As firms fund each other in the face of difficulties in accessing financing, the increase in concordats and the dangerous climb in bounced checks have made the payment balance of the market fragile. While the risk level of companies that had to extend maturities due to the recession increased, concerns about ‘whether the payment chain will break after the elections’ are rising.
Accumulating financing problems, growing cash crunch and declining business capacities are deepening payment problems in the market.
Concordats, which reached the highest level of the last 4 years with 519 last year, made a dangerous start to the new year. While the number of files for which a provisional deadline was granted in January reached 93, it was seen that at least a few concordat processes started every day in February.
The picture is not encouraging for checks, which have been increasing in the market for the last 2 years due to financing problems. In the whole of last year, the number of bounced checks increased by 19 percent compared to 2022 and reached 146,832, while the number of drawers whose checks were written increased from 13,583 to 16,077. The amount of bounced checks also increased by 176 percent at the end of last year compared to 2022 and reached TRY 57.06 billion.
Bounced checks at all-time high
In January, a record was broken in bounced checks. In the first month of the year, the number of checks ‘written back’ increased by 74 percent compared to the same month of the previous year and reached 20,245, while the amount of bounced checks increased by 257 percent to TRY 10.67 billion, reaching the highest monthly level in history. In this period, the number of drawers whose checks were written reached 4,855. This picture seen on the payments side increased the risk level of companies that make transactions with maturity or have receivables in this period when the market almost funded each other, while raising concerns that the payment balance would deteriorate.
* Çetin Tecdelioğlu, President of Istanbul Ferrous and Non-Ferrous Metals Exporters’ Association:
It is necessary to increase the guarantee of banks in checks
Commenting on the issue, Çetin Tecdelioğlu, President of the Istanbul Ferrous and Non-Ferrous Metals Exporters’ Association (İDDMİB), stated that almost all of the sector and its sub-branches such as hardware, armatures, furniture accessories and kitchenware are currently turning with forward transactions. Tecdelioğlu said that the maturities are evaluated as a risk in this period and pointed out that there are serious concerns in the market about whether the companies can pay their checks at the end of the maturity. Stating that the number of bounced checks increased in the last two months and that there was a similar trend in February, Tecdelioğlu noted that the situation increased the concerns.
“The easiest solution is to lower loan interest rates”
Pointing to high interest rates as the most important reason for the problems experienced on the payment side, Tecdelioğlu said, “At the same time, the shrinkage of business in the retail sector due to the contraction of the market was also effective. Because companies set a sales target while making their budgets, but there is no movement to realize those targets. Due to the shrinkage of the market, there are difficulties in paying the checks that are due and making the payments that are due. The easiest solution here would be to lower loan interest rates. There is currently no problem in accessing financing, but the cost of financing is very high. It is very difficult to pay this cost with current business capacities. Businesses have seriously downsized”. According to Tecdelioğlu, the guarantee of banks on checks should be increased in order to protect creditors on the payments side.
* TOBB Ready-to-Wear and Apparel Industry Assembly President Şeref Fayat:
We should be cautious both at home and in exports
Ready-to-wear clothing is one of the sectors that have recently received many concordat news… Stating that the sector left behind a bad year on the payments side, Şeref Fayat said, “A more difficult year has begun.” Pointing out that the risk in payments started to be experienced not only in the domestic market but also in export markets, Fayat said, “In the past, when such payment problems started in the domestic market, the producers would focus on exports, because we could save the sector there. The fact that our main market was in recession in this period caused the companies there to have payment difficulties and to open maturities. Therefore, we should be cautious both domestically and in exports.”
“Eximbank started to reduce the insurance limits of its customers”
Reminding that Eximbank’s receivables insurance was their biggest supporter to avoid payment problems in exports, Fayat claimed that Eximbank also started to reduce the insurance limits of its customers in this period, pointing out that this situation increased the risk.
* Yavuz Eroğlu, Chairman of TOBB Plastic, Rubber and Composite Industry Assembly:
The market is more sensitive about maturity than in the past
Describing the developments on the payments side in the market for the EKONOMİ, Yavuz Eroğlu explained that there are two kinds of approaches in an environment where interest rates are very high. Eroğlu said, “The first reflex is that those who sell goods in a high interest rate environment try to shorten the maturities. Because the maturity difference applied by the company today is 3-4 times higher than the maturity difference applied in the past. Naturally, those supplying to the market are trying to lower the maturities of their receivables compared to the past. At the same time, they are trying to show a higher collection performance. The market is more sensitive about maturities than in the past.”
* Association of Turkish Footwear Manufacturers (TASD) President Berke İçten :
Funding costs constitute 30 percent of the label
In 2018 and 2019, when the concordat storm was experienced, we witnessed the applications of large shoe companies. TASD President Berke İçten, with whom we talked about the current situation, stated that there were concordat processes at that time and that there are still those who still have problems with their receivables.
“Even if you reduce production, overhead costs are reduced to a certain extent”
Stating that concordats are not widespread in footwear except for a few companies on the producer side, İçten said, “However, we are a sector where companies fund each other and market credit is widespread. If the price tag is 100 liras in the market, 30 liras of this is the cost of funding… Steps are being taken to reduce domestic demand. The contraction in domestic demand means a decrease in production. But even if you reduce production, overhead costs fall to a certain extent. This time your production cost increases. You are forced to make shoes more expensive, because the scale breaks down. It is difficult to sell products at that cost. Therefore, if companies are not strong in terms of financing, the balance of payments deteriorates. 2024 is a year that we expect to be troubled in this sense.”
Reminding that before 2018, the maturities reached 20 months, but could be tolerated in the inflation environment at that time, İçten said, “However, after these long maturities, the concordat storm entered. Then, both the pandemic and the export increase shortened the maturities, and it was very good. However, unfortunately, we are now seeing that the terms are getting longer. Because the goods are not being sold, everyone says then let’s open maturities. But this also poses a risk for producers. Unfortunately, there is an increase in trade with maturities at the moment. On average, maturities of 8-10 months are being discussed.”