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January 25, 2019 in Fintech, success stories

A lifeline for Turkish families during double-digit inflation

In 2018 Turkey’s economy plummeted into economic crisis after nearly two decades of steady growth. The past year has seen double-digit inflation, a plunging Turkish lira, and a spike in loan defaults and borrowing costs.

“Over the past six months, default rates in Turkey have been increasing,” Pelin Bedirhanoglu, founder of Turkish startup Tekkredi. “But this tells a misleading story. People can make and save enough to pay back their loans, but when inflation hits, this makes it hard for them to make repayments. They need help to prepare themselves for economic conditions that are beyond their control.”

Tekkredi helps address this problem, leveraging machine learning, AI and open data to help banks identify near-prime individuals who are still lendable despite relatively higher probability of default. Tekkredi’s algorithm helps banks move beyond a one-size-fit-all approach to product pricing - gaining access to new customers while allowing these individuals to get loans that they badly need to turn their finances around

Tekkredi was founded in 2014 and was making steady progress, signing on banks that wanted to reach new consumers in the booming economy, and acquiring customers for loan consolidation and restructuring. Then the crisis hit. With the falling value of the Lira, Turkish banks suddenly needed to refinance $6.4 billion in loans, shifting their attention away from gaining new customers and towards larger corporate loans. This has made things even harder for families who already had a hard time getting a loan.

Since the crisis, the Tekkredi team has spent their time improving their product and technology, expanding their data science team and refined their algorithms. They’ve also conducted a survey of more than 5,000 borrowers, and found that 92% of people that have debt are unwilling to talk to others - whether loved ones or financial advisors - about their finances.

“This is very important for Turkey’s financial health context - when people have a problem, they’re keeping it to themselves rather than seeking help,” said Bedirhanoglu. In response, Tekkredi has begun conducting financial literacy programs to help their customers better manage their budgeting, spending habits and, ultimately, debt.

Pelin Bedirhanoglu, Founder of Tekkredi

Bedirhanoglu seems to have mastered the art of making the most out of a bad situation. “I’m 33 now,” she said. “There's an economic crisis almost every ten years globally and we've been through more than three different crises in Turkey and globally that I can remember. Crises are great times to create value and there’s lots of work to be done.

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