Targeted Turkish credit policies that benefit SMEs

Turkey's targeted lending policies adopted by the central bank this year have ensured that small and medium-sized enterprises (SMEs) have received the highest share of banking sector loans ever, a deputy central bank governor said.

SMEs received 558 billion liras ($30 billion) of the total 1.2 trillion liras of corporate credit extended by commercial banks in the nine months to September, according to data compiled by the central bank. "This is the highest share and amount SMEs have received from banking sector loans," Taha Çakmak said in a written response to Reuters' questions. The central bank has cut its policy rate twice in the past two months as part of an unorthodox economic program put in place by President Tayyip Erdogan that prioritizes production, exports and low interest rates, with inflation exceeding 80%. The central bank has also sought to reduce the widening spread between the policy rate and borrowing rates to provide cheaper access to finance. It prioritized SMEs by exempting loans to SMEs from the collateral requirement imposed on creditor banks. Interest rates on corporate loans have fallen from an average of 23% in 2021 to around 18% this year, and the share of lira-denominated borrowing has increased in response to currency-prioritizing policies, Çakmak said. "The current policy mix is not causing inflationary pressures and resources are being directed to areas necessary for sustainable economic activity," he told Reuters. The lira has depreciated about 29 percent against the dollar this year on concerns over low policy rates and the direction of Turkey's economic policy. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!