While banking penetration in Turkey's major cities is near European levels, issues of accessibility and trust mean that a large proportion of the rural population remains unbanked. "A significant portion of the population has no access to the services of formal banks," Burcu Arasli, the head of the microfinance division at the United Nations Development Programme's Turkey office, told OBG. "More than 50% of the population keep their money under their pillow instead of in a bank. After the crisis of 2000-01 a lot of people lost faith in banks," he said.
The country's banks are speeding up efforts to expand branch networks in the region. According to Tolga Egemen, the executive vice-president of Garanti Bank, the fastest-growing bank in the country with 100 new branches opened already in 2008, there is plenty of room for expansion. "While in a country like Switzerland banks such as UBS are forced to go international in order to maintain profits and growth, in Turkey there is still a huge untapped potential, especially in the east," he said.
Although branches in rural areas are not as profitable in the short-term as those in major cities, it is important to establish a client base according to Egemen. "The profitability of these banks varies from region to region. A bank can become profitable in Levent in Istanbul in three months. In some parts of Anatolia, where it is the second or third branch, it takes two years. Where it is the first branch in an area it is more effective," he said.
One of the Turkish government's key priorities is to increase business and agricultural opportunities in the country's Anatolian heartland. A broad incentives package, including tax breaks, is available to businesses operating in the region and the government's renewed commitment to the South-east Anatolia Project (GAP) could potentially increase available agricultural land in the region three-fold via the construction of 2000 km of irrigation channels designed to carry water from the Euphrates and Tigris rivers. Turkey's prime minister, Recep Tayyip Erdogan, has said that GAP will provide 4m jobs and help reduce support in the region for the separatist Kurdistan Workers Party (PKK), against whom the Turkish military has been fighting a long and costly campaign.
Zeki Onder, the executive vice president of Sekerbank, told OBG that the exploitation of Turkey's huge reserves of uncultivated land is central to the country's long-term economic growth and the reduction of its sizeable current account deficit (CAD). "In the long term the CAD can only be reduced by increasing industry and production. In the past textiles, automobiles and white goods have emerged as Turkey's major competencies. Now agribusiness has emerged as the next area of potential," he said.
Large-scale projects are already under development in the region. Koc Holding, the country's biggest company, is investing $84m to build what will be the world's fifth-largest tomato-paste-processing plant outside the city of Sanliurfa.
"We expect to see movement from the government and the private sector to stimulate large business and land consolidation in the region. Inheritance laws have been reformed to prevent the fractionalisation of land and some companies are investing up to 10m-15m euros for a single high-tech greenhouse. This demonstrates the size of businesses involved," Onder told OBG.
In addition to the country's major companies, small and medium-sized enterprises (SMEs) are taking root in the region. Metin Karabiber, the assistant general manger of Fortis Bank, told local press that the country's "economic growth basically relies on SMEs in Anatolia". According to Karabiber, the bank's loans to SMEs grew from $170m (7% of total loans) in 2004 to $2.5bn (35% of loans) so far in 2008.
According to Onder, the grey economy in the region is also starting to shrink as local small-scale agricultural producers turn to banks for financing. "Farmers are happy to be identified as a customer base and moreover they are not put off by the current high interest rates as it makes little difference on small-scale loans," he said. Sekerbank takes a direct approach to building its microbusiness customer base and provides tailor-made products, such as credit cards that are paid off after harvest.
The potential of the sector has also caught the eye of international financial investors. KfW Bankengruppe, a German public bank, has established a joint venture with Sekerbank, Is Bank, AK Bank and Garanti Bank to provide 90m euros in loans to citizens of 49 Turkish provinces. The size of this fund will grow in the future, according to Onder.
However, certain obstacles have yet to be overcome. Human resources can be a major challenge for banks in rural areas according to Remy de Cazalet, the managing director of Michael Page Turkey, an executive search company. "It is hard to find qualified staff in the east and even harder to send them there. The banks have resorted to sending staff who may have studied and worked in major cities but who have their origins in the region," he told OBG.
Representatives of Anatolian businessmen claim that banks undervalue property used as collateral for loans and that greater effort needs to be made by the government to stimulate business in the east of the country. The Van Chamber of Commerce and Industry, for example, has said that further investment incentives - including additional tax breaks, improved transport infrastructure and reduced-price energy - are necessary to achieve further growth.