Turkey ready to put up capital for Islamic megabank: Deputy PM Babacan

Turkey ready to put up capital for Islamic megabank: Deputy PM Babacan

ISTANBUL - Reuters
Turkey ready to put up capital for Islamic megabank: Deputy PM Babacan

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Deputy Prime Minister Ali Babacan has said Turkey, Indonesia and the Islamic Development Bank have accelerated their efforts to establish a “megabank” with the aim of creating a platform to serve as a “central bank” for the world’s Islamic lenders, as reported by Reuters. 

“Turkey is ready to put up $300 million of equity for the establishment of the bank,” he said on May 20, at a meeting of the Participation Banks of Turkey, which represents Islamic lenders in the country. 

He said they wanted to position the bank to help Islamic lenders to manage their cash flows. The new bank, which is aimed to get a kind of central bank status for the Islamic banks, may also have investment banking capabilities in the future, he said. 

“The Islamic Development Bank has worked for the establishment of the megabank for the last three to four years. We saw some slowing down in the activities to launch the bank. Then, as the representatives from Turkey, the Islamic Development Bank and Indonesia, we drew a road map to set up the bank last month,” Babacan said. 

“As Turkey, we have promised to put up $300 million in equity to launch the bank. The representatives from Indonesia also showed their intent to mobilize the same amount. Some leading institutions want to be part of the bank as well,” he said. 

Babacan also said the latest global economic crisis showed that “interest-free financial methods are much more reliable, much more stable and much more robust,” as quoted by Anadolu Agency. 

Stating that “musareke” (profit-loss sharing) was a positive form of risk management, he said, “We believe that when this system becomes widespread in our country, our financial system will become much more robust.”

His remarks came after one of Turkey’s largest state-controlled banks, Ziraat Bank, was authorized by the country’s banking regulator to start operations in its Islamic banking division last week.  

There are over 300 Islamic financial institutions in 75 countries, according to Babacan.