A report from S&P published in December on the outlook for Islamic finance confirms that developments in the field are set to continue. Zeynep Holmes, its regional head of Eastern Europe, Middle East & Africa, stated that the ratings agency believes that worldwide Shariah compliant assets, which are estimated at upwards of US$1.4 trillion, are likely to sustain double-digit growth in the coming two to three years. In the report, S&P also noted that aspiring regional champions, such as Turkey, may also help foster a more systematic approach to channelling and shaping growth in Islamic finance.
In 2014 the industry will be focused on regulatory efforts for improved regulation of Islamic finance and the establishment of additional bodies at the national level. Additionally, newcomers such as Turkey, Oman and Nigeria have started to follow in the footsteps of fast-growing pioneers such as Malaysia.
Murat Çizakça, a professor at the Global University of Islamic Finance in Kuala Lumpur, stated at the Ninth World Islamic Economic Forum (WIEF) in London that Istanbul is the only city in the world with the potential to radically change the evolution of Islamic finance from one of imitating western financial instruments into one of discovering and modernizing authentic Islamic instruments.
Despite the fast growth and good progress of Turkey in Islamic finance participation banking field, it should be acknowledged that there is still a long way to go for Islamic insurance (Takaful) and Islamic capital markets. Although participation banking is considerably settled in Turkey, there is no legal infrastructure for Islamic insurance companies. However, since foreign investors such as Bahrain-based Albaraka, have expressed their interest in Islamic insurance a new regulation may be expected in near future.
In addition to the new Islamic finance instruments, an increase is forecast on the participating banks’ share within the Turkish banking sector. The Participation Banks Association of Turkey stated that the share of participating banks will be 15% in 2023 which is also in line with the governments expectations.
Ali Ceylan is a partner at Baspinar & Partners Law Firm. He can be contacted at
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