Turkey Bets on Digital and Green SMEs, but Productivity and Financing Gaps Threaten Progress

Turkey’s SMEs dominate business and employment but face major productivity, financing, skills and technology gaps that constrain their contribution to economic growth. Stronger finance, digital and green investment, workforce development and results-based SME policies could turn the sector into a more powerful driver of innovation, exports and sustainable growth.

Turkey's small and medium-sized enterprises are reaching a critical stage where the policy challenge is shifting from creating support programmes to ensuring those programmes actually improve productivity, investment and competitiveness. The SME Policy Index for Western Balkans and Turkey 2026 – Economy Profile for Turkey, prepared by the Organisation for Economic Co-operation and Development (OECD), with the European Commission and in co-operation with the European Bank for Reconstruction and Development (EBRD) and European Training Foundation (ETF), finds that Turkey has developed a substantial SME support system, but gaps in finance, productivity, skills, insolvency, digital adoption and policy monitoring continue to limit its impact.

SMEs Create Most Jobs, but the Productivity Gap Remains Wide

SMEs are the backbone of Turkey's private economy. In 2024, micro, small and medium-sized enterprises represented 99.6% of registered businesses and provided 68.5% of employment, but generated only 41.2% of gross value added.

The difference is reflected in productivity. MSME labour productivity averaged EUR 13,458 per worker, equivalent to only 32.2% of the EUR 41,776 generated by large enterprises. Microenterprises produced just EUR 4,931 per worker, compared with EUR 27,242 among medium-sized businesses.

For policymakers, this suggests that simply increasing the number of businesses will not be enough. Support needs to help promising firms grow, modernise production, improve management, innovate and move into higher-value markets.

The macroeconomic environment makes this transformation harder. Inflation reached 64.9% in 2023 before declining to 44.4% in 2024. Although unemployment fell from 13% in 2020 to 8.6% in 2024, informal employment remained high at 26.6%, creating additional productivity and competitiveness challenges.

Finance and Skills Could Decide Which Businesses Can Scale

Access to affordable finance remains a major constraint. Credit Guarantee Fund support declined from 39,314 businesses in 2022 to 10,107 in 2024. Although Turkey provides significant public financing for innovation, green investment and digitalisation, smaller businesses can still struggle to obtain the long-term capital needed to expand.

KOSGEB supported around 57,000 SMEs in 2024, while TÜBİTAK operates substantial research and innovation programmes. However, stronger evaluation is needed to determine whether these programmes are producing higher productivity, investment, exports and business survival.

Turkey's insolvency framework also requires attention. Bankruptcy proceedings can take around five years, while preventive restructuring and early-warning mechanisms for distressed SMEs remain underdeveloped. Faster restructuring could prevent temporary financial difficulties from destroying otherwise viable businesses and jobs.

Skills are another concern. Adult participation in learning stood at only 8% in 2024, compared with 13.3% in the EU. Meanwhile, 22.9% of young people aged 15-24 were neither employed nor in education or training, rising to 30.1% among young women.

For government and development partners, SME financing should therefore be increasingly connected with vocational training, apprenticeships, management development and digital skills.

Green and Digital Transition Creates a New Investment Market

Turkey performs relatively strongly in SME digitalisation, scoring 3.57 out of five compared with the regional average of 3.00. Government strategies and programmes support digital technologies, cybersecurity, artificial intelligence and innovation, although implementation remains fragmented and does not yet reach SMEs evenly.

This creates opportunities for technology companies, banks, fintech firms, cybersecurity providers, cloud-service companies, consultants and training providers. Rather than viewing digitalisation simply as an IT investment, policymakers could encourage SMEs to use technology to improve productivity, energy efficiency, market access and supply-chain management.

The green transition presents another major opportunity. Turkey's Green Industry Programme provides USD 250 million through KOSGEB until 2030 and reached 1,743 beneficiaries in 2025. Green investment is also supported through guarantees, tax incentives and sustainable-finance mechanisms.

International development partners can play an important role by combining concessional finance, guarantees and private investment to finance cleaner manufacturing, renewable energy, energy efficiency and circular production.

The risk is that smaller firms without finance or technical expertise could fall behind as environmental and digital requirements become more demanding.

Turkey Must Shift From Counting Programmes to Measuring Results

Turkey has already established important foundations. The e-Devlet platform provides more than 8,000 services from over 1,000 public institutions, while company registration has been digitalised through MERSİS.

Women's entrepreneurship has also progressed. The share of women entrepreneurs increased from 14% in 2021 to 18.2% in 2024, while KOSGEB provided TRY 339 million to 8,974 women entrepreneurs during 2024-25.

However, the report's wider message is that Turkey needs stronger coordination and measurement. Governments should evaluate programmes according to changes in productivity, exports, technology adoption, employment quality and business survival rather than primarily counting beneficiaries and financial disbursements.

Development partners can support better data systems, alternative financing, credit guarantees, skills development and green and digital investment. Private-sector stakeholders have opportunities in finance, technology, professional services, renewable energy, innovation and export support, but must navigate financing constraints and large differences in SME capabilities.

Turkey already has entrepreneurial scale. Its next challenge is to convert that scale into productivity. Better finance, stronger skills, faster restructuring, wider technology adoption and measurable green investment could transform SMEs from primarily an employment engine into a stronger source of innovation, exports and sustainable economic growth.