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FINANCE > New Islamic banks ready to open soon

ISTANBUL - Reuters

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Deputy PM Babacan (R2) said the
new Islamic banks would open. AA photo

Deputy PM Babacan (R2) said the new Islamic banks would open. AA photo

Turkey has begun to open the doors to giving new banking licenses after the 2001 banking crisis, with no exception for interest-free Islamic banks, called participation banks.

Turkish Deputy Prime Minister Ali Babacan said at the Turkish Participation Banks Union’s annual meeting that it appeared the format of two participation banks would be clearer in a few months. The state-run banks, Ziraat Bank and Halkbank, will establish these two participation banks. “These banks should contribute to growing the participation banking sector, which is composed of very few players in Turkey,” Babacan said.

As of now four banks have operated in the participation banking industry: Bank Asya, Türkiye Finans, Albaraka Türk and Kuveyt Türk. They constitute 5.3 percent of the Turkish banking industry.

“More than 600 Islamic finance institutions are in the world right now and control over $1 trillion. This may seem big, but it constitutes just 1 percent of the entire finance industry... Participation banks should have a greater share in order to raise people’s access to more financing and to enable the finance sector to be more inclusive, which is also one of the biggest elements on the current agenda of the G-20,” Babacan said.

The aim of the Participation Banks Association of Turkey is to triple the share of Islamic banking assets in Turkey by 2023.

Ziraat Bank, Turkey’s largest state-run lender, has been planning to set up a separate Islamic bank, general manager Hüseyin Aydın said on April 13. Turkish lender Halkbank appears to be the second bank to start offering sharia-compliant services under a new entity.

May/13/2013

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Ry Vagim

5/13/2013 11:12:56 PM

sounds like an oxymoron! Isn't borrowing money againts Islam?

Red Tail

5/13/2013 9:24:10 PM

Good news! I have for a long time wanted a new Mercedes of the same time as our PM has and which we tax payers have paid for (caosts around 200 000 Euros). And now if we can get interest free loans, that must mean that I can now go to the bank and take a loan and buy one!! Super!!!

Brit in Turkey

5/13/2013 7:09:29 PM

Many thank K M, Tekion and Sparks. I've read Wikipedia (well most of it as it goes on and on) and this banking just seems to be a series of work-rounds to avoid interest payments or receipts. So if you need a mortgage the bank buys the house and sells it back to you at a higher price to encompass the interest that would normally be charging (a fixed interest loan?). Depositors get capital growth (just like bonds) or profit-sharing. There may be some good ideas there to be studied.

K M

5/13/2013 6:14:06 PM

BRIT, and Others, Wikipedia has a good entry on how the banks get around the appearance of interest while still making their profits. Long answer short, a lot of it has to do with work-arounds so that banks do what banks always do, only it looks different on the surface and has different terminology.

mara mcglothin

5/13/2013 5:00:02 PM

JOHN And the Islamic system is meant to enrich whom??????

Mackie Messer

5/13/2013 3:50:19 PM

They should be careful not to repeat the mistakes of the Islamic Bank of Britain, which has had to be rescued with Qatari money. The bank was established in 2004. It has not been a commercial success and has consistently lost money since its launch. UK savers' deposits are protected up to 85 thousand pounds by a regulated compensation scheme, but shareholders are not and the original shareholders lost most of their investment.

Brian Irlanda

5/13/2013 11:48:19 AM

"Turkey has begun to open the doors to giving new banking licenses .. for interest-free Islamic banks, called participation banks." Let us get one thing straight. There's NO SUCH THING as an Interest Free bank. I've researched Islamic banking and "profit sharing rates" as they call it are no different to commercial banks. If you don't pay back your loan they'll repossess your assets. Same business, different packaging. It is dishonest, in my opinion to say it is better than traditional banking.

Tekion Particle

5/13/2013 11:38:43 AM

Brit in Turkey, if anyone is daft enough to put their money in one of those banks for safe keeping I guess they make the money work for themselves by investing it, while they make money the depositors' money devalue in time and eventually eroding away to nothingness. Win win situation for the Islamic bank.

John Smith

5/13/2013 11:24:26 AM

Good idea. The western system is designed to enrich the west only.

Sparks

5/13/2013 10:49:44 AM

@ BRIT IN TURKEY. Yes I also do not know how they run those banks: no interest, no income I suppose. So a free mortgage is possible. Have to rush to the Ziraat Bank immediately :-)
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