Consumer Credit Explodes Despite Tightest Monetary Policy in Years

Turkey’s financial landscape is witnessing a remarkable contradiction: consumer credit growth has accelerated to record levels despite one of the most aggressive tightening cycles in recent history. According to the latest Central Bank data, the annualized 13-week growth rate for consumer loans, excluding credit cards, jumped to 59.17% as of the week ending November 14. This marks the fastest credit expansion since the start of the tightening era in June 2023, raising critical questions about household demand, bank strategies, and financial stability.

The spike arrives even as interest rates stand at multi-year highs, and a broad set of macroprudential measures is designed to cool lending. Yet consumer demand remains exceptionally resilient. The sharpest momentum comes from personal needs loans, which have surged despite borrowing costs rising dramatically. Over a single week, consumer credit growth climbed 12.3 points, while growth in individual credit cards soared 16 points, reaching 52.11%.

Credit Market Divergence: Commercial Loans Slow, Consumers Accelerate

Industry data compiled by Economim highlights a widening disconnect between business and consumer credit. Commercial loans, adjusted for exchange-rate effects, slowed to 19.50% annualized growth, evidence that monetary tightening is successfully constraining corporate borrowing.

But household lending is moving in the opposite direction. Banks appear to be shifting their strategic focus toward retail products, prompting a sharp increase in loan volumes. Analysts note that banks with room in the Central Bank’s eight-week calculation window have intensified campaigns for personal loans and overdraft accounts (KMH), seeking to strengthen year-end balance sheets.

This strategic realignment underscores the growing importance of consumer banking amid weakening corporate credit and higher financing costs.

Both Public and Private Banks Cross the 60% Threshold

The surge in consumer credit is not limited to a specific segment of the banking sector — it is broad-based and accelerating. Both public and private banks recorded significant weekly jumps:

Public Banks:
Consumer loan growth leapt 16 points in one week, climbing to 56.61% on an annualized basis.

Private Banks:
Growth climbed even higher, surpassing 60.25%, marking one of the strongest retail lending surges seen this year.

The simultaneous expansion across both segments signals intense competition in the consumer lending market, fueled in part by banks seeking to meet annual performance and profitability targets.

Rising Non-Performing Loans Sound an Alarm

Alongside the rapid lending boom, another trend is drawing attention: a critical increase in non-performing loans (NPLs). According to the Banking Regulation and Supervision Agency (BDDK), delinquency ratios have risen across nearly all consumer categories.

Consumer loans NPL ratio: 3.94%
Personal needs loans NPL ratio: 5.23%
Individual credit cards NPL ratio: 4.39% — up 1.5 points from a year earlier

This rise in overdue debt underscores the risks of accelerated lending amid high inflation and limited household purchasing power. A rapid credit expansion can temporarily ease financial pressure on families, but it also increases the likelihood of repayment strain as interest burdens rise.

Experts warn that if the surge in retail credit continues unchecked, it could challenge financial stability in the months ahead — particularly if unemployment or inflation moves unfavorably.

A Complex Picture for Policymakers

The unexpectedly strong credit appetite poses a complex dilemma for monetary authorities. While high interest rates are intended to cool demand, the data suggest that households are increasingly turning to loans to maintain spending power amid ongoing price pressures. This behavior can blunt the effectiveness of monetary tightening.

For the banking sector, the boom offers short-term growth opportunities but also exposes institutions to rising credit risk. With NPL ratios climbing, regulators may face renewed pressure to adjust macroprudential rules aimed at limiting retail credit.

As the year draws to a close, financial markets will closely watch whether lending momentum continues or reverses amid high borrowing costs and regulatory measures. For now, the data shows that despite one of the strictest policy regimes in recent memory, consumer credit in Turkey is accelerating at full speed.