Turkish cleric’s article on bonds disturbs Islamic lenders
The Treasurey building in Ankara is seen in this file photo. Hürriyet photoA top consultant for Turkey’s participation banks said that Treasury-issued revenue-linked bonds are no different than government bonds, as both are based on interest, according to daily Vatan. Professor Hayrettin Karaman’s fatwa-like comments shocked participation banks, which decided not to bid for new revenue-linked bonds.
It all began with an article Karaman published February 19 in the Yeni Şafak newspaper. Karaman argued that revenue-linked bonds have certain structural issues, and that “revenue-linked bonds are like governments bonds. Unless they become revenue-sharing bonds, their revenues are also based on interest.”
In light of his comments, the participation banks decided not to attend the Turkish Treasury’s revenue-linked bonds tender, putting the Treasury in a precarious position. In addition, the participation banks opted to trade in their revenue-linked bonds for more “religiously appropriate” Islamic banking instruments such as rental sukuk bonds.
“If we can get sukuk bonds by the due date in August, we will be really relieved,” said Osman Akyüz, general secretary of the Participation Banks’ Union.
According to data released by the Participation Banks’ Union, as of March three participation banks held a total of 984 million Turkish Liras worth of revenue-linked bonds. There are 459 revenue-linked bonds in the hands of individuals or corporations, according to the same data.