SOAS Research Online

Abstract

Progressive public banking is essential for sustainable development. Turkey’s experience illus- trates this point, where state-owned banks have been at the centre of national developmental strategies and public infrastructure building since the early 20th century, collecting people’s savings and using them for domestic loans to fund government projects. The Turkish govern- ment later encouraged private banking as part of an economic liberalization experiment, but frustrated by this process it turned to a state-led developmental strategy. Some 10 state-owned commercial banks and three development banks would come to control just over 70 per cent of the sector’s assets by the 1970s, providing loans that far outstripped those of private and foreign banks. Thirty years of neoliberal restructuring followed, with a renewed push for privatization after the 2001 Turkish banking crisis. Nonetheless, three large state-owned commercial banks and three small development banks continue to offer alternative sources of financing for national development. Together they control about 30 per cent of the sector’s assets, equaling nearly US$193 billion. They have worked sustainably toward achieving their institutionalized develop- mental mandates, funding industrialization, public infrastructure, other state-owned enterprises, agriculture, small trades, cooperatives, and so on. This study builds an historical and qualitative perspective on the state banking experience of Turkey, exploring motivations behind changes in state-owned banks (SOBs) and examining dif- fering perceptions of state banking, drawing on extensive interviews with more than 50 key actors in this sector. We conclude that the public banking model can allow these institutions to diverge from private, profit-maximizing imperatives with clear advantages: • focus on extra-market financial coordination • support in times of financial crisis • access to finance • provision of a savers’ safe haven • improved efficiency