An Assessment of 2016: Strategies, Developments and Future Goals

Celebrating its first year of operation in the sector, Ziraat Participation is proceeding resolutely towards the goals of its road map, step by step.

SMEsproving low-cost financing to SMEs

Offering products and services that are of high added value for its customers and fully compliant with the principles of participation banking, Ziraat Participation continued to support individual banking customers as well as the real sector throughout 2016, backed by the power of the Ziraat brand.

Ziraat Participation is constantly increasing the quality of its services and provides the best source of financing to its stakeholders with new products and services that will contribute to the development of participation banking.

Operating with the aim of being a leader and a respectable participation bank, not only in our country but also in our region, Ziraat Participation will provide an ever-greater contribution to the real sector and the country’s economy within the framework of Turkey’s 2023 targets.

PSCPre-shipment Export Credit

Corporate and Entrepreneurial Banking

Ziraat Participation aims to increase the share of participation banking in the sector by acquiring new customers and diversifying its product range.

As a result of systematic efforts carried out in 2016, Ziraat Participation reached customers in many regions of the country in the corporate and entrepreneurial segments and established strong cooperation with its customers by providing appropriate solutions for their different needs.

Aiming to bring a breath of fresh air to the sector, Ziraat Participation implemented the first profit-loss partnership project by bringing existing applications to a new sector in 2016.

Ziraat Participation began the disbursement of World Bank originated funds in line with efforts carried out to provide SMEs with access to low-cost financing.

Within the scope of Türkiye İhracat Kredileri Bankası A.Ş. (Export Credits Bank of Turkey) originated credits, in 2016, disbursements were made in USD terms under the heading of Pre-shipment Export Credit (PSC).

Ziraat Participation plans the following in 2017;

To continue to implement its practices in different sectors with profit-loss partnerships,
To carry out disbursements under the Portfolio Guarantee System in addition to equity and Treasury-backed disbursements by renewing the contract entered into with the Credit Guarantee Fund which has the stated aim of supporting SMEs,
To carry out disbursements of Pre-shipment Export Credits in EUR and TL terms as well as US dollar terms.

Retail Banking

Aiming to meet customer expectations by providing the right products and services in a timely manner, Ziraat Participation took important steps in attracting individual customers in 2016 and achieved a successful performance.

24/7meeting the needs of customers round-the clock.

Within the framework of participation banking principles, Ziraat Participation continues to support its customers and to meet the needs of customers 7 days a week, 24 hours a day with the most appropriate solutions and through the most appropriate channels such as the branches, ATMs, the Internet and Mobile Banking applications and the Call Centre.

Ziraat Participation in 2016;

Began to offer State subsidized Dowry Participation Account, Housing Account and Investment Fund products to customers.
Began to carry Social Security Institution (SSI) Revenue / Monthly Payment transactions for pensioners through the Bank, by completing the protocol processes of 14 different institutions by the end of 2016.
By the end of the year, the risk balance for individual loans surpassed TL 750 million. In addition, the number of contracted housing projects rose to 55 and the Bank began to meet the financing needs of its customers from the related projects.
Continued to enter physical POS (point of sale machine) allocation agreements with business establishments and began to sign contracts with cash register POS / payment registers companies.
Increased the rate of rollout in the allocation of physical POS and cash register POS / payment registers.
In the second quarter of the year, the Bank offered its customers the Individual Financing Card product.
The Bank rapidly increased the number of Ziraat Participation cards in circulation to 40,000 by the end of the year.

Ziraat Participation aims to increase the share of participation banking in the sector by acquiring new customers and diversifying its product range.

Within the scope of the “Correspondent Banking” project, anyone who wants to become a Ziraat Participation customer can open a Ziraat Participation account through any Ziraat Bank branch and apply for a Ziraat Participation Bank Card. Users of the Bank card are also able to inquire their balance and withdraw money from any Ziraat Bank ATM free of charge.

In 2017, the Retail Banking targets are:

Physical POS will continue to be distributed in the allocation of cash register POS / payment registers, while the member businesses will be offered the Virtual POS product. There are planned to be 1,400 POS machines in the field by the end of 2017.
Work on the Legal Financing Card product, which aims to meet the financing needs of legal customers and on the Ziraat Participation Credit Card product for individual customers, will continue.
The Quick Bank Card product, which provides immediate card allocation from the branches, will be rolled out more widely in the field.

64%increase in the number of ATMs (at year-end 2016)

Channel Management
Adopting the multi-channel strategy, Ziraat Participation offers its customers effective and high-quality services through branches as well as through electronic service channels. The results achieved in this area in 2016 are listed below.

ATMs

As of the end of 2016, the number of active Ziraat Participation ATMs increased by 64% when compared to the previous year, with transaction volume amounting to TL 225 million.
The process of depositing money into accounts can be conducted in Turkish, English, German, Arabic and Russian from all ATMs.
The card copying security application is used in all ATMs to ensure that customers are not exposed to ATM fraud.

The Bank aims to offer a better service from ATMs in 2017 following customer experience analysis, with improvements in customer service by informing those managing the ATMs, closer liaising with organizations in electronic and mobile media through the automatic breakdown and maintenance status follow up service and an increase the number of ATMs.

Ziraat Participation expanded its financing opportunities from domestic and foreign banks in Turkish Lira and foreign currency terms in 2016, in accordance with the principles of participation banking.

Customer Communication Centre and Central Banking Branch

In 2016, a total of 106,000 customer calls were received and 48,000 informative SMS and 107,000 informative e-mails were sent from the Customer Communication Center.
The Interactive Voice Response system (IVR) was put into practice with English and Arabic language options.
The Call Center was ranked third among 33 call centers, by evaluating Customer Communication Center calls.
The Central Banking Branch entered operation to provide services to customers who are correspondent and using the web.
The Solution Support Center, which serves the customers of the Central Banking Branch, entered operations.

Internet Banking

Ziraat Participation’s Internet Banking transaction functions were expanded so that customers can perform all their banking transactions from the branchless channel.
Both the number of Internet Banking customers and transaction volumes more than doubled, with the total number of customers reaching 58,000, including 52,000 Individuals and 6,000 Corporate Users.
The total volume of the 363,000 transactions conducted through Internet Banking channel stood at TL 2 billion.
The “Instant Account Opening” option for applications was introduced to allow potential customers of the Bank to be an instant customer, by logging in from the desired media.
The opportunity to switch from individual internet banking to the E-Government Gateway, which provides access to the services offered by the public institutions and organizations in electronic media from a single point, was provided without the need for an e-government password.

Ziraat Participation aims to support the lives of its customers by ensuring the integration of its products and services with non-branch digital channels and by spreading the use of non-branch channels, mainly the mobile channel.

In 2017, the Internet Banking channel is planned to be redesigned to enhance the Internet Banking experience for customers, to offer a flawless and easy design and to meet different customer needs.

Participation Mobile appwas launched.

Mobile Banking
The Ziraat Participation Mobile Banking application was made available for iOS operating system users with the “Participation Mobile” brand on 17 December 2016, with the aim of helping customers with its innovative and customer oriented digital strategy. The application had been downloaded by 3,000 customers by the end of 2016.

Many banking transactions such as accounts, account movements, money transfers, bill payments and password transactions can be performed with the Participation Mobile.

In 2017, the Participation Mobile application will offered to customers using the Android operating system and users will be able to logon to the application with Mobile Approval, which will be enabled with new function developments.

Customer Satisfaction
In 2016, a total of 1,108 of the total of 5,317 incidences of feedback that were resolved in the Ziraat Participation Customer Satisfaction Unit were customer complaints.

The average resolution time for items of feedback was 1.13 days during the year and the average resolution time for complaints stood at 1.70 days. In the sector, where the average response time is between 5-7 working days, Ziraat Participation was positioned among the fastest banks in this field.

In 2016, Ziraat Participation was awarded the ISO 10002: 2014 Customer Satisfaction Management System quality certificate, an indicator that customer feedback is being responded to well and also of continuous improvement in accordance with international standards.

Lease certificateissuance approval was obtained. (2016)

Treasury Management and International Banking
Ziraat Participation succeeded in more than tripling its asset volume in 2016 in line with the growth strategy of placing weight on the real sector and the financing of foreign trade.

Ziraat Participation’s Basic Liability Management Strategy envisages the extension of the participation fund base and to manage these pools in the most efficient way. Within the scope of resource diversification and low cost resource utilization, Ziraat Participation, which also uses resources outside the participation fund, expanded its financing opportunities from domestic and foreign banks in Turkish Lira and foreign currency terms in 2016, in accordance with the principles of participation banking.

In 2016, Ziraat Participation met the need for financing from participation funds and the resources that have longer term than participation funds, other resources that are in line with the principles of participation banking and the equity by taking into account the risk-return balance. Moreover, despite the rapid growth in liabilities in the balance sheet, it diversified resources for the financing of the real sector, creating liabilities in the balance sheet by considering optimal cost and maturity.

Ziraat Participation effectively used interbank borrowing and financing products to fulfil the required reserve liability, to meet the liquidity needs in line with the participation banking principles and to assess the surplus.

Completing its first year in 2016, Ziraat Participation rapidly expanded its product range to respond to the needs of its customers as soon as it entered operation. The infrastructure and modular systems required for customers to invest in the lease certificates in the Ziraat Participation portfolio were established and customers were offered the opportunity to purchase and sell foreign currency for hedging purposes. In addition, in accordance with the principles of participation banking, the activities for the sale of investment (mutual) funds to customers were completed and in this context, the related funds started to be sold to customers in 2016.

Correspondent Relations
In 2016, Ziraat Participation established a swift correspondent relationship with a significant number of banks by completing the legislative compliance process and began to quickly meet the requests in the foreign trade field. Completing account correspondence agreements with correspondent banks in different currencies, in 2016 Ziraat Participation signed a mutual Wakala / Murabaha contract with several banks.

Within the framework of these contracts, foreign resources aimed at increasing the diversity of the resources with interbank Murabaha and Wakala transactions were provided.

In 2016, Ziraat Participation also successfully completed a USD 155 million Murabaha syndication performed with the participation of international banks.

Ziraat Participation, which plays an active role in capital markets as a part of its strategy of enriching the resource structure, obtained issuance approval with a TL 1.5 billion ceiling from the Capital Markets Board in order to issue TL denominated lease certificate in the local market with its affiliate, Ziraat Katılım Varlık Kiralama A.Ş. In this framework, issuances were made in batches of TL 100 million.

In 2016, Ziraat Participation provided long termed resources from various development banks, mainly the World Bank, for financing SMEs and foreign trade financing and maintained its financing support for SMEs and the real sector.

Ziraat Participation aims the following in 2017;

Significantly increasing the number of correspondent banks and the level of foreign trade volume,
Renewing the existing Murabaha syndication with a higher amount in order to ensure borrowing diversification outside participation funds and to extend maturity structures on the resource side,
Continuing to issue lease certificates in the domestic market,
Adding depth to the capital markets by carrying out corporate lease certificate issuances in favor of third parties other than Ziraat Participation, through a new asset leasing company to be established,
Providing increasing support to the real sector by maintaining a supply of resources from international institutions for the financing of SMEs and foreign trade.

The infrastructure and modular systems required for customers to invest in the lease certificates in the Ziraat Participation portfolio were established and were started to purchase and sell foreign currency for hedging purposes.

Operational Transactions

In 2016, Ziraat Participation implemented an array of operational measures to facilitate and accelerate the process of the participation banking product and service offering.

Within the scope of the protocol signed with the Social Security Institution (SSI), the required studies were completed and SSI premiums started to be carried out through the Bank channel.
SSI pension payments started to be carried out through the Bank.
Studies on the “QR Coded Cheques”, carried out in coordination with the Credit Registration Bureau (CRB) and which will provide significant support to the operation and security of our country’s cheque market, were completed and customers started to receive QR Coded Cheques.
The tests being conducted by Ziraat Participation and the Interbank Check Clearing House regarding the “Video Electronic Cheque Processing and Clearing” (GEÇİŞ-Transition) Project, which was developed to allow cheque images to be transferred in electronic media and be viewed by all member banks, were completed successfully and the project was into practice.
Certification tests for customs duty collections were completed and as a result of the tests conducted with the Revenue Administration Department, customs duty payments could be collected through the Bank channel.
Tests for carrying out money group demands through the “Ziraat Money Demand” application were completed and the work was put into practice. Thus, a traceable, controllable and time-saving structure was established.
Bill payments for Türk Telekom, Vodafone and Turkcell started to be conducted through the Bank.
Bill payments for İGDAŞ, Türksat, Dicle Electricity, Meram Electricity, KOSKİ and Aksaray Water started to be conducted through the Bank.
The Bank started to process Hajj and Umrah payments.
The E-distraint Integration project carried out jointly between the Savings Deposit Insurance Fund and the Bank was completed, paving the way for savings in manpower and time thanks to the automatized processes.

QR Coded Chequesbegan to be offered to customers.

Information Technology

Bringing innovative products into operation at the right time is an indispensable goal for Ziraat Participation, which it achieved by using the most up-to-date technological infrastructures in line with customers’ needs.

In 2016, in the field of Information Technologies;

In addition to 30 projects completed within the scope of business development activities, work of 38 projects is ongoing.
Integration with TROY, Turkey’s national payment method, was carried out.
The Central Banking branch infrastructure was established and put into service within the framework of Digital Banking and Branchless Banking activities.
The Financing Limited Card product, for financing individual needs, was offered to customers.
The Profit - Loss Partnership project was commissioned in order to finance projects.
The video cheque clearing infrastructure was established.
Within the scope of business continuity infrastructure improvement activities, tests on the Disaster Center were completed and basic banking operations were made to work in the Disaster Center.
The back-up and load balancing infrastructure were prepared by adding more banking application servers, thereby bringing the opportunity to provide uninterrupted service to customers.
“Network Performance Monitoring” and “Application Performance Monitoring” tools, which are for monitoring the performance of the IT infrastructure, were adapted with the aim of enabling monitoring of the service performance on a 24/7 basis.
The automatic shutdown of computers after work was implemented, ensuring energy savings throughout the Bank.
E-billing and e-notebook applications were put into effect.
Work on the transition to Windows 10 was completed.

As of the end of 2016, Ziraat Participation was serving its customers with 655 employees and 44 branches.

Human Resources

In line with its strategies and targets, Ziraat Participation’s practices in the field of human resources are focused on creating a happy and productive work environment and contributing to the development of employees’ performance by guiding employees in partnership with their units and branches.

As of the end of 2016, Ziraat Participation was serving its customers with 655 employees from 44 branches.

Ziraat Participation, which continued to improve its operational and financial performance during 2016, its first year of its operations, also accelerated its efforts focused on the development of its employees.

In line with its plans to transform into an internally fed structure, Ziraat Participation strengthened the sense of corporate loyalty and belonging of its employees by presenting career opportunities primarily to its own personnel.

In 2016, with the cooperation of Ziraat Participation and Istanbul Commerce University, a promotion examination was held in Ankara and Istanbul for personnel with the necessary competencies and successful personnel were promoted to a title one level superior.

Ziraat Participation aims to enrich the youthful and dynamic structure of human resources as well as creating jobs for new generations when planning the future. For this purpose, the examination for the Service Representative position was held in six different provinces and in seven locations across the country with the help of Anadolu University. A total of 42,500 applications were received for the examination and recruitment processes are continuing for 200 candidates who passed the exam in line with Ziraat Participation’s needs.

In 2016, Ziraat Participation expanded its personnel’s access to health benefits by completing the transition into “the MEMBERS of T.C. ZİRAAT BANKASI A.Ş. and T. HALKBANKASI A.Ş. PENSION AND ASSISTANCE FOUNDATION (TZHEMSAN). Employees were then covered for treatment in both public hospitals and private hospitals and health care facilities, either free of charge or by paying a reduced contribution.

Ziraat Participation aims to create a common business culture; in 2016, the Bank completed the “More by Sharing Business Culture Principles” project, which it launched in 2015. After this date, the personnel who started to work in the Bank received business culture lessons from the Bank’s own internal lecturers as part of the orientation program.

This project aims to help those coming from different banking or institutional cultures learn about the Ziraat Participation Culture and adopt these principles by practicing on the job. With the business culture to be created, employees will work towards realizing the corporate goals and objectives and increasing their corporate loyalty.

A total of 114 training programs were organized for employees of the Bank in 2016. The employees, who underwent an intensive training program, received 6.9 days of training per person.

36 Bank employees took part in the eight-day “Islamic Economy and Participation Banking Certificate Program” organized by the Sabahattin Zaim University, in accordance with Bank’s aim of being the best at learning about and teaching participation banking.

Ziraat Participation’s First Partnership

Ziraat Katılım Varlık Kiralama A.Ş., which was Ziraat Participation’s first partnership with a subsidiary status, was established on 22 January 2016 with a capital of TL 50.000.

Ziraat Katılım Varlık Kiralama A.Ş.
Ziraat Katılım Varlık Kiralama A.Ş. was established on 22 January 2016 with a capital of TL 50,000, paid entirely by Ziraat Participation with the authorization obtained from the Banking Regulation and Supervision Agency (BRSA) and the Capital Market Board (CMB) to issue exclusively lease certificate within the framework of the Communiqué on Lease Certificates (III-61.1) of the CMB, which was published in issue 28760 of the Official Gazette, dated 7 June 2013.

The company’s head office is in located in Fatih, Istanbul.

As of 30 September 2016, the company had no personnel.

Lease certificates (Sukuk), issued by Ziraat Katılım Varlık Kiralama A.Ş. and for which the payment was made, with a nominal value of TL 100,000,000, a maturity of 86 days and an amortization date of 12 August 2016, were issued within the framework of the authorization of the General Directorate of the Stock Exchange on 24 March 2016. The periodic profit share return rate is 2.49753% and the annual compound profit share rate is 11.04%.

Lease certificates, issued by Ziraat Katılım Varlık Kiralama A.Ş. and for which the payment was made, with a nominal value of TL 100,000,000, a maturity of 89 days and an amortization date of 9 November 2016, were issued within the framework of the authorization of the General Directorate of the Stock Exchange dated 24 March 2016. The periodic profit share return rate is 2.4383% and the annual compound profit share rate is 10.38%.

Lease certificates, issued by Ziraat Katılım Varlık Kiralama A.Ş. with a nominal value of TL 100,000,000, a maturity of 91 days and an amortization date of 8 February 2016 were issued within the framework of the authorization of the General Directorate of Stock Exchange on 24 March 2016. Since 11 November 2016, the certificates started to be traded only among qualified investors in the Borrowing Instruments Market, Outright Purchases and Sales Market. The periodic profit share return rate is 2.51808% and the annual compound profit share rate is 10.49%.

Issuer	Ziraat Katılım Varlık Kiralama A.Ş / Ziraat Katılım Bankası A.Ş.
Issuance limit approved by CMB and approval date	TL 1,500,000,000 / 23.03.2016
The nominal amount of Ziraat VKŞ Lease Certificates in circulation	TL 100,000,000
Sale Type	Sale To Qualified Investor (outside the stock exchange)
Record Date	8 November 2016 Tuesday
Settlement and Maturity Starting Date	9 November 2016 Wednesday
Type	Lease certificate (based on management agreements)
Issue Amount (nominal)	TL 100,000,000
Maturity	91 days
Redemption Date	8 February 2017 Wednesday
Simple Yield	10.10%
Compound Yield	10.49%
Amount	TL 1
Amortization method	Principal and return payment will be paid at the end of the maturity.
Date of transaction	11 November 2016 Friday - BİAŞ (Borsa İstanbul A.Ş.) Debt Securities Market