As Islamic banking gains ground in Turkey and the government increasingly supports its promotion and development, ALI CEYLAN explores recent developments in a country that has faced turbulent times yet retains a strong economic foundation and high growth prospects.
Deputy prime minister Ali Babacan, who is in charge of economic administration, stated that Islamic banking is no more a ‘stepchild’ in the Turkish banking regulation, calling on more lenders to show interest in the growing business. Speaking at the general assembly of Turkey’s Union of Participation Banking (TKBB) in Istanbul on the 27th May, he said: “In terms of legal regulations, our participation banks are no longer our step children, but our own child, Turkey entered the Sukuk and lease certificate market late, but has achieved great steps.”
Babacan said Turkey is open to prestigious banks with a strong capital structure that would promote in the sector as long as they fulfil the needs of the regulation, recalling that the three state lenders, Ziraat Bankasi, Halkbank and Vakifbank are preparing to open up participation banks.
“We would like to increase the number of participation banks in the sector and would like to do this via the private sector,” he said. There are a considerable number of participation banks in 75 countries and they have reached a size of assets of US$1.7 trillion, Babacan said, projecting that the balance sheet size of such banks in Turkey will reach US$121 billion in 2018. TKKB President Ufuk Uyan said that he expected participation banks to launch US$1-2 billion-worth of Islamic bonds this year.
Derya Gürerk has been picked as the new president of TKKB and Ahmet Beyaz has become his deputy. Uyan remained a board member along with Fahrettin Yahşi.
Japan agency: “Turkey’s credit rating outlook stable”
Japan Credit Rating (JCR) Agency has approved Turkey’s current credit status and said the country’s outlook is stable. Turkey’s credit rating is determined as ‘BBB-/BBB-’. The agency said that Turkey’s rating is supported by Turkey’s relatively developed economy, which is larger than its Middle Eastern neighbours, with a GDP per capita exceeding US$10,000, the agency said in a statement released on the 10th July.
The JCR also said that some sectors provide a buffer against economic shocks and are underpinned by strict fiscal policy and banking supervision such as banking and household sectors. However the agency said that the ratings are constrained by a “chronic” current account deficit and heavy reliance on international financial markets for external financing.
The organization advised Turkey to deal with fundamental challenges such as a chronically high inflation rate, which was 9.2% in consumer prices in June, a low savings rate, which was 12.6% in 2013, and heavy dependence on importing certain goods.
Islamic lender denies ending sales talks with Qatari bank
Turkish Islamic lender Bank Asya has ruled out reports claiming that it has ended share sales talks with Qatar Islamic Bank (QIB). Reuters on the 2nd July asserted Bank Asya and the QIB have ended their confidential correspondence; after failing to agree on price.
Bank Asya said that it had started talks with QIB in March for creating a strategic partnership with them and planned to complete the procedure soon. Some sources suggest that Ziraat Bank, which is Turkish state-run bank, may be a future partner to Bank Asya: however the two banks have not officially begun negotiations. Ziraat Bank officials have said that there has not yet been any official move towards Bank Asya, but they did not deny the possibility of such a purchasing transaction. Ziraat is planning to launch a participation bank for interest-free financial services.
On the 1st July, Bank Asya made an announcement about its asset worth and has moved to sell assets worth about TRY133 million (US$62.21 million).
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
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