Turkey state-run banks offer cheap loans with six-month payment waiver

Turkey’s three main state-run banks began offering cheap loans to businesses of as much as 100 million liras ($15.5 million) to help combat the economic fallout of the COVID-19 pandemic.

The interest rate on the three-year loans, which will be used by companies to bolster their capital, will be 7.5 percent annually, Dünya newspaper reported on Wednesday. Consumer price inflation in Turkey is 12.4 percent. 

The loans, to be provided by Ziraat Bank, Halkbank and Vakıfbank, include no requirement to pay interest or capital for a period of six months, according to Dünya. The government will provide collateral via the Credit Guarantee Fund should businesses not have the required amount, it said. They must pledge not to reduce their workforce.

Turkey’s government is working to avoid a repeat of an economic downturn that followed a currency crisis in 2018. It reported the first case of the coronavirus two weeks ago and since then confirmed infections have soared to 1,872. Forty-four people have died.

Companies must have annual turnover of 125 million liras to benefit from the maximum 100 million lira loan, Dünya said. Businesses can borrow as much as 10 million liras should their turnover be between zero and 25 million liras, and as much as 25 million liras if turnover is between 25 million liras and 125 million liras.

President Recep Tayyip Erdoğan has used state-run banks to revive economic growth. Cheap loans had led to a borrowing boom and an annual expansion in the economy of 6 percent in the fourth quarter of last year.