As Turkey has been preoccupied with the construction of mega projects particularly in recent years, other financing methods and instruments such as Islamic financial instruments, which are also used in the UK, one of the pioneering financial centers of the world, can come into play
The 689th Lord Mayor of the London City Corporation Andrew Parmley said that Turkey in recent years has been focusing on a series of mega projects such as airports and nuclear power plants and the country may benefit from Islamic finance instruments for funding these projects.
Speaking at the Istanbul TALKS Islamic Finance Summit organized at the Consulate General of the U.K. under the sponsorship of the Participation Banks' Association of Turkey (TKBB), Lord Mayor Parmley, who oversees the financial center of the U.K., highlighted that Istanbul has all the qualities to become an Islamic financial center and the U.K. wants to share its expertise in Islamic finance, particularly regarding the question of how Turkey's mega projects can be funded via Islamic financial instruments.
Highlighting the ongoing construction mega projects including airports, nuclear power plants and hospitals that can be financed via financial instruments that are fully compliant with sharia law, he further added that Turkey may benefit from the U.K.'s expertise in this area and may structure the financing of these projects, attracting international investors as well as domestic partners.
Islamic finance mechanisms have been used in a number of projects in London itself, such as the Shard, the Olympic Village, and the redevelopment of the Chelsea Barracks and the Battersea Power Station sites.
Meeting the financial needs associated with infrastructural projects via sharia-compliant measures offer a way to alleviate the burden of mounting debt while creating debt finance via real assets and services and meeting the need for funding. In the sharia-compliant financial transactions, the creation of debt finance is available through real assets and services. In this regard, Islamic finance is capable to assume the useful function of the conventional loan while avoiding a pyramid of debt.
For instance, Sukuk, or Islamic bonds which merely confer ownership of a debt and grants the investor a share of an asset, along with the commensurate cash flows and risk, can be used as a possible financing mechanism for infrastructural projects. However, its success will largely depend on the development of institutional investors, regulatory and legal framework to encourage asset-based finance, Takaful (Islamic insurance), and the diversification of financial products for resource mobilization and risk management.
'Istanbul is qualified to become an Islamic finance hub'
For Istanbul to become an Islamic financial center, Parmley listed a couple of requirements. Political will must be revealed, he said, highlighting that there must also be an infrastructure for resolving the emerging ententes through legal means.
Parmley indicated that specific training should be given on the matter of Islamic finance, and stressed that access should be granted to the world's other financial centers.
Stressing the importance of technological infrastructure, Parmley noted that a fair business environment where the rule of law is valid must be established, adding that it is necessary to offer attractive options for employees here.
Parmley said the Brexit process will not set London back from its position as the world's leading financial center. Informing that the London Municipality is a small area in the city of London and that only 8,000 people live there, Parmley said 450,000 finance workers come to this area everyday and this number is expected to rise to 575,000 by 2030.
Parmley underscored that most finance workers do not think they will ever leave London and go somewhere else.
Parmley suggested that other financial centers in the world will try to take advantage of the situation London is currently facing, underlining that financial institutions are evaluating their current situation and that they have to make this evaluation. "And what they told me is that they can move a small part of their organization to Europe for a temporary period if necessary, and then move those departments back to London," Parmley said, adding that London has served as a center for the development of fintech (financial technology) and that 30,000 fintech offices were opened in a small part of the city last year, meaning the number of fintech employees in London is more than the number of employees in Silicon Valley.
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