Ankara: Turkey is entering into a new era of finance which is the era of Islamic finance for the country as it has started to open the doors to giving new banking licenses after the 2001 banking crisis, with no exception for interest-free Islamic banks that are called participation banks.
Turkish Deputy Prime Minister Ali Babacan said at the Turkish Participation Banks Union’s annual meeting that it appeared the format of two participation banks would be clearer in a few months. The state-run banks, Ziraat Bank and Halkbank, will establish these two participation banks.
“These banks should contribute to growing the participation banking sector, which is composed of very few players in Turkey,” Babacan said.
As of now four banks have operated in the participation banking industry: Bank Asya, Turkiye Finans, Albaraka Turk and Kuveyt Turk. They constitute 5.3 percent of the Turkish banking industry.
“More than 600 Islamic finance institutions are in the world right now and control over $1 trillion. This may seem big, but it constitutes just 1 percent of the entire finance industry... Participation banks should have a greater share in order to raise people's access to more financing and to enable the finance sector to be more inclusive, which is also one of the biggest elements on the current agenda of the G-20,” Babacan said.
The aim of the Participation Banks Association of Turkey is to triple the share of Islamic banking assets in Turkey by 2023.
Ziraat Bank, Turkey's largest state-run lender, has been planning to set up a separate Islamic bank, general manager Huseyin Aydın said on April 13. Turkish lender Halkbank appears to be the second bank to start offering sharia-compliant services under a new entity.