Islamic Finance in Turkey – it is one of the prospective countries for Islamic Finance to develop. Turkey, which straddles the Asian and European continents, is a beautiful country full of God’s blessings. It also includes remarkable geographic location. Due to various financial, economic, and other regional issues in emerging Islamic finance centers, Turkey’s shoreline is a bridge between Europe, Asia, and Africa. Considering multiple factors, including its important role within the region and its geographical conditions, it’s not wrong to say that the prospects of Turkey becoming an Islamic banking and finance hub are very high.
In Turkey, Islamic banking assets, also known as participation banking assets, will double over the next five years, from roughly 7.2 per cent of total banking assets in December 2020. It is according to research released Monday by global rating agency Moody’s.
According to Moody’s, the total assets of Turkish participation banks surged by 54 per cent last year. It exceeds the overall banking sector’s asset growth of roughly 36 per cent.
How Did It Start?
There is no doubt that, in comparison to Malaysia and other Arab countries, Turkey is a late adopter of Islamic banking and finance. It is a fact that Islamic banking came into existence in the country in 1980. However, it gained popularity in 2005 after being backed by the Turkish government and political leadership. Furthermore, The country’s need for Islamic banking and financial services is growing by the day. The demand-driven Islamic financial services and products are exploding. AlBarakah, Kuvweyt Turk Bank, Turkiye Finans, Vakif Katilim, and Zirat Katilim are among the country’s five Islamic banks. Meanwhile, a few insurance companies provide Takaful windows, and there is limited evidence of Islamic Microfinance in the country, but the need for Islamic Microfinance is growing by the day due to the economic pressures.
Development of Islamic Finance in Turkey
In Turkey, there are over 1400 Islamic bank branches, employing over 20,000 employees. Turkey’s Islamic banking and financial sector is going to reach 100 billion dollars by 2020. It’s worth noting that there’s a critical shortage of trained and skilled workers. Many national and international universities and colleges have begun to offer Islamic banking and finance programs. They are offering them at the bachelor’s, master’s, and doctoral degree levels. The trend in Islamic finance education is fast rising.
The development of the Istanbul International Financial Center is a major element in the rapid growth of Islamic banking and finance. The move would undoubtedly big factor in attracting foreign investment into the country. Following the European Union’s blacklisting of the Dubai International Financial Center (DIFC) and Bahrain Financial Tax-Free Zone, as well as the UAE’s implementation of a 5% VAT, it is forecastable that capital will flow to Turkey, which will be a major boost for the Turkish Islamic Banking and Finance Industry in attracting Foreign Direct Investment (FDI). All of these variables may increase Turkey’s chances of becoming an Islamic financial center.
On 8 February 2021, Turkey declared the establishment of a new department within the President’s Finance Office.
The new department is to focus on raising awareness of participation finance and developing strategies in the field. It is said by a presidential decree published in the Official Gazette.
It also aims to boost cooperation among public institutions, the private sector, universities and nongovernmental organizations (NGOs) so Islamic finance develops.
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