Turks are in a spiral of debt
Ali Golpinar no longer knows where to put the dozens of letters sent to his voters every day, and when they do not arrive, he goes to his office as the “mukhtar” of the district mayor in the suburbs of Ankara, the capital of Turkey.
Notices of unpaid bills, official notices or subpoenas: the number of these letters, mostly debt collection, has doubled in two years to about forty a day in this modest district of about 25,000 people.
“These are just undelivered letters. Imagine the total number. People can no longer pay their debts,” says Mukhtar.
According to Turkish media, in August, 24 million recovery files were waiting for the country’s courts.
According to the Bank Regulation Agency of Turkey, between March and September, the amount of unpaid loans by individuals increased from 17 billion Turkish lira to 29 billion lira ($1.55 billion).
– Credit competitions –
The increase in debt is one of the consequences of very high inflation, which has hit Turkey over 84% in one year.
More than 40% of workers must be content with the minimum wage, which will be raised from $300 to $450 on January 1.
But with rising rental prices (+163% in one year in Ankara, +144% in Istanbul), housing costs will continue to absorb almost all low wages, emphasizes Hacer Foggo, the CHP’s head of anti-poverty. Turkey’s main opposition party.
In this context, an old practice has become popular again: shopping on credit at neighborhood businesses.
“Asking a loan from the bank is risky. But the local grocer knows you and will not refuse you,” says teacher Golpinar.
Based on trust, with no paperwork to sign or interest rates, this buy-to-let loan is the last option for some over-indebted families.
“More customers want to pay with credit,” says Yüksel Kurt, who works at a grocery store in Keçiören district, in the northern suburbs of Ankara.
“Some of them I have to give up because I know they will never be paid back to me. If the debt is not paid after 6 months, we know we have to forget about it,” he says, showing the torn pages of the notebook where he records the debts.
Bread, cookies, butter… credit purchases are often basic necessities, but they add to already long debt lists.
“Many are repaying their debts by borrowing elsewhere,” says Mr Kurt.
A young woman who comes to buy cigarettes on credit refuses to talk because she is ashamed.
In the neighboring bakery, Cemal Aygün reminds that shop owners themselves are often in debt.
“I owe 10,000 Turkish lira ($535) to my flour supplier (…) Every month I ask my friends to help me.”
– “Dilemmas” –
Economist Erinç Yeldan says that until 2021, the Turkish government was encouraging this debt spiral.
“Access to bank loans has been eased to promote virtual growth (…),” he explains.
The result: people without stable employment or insufficient income now have loans they cannot repay, says Hacer Foggo.
“They are faced with dilemmas: pay the rent, take their child to the doctor or pay off their loan,” he laments.
In Turkish opposition-run town halls like Istanbul and Ankara, the website lets you pay for water and gas for those who need it most.
However, no organization is responsible for excessive debt.
Mr. Yeldan says with regret that “there are specific events that have turned into charity actions, without this organization.”
There is government assistance for the poorest, but not enough, Judge Foggo.
With the upcoming presidential and legislative elections in June 2023, the government is stepping up initiatives.
Thus, President Recep Tayyip Erdogan announced in early November that debts below 2,000 Turkish lira ($105) would be written off, subject to the creditor’s approval.
Mr. Golpinar still remains skeptical: “I don’t know anyone who can benefit from it,” he says.