What is IUBAL and How Does It Work?
The Investment Undertaking Based Advance Loan (“IUBAL”) is a credit mechanism that enables the financing of investment projects of strategic importance under government-supported favourable terms. Since 2020, it has been made available to investors through deposit, participation and investment banks, under the coordination of the Ministry of Industry and Technology (“MoIT”) and the Central Bank of the Republic of Türkiye (“CBRT”). The incentive programmes within the scope of IUBAL are the Decision on State Aid for Investments dated 30 March 2025 and numbered 9903 (“Decision No. 9903”) and the Decision on the Provision of Project-Based State Aid for Investments dated 17 October 2016 and numbered 9495 (“Decision No. 9495”). As of the date of this Article, numerous public and private banks, primarily TKYB, act as intermediaries for the utilisation of IUBAL.
The legal framework for the IUBAL is set out in the Circular on the Strategic Prioritisation and Technical Assessment of Investment Projects dated 26 November 2023 (“Circular”), prepared by the MoIT, and the Implementation Guidelines for Investment Undertaking Based Advance Loan/Financing dated 23 November 2023 (“Guidelines”), prepared by the CBRT. The application conditions, evaluation process, financing conditions and investor undertakings are outlined below.
What Are the Application Conditions for IUBAL?
In accordance with the Circular, the following investors may apply for IUBAL:
- Investors who have obtained an Investment Incentive Certificate (“IIC”) as part of the Türkiye Century Development Initiative programme defined in Decision No. 9903,
- Investors who have obtained an IIC by qualifying for project-based state aid under Decision No. 9495,
- Investors who do not hold an IIC but aim to produce products within the scope of the Strategic Priority Products List attached to the Circular or to carry out technology development activities within the scope of the Technology Areas List.
In addition, the following minimum thresholds must be met:
- The total investment amount (including R&D expenses) must be at least 1 billion Turkish lira,
- The investor must have at least 50 million Turkish lira in equity or paid-up capital in its latest financial year’s balance sheet,
- At least 20% of the total investment amount must be funded from equity.
How is a IUBAL Application Assessed?
IUBAL applications are subject to a two-stage evaluation process. The first stage is conducted by the MoIT, whilst the second stage is carried out by the intermediary bank and the CBRT.
A. What Review Takes Place at the MoIT?
The reviews within the MoIT are carried out by a Technical Committee formed with the participation of CBRT observers.
The Technical Committee assesses the investor’s technical competence, the investment’s contribution to the national economy and its added value during the preliminary application stage. If the preliminary application is deemed suitable, a scoring process is carried out in accordance with the following criteria set out in the annex to the Circular:
- The nature and scale of the investment that will enhance competitiveness and technological capacity in the relevant sectors,
- Use of domestic machinery,
- The use of domestic inputs and the potential for domestic added value,
- The import substitution effect and export potential of the additional capacity to be provided by the investment,
- If production is planned as a result of the investment, the contribution of the additional capacity to supply continuity and price stability at the national level,
- Green production performance and contribution to sustainability targets
Following an assessment of each criterion within its own weighting framework, the investment’s Investment Project Technology/Strategy Score (“IPTS”) is determined and an IPTS Certificate is issued.
B. How is the Assessment by the Intermediary Bank and the CBRT Conducted?
Investments with a IPTS of 70 or above may apply to intermediary banks for the use of IUBAL.
In accordance with the instructions, investors are required to present a promissory note to serve as security for the financing. The intermediary bank may also request additional collateral in addition to these notes.
The intermediary bank also assesses the investor’s financial creditworthiness. In this context, the following matters are examined in particular:
- The existence of serious enforcement proceedings or seizures,
- Whether the investor has undergone a composition or bankruptcy process in the recent past,
- The existence of unresolved protests against the firm.
Following a positive assessment, the intermediary bank applies to the CBRT. The CBRT confirms the suitability of the IUBAL utilisation and allocates the financing to the intermediary bank.
What are the Financing Conditions for IUBAL?
According to the CBRT’s press release dated 23 November 2023 and numbered 2023/48, the IUBAL is provided under the following conditions:
- With a maximum maturity of 10 years,
- With an annual interest rate or profit share ranging from 15% to 30%, and
- Subject to an annual total limit of 100 billion Turkish lira
The maximum amount that can be granted for a single investment project is 5 billion Turkish lira, which may constitute up to 70% of the total investment amount. Projects with an IPTS of 85 or above may utilise an additional 5 billion Turkish lira on top of this limit.
An additional discount is applied on the base interest rate of between 15% and 30% under the following conditions:
- The IPTS score is 85 points or above,
- The financing secured from abroad constitutes at least 20% of the total investment amount,
- The investor’s long-term credit rating is A or higher.
Once all discounts have been applied, the annual interest rate under the IUBAL scheme is set at a minimum of 10%.
What Are the Investor’s Undertakings Under the IUBAL Scheme?
In return for the favourable financial terms provided under the IUBAL, the investor must comply with the following obligations throughout the term:
- Ensuring that the net foreign exchange position does not exceed 5% of total assets,
- Fulfilment of reporting obligations regarding the Systemic Risk Data Monitoring System (SRDMS) operated by the CBRT,
- All contracts to be signed with resident persons in Türkiye regarding the IUBAL investment and the sale of goods or services produced must be conducted in Turkish lira,
- Compliance with legislation on international sanctions, legislation on the protection of the Turkish lira, and foreign exchange legislation.
Conclusion and Summary
IUBAL is a credit mechanism, implemented under the coordination of the MoIT and the CBRT, aimed at financing strategic investment projects under favourable, publicly supported terms. Investors must hold IIC status under Decision No. 9903 or Decision No. 9495, or undertake investments in accordance with the lists attached to the Circular; furthermore, the minimum investment amount and the thresholds for equity and self-financing ratios must be met.
Under the IUBAL scheme, which offers loans with a maximum maturity of 10 years and interest rates ranging from 15% to 30% per annum, financing of up to 5 billion Turkish lira per project is available, with an additional 5 billion Turkish lira available for projects with a high IPTS. In return, investors are subject to various undertakings, including restrictions on net foreign exchange positions, SRDMS reporting obligations, the requirement to enter into contracts and make sales in Turkish lira, and compliance with international sanctions and foreign exchange regulations.
Frequently Asked Questions (FAQ)
What is the Investment Undertaking Based Advance Loan (IUBAL)?
IUBAL is a credit mechanism, implemented under the coordination of the MoIT and the CBRT, designed to facilitate the financing of strategically important investment projects under favourable, publicly supported terms. It is channelled through deposit, participation and investment banks.
Who can apply for IUBAL?
Investors who have received IIC under Decision No. 9903 or Decision No. 9495, as well as companies making investments under the Strategic Priority Product List or Technology Sectors List attached to the Circular, may apply. Additionally, the following conditions must be met: a minimum investment amount of TRY 1 billion, TRY 50 million in equity capital, and a 20% self-financing ratio.
What is the IUBAL interest rate?
The annual interest rate for IUBAL ranges from 15% to 30%. Additional discounts may apply if certain conditions are met, such as a high IPTS, a high proportion of foreign financing, and a high credit rating. After all discounts, the minimum interest rate is 10%.
How much financing can be provided through IUBAL?
A maximum of TRY 5 billion in financing can be provided for a single project, and this amount may constitute up to 70% of the total investment. Projects with a IPTS of 85 or higher may utilise an additional TRY 5 billion. The annual total pool size is TRY 100 billion.
What is the IPTS and why is it important?
The Investment Project Technology/Strategy Score (IPTS) is a score determined by the Technical Committee within the MoIT based on the strategic and technical qualities of the investment. A minimum IPTS of 70 is required for a IUBAL application. An IPTS of 85 or above provides the advantage of additional funding and an interest rate reduction.
What is the term of an IUBAL?
IUBAL is provided with a maximum term of 10 years.
What are the obligations of an investor utilising an IUBAL?
The investor is obliged to undertake that their net foreign exchange position does not exceed 5% of total assets, that SRDMS reporting obligations are fulfilled, that domestic contracts and sales are conducted in Turkish lira, and that compliance with international sanctions and foreign exchange regulations is ensured.
