Feridun: Government Borrowing from Banks Deprives Small Businesses of Credit

Speaking to Kıbrıs Postası, Feridun also pointed out the factors behind the higher profitability rates reported by banks in the TRNC compared to those in Turkey.

Feridun cautioned that high inflation could distort profit figures and questioned the economic impact of the government using banks as a source of financing.

"Small Businesses Losing Vital Credit Opportunities"

Highlighting the risks of increased public borrowing, Feridun emphasized that restricting private sector access to credit could stifle economic growth. He argued that bank profitability should not be assessed solely based on figures but also on who receives loans and under what conditions.

He illustrated the issue by stating that if the government borrows $30 million from banks in a small economy, it could mean that around 3,000 businesses lose access to those funds. "Some businesses could survive and even expand with just a $10,000 loan, but they are being denied these opportunities," he said.

Concerns Over Wealth Transfer and Banking Sector Profits

Following reports of high profitability among banks in the TRNC, questions have arisen about whether banks are making unfair gains. Feridun noted that in times of economic hardship, high interest rates can lead to an unfair transfer of wealth from lower-income groups to wealthier ones. However, he urged for an objective evaluation of whether banks were responsible for this situation.

While acknowledging that banks generally operate profitably, Feridun suggested that public frustration with the sector is partly fueled by bank executives frequently highlighting their profit margins. He stressed the importance of examining how much of the banks' deposits are being converted into loans and how much they contribute to the economy.

He also warned that sector-wide profitability rates can be misleading and that bank-specific analyses would yield more accurate insights. According to 2023 data, while some banks reported profitability rates of 50%, others exceeded 100%, making it necessary to assess profitability claims with caution.

Feridun further noted that in order to compare the profitability of banks in the TRNC with those in Turkey, the impact of inflation must be considered. He explained that inflation could distort profit figures, and while there have been criticisms about banks exploiting customers' financial difficulties or offering poor service, linking these complaints to overall profitability ratios would not be an objective approach.

"Banks Should Focus on Lending to the Economy, Not Funding the Government"

Feridun acknowledged that frustration toward banks during economic crises is understandable. However, he emphasized that banks operate under strict regulation and pay taxes based on real earnings. Instead of targeting banks for their profitability, he argued that more scrutiny should be placed on businesses that generate profits but evade taxation.

Finally, Feridun clarified that banks are not responsible for economic downturns and can remain profitable even in poorly managed economies. However, he questioned whether the government should rely on banks as a financing source, stressing that banks' primary role should be to provide credit to the economy rather than fund the state.