Securitized trade finance Ram Dis Ticaret, A.S. (Turkey) : PRE [Bureau for Private Enterprise] project number 940-0002.56

capital markets. External evaluation covers the period 1/87-1989. A.I.D. provided a $2 million co-guarantee to facilitate the borrowing of $10 million from the U.S. capital market by Ram Dis Ticaret A.S., a subsidiary of Koc Holding, A.S. Ram was to use $4 million of the loan to finance trade transactions for SMSE's, and make its best effort to use at least half of the remaining $6 million for the same purpose. However, while the amount of trade financing provided to SMSE's probably increased as a result of the project, credit terms to SMSE's did not become more favorable. Out of a sample of 14 borrowers representing Ram's trade finance portfolio, half were SMSE's, but the amount lent to SMSE's represented only 13% of total credit available to the sample. Moreover, with only one exception, all loans in the sample went to clients with pre-existing credit lines from Ram and most were renewals of previous credits - again in contrast to original project design. Virtually no marketing efforts were made to attract new small enterprises. The project did succeed in helping Koc obtain long-term fixed rate foreign currency credit in the U.S. capital market, thereby reducing the Koc Group's dependence on short-term, variable rate commercial bank Eurocurrency financing. The project also played a role in the successful negotiation of a subsequent borrowing of German DM30 million through the Morgan Guaranty/International Finance Corporation. Nonetheless, the goal to create a new capital markets mechanism for Turkey was not achieved. First, the project loan was to be guaranteed by existing trade receivables, but there was no evidence that Ram's trade receivables were used as security. Second, there were no Turkish institutions involved in guaranteeing Ram's notes nor any observable impact on other Turkish financial institutions. There were no follow-on projects carried out to test the model through a small company. Compliance with the terms and objectives of the projects was mixed. Although Ram's sales and finance departments play major roles in trade finance operations, they were only superficially informed of the provisions of the A.I.D. agreement. For example, Ram's finance staff was not told to segregate the project loans under the facility into separate accounts. Measurement of the borrower impact was impossible because funds were commingled and the required sub-borrower reports were not submitted to A.I.D.