Türkiye and its metropolis, Istanbul, have major potential in the Islamic economic landscape, according to Yousef Khalawi, secretary-general of the AlBaraka Forum for Islamic Economy, citing the diversified economic base, strategic geography and institutional development.
Türkiye's ambitions took clearer shape last week when officials used a major summit to portray the country's potential to be a leader in shaping a more integrated, innovation-driven Islamic financial system.
“Türkiye has a great potential, basically because it represents a real, full and comprehensive economy,” Khalawi told an interview with Daily Sabah on the sidelines of the 2nd Global Islamic Economy Summit.
But its advantages lie in the diversity of its economic foundations, he noted.
Those foundations, according to Khalawi, include a strong agricultural sector, a well-developed industrial base, and competitive advancements in services, technology and tourism.
The summit was organized by the AlBaraka Forum for Islamic Economy at the Istanbul Financial Center (IFC), a sprawling development the Turkish government hopes will transform the city into a financial bridge between East and West – and between the conventional and Islamic financial systems.
Khalawi stressed macroeconomic challenges such as inflation and currency volatility, but highlighted Türkiye as a rare example of a Muslim-majority nation with such infrastructure.
“The issue is just that challenges: inflation, foreign exchange rate, but besides that, you have a full economy,” he noted.
“When you consider that as part of the Islamic world, you would have only just a few examples like that. So Türkiye comes on top,” he said.
“For this reason, there is a huge potential.”
Khalawi went on to call Istanbul “one of the top business cities in the Islamic world,” saying that the metropolis “comes in the middle of the world with its own heritage, and with its great expected future.”
“With the potential and with having also the Istanbul Financial Center, with the launch of their (Türkiye’s) first national strategy for Islamic finance, all that will lead anyone to Istanbul,” he noted.
Istanbul is now one of three host cities of the AlBaraka Forum's flagship summits – alongside Medina, where the forum began in 1981, and London. Plans for a fourth summit in the Far East are underway, according to Khalawi.
Despite years of steady growth, Islamic finance continues to represent only a small fraction of global financial markets.
Khalawi said a lack of public communication, innovation, regulatory clarity and liquidity tools hampers progress.
“Building the system based on the Islamic banking system is one of the reasons. Most of our experts, and most of the investment, have focused on Islamic banking,” he said.
"Innovation is another issue. Regulatory framework is a third issue, and for example, till now, Islamic banks have hosted their liquidity where? In central banks. And central banks gave them interest, which is impermissible under Islamic law. This will immediately affect your profitability," Khalawi explained.
"So, until we create an alternative instrument to manage the liquidity, you will always be affected badly by that."
There are lots that needs to be done, Khalawi said.
Publicity is a part of that, and for this reason, he noted, the forum has been working for over a year on what Khalawi described as "a strategic framework for communication in Islamic economy," with plans to launch it next year at the Istanbul Financial Center.
Khalawi also referred to the untapped economic potential given the Muslim world's demographic weight.
"What's the number of Muslims across the globe now? We are almost 25% (of the global population). What are the numbers reflecting the volume of their economic impact? It's still very low compared to 25% of the population," he noted.
Addressing the summit last week, President Recep Tayyip Erdoğan Erdoğan also emphasized the Muslim world's underperformance, urging for greater intra-Islamic cooperation in trade, finance and investment.
"Muslims account for 25% of the world's population, yet Islamic finance assets total only about $2.5 trillion," Erdoğan said.
"The Organisation of Islamic Cooperation (OIC), which is the largest international organization after the United Nations, consists of 57 member countries. However, their share in global trade is only around 11%," he noted.
"In terms of population, we represent 25% of the world, yet our contribution to the global economy is approximately 9%."
Khalawi went on to emphasize that the Islamic economy should be viewed beyond the narrow lens of banking and finance.
“When we talk about Islamic economy, we talk about it as a holistic system ... it covers everything, including what they call today the socio-economy,” he said.
He dismissed the notion that Islamic finance should be viewed merely as an alternative to the conventional banking system.
“Islamic economy is not something new. The new is the modern Islamic economy, which started like five decades ago through Islamic banking. But the rest of the ecosystem of Islamic economy is much more beyond that, and it’s working now for almost 14 centuries.”
Asked whether the Islamic economy offers solutions to today’s global economic challenges, Khalawi said, “Theoretically, yes. Practically, we still miss strong innovations.”
He explained that while the philosophical and theological underpinnings of Islamic economy are robust, rooted in the Quran, Sunnah and centuries of history, today’s practitioners must adapt these principles to modern economic realities.
“The ecosystem of the economy has been changed ... You cannot just implement that experience today.”
This adaptation, he said, requires investment in capacity building.
At this year’s summit, three workshops addressed critical issues: sukuk (Islamic bonds), the halal sector, and the Islamic economy’s growth potential fueled by the global Muslim population.
"So when leaders understand that potential, they will invest more in developing more products and areas," Khalawi said.
