Nearly 4 million Syrian refugees currently reside in Turkey. The Syrian community in Turkey makes up nearly 4.4% of its population. Turkey has developed a legal framework for Syrians to own and register their businesses, in a praiseworthy effort to include refugees in the national economy. While the number of Syrian refugees is large, their share of commercial activities in terms of business ownership is still relatively small. There are only 15,000 Syrian owned registered businesses in Turkey, most of which employ less than 10 people.

The business landscape in Turkey has room for more Syrian-owned small and medium sized enterprises (SMEs) and in order for more operating Syrian entrepreneurs, better access to bank loans, is a must. An increase in Syrian entrepreneurs’ current level of access to financial tools such as loans, credit cards and legal forms of money orders, can help the Syrian community establish more businesses and positively contribute to the commercial landscape and growth of the Turkish economy.

In 2021, SPARK published a report identifying barriers and opportunities for Syrian refugees’ access to financial services, as part of a project that creates employment for Syrian refugees and host community members via improved access to finance, with the support of the European Union, through the EU Regional Trust Fund, in response to the Syrian crisis, the ‘MADAD’ fund. The research spanned the cities of Adana, Hatay, Gaziantep, and Şanlıurfa, and included in-depth interviews with 30 Syrian owners of SMEs, with an additional 30 Syrian SME owners providing input through a detailed questionnaire. Four interviews were also conducted with bank branch managers and fintech professionals.

The conclusions of this report, entitled ‘Access or Non-Access to Finance: Challenges Faced by Syrian SMEs in Turkish Border Cities’, are summarised here.

How do Syrians contribute to Turkey’s economy?

Syrian entrepreneurship has the potential to contribute to the local economy and local communities, to create employment and positively impact the inclusion of Syrians into the local community. It is estimated that 30% of Syrian-owned companies in Turkey are unregistered, a number that can be reduced through incentives generated by access to financial tools. Unregistered businesses tend to remain small with a lower number of employees, which limits Syrian and Turkish co-working. Unregistered businesses tend to cluster within refugee districts, reinforcing the divide between refugees and host community members.

Barriers faced by Syrians in accessing financial services in Turkey

Registration
Several factors affect the registration status of Syrian owned businesses, such as limitations on free movement in the country, language barriers and a lack of knowledge of Turkish regulations on business and employee registration. Limited financial inclusion prevents entrepreneurs from acquiring a credit card or taking a bank loan.

Unbanked population
The majority of Syrian refugees in Turkey tend to remain “unbanked“, and are reluctant to place their capital in Turkish banks due to the lack of confidence created by their legal status as ‘Syrians under temporary protection’, rather than refugees. For simple money transfers, the Turkish Postal Service PTT is a preferred solution. However, for more complex services, there are few options for Syrian refugees, as there is a limited number of banks that agree to provide services to refugees. 

Language barriers
Several state banks welcome Syrian refugees, yet the language-based accessibility remains an issue as Arabic is not an option on mobile apps and a language barrier remains on the branch level. Private banks with non-Arabic foreign partners categorically refuse to serve Syrian refugees even after naturalisation. Many Syrians perceive this to be an act of discrimination. 

Credit history
From the banks’ perspective, banks struggle to make financial tools available to Syrian refugees as most do not have a credit history. Research has shown that 70% of Syrians did not have previous dealings with the banking sector in Syria. This lack of dealings with the banking sector contributes to the issue of credit notes. A higher credit note is important for banks to positively evaluate credit applicants and enable financial services. Lack of credit notes makes banks consider applicants as risky. 

Sanctions against Syria
Representatives from the banking sector also note that one of the factors that makes banks consider it as risky to provide services, is the international sanctions against Syria (The Money Laundering, Terrorist Financing Act of 2017) and its outcomes on the financial transactions in and out of Syria. Banks fear that if they provide services to Syrians to open bank accounts, they will be transferring money to their homeland, potentially violating international sanctions. 

Credit cards
Obtaining a credit card remains difficult for Syrian refugees. Very few Syrian refugees hold credit cards and those who do, have to keep a deposit in the bank corresponding to the amount of the card limit. This appears to be a policy choice by the banking sector, and the reasoning behind it is the lack of credit history of applicants. Similarly, obtaining a formal bank loan is quasi-impossible for Syrian enterprises. Research shows that 60% state they would use a bank loan if they had access, yet a similar obstacle that is in place for credit cards ownership, appears to be in place for bank loans. It is not possible for Syrian refugees to acquire non-movable assets in Turkey, due to the “principle of reciprocity” with Syria, therefore making it difficult for Syrian entrepreneurs to show collateral in their loan applications.

Turkish ownership
Banks require that enterprises which apply for loans must have at least one Turkish owner, due to Syrian refugees not complying with the “minimum credibility” requirements of the banks. This is due to a working principle named “Know Your Customer” followed by banks, that can enable them to categorically refuse to serve customers that they deem risky. 

Solutions to increase Syrians’ access to financial services in Turkey

There is a greater need for concentrated efforts to target a whole new generation that views Turkey as its motherland. There is a need to prepare for social cohesion between Syrian refugees and their communities in the financial system in Turkey and for a perspective that paves the way for economic well being and growth of Turkey by including Syrian refugees.

What can banks do to increase refugees’ access to financial tools?

Creating a viable alternative to the informal Hawala system to encourage Syrian entrepreneurs to use official channels for fund transfers is a start. This will help entrepreneurs to be more visible in the financial system of Turkey.

What can NGOs do to increase refugees’ access to finance?

Assist entrepreneurs to register their businesses, provide grants to encourage higher employment, and deliver financial literacy training, to show how the banking and financial system works.

What can policy-makers do to increase refugees’ access to financial tools?

Easing the restrictions on getting a work permit and clarifying the rules for refugee entrepreneurs who wish to be naturalised is a start. Easing the rules for harmonising diplomas and certificates can also benefit many skilled individuals to transfer their skills to the job market in Turkey. 

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Read the full report, ‘Access or Non-Access to Finance: Challenges Faced by Syrian SMEs in Turkish Border Cities’, funded by the European Union.