The Regional Development Banking Loan Provisioning in Turkey: Distance or Politics Matter?

Development banks have played a leading role in supporting development in many countries. Despite the liberalisation process of the 1980s and 1990s, development banks continue to be influential in financing development. In the Turkish case, the performance of development banking in supporting development has varied over time. However, one feature remained constant: development banking loans did not contribute to the alleviation of regional imbalances even during the period of import substituting industrialisation between 1963 and 1979. In this study, focusing on the period between 1963 and 1994 in Turkey, we found that regional development banking loans were primarily distributed to the periphery of the capital city, indicating the importance of geographical distance on development loan lending. The results also show that political connection of the municipalities to the central government was influential. Yet, the results suggest that elections do not significantly affect development banking activities.