Evaluation of 2019: Strategies, Developments and Future Goals

ZIRAAT PARTICIPATION MAINTAINED ITS STRONG FINANCIAL AND OPERATIONAL PERFORMANCE IN 2019, GENERATING A PROFIT OF TL 516.7 MILLION, AN INCREASE OF 60% OVER THE PREVIOUS YEAR.

Ziraat Participation maintained its strong financial and operational performance in 2019, generating a profit of TL 516.7 million, an increase of 60% over the previous year.

In order to meet the financial needs of its customers through the right channels at the right time and with the right value proposition, Ziraat Participation has continued to be the reliable solution partner of its customers in corporate and retail banking business lines by ensuring product, service and distribution channel diversity in line with participation banking principles and by increasing service quality.

With the new products and services that will contribute to the development of participation banking, Ziraat Participation provides the most appropriate source of financing for its stakeholders and enhances its service quality day by day.

Ziraat Participation will continue to increase the support it provides in financing to the real sector and its contributions to economic growth in the future, in line with Turkey’s 2023 targets.

CORPORATE AND ENTREPRENEURIAL BANKING

Ziraat Participation continues its operations at full speed to ease SMEs access to financing and provide them with the most favorable conditions. In this context, two protocols were signed between the Bank and Credit Guarantee Fund, “Program on Competitiveness of SMEs- COSME” on 12 April 2019 and “CGF Support Credit” on 27 May 2019.

In cooperation with KOSGEB, our Bank signed Düzce and Istanbul Emergency Support Credit Protocol to provide favorable financing for businesses who were affected by the flood and landslide occurred on 17 August 2019 at Eminönü Tram Underpass and Spice Bazaar Underpass.

Standing by the tradesmen who are in need of emergency financing support, Ziraat Participation will continue its contributions to SMEs who have significant roles in our country’s production and commercial ecosystem.

Providing the most appropriate solutions and value propositions for the needs and expectations of its individual and corporate customers through the most appropriate channels, Ziraat Participation conducts comprehensive activities to increase its product variety. In this context, credit card studies which started in the third quarter of 2019 continue at full speed to meet customers’ expectations and increase their satisfaction.

EMV product was launched which added contactless transaction feature to Ziraat Participation’s bank cards and enabled them to be used in e-commerce. Virtual POS product which was launched in April 2019 will continue to expand in 2020.

To increase finance transaction process quality of its corporate customers who already have active limits, Ziraat Participation launched a “Mobile Financing” option where customers can conduct their finance transactions without coming to the branch through Participation Mobile. The Bank will continue its activities to facilitate its customers’ access to financing and to allocate funds with favorable terms.

In accordance with the regulation amending the “Regulation on Procedures and Principles for the Acceptance and Withdrawal of Deposits and Participation Funds and Deposits, Participation Funds, Custody and Receivables Undergoing Lapse of Time” published at the Official Gazette numbered 30569 dated 18 October 2018, a new application became available which allows participation banks to collect funds with Investment Proxy Agreement.

In this context, Ziraat Participation started fund collection transactions via Investment Proxy Agreements for corporate customers on 15 July 2019. “Communique on Maturities and Types of Deposits and Participation Funds” published in the Official Gazette numbered 30809 dated 22 June 2019 allows participation accounts based on Investment Proxy Agreements to be opened with maturities less than 1 month. Hence our corporate customers are also allowed to open participation accounts with maturities less than 1 month.

ZIRAAT PARTICIPATION CONTINUED TO BE THE CUSTOMERS’ PREFERENCE IN 2019 WITH ITS INNOVATIVE APPLICATIONS, EXPERT EMPLOYEES AND WIDE-SPREAD SERVICE NETWORK.

RETAIL BANKING

With the objective of offering the most appropriate products and services through the most appropriate channels based on the needs of varying customer groups in Retail Banking, Ziraat Participation continued to be the customers’ preference in 2019 with its innovative applications, expert employees and wide-spread service network.

Ziraat Participation intermediates in issuance of Gold-based Lease Certificates in order to bring gold from under-the-mattress into the economic system and to provide new resources. As an intermediary bank registered by Republic of Turkey Ministry of Treasury and Finance, the Bank realized Gold-based Lease Certificate issuances between December 2018 and February 2019 across Turkey through its 61 branches in 29 cities.

In order to support its customers’ house purchases and to contribute to activity in construction industry, Ziraat Participation participated in the housing financing campaign at 0.99 profit margin started by three public banks in the second quarter.

Ziraat Participation cooperated with automotive brands manufacturing in Turkey to support domestic production. The Bank offered Vehicle Financing Packages Specific to Domestic Production to its customers who purchase 0 km domestic passenger and commercial vehicles.

PROJECT FINANCING AND FINANCIAL PARTNERSHIPS

FZK Mühendislik ve Sınai Yatırımlar A.Ş.
FZK, the first Musharakah Investment in manufacturing area in participation banking, was included in accredited firms list of the Directorate of Defense Industry. Conducting joint projects with TUSAŞ and ASELSAN, the Company successfully performed its role in the production of Korkut Low Level Air Defense Armor System and contributed to its placement in our army’s inventory.

Yünsa Yünlü Sanayi ve Ticaret A.Ş.
Within the scope of financial partnerships, the Bank purchased 57.88% of shares of Yünsa with its subsidiary Sürmegöz Tekstil Yatırım A.Ş. from Hacı Ömer Sabancı Holding. Yünsa is the largest woolen fabric producer of Europe operating under one roof and 5th largest in the world. The target is to increase production and exports of Yünsa which currently exports 75% of its sales.

Livzym Biyoteknoloji Arge A.Ş.
The Bank purchased 6% shares of the company which produces enzymes in biotechnology with an import-substitution policy within the scope of financial partnerships and supported the firm’s production activities.

Renewable Energy Sources
Ziraat Participation prioritizes supporting renewable energy sources in line with our country’s strategy and priorities in energy area. The Bank realized project financing at an amount of TL 755 million in renewable energy area as of 2019 year-end.

2020 Outlook

Efficiency improvement activities in financial partnerships will be conducted.
Financial partnerships will continue with domestic and national companies which have import-substitution policies
Studies are carried out to establish crowd financing infrastructure and implementation.

DIGITAL BANKING

Ziraat Participation utilizes alternative distribution channels extensively to reach larger number of customers in addition to its wide service network. In 2019, innovative applications gained speed to increase effective use of alternative channels to ensure these channels are preferred as much as branches.

In 2019, Ziraat Participation’s number of active ATMs increased by 13.64% YoY to reach 75, number of active customers using Internet Banking increased by 57% to reach 166,588 and number of transactions over this channel reached TL 12.3 billion.

Participation Mobile application was updated as follows;

A flexible structure was set up to provide customers with faster transaction capability with its customized main screen.
An expanded and detailed transaction set was implemented considering customer needs.
Pre login screens, smart menu and modern designs were used.

INTERNET BANKING CUSTOMERS INCREASED BY 57% TO REACH 166,588 AND NUMBER OF TRANSACTIONS OVER THIS CHANNEL REACHED TL 12.3 BILLION.

Internet Banking and Mobile Banking

Mobile Financing product which allows customers to obtain financing through mobile branch without coming to the branch was launched. In addition to this project, Mobile Proxy Project pilot studies started.
In line with the Bank’s strategy, Artificial Intelligence and Open Banking workshops were realized within the scope of Ziraat Participation Digital Days to increase digital awareness.
In order to ease customers’ entry to Participation Mobile, Single Password access to application is offered for determined devices as an alternative to access via SMS.
“Digital Approval” project started which will enable the Bank to receive customer approvals using Mobile Banking and Mobile Approval capabilities instead of signed forms received at branches.
Studies on remote customer gain (application via video chat, biometric face recognition technologies), corporate web site update and integration of Chatbot applications to Bank channels are being carried out.

Centralized Banking

899 Centralized Banking Branches continue their operations to serve customers who opened their accounts via correspondent banks and Web.
41,000 calls were answered at the Solution Support Center.
63,400 outbound calls were realized at the Solution Support Center.
Customer retention and deposit calls activities were conducted at the Solution Support Center.
Customers who applied from the Web with missing contracts were regularly called and ensured that they have signed their contracts by informing via SMS.
The Bank started to work with the Telekurye company to obtain the contracts of customers applying from the website without them having to go to the branch.

Customer Satisfaction and Communication Quality

In order to increase the performance of the Customer Communication Center, to improve operational processes and to evaluate the customer experience, Call Analysis Project is being conducted to analyze calls conducted with customers.
In 2019, a total of 8,883 notifications were resolved at the Customer Satisfaction Unit. 2,111 of these resolved notifications were customer complaints.
The average resolution period for all notifications in 2019 was 1.32 days and the average resolution period for the complaints was 2.75 days.
The ISO 10002: 2014 Customer Satisfaction Management Quality Certificate, which was received in the first year of the Bank’s establishment and indicates that customer notifications were answered to a high standard of quality and were undergoing continuous development according to international standards, was renewed in 2018.
Studies are being carried out to analyze customer notifications with text analytics (artificial intelligence).
In accordance with the customer-oriented business discipline, customer notifications are reviewed within the same day received and responses are provided to customers within two business days at the latest.

TREASURY MANAGEMENT AND INTERNATIONAL BANKING

In line with the real sector and foreign trade financing strategy…
Ziraat Participation expanded its asset size by more than 60% in 2019, while pursuing a strategy to finance majorly the real sector and foreign trade.

Ziraat Participation pressed ahead with its resource diversification in asset liability management with the main resource being participation funds, and it established a liability base of the balance sheet taking into consideration optimum cost and term. The Bank adopted a strategy of effectively managing the pools of participation funds. Moreover, obtaining a syndication credit from international markets and two subordinated loans from domestic resources, Ziraat Participation not only created resource diversity and also strengthened its funding structure.

The Bank participated Takasbank’s Gold Transfer System and became a member. Customers of domestic member banks can perform gold EFT transactions in this system.

Furthermore, Ziraat Participation participated in BİGA Project conducted by Takasbank and transfer transactions between member banks were made at the first phase.

Ziraat Participation has effectively deployed interbank borrowing and financing products to fulfill the required reserve liability and to meet its liquidity needs in line with the principles of participation banking, and to assess the surplus and fulfillment of reserve requirements.

Correspondent Relations
In 2019 Ziraat Participation established a swift correspondent relationship with a significant number of banks by completing the legislative compliance processes and quickly met the requests in the foreign trade field. In 2019, Ziraat Participation reached 42 different correspondent accounts in 16 different currencies and signed mutual wakalah/murabahah contracts with numerous banks. Foreign funds were obtained to increase resource diversity through murabahah and wakalah transactions within the frame of these contracts.

Ziraat Participation, which plays an active role in the capital markets as a part of its strategy to enrich the resource structure, obtained issuance approval with ceilings of TL 500 million, TL 4 billion and TL 8 billion from the Capital Markets Board to issue three separate TL denominated lease certificates in the local market with its affiliates, Ziraat Katılım Varlık Kiralama and ZKB Varlık Kiralama. Within this framework, issuances were made in different amounts with a total of TL 8.2 billion.

IN 2019 ZIRAAT PARTICIPATION ESTABLISHED A SWIFT CORRESPONDENT RELATIONSHIP WITH A SIGNIFICANT NUMBER OF BANKS BY COMPLETING THE LEGISLATIVE COMPLIANCE PROCESSES AND QUICKLY MET THE REQUESTS IN THE FOREIGN TRADE FIELD.

In 2019, Ziraat Participation continued to provide long term resources from the World Bank and various other development banks, for financing SMEs and foreign trade financing and to maintain its financing support for SMEs and the real sector.

Ziraat Participation aims to complete the following steps in 2020:

Significantly increase the number of correspondent banks and the level of foreign trade volume,
Use a murabaha syndicated loan with the participation of international banks,
Continue issuing lease certificates in the domestic markets,
Add depth to the capital markets by carrying out corporate lease certificate issuances in favor of third parties other than Ziraat Participation, through the newly established asset leasing company,
Provide increasing support to the real sector by maintaining a supply of resources from international institutions for the financing of SMEs and foreign trade,
Mediate new transactions within the scope of country loans.

Credit and Foreign Trade Operations

E-Release/E-Mortgage
E-release and e-mortgage protocols were signed between the Bank and General Directorate of Land Registry and Cadaster with the objectives of shortening transaction times of land registry transactions, decreasing the work load of the personnel and providing customer satisfaction by effective and fast services. E-release transactions can be performed online at all branches since 10 October 2019. E-mortgage transactions are planned to start in mid-February 2020.

Electronic Letter of Guarantee
Developments in Electronic Letter of Guarantee Project (ETMP) were completed in 2019 and the application was launched. ETMP activities were realized in 2 separate development areas, private sector and public sector. On the private sector side, letters of guarantee can be provided in electronic environment for approximately 150 drawees, including Eximbank.

On the public sector side, pilot application started at Customs Offices and it will be expanded in the following periods. The whole process related with letters of guarantee within the scope of ETMP is performed on the platform provided by Kredi Kayıt Bürosu (KKB). These developments resulted in elimination of paper environment and minimizing the risk.

Participation Banks Invoice Recording System
Participation Banks Invoice Recording System (KBFKS) was established by the Participation Banks Association of Turkey (TKBB) and Ziraat Participation participated in this system.

In this system, an invoice pool is formed where all participation banks are included and all documents related with purchases and sales subject to fund use are being sent to this pool.

Duplicate invoice use among participation banks is prevented with this method, and inquiry and verification of e-invoices can be made from Revenue Administration.

Dir Automation Project
Closing of commitments related with undocumented foreign currency credits allocated within the scope of Export Incentive Legislation, monitoring of documented credits in electronic environment and closing of their commitments at due date can be performed with this project that will ease the lives of Ziraat Participation customers.

SWIFT GPI
Activities to launch SWIFT GPI product to be used in foreign trade transactions started in 2019, and they are expected to be completed in 2020. With SWIFT GPI, end-to-end monitoring of international payments, monitoring of correspondent bank expenses transparently, reducing status inquiry transactions and pausing payments rapidly and requesting repayment will be possible.

Ziraat Participation plans to open this product in digital channels for customers’ use and achieve a first in participation banking industry. Customers will be able to monitor their payments and correspondent bank expenses transparently.

OPERATIONAL TRANSACTIONS

Ziraat Participation conducts its operations with the objectives of contributing to operational efficiency and reducing the work load of branches by standardizing participation banking product and service offering processes.

In 2019;

the number of Filika cards was 1,499
the number of debit cards was 183,999
the number of member firms was 2,540
the number of POS devices was 2,968.

Ziraat Participation started to collect invoice payments for 203 more institutions. Hence, customers are able to pay their invoices through the Bank.
Leasing Standard (IFRS 16) issued by the International Accounting Standards Board and Financial Accounting Standards Board became effective on 1 January 2019 for companies subject to regulation. Ziraat Participation completed its preparations accordingly and system infrastructure has become ready for calculations required by the new Leasing standard to be used starting from 1 January 2019.

E-collection Project which is conducted by General Directorate of Accounting and Ziraat Participation allows payments within the scope of this project such as Zoning Amnesty and Paid Military Service to be made through the Bank and this provided an opportunity to win new customers and products.

Branch Operation Coordination service was formed within Operation Center Department and this provided an opportunity to perform operational transactions of branches centrally, such as contracts, mortgages, cash pledges, vehicle pledges, receivable assignments, sales promise contracts, entries, exits and updates.

Within the scope of activities to perform centrally executed transactions at standard formats in digital environment, lien documents submitted to Ziraat Participation through National Electronic Notification System (UETS) can be entered automatically into the system starting a flow and a response letter is created after customer inquiries.
An automatic payment order infrastructure will be set up for taxes to ensure customers make their tax payments timely and effectively. Customers will be able to manage their cash flows through the Bank.
Lien response letters will be sent through Registered Electronic Mail system.

With the planned developments, it will be possible to send lien documents through the system and this transaction will be free of charge. Thus, transactions will be performed through the system in a paperless form in line with the Bank’s digitalization strategic plan.

An infrastructure will be set up to provide collection of tax and social security payments flawlessly and rapidly through Barcode and QR system. This application will contribute to labor savings.

INFORMATION TECHNOLOGIES

Ziraat Participation, which aims to improve customer experience in the field of information technologies and thus increase productivity, quality and speed, has achieved significant progress by integrating the innovation and change management demanded by the current era with its systems and processes.

The following significant projects were completed in Information Technologies:

Open Source Operating System migration infrastructure studies were completed and pilot branch extension activities started.
Ziraat Participation and Ziraat Leasing merger was completed.
Participation account based on investment proxy product was formed.
Self-service reporting platform set-up and report governance activities were completed.
Digital Channel Analytics Project was completed.
Automatic intelligence infrastructure was set up for foreign trade flows.
Management of currency fluctuation controls was established.
Competence-based performance evaluation system was set up.
Mobile Financing and Mobile Proxy Projects were completed.
E-letter of guarantee project was completed.
Participation Insurance Platform Implementation was realized.
Forward Transactions with Customers were made available.
Desk-top virtualization platform was set up for the Call Center.
Main Data Center Superonline lines were backed up to receive service from a different pop.

FINANCIAL MANAGEMENT

Periodic controls are being performed to accurately record all transactions in the accounting system in accordance with the uniform chart of accounts, related regulations and legislation to provide healthy financial statements. During the merging process of Ziraat Finansal Kiralama A.Ş. and our Bank in 2019, which was a first in our industry, all transactions related with this merger on the financial data were realized in accordance with the relevant legislation and financial statements were prepared without any problems.

In order to meet the needs of domestic and international users of financial information, the Bank’s financial data are being disclosed to the public and reported to official authorities in a reliable and transparent manner and in accordance with international standards. Within the scope of our Bank’s internal and external audits, auditor’s requests are met without exception and our Bank’s legal obligations are fulfilled. Also, healthy operation of the Bank’s business processes is being regularly tested.

IN ORDER TO HAVE OUR EMPLOYEES UNITE AROUND THE SAME VISION AND STRATEGY TO REACH COMMON TARGETS, A FAIR, COMPETITIVE AND NUMERIC CRITERIA BASED PERFORMANCE EVALUATION SYSTEM WAS SET UP.

In addition to systematic reporting to official authorities, new generation presentation applications are used for asset and liability committee reporting to the Bank’s senior management, hence providing senior management Access all kinds of information they need. The budget is prepared in accordance with the Bank’s strategic targets and compliance of performances of units is controlled.

In order to have our employees unite around the same vision and strategy to reach common targets, a fair, competitive and numeric criteria based performance evaluation system was set up. Employee performance and customer profitability are being measured and performance premium payments are made to employees based on the principles determined based on success listings formed as a result of individual performance evaluations. Competence application was implemented with the objectives of creating a common language within the Bank to provide for a performance-focused communication, to convey these properties and behavior to our employees and to harmonize employees’ knowledge, skills and behavior with the Bank’s vision, strategy and goals.