Turkey’s cheap-credit push pays off

ISTANBUL: Turkey’s push for cheap credit to mitigate the fallout from the coronavirus is bearing fruit, as companies and consumers take advantage of lower borrowing costs to refinance debt and shore up their finances.

Lending surged more than 60% in the 13 weeks through April 24 when annualized and adjusted for foreign-exchange fluctuations, after shrinking as much as 10% on the same basis during early 2019, according to central bank data. Commercial loans soared more than 80% and retail facilities by about 45%.

The acceleration, albeit led by state-owned lenders, is fulfilling President Recep Tayyip Erdogan’s long-held desire to stoke economic growth using debt – even before measures to contain Covid-19 brought global economies to a halt. In Turkey, that drive resulted in deep interest-rate cuts and a series of regulations aimed at forcing banks to lend, including a new asset ratio introduced last month.

“Banks have to extend loans to businesses to meet the asset ratio – it’s become an important drive to step-up lending,” said Bulent Sengonul, a banking analyst at Istanbul-based brokerage Is Investment. “It’s a good opportunity to refinance existing debt at lower costs and accumulate some cash for rainy days.”

For business owners like Alper Akmaner, who makes and distributes the Cire Aseptine brand of Swiss beauty products, the support couldn’t have come at a better time. He borrowed about 3 million liras (US$424,000) after the start of the pandemic, around 85% of which came from state-owned lenders.

“I am borrowing to keep producing, hoping that the tide will turn positive,” he said. “Loans are renewed and payments have been deferred until the last quarter. What will happen then is a big unknown.” —