Türkiye’s effort to keep productive investment moving through a period of expensive credit reached a significant milestone in late 2025, when Industry and Technology Minister Mehmet Fatih Kacır said 1,647 projects had generated TRY 25.5 billion in financing under the first two rounds of KOSGEB’s Capacity Development Support Program. The initiative matters beyond its headline value. By subsidising financing costs for selected manufacturers and technology companies, Ankara is trying to strengthen the domestic suppliers, digital capabilities and research businesses on which foreign investors increasingly depend.
A Targeted Response to Tight Credit Conditions
Kacır announced on November 23, 2025 that the first two application rounds had financed 1,647 projects, while 1,266 companies had applied in the third round. The first two rounds therefore produced average financing of approximately TRY 15.5 million per project.
The program is administered by the Small and Medium Enterprises Development Organization of Türkiye, known as KOSGEB. Under the 2025 terms, eligible companies could seek loans of between TRY 1 million and TRY 20 million, with maturities of up to 36 months and a project implementation period of 24 months. KOSGEB provided 20 percentage points of interest or profit-share support.
That distinction is important for investors assessing the scheme. The TRY 25.5 billion figure represented financing volume made available through financial institutions, not an equivalent amount of cash grants paid directly by the government. Borrowers remained responsible for the principal and for financing costs above the subsidised portion. Banks also retained their role in credit assessment, collateral requirements and loan approval.
The economic rationale was nevertheless strong. The OECD’s 2026 review of SME financing in Türkiye found that high interest rates and insufficient collateral were the main reasons companies avoided bank borrowing. Only 36 percent of micro-enterprises, 46 percent of small companies and 55 percent of medium-sized businesses used bank credit, according to the European Commission’s 2025 Survey on the Access to Finance of Enterprises cited by the OECD.
The same OECD report said outstanding SME loans reached TRY 4.917 trillion in April 2025, up 33.2 percent from a year earlier. Yet nominal growth partly reflected Türkiye’s high-inflation environment, while the share of SME lending in total business loans had fallen to 35.2 percent in 2024. In that setting, a 20-point financing subsidy could materially change a project’s viability, even though it did not eliminate borrowing costs.
From General SME Relief to Industrial Upgrading
The Capacity Development Support Program was more selective than a broad working-capital rescue package. Its stated purpose was to improve productivity, resilience, production capacity, market reach and institutional capability. It also sought to upgrade smaller companies supplying larger industrial groups.
Eligible activities in 2025 included manufacturing, telecommunications, computer programming and consultancy, information infrastructure and data services, and scientific research and development. Qualifying expenditures covered machinery, equipment and moulds, software, personnel, certification, testing, training, design, intellectual-property services and project-related working capital.
This design aligns the program with Türkiye’s larger industrial-policy agenda. Rather than supporting consumption, KOSGEB directs subsidised credit toward assets and capabilities that can raise output or move companies into higher-value supply chains. A manufacturer may use the facility to automate a production line, while a software company may finance new personnel or enterprise systems. A component supplier may invest in testing and certification required by an international original-equipment manufacturer.
KOSGEB initially required applicants to be small or medium-sized limited or joint-stock companies and generally to demonstrate rapid growth. Exemptions applied to businesses with specified innovation credentials, companies operating in technology development zones or TEKMER technology centres, and suppliers presenting qualifying order contracts with large enterprises.
Türkiye also widened the pool of potential beneficiaries in August 2025. Presidential Decision No. 10182 increased the annual turnover or balance-sheet ceiling in the national SME definition from TRY 500 million to TRY 1 billion, while retaining the requirement of fewer than 250 employees. KOSGEB said the amendment would bring more businesses within the scope of public support.
The timing was significant. Inflation had pushed many nominally growing companies above the previous financial threshold even when their real scale had changed little. Raising the ceiling reduced the risk that established industrial suppliers would lose SME status solely because of price increases.
The 2025 Results and the Next Financing Layer
The third-round application volume suggested that the first two rounds had not exhausted demand. KOSGEB subsequently reported that 793 companies obtained access to TRY 12.9 billion through the final 2025 round. That brought the year’s total to 2,440 SMEs and TRY 38.4 billion in financing, or approximately TRY 15.7 million per company.
The program continued into 2026. KOSGEB’s February 2026 announcement retained a TRY 1 million minimum loan, a TRY 20 million standard ceiling, a 24-month project period, a maximum 36-month maturity and 20 percentage points of financing support. The agency’s current framework also provides higher ceilings of up to TRY 30 million for qualifying suppliers in defence, aviation and space, depending on certification level.
A separate World Bank initiative reinforced the policy direction. In December 2025, the World Bank approved a EUR 750 million guarantee designed to mobilise as much as EUR 1.5 billion in ten-year commercial financing through VakıfBank. The Access to Finance for Jobs and Growth project targets approximately 30,000 micro, small and medium-sized enterprises, including women-led and youth-led companies.
World Bank Türkiye Country Director Humberto Lopez said the initiative would help entrepreneurs obtain financing to grow, innovate and create jobs. Its longer-tenor structure complements KOSGEB’s interest subsidy, although the two facilities have different eligibility conditions and implementation channels.
Together, the programs show that SME financing is being treated as an industrial competitiveness issue. Türkiye’s policymakers are using public support to reduce the cost or extend the maturity of private lending, rather than relying exclusively on direct budgetary grants.
Why the Supplier Base Matters for FDI
The relevance for foreign direct investment lies primarily in the quality of Türkiye’s operating ecosystem. A multinational establishing a factory does not invest only in land, buildings and imported machinery. It also requires local companies capable of meeting specifications for components, packaging, software, maintenance, testing and logistics.
Türkiye attracted USD 13.1 billion in FDI in 2025, a 12.2 percent annual increase, according to Central Bank data reported by the Presidency’s Investment and Finance Office. Manufacturing received USD 3.02 billion, or 31 percent of total inflows, while information and communication attracted USD 1.31 billion. Treasury and Finance Minister Mehmet Şimşek said non-real-estate FDI reached USD 10.7 billion, its highest level in a decade.
Those figures make supplier capability more consequential. International manufacturers can localise procurement only when smaller Turkish businesses can finance machinery, obtain international certifications and maintain sufficient working capital to fulfil large orders. KOSGEB’s program can therefore support FDI indirectly by lowering the cost of upgrading prospective suppliers.
It may also affect transaction strategy. An international company considering a joint venture, minority investment or acquisition in Türkiye could find that a target business has already financed new capacity through KOSGEB. Conversely, a foreign entrant might structure a supplier-development program around eligible Turkish SMEs, helping them obtain the equipment, software and certification needed to join its procurement network.
Foreign ownership does not automatically exclude a Turkish company from public support. The Ministry of Trade states that companies incorporated in Türkiye by foreign persons or foreign legal entities are classified as Turkish companies and receive equal treatment under the investment incentive system. However, equal treatment does not guarantee eligibility for every KOSGEB facility.
The Capacity Development Support Program applies additional tests concerning company size, activity codes, growth history, registration and project quality. Under Türkiye’s SME regulation, the figures of linked enterprises can also be consolidated when determining status. A Turkish subsidiary of a large multinational may therefore exceed the SME thresholds once its corporate relationships are considered, even if the local operation alone is small.
Incentives Must Be Assessed as a Portfolio
KOSGEB support sits alongside Türkiye’s broader investment incentive system, which was restructured through Presidential Decree No. 9903 in May 2025. UNCTAD reported that the new framework includes technological, regional-development and strategic initiatives, with instruments such as VAT and customs-duty exemptions, corporate-tax reductions, social-security support, land allocation and financing assistance.
The Presidency’s Investment and Finance Office said 432 incentive certificates were issued to international investors in 2025, covering TRY 109.5 billion in investment and an expected 16,700 jobs. For much larger high-technology projects, the HIT-30 program offers negotiated, project-based support. Its minimum fixed investment threshold is TRY 2 billion in designated high-technology fields, according to the Ministry of Industry and Technology.
This creates several layers of support, but investors cannot assume that benefits can be combined freely. KOSGEB’s implementation rules prohibit receiving support from another institution or another KOSGEB program for the same financed expenditure. Machinery receiving interest support under one program may therefore require separate treatment from equipment covered by VAT or customs exemptions under an investment incentive certificate.
The practical task is to map each expenditure to the correct instrument before orders, loan agreements and import transactions are finalised. This is where investment-incentive planning intersects with legal and tax compliance, import-export facilitation and project management. Incorrect sequencing can result in an otherwise eligible cost falling outside the approved period or being counted twice.
Currency is another consideration. A lira-denominated subsidised loan can reduce local financing costs, but imported equipment may be priced in euros or dollars. Investors need to model exchange-rate exposure, customs treatment, VAT cash flow and the timing of supplier payments rather than viewing the 20-point subsidy in isolation.
What This Means for Foreign Investors
KOSGEB’s TRY 38.4 billion full-year result demonstrates substantial demand for financing among Türkiye’s growth-oriented manufacturers and technology SMEs. For international investors, the principal opportunity is not unrestricted access to cheap credit. It is the possibility of entering a market where public policy is actively financing supplier development, digitalisation and productive capacity.
Acting on that opportunity requires detailed market-entry work. Investors should identify eligible local suppliers, test whether their capacity projects match procurement requirements and assess whether collaboration, a joint venture or acquisition offers the best route. Company incorporation and corporate structuring must then account for SME-status rules, foreign ownership, linked-enterprise calculations and the planned division of activities between the Turkish entity and its overseas parent.
Investment-incentive analysis should compare KOSGEB support with the national incentive system, free-zone benefits, R&D support and project-based programs. Legal and tax compliance must verify eligible expenditures, documentation, related-party purchases, employment obligations and restrictions on overlapping aid. Government relations and regulatory liaison can help coordinate applications involving KOSGEB, ministries, development agencies and financing institutions.
For export-oriented projects, import-export facilitation becomes critical when subsidised financing is used for imported machinery or when new capacity will serve European and regional markets. Expo and trade-fair representation can also help upgraded Turkish suppliers convert new capacity into international orders. Finally, on-the-ground project management is needed to align loan drawdowns, equipment delivery, permits, certification and reporting with the approved timetable.
The broader signal is clear: Türkiye is using targeted credit support to build the industrial layer beneath major investments. Foreign companies that evaluate that supplier ecosystem as carefully as they evaluate tax incentives, labour costs and factory locations will be better placed to turn the policy into a durable operating advantage.