The Turkish treasury carried out a successful Sukuk issuance last September which marked the first sovereign Sukuk issuance by the Turkish government. Investor demand for this sovereign Sukuk issuance was eight times more than the projections made by the government. The return from the Sukuk was 2.8% for its investors. This profit percentage is almost half the price of the Eurobond issue which was carried out by the Turkish government at the same time.
As a result; this Islamic finance instrument is now considered by Turkish companies to be a less expensive and more reliable way to create funds for their investment projects. Agaoglu, one of the major real estate companies in Turkey, has announced that it is interested in a fundraising plan through Islamic finance instruments. The plan includes using Islamic finance instruments such as Sukuk and Murabahah. Agaoglu expects to create funds worth up to US$2 billion. The chairman of the Agaoglu Group, Ali Agaoglu, stated that the firm is keen to attract Gulf investors and create funds for its real estate projects through a less expensive method compared to conventional economic instruments. He also added that it will be the first Sukuk issuance carried out in the real estate market in Turkey.
At the second Turk–Arab Banking and Financial Forum, the chairman of the Banking Regulation and Supervision Agency (BRSA), Mukim Oztekin, stated that participation banks (the term used to refer to Islamic banks in Turkey) used to have a 1.4% share of the Turkish banking sector’s total assets in 2001, but by the end of 2012 this had increased to 5.1%. It is expected that the total percentage of the participating banks will increase to 10% in the medium and long-term. Oztekin also stated that the investors in the region are interested in Turkish participation banks; and three of the banks’ major shareholders are foreigners.
Gulf and Middle East investors are not only interested in participation banks in Turkey but they are also investing in the conventional bank sector. Last year, Lebanese banking group Bank Audi obtained a banking license from BRSA and recently began banking activities in Turkey under the name of Odea Bank.
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
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