in the agricultural sector for the next 2 to 3 years, particularly in terms of sustainable agriculture, digitalization and addressing the challenges faced by smallholder farmers?
Our bank will continue to provide traditional agricultural financing, but we also anticipate that new approaches will emerge in credit processes due to the new conditions brought about by climate change. In addition, Turkey has plans to increase production of beef and cereals, and we expect demand for financing to increase in line with these plans. Furthermore, we see the spread of new agricultural technologies as a very important area of development. The emergence of new business models in this field will drive the creation of new financing products.
Given the absence of a microcredit institution in Turkey, the majority of small and large farmers currently rely on banking services for their credit needs. To enhance their access to credit, it is essential to collaborate with cooperatives within the supply chain. This is particularly crucial as Turkey has transitioned to a planned agricultural production model, which will yield tangible results this year. This will require compliance from small farmers, and we predict that loans will be made available to them through traders or cooperatives as part of a guaranteed scheme.
In summary, we believe that the next 2 to 3 years will see the development of the digital ecosystem, growth in sustainability financing, and an increase in value chain financing projects.
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