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FINANCE > Turkey urged to seize Islamic banking opportunity

ISTANBUL - Hürriyet Daily News

Islamic banking will triple itself in ten years and it holds further substantial opportunities for Turkey, but there are still margins for growth, a report says

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Turkey’s non-interest, Islamic-compliant banks hold 5 percent of the total banking market at a size of $31 billion.

Turkey’s non-interest, Islamic-compliant banks hold 5 percent of the total banking market at a size of $31 billion.

The Turkish Islamic banking sector will triple in 10 years reaching $100 billion by 2023, while the country would have even more potential if it would meet the foreign demand by offering more of a variety of Islamic financial instrument, an Ernst & Young report has said.

Islamic banking, which follows the requirements of Shaira and does not charge interest, has emerged as a prominent system at a time when European banks that have been the backbone of global sector are only slightly recovering from the aftermath of the financial crisis. The Islamic banking sector offers great opportunities for Turkey as well, as the country seeks its share in interest-free banking in light of the value and market presence of Islamic banks, also known as participation banks.

The report published by Ernst & Young on the sector says Turkish participation banks have expanded every year at an average of 19 percent and their commercial volume reached $1.3 billion in 2011.

Currently, all of the banks in Turkey that offer interest-free services to their customers hold 5 percent of the total banking market at a size of $31 billion, and the report expects Turkey will increase the size of its participation banks to over $100 billion.

While the general outlook of the sector looks promising, Turkey fails to reach its actual potential in the sector, the report warns.

Turkey has been trading only sukuk certificates indexed on rent certificates as an Islamic banking vehicle since last August, but there are three more non-interest financial instruments that are used in international markets.

New banks and new instruments coming

The Turkish Capital Market Board (SPK) has announced that it is preparing the necessary regulations for introducing three new Islamic-compliant financial instruments to supplement the existing sukuks at the beginning of this month.

According to the report, serving new, non-interest financial instruments to foreign investor from Asian and Gulf countries and using sukuks to finance Turkey’s planned domestic infrastructure investments, projected to reach $20 billion by the end of 2013, would accelerate the sector’s growth. Currently only one Turkish participation bank, Bank Asya, is completely Turkish-capitalized. The majority stakes of the other three, Albaraka Türk, Kuveyt Türk and Türkiye Finans, are held by Middle Eastern capital owners.

The Turkish state announced it will establish two new participation banks that offer interest-free services.

March/21/2013

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mara mcglothin

3/26/2013 3:56:50 PM

MURAT Exploit a religious system of banking? Not that is a good concept. Yes VARGEN it does sound like the banks will be allowed to have the depositors cake and eat it too!

Socialist TRK

3/26/2013 10:53:05 AM

From what I understand from Islamic banking it is the most unfair concept ever. They don't pay interest but they pay you a portion of the return from where they invest the money. However if the investment makes a loss, 100% of this loss is footed by the person and zero loss for the bank. With this in mind the theiving Islamic banks make high risk investments - high risk, high return. Win and both win big. Lose and the person losses his deposits

Brian Irlanda

3/26/2013 9:02:29 AM

Islamic banking is a sham, a con trick. They don't charge interest??? Of course they do! They just call it something else! Don't be fooled by this. It is the same system with a different name. When you hear "they don't charge interest", do you think you are getting the money for free? Of course not, when you pay your contribution or what ever it is called you will see that it is equivalent to the commercial rate.

Vargen Vargen

3/21/2013 6:59:47 PM

Sounds like an excelent idea for the banks. Not being allowed to pay interest to the owners of the money. Sounds excelent and very easy money for the banks.

Murat

3/21/2013 3:34:01 PM

If you put aside the expected and maybe understandable knee-jerk reactions as examplified here, there is actual substance behind this. Turkey would be smart to exploit this opportunity, which is real.

Faruk Beisser

3/21/2013 9:18:50 AM

Yes, yes, yes, everything to rip off more people, this time under the guise of religion! The suffering of the POOR, POOR banks rips me to tears!

Pawel Bury

3/21/2013 8:41:45 AM

Islamic economics...
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