With more than 600 institutions worldwide and with estimated $
1.4 trillion Sharia-compliant assets in 2014, Islamic Finance
("participation banking") market in Turkey keeps growing
and such growth is likely to continue in the future. Despite the
size and the potential of the Islamic finance market, in 2014,
Turkey has only four private participation banks. It is likely that
this situation will not remain the same as the Turkish government
is preparing the regulatory framework in order to introduce three
state-owned banks in participation banking market.
The first participation bank in Turkey; AlBaraka Türk
completed its establishment in 1985. Four years later the second
participation bank Kuveyt Türk was established. These were
followed by Bank Asya in 1996 and Türkiye Finans in 2005.
in 2012, first Islamic bond ("Sukuk") issuance
of $1.5 billion was announced by the government and the regulatory
requirements have increased significantly.
But the most important changes in the regulatory framework were
made in 2013 whereby new instruments were introduced. Today,
participation banks' market share stands at 5% of the total
banking sector. However, the government targeting a %15 share of
the total financial assets by 2023 and sector assets are expected
to triple within the next 5 years pursuant to recent
In 2013, Deputy Prime Minister of Turkey, Ali Babacan announced
that two state-owned banks will enter the participation banking
market. Today with recent developments, this has increased to
three; Ziraat Bank, Halkbank and VakıfBank.
The first state-owned and the biggest bank which established a
participation banking unit is Ziraat Bank. In October 2014, Ziraat
Bank obtained permission from the Banking Regulation and
Supervision Agency to set up a participation bank with $300 million
However, the government did not stop and only five days after
the announcement of the creation of Ziraat Bank's Islamic
finance unit, a bill envisaging changes to banking legislation was
sent to the Parliament. Most importantly, this provided
Vakıfbank's shares to be transferred to the
Undersecreteriat of Treasury and the creation of a participation
Finally, the third state owned bank; HalkBank is reportedly
seeking regulatory approval for the establishment of the Islamic
finance unit after the authorization granted in October 30, 2014 by
the bank's board of directors. After this announcement, all
three state-owned banks are set to establish participation banking
units. However, uncertainty still remains on whether these units
will be established as separate entities.
Even if no further details were communicated, recent activities
demonstrate the intention of the government in this area. The
initiative of the government to promote the participation banking
sector will be a major step towards the development of the sector
in Turkey and in Turkey becoming a new center of attraction for the
investors located in South Asia and the Gulf.
Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).