Building on historic ties in the Middle East, a growing interest in Islamic finance in Central Asia and potential European Union membership, Istanbul is well positioned to become a global centre for Islamic finance as it is uniquely positioned to channel surplus funds from the Islamic world into countries and regions needing financing.
Speaking at a recent conference at Borsa Istanbul, President of the Islamic Development Bank (IDB), Mr Ahmed Mohammed Ali Al-Madani noted the emergence of European Islamic finance centres in London and Luxembourg, and stated the geographical position of Turkey is very attractive to benefit from the growth of Islamic finance in Europe, Asia and the Middle East.
Mr Ahmed further stated the Borsa Istanbul can be a major player in the Sukuk market, with the listing of the AAA rated IDB sukuk in Istanbul being a sign of its attraction as the sukuk market is growing very fast which will likely to lead to more listings in Istanbul.
Turkey has an active and growing Islamic finance sector, with Islamic banks referred to as participation banks due to Turkey constitutionally being a secular country. In 2012 Turkey issued the first European Sovereign sukuk with a $1.5 billion 6 year issuance.
Turkey has four existing private Islamic lenders, Turk, Bank Asya, Turkiye Finans and Kuveyt Turk who jointly have a network of 1,000 branches employing more than 16,000 people. Two state banks, Halkbank and Ziraat Bank plan to launch Islamic windows later this year. A third state run bank Vakifbank will be the third new entrant after the Turkish banking regulator recently approved its application to offer Islamic banking services.
Growth within the Islamic banking sector will be boosted as participation in Islamic finance increases domestically. According to World Bank data 8% of Turks do not participant with conventional banks, viewing their interest based business models as haram (sinful). It is also likely some users of conventional banks will switch over into Islamic banks as the market develops.
In a speech delivered during the 10th Turkish-Arab Economic Conference, the CEO of Kuwait Finance House Mazen Al-Nahedh called for a partnership between Kuwaiti and Turkish private sectors to benefit from the globally growing Islamic banking industry.
Al-Nahedh said that there is a great opportunity to make Turkey a sharia compliant Islamic banking hub and a gateway to market these services to Europe, Middle and South Asia.
“We believe that Turkey has the sufficient expertise and qualifications to play this leading economic role, which will be, if completed, a new era in economic development and enhance Turkey’s position on the global economic stage.” He asserted KFH’s readiness to cooperate with Turkish counterparts to make Turkey a gate for Islamic financial services.
“Kuwait-Turk (a subsidiary of KFH) plays a vital role in bridging economic relations and cooperation among Turkey, Kuwait and GCC countries,” he said.
Al-Nahedh revealed that KFH also aims, through the license obtained recently to establish an Islamic bank in Germany, to reinforce commercial and economic ties between Europe, Asia and GCC countries through Turkey and Kuwait.