The Participation Banks Association of Turkey (TKBB) recently held its 12th Ordinary General Meeting at Çırağan Palace in Istanbul. Leading individuals of the financial sector and government officials attended this meeting to discuss the performance and future of the participation bank sector and Islamic finance market in Turkey.
In the meeting, deputy prime minister Ali Babacan stated that the Treasury’s lease certificate (Sukuk) issuance in 2012 was selected as the most successful issuance in the world, although it took Turkey 10 years to be able to carry out such an issuance. Babacan emphasized that the participation bank model is one of the most important solutions offered to the ongoing financial crisis. A participation bank system suggests commerce and investment against capital movement and this can be considered as the fundamental factor that separates this system from conventional banking.
Babacan also stated that Turkish participation banks’ total share within the financial services sector has increased, however they need to maintain this growth during the following years. The performance of the banks after the legal changes in 2005 is especially noteworthy. There were legal obstacles for participation banks and these obstacles blocked their development when compared with conventional banks. As a result of these obstacles, the objective of Turkey to be the leader of the world’s Islamic financial markets has been postponed. However, the Turkish Islamic finance and participating bank sector is finally looking more promising.
It is now possible to obtain new banking licenses in Turkey and applies not only to new conventional banks — it is now also possible to establish new participation banks. However, there are still strict requirements concerning the capital adequacy of the new banks. The source of the capital and qualification of the people willing to establish a new bank will be considered carefully by the relevant authorities.
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
[email protected]
.