Turkish state to open two non-interest Islamic banks

Turkish state to open two non-interest Islamic banks

The Turkish state will establish two new participation banks that offer interest-free services, using the names of Vakıfbank and Halkbank to benefit from their credibility in the market, sector players have said.
The new banks to be established will act as completely separate institutions from their eponyms with new banking permission licenses and fields of operation, but the brand popularity of Vakıfbank and Halkbank will help the banks be acknowledged in the market. 

Last week, Deputy Prime Minister Ali Babacan hinted that two state-owned banks may offer interest-free services, without giving specific names.

Turkey seeks to its share in the interest-free banking sector in light of the value and market presence of participation banks.

The banks, which operate in line with Islamic principles by not using interest, had raised the amount of their deposits two times more than deposit banks last year, according to data from Turkey’s banking regulation board.Currently there are four banks in Turkey that offer interest-free services to their customers, and only one of them, Bank Asya, is Turkish-capitalized.The major stakes of the other three, Albaraka Türk, Kuveyt Türk and Türkiye Finans, are held by Saudi Arabian, Bahraini and Kuwaiti capital owners.

The ratio of the amount of funds collected by participation banks versus the overall sector rose from 5.6 percent to 6.1 percent last year compared to 2011.