Azernews.Az

By Bloomberg

Turkish companies lacking access to export markets are struggling to repay debts and access financing, with many of them struggling to stay afloat, according to Nurettin Ozdebir, head of the Ankara Chamber of Industry.

Manufacturers supplying the domestic market are making losses and their capital is eroding as the lira slides, Ozdebir said in an interview in Ankara on Wednesday. That’s pushing many of them into higher-risk financing methods including factoring, he said. Factoring companies typically lend at higher costs to companies that can’t get bank loans, in exchange for a claim on the borrowing company’s receivables.

“Lack of financing with suitable conditions could prove to be fatal for small producers,” Ozdebir said. “Companies, except exporters, are in trouble.”

The government’s focus on cutting interest rates to boost the economy may not help the majority of small businesses, Ozdebir said. Instead, measures are urgently needed to ease their access to bank financing, he said.

President Recep Tayyip Erdogan has led the charge in urging the central bank to cut rates, a move that has so far been resisted by Governor Erdem Basci as inflation hovers above 7 percent. The conflict has heightened investor concerns about the bank’s independence, helping push the lira down to successive records versus the dollar this month.

‘Partially Right’

“The president is partially right in his calls for lower interest rates, but the problem can’t be solved through rate cuts alone,” Ozdebir said. “There is a need to look at the problems of the industry as a whole; there’s a need to reshape the banking system, which is getting syndicated loans at 1-2 percent and selling to investors at 6-7 percent.”

As investors focus on the benchmark one-week repo rate, local companies would see a bigger boost from cuts to the top of the so-called lending corridor, he said. Banks typically base their lending rates to local companies on the top end of the corridor, also known as the overnight lending rate.

Loan growth across the nation’s approximately 3 million SMEs was around 23 percent last year, according to data from the banking regulator. The economy probably grew about 3 percent, according to government forecasts.

The central bank’s next rate meeting is scheduled for Feb. 24.