Kuveyt Türk focuses on gold market

Kuveyt Türk, one of Turkey's four participation banks, is planning to launch a gold fund directed at institutional investors who want to invest in gold on an interest-free basis. The bank's general manager Ufuk Uyan said the lender also launched a new product for retail investors, which is a gold gram unit with Kuveyt Türk’s logo. The bank is also in the process of opening a new branch in Dubai, and will expand its network in Turkey next year.

Uyan said the global crisis boosted gold investments worldwide. "Gold has been appreciating significantly in the past year, mainly because the U.S. dollar has been so weak. There are also countries that are shifting to gold, including Russia. As interest rates have gone down significantly due to the crisis, people are seeking new venues of investment and gold is one of those alternatives," he told Hürriyet Daily News & Economic Review on Wednesday.

“However, when investing in gold people should observe the markets carefully, be cautious, and – most importantly – remember to diversify their portfolio,” Uyan said. "One should not forget that gold prices can fluctuate considerably as well. Whereas in the New Year gold prices stood at $1,000, after a while they declined to $865. Our advice is that one should invest in a well-diversified portfolio which includes gold, but also dollars and euros."

Kuveyt Türk's drive to "converting gold into a financial product" as Uyan put it includes the so-called golden participation accounts. "This new alternative, launched earlier this year is quite unique in the world of Islamic banking. It is unique because it is a termed product. So the client can open a gold participation account with a term from one to 12 months and at maturity receive the profit in gold terms. We developed this product to attract the under-the-pillow gold investments of Turkish people," Uyan said.

Kuveyt Türk, which celebrates its 20th anniversary this year, is one of the oldest participation banks in Turkey. Currently it has 130 branches, but expansion is in the cards. "Next year, we will open between 10 and 15 new branches. We are currently working to open a branch in the Grand Bazaar in Istanbul," Uyan said.

International expansion is also in sight as the bank recently got a license to open a branch in Dubai. "Dubai is one of the world's centers in gold trade. We also have branches in Bahrain and Germany and a representative office in Kazakhstan. Our intention is to integrate our services internationally as well," Uyan said.

According to Uyan, Islamic banking in Turkey is evolving rapidly, with all participation banks planning to open new branches and introducing new products. "This is an emerging sector, which has a market share of some 5 percent in terms of total assets. We hope to reach a market share of some 10 percent within the next five to 10 years. There is important growth in the sector as interest rates decline. People are discovering the wits of interest-free banking," he said.