Savings Finance

Savings Finance Companies

Saving Finance Companies are entities governed by the Law on Financial Leasing, Factoring, Financing, and Savings Finance Companies No. 6361. These companies facilitate customers, both individuals and legal entities, in meeting their housing, vehicle, and covered workplace needs by encouraging them to save first. Saving finance companies manage the savings fund pool and facilitate allocation to customers who fulfill the conditions specified in the contract.

Savings finance activity refers to the practice of saving a certain amount of money over a specific period, based on interest-free financing principles, for the acquisition of housing, covered workplaces, or vehicles, subject to the realization of pre-defined conditions in a contract. It involves providing financing to customers and managing the collected savings.

Historical Background of the Savings Finance Sector:

The sector has been operating since the 1990s. However, the sector's legal framework was established by Law No. 7292 dated 04/03/2021, which amended the Law on Financial Leasing, Factoring, and Financing Companies No. 6361 by adding savings finance companies. As a result, the name of the law was changed to the “Law on Financial Leasing, Factoring, Financing, and Savings Finance Companies.” Following this legislative change, the Banking Regulation and Supervision Board granted operational permits to six savings finance companies in 2022.

Special Definitions for the Savings Finance Sector:

Organization Fee: It refers to the amount customers will pay for the management of savings finance activities and the savings fund pool within the scope of savings finance contract. In addition to the organization fee, savings finance companies do not charge any additional expenses such as commission, interest, or loan allocation fees. The amount of the organization fee varies depending on the price of the house or vehicle the customer obtains, depending on the promotional campaign they benefit from. The organization fee varies between 8% and 14% and may differ based on the asset to be purchased. Options such as paying the organization fee in installments are also available.

Allocation: Pursuant to the savings finance contract, the customer's savings and the committed financing amount specified in the contract are transferred to third parties acting as sellers, on behalf of the customer, their heirs, or their representative, for the purpose of acquiring housing, covered workplaces, or vehicles, provided that the conditions for entitlement to allocation are fulfilled.

Savings Fund Pool: It refers to the remaining amount after deducting the allocated amounts and savings repayments from the total amount consisting of accumulated savings and financing repayments held by the savings finance company during a specific period.

Customer: It refers to the individual or legal entity that enters a savings finance contract with the obligation to pay the organization fee and the savings amount and meets the conditions specified in the contract in order to utilize the contracted financing.

The most distinguishing feature of the savings finance system compared to the credit system in banks is that there is no direct and immediate cash disbursement to customers. The entitlement to allocation for customers depends on reaching a certain savings amount and being a part of the system for a certain period. Additionally, customers who want to purchase a house, vehicle, or covered workplace first find the asset they want to buy, and then the payment is made directly to the seller.

In savings finance companies, contracts are divided into Customer-Based (Non-Lottery) Savings Finance Contracts and Lottery-Based Savings Finance Contracts.

• Customer-Based Savings Finance Contract: In the customer-based saving financing agreement, the allocation date is predetermined in the savings finance agreement drawn up independently on a customer basis. While there is no obligation to make a down payment, customers who pay a higher down payment become eligible for allocation earlier. After the fulfillment of the conditions specified in the legislation and the contract, savings finance companies allocate funds to customers.

• Lottery-Based Savings Finance Contract: Savings finance contracts are arranged by forming lottery groups. In the lottery system, some companies conduct monthly lotteries, while others conduct quarterly lotteries in the presence of a notary. The dates of the lotteries conducted by the companies are announced through their social media accounts. Customers who are selected in the lottery are allocated funds when the time comes, and monthly installments are collected from customers until the debt is fully paid.

For assets financed during the financial period, there must be a residential property, covered workplace, or vehicle that can be partially mortgaged or pledged as collateral. Upon full payment of all installments and settlement of the debt, the mortgage and pledge on the property or vehicle are lifted.

Savings finance companies provide benefits to customers, employees, the national economy, and all other stakeholders. They enable savers to access financing without incurring additional costs, in an interest-free, down payment-free, and credit-free manner, based on their own payment capacity. Another convenience provided to customers is that customers who have difficulty paying have the right to freeze their installments for up to 6 months. However, customers who exercise this right will have their allocation period postponed for the same duration as the freeze period.

The increase in savings rates in the country, along with the expansion of branch networks and the rise in employment, leads to the inclusion of savings kept outside the formal financial system. This contributes to the national economy by channeling informal savings into the economic system. It also brings vitality to the real estate and automobile sectors by addressing housing and vehicle needs. Additionally, at the end of each period, taxes are paid to tax authorities based on the profits obtained, further benefiting the national economy.

• Which institution is responsible for the supervision of Savings Finance Companies in Turkey?

The regulation and supervision of companies subject to the Financial Leasing, Factoring, Financing and Savings Finance Companies Law No. 6361 are carried out by the Banking Regulation and Supervision Agency (BRSA). Companies that obtain a license from the authority operate and are supervised within the framework of the rules and obligations determined by the BRSA.

• Is there a professional association for Savings Finance Companies?

According to Article 40 of Law No. 6361 on Financial Leasing, Factoring, Financing and Savings Finance Companies, savings finance companies that obtain an operating license from the Banking Regulation and Supervision Agency are required to become members of the Financial Institutions Association within one month. You can find information about existing savings finance companies in the “Our Members” section.

• What does savings finance activity mean?

Savings finance activity refers to the practice of saving for a specific period according to interest-free financing principles, providing financing to customers for the acquisition of residential property, covered workplaces, or vehicles upon the fulfillment of pre-determined conditions, and managing the collected savings.

• What is the organization fee?

The organization fee represents the amount customers will pay for the management of savings finance activity and the savings fund pool within the framework of the savings finance contract. Savings finance companies do not charge any additional expenses such as commissions, interest, or loan origination fees apart from the organization fee. The amount of the organization fee varies depending on the price of the house or car that the customers have purchased, depending on the campaign they benefit from. The organization fee varies between 8% and 14%, depending on the asset to be purchased. Additionally, options such as installment payments for the organization fee are available.

• When is the allocation performed?

In accordance with the savings finance contract, the allocation is carried out by paying the customer's savings accumulation and the committed financing amount to the third parties acting as sellers, on behalf of the customer, their heir, or their representative, for the purpose of acquiring residential property, covered workplaces, or vehicles, upon the fulfillment of the conditions for entitlement to allocation.

• What is a savings fund pool?

The savings fund pool refers to the remaining amount after deducting the allocated amount and savings repayments from the total amount consisting of accumulated savings and financing repayments held by the savings finance company during a specific period.

• Who is a customer?

A customer refers to an individual or legal entity who enters into a savings finance contract, subject to the obligation to pay the organization fee and the savings amount, and the fulfillment of the conditions specified in the contract, in order to utilize financing.

• What can be acquired through the savings finance system?

Through the savings finance system, one can become a homeowner of residential property, a vehicle, motorcycle, caravan, or a covered workplace.

• What are the application documents?

Customers who want to benefit from the savings finance system can apply without the need for documents other than their Turkish Republic identification card.

• How can one apply?

Applications can be made through branches, the Digital Branch, or the websites using the Turkish Republic identification card.

• Can individuals living abroad benefit from the system?

Anyone who is a citizen of the Republic of Türkiye can benefit from the system. Additionally, individuals residing abroad can also purchase real estate and vehicles from Turkey.

• Is there an age limit to join the system?

To participate in the system, you must be 18 years of age or older.

How is the right of customers who wish to exit the system protected?

Customers who wish to exit the system are entitled to a full refund of the entire amount they have paid, except for the organization fee, as specified in the contract.

• Can a property be sold or rented out before the debt is paid off?

Customers cannot sell their homes before the debt is paid off, but they can rent them out. Only customers who want to repay the property debt early can proceed with real estate sales transactions.

• How is the delivery date determined?

In non-lottery savings finance contracts, the installment amounts to be paid and any down payments can be predetermined. In lottery-based individual savings finance contracts, participation in the lottery starts from the first month. When you become a lucky winner, you become eligible for delivery. Customers whose names are not drawn in the lottery can receive their deliveries no later than the middle of the term.

• Where and how are installment payments made in the savings finance system?

All payments, such as down payment, organization fee, interim payments, installments, etc., need to be deposited into the accounts of savings finance companies in banks. No payment is collected in cash.

• Are the installments fixed in the savings finance system?

Are there any additional payments? In case of the payment plan specified in the savings finance contract is followed, no additional payments are requested. However, customers who have received their deliveries can choose to make higher payments or interim payments, which may result in a decrease in the remaining payment amount or a reduction in the number of installments.

• Are there additional costs during delivery?

The title deed fees of the purchased real estate are subject to the purchase is paid to the designated banks by the title deed directorate in the district. Additional costs such as title deed fees, appraisal fees, foreclosure and stamp duty, insurance, and mortgage expenses are the responsibility of the customers.

The organization fees charged for housing acquisition contracts are considered within the scope of housing financing according to Article 57, paragraph 1 of Law No. 6362 and are exempt from stamp duty, fees, and banking and insurance transaction tax (BSMV).

• Can customers with existing bank debt enter the system?

Having existing bank loan debt does not prevent customers from participating in the Savings Finance System. Evaluations by banks or other financial institutions are not considered in this system.

Can one participate in multiple systems? Customers benefiting from the savings finance system can participate in different projects in the field of housing, vehicles, and covered workplaces. In this system, a customer can simultaneously purchase both a house and a car.

Savings Financing tab will be added to https://www.fkb.org.tr/raporlar-ve-yayinlar/kaynak-yayinlar/finansal-kiralama/

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Accounting of Interest-Free Financial Institutions within the Framework of Uniform Chart of Accounts and AAOIFI Standards (TKBB-Participation Banks Association of Türkiye)) 2020

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