Turkey seeks huge piece of Islamic finance pie

Deputy Prime minister in Charge of the Economy Mehmet Şimşek, speaking at the Interest-Free Finance Coordination Board's meeting on the growing importance of Islamic banking, said the size of the sector globally was projected to grow to $3.5 trillion in the next five years and Turkey aimed to manage a sizeable portion of this huge sector. Known locally as interest-free banking, Turkey has taken great strikes in recent years to enter the Islamic finance sector by setting up participation banks. Saying that the government was committed to help the sector thrive in Turkey, "to become one of countries benefiting from this potential, our efforts continue at full speed," Şimşek said. Furthermore, he indicated that the total size of assets of participation banks reached $183.93 billion by the end of 2015. Pointing out that the participation banks' share in the overall banking sector was 5.1 percent, he stressed the goal set by the representative of the sector was to attain 15 percent by 2025.

In the official statement released by the Turkish Treasury on Monday, it was said that the national and global outlook of the interest-free finance sector was evaluated at the meeting. Proposals to increase the diversification of interest-free finance products and services as well as liquidity facilities for participation banks were evaluated. Progress in the action plan called "Strengthening Interest-free Finance and Participation Banking" as a component of the Istanbul International Financial Center (IFC Istanbul) program was elaborated on, and it was decided that the board would work on the issues raised at the meeting to develop the interest-free finance sector.

"In the concept of the Silk Road project, China is attempting to use Islamic financial products in order to improve ties with Muslim countries and to provide a variety of resources in infrastructure investments. Islamic finance is seen as an important area in the realization of the United Nations Sustainable Development Goals," he added.

Şimşek underlined that the government had assumed a leading role to boost participation banking. He mentioned the creation of new participation entities by state-owned Ziraat Bank and VakıfBank, and the issuance of dollar- or lira-denominated sukuk (Islamic bonds) by the Undersecretary of Treasury. "Sukuk will continue to be an important tool of our portfolio in efforts to diversify debt instruments and the expansion of our country's investor base," he added. Participation banks have been operating for over 30 years in Turkey. Five banks, two of which are state-owned, have a license to provide Islamic finance services. According to the Participation Banks Association of Turkey, these five banks have over 950 branches operating across the country. The total number of employees in the participation banking sector was around 16,000 as of June of this year.