Turkish central banker is social scientist with roots in Islamic finance

Istanbul - After Winning the backing of President Tayyip Erdogan, Turkey's new central bank governor must now convince investors that an Islamic banker without formal training in economics can tame inflation while resisting political pressure to cut rates.

Turkey's cabinet on Monday approved Murat Cetinkaya as the next central bank head, giving some initial relief to investors who had feared a battle between Erdogan, who equates high interest rates with treason, and Prime Minister Ahmet Davutoglu's more orthodox economic team.

Despite the initial relief in markets, the 40-year-old Cetinkaya remains something of an unknown quantity, lacking the experience of his predecessor, Erdem Basci, an engineer turned economics Ph.D. whose term as governor expires next week.

(The Jerusalem Post / 14 April 2016)

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Islamic finance gains ground in Turkey

Istanbul is on the way to becoming one of the world’s leading finance centers, the head of the city’s stock exchange has said.

“With more investors coming to Istanbul and more cooperation across the world, we will proceed faster with making the city a finance center,” Borsa Istanbul CEO Tuncay Dinc told Anadolu Agency in Bosnian capital Sarajevo on Friday.

Speaking at the inauguration of the Islamic index at the Sarajevo stock exchange, Dinc said Istanbul should be further integrated into world markets.

One of the areas the Borsa Istanbul is leading the world is in interest-free finance, which is compatible with Islam.

Interest-free finance has become increasingly and Turkey has placed particular focus on participation banks that offer finance based on assets.

Vakifbank, Turkey’s third-largest state bank, recently received approval to launch an Islamic banking division, following the opening of Turkey's first state-owned Islamic bank.

“The effect of participation banks in the banking sector is increasing,” Dinc said.

(Albawaba Business / 13 March 2016)

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Turkish deputy PM Şimşek projects rapid growth in Islamic banking

Highlighting that the share of Islamic banks within the banking and financial system is nearly 5 percent, deputy prime minister in charge of economy, Mehmet Şimşek, said: "Our president [Recep Tayyip Erdoğan] set a goal for a 25 percent share of Islamic banking in the long-term, but we will take the necessary steps for the share to reach at least 15 percent in the medium-term." Responding to a question about why the Halk Participation Bank's establishment was delayed, Şimşek said: "Halkbank actually had taken a fast start, but as I understand, there was a dispute regarding the establisher of the bank, Halkbank or the Treasury; that's why it was delayed. Now, we are speeding up the process."

Elsewhere, the Banking Regulation and Supervision Agency (BDDK) approved the foundation of Vakıf Katılım Bankası A.Ş., Vakıf Bank's new participation bank, which began operations on Feb. 26. Vakıf Katılım Bank CEO Öztürk Oran announced that the bank will operate from its current headquarters for the first quarter and hire 120 employees; however, the target is to open 30 branches and hire 500 employees by the end of the year. Onan said the first branches will be opened in the provinces of Istanbul, Ankara, Konya, Gaziantep, Bursa, İzmir, Adana, Antalya and Kayseri.

Stressing that Vakıf Katılım Bank will open 100 branches and hire 1,200 employees within three years, Oran added that Vakıf Katılım aims to attain 10 percent of the participation banking system's market share by 2018. "Our main goal is to become the leading bank in the Turkish participation banking sector by 2023. Going public is not in our short-term or long-term plans," Oran said. 

Oran added that participation banking can only develop through public banks, emphasizing that Vakıf Katılım aims to increase competition in the market. "As a state bank, the market's trust is high, and therefore with this trust and belief, we believe we will assume a crucial role in drawing foreign funds to our country," Oran said.

In addition, according to an official report released a couple of months ago by international credit rating agency Fitch, the number of loans granted by participating banks in Turkey will continue to increase in 2016, and be likely higher than average due to the entrance of new banks in the sector and the evident rise of the sector's penetration rate. 

The number of Turkish participation banks has increased to five with the foundation of the Ziraat Participation Bank, and as of September 2015, the total assets of participation banks and loans in the banking sector was around 5.1 percent. The total number of participation banks increased to six at the end of February when Vakıf Participation Bank began operating. 

The report also reflects the government's decision to increase the rate of the assets and loans in the participation banking sector to 15 percent by the end of 2023. Along with the Ziraat Participation Bank founded in May 2015 and Vakıf Bank on Feb. 26, Halkbank is also planning to establish participation banks soon, which are all state-owned.

(Daily Sabah Business / 07 March 2016)

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Turkish gov’t commences prep work to launch Islamic banking coordination mechanism

Deputy Prime Minister Mehmet Şimşek has said preparatory work to launch a coordination mechanism for Islamic banking in Turkey have started, and the related circular note has recently been sent to the Prime Ministry. 

Şimşek particularly stressed the rising popularity of interest-free Islamic banking, dubbed “participation banking” in Turkey, around the world since the 2008 financial crisis. 

“Britain performed its first sukuk export worth 200 million pounds in June 2014. TheCityUK group launched its ‘Secretary on Islamic Finance’ in 2011 to coordinate and support the development of Islamic finance. The Islamic Finance Task Force [IFTF] in the U.K. was established in 2013 with the aim of making the county an Islamic finance hub and to lure further investments in this field, so Britain aims to be a hub in Islamic finance,” he said. 

“Luxembourg has the largest Islamic finance investment funds among non-Muslim countries with its 5 billion euros of funds, following Saudi Arabia and Malaysia,” he added, as quoted by Anadolu Agency. 

Şimşek also stated that Russia’s Sberbank had earlier announced that it would launch Islamic finance services in its own country. 

“Turkey has had one of the highest potentials in developing alternative banking activities in addition to traditional banking. In order to be able to realize this potential, new additional initiatives need to be created in addition to existing ones,” he said. 

The development of Islamic financial instruments and the launch of the mechanism for coordination are one of the priorities of the 64th Government Program and the 10th Development Plan, he added. 

Şimşek noted that preparation has started in order to establish this coordination mechanism. 

(Daily News / 07 December 2015)

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Turkish watchdog to revise Islamic banking regulations

The head of Turkey’s banking watchdog has pledged to revise the regulations governing the Islamic banking sector to increase the popularity of the sector in the country.

Mehmet Ali Akben, president of the Banking Regulation and Supervision Agency (BDDK), said there was a strong need for changes to the rules governing what are known as “participation banks” in Turkey.

“We are trying to readjust those rules,” he told an Islamic finance conference in Istanbul on Nov. 19. “We believe this system will shine on both a local and global scale in the coming years.”

He said there was a demand for a financial model working under non-interest-based rules and that the BDDK had launched a separate body to analyze how Islamic finance could be developed and popularized in Turkey.

Launch of sharia boards for Islamic banking 

Akben said the BDDK would launch the required regulations enabling the system to grow further in Turkey and to become exemplary around the world. 

“In this vein, should the sharia boards be under the direction of the BDDK? ... There have plans to launch these boards under the Association of the Participation Banks, but this issue could be reassessed to determine which option is best,” he said.  

 Talat Ulussever, chairman of the Borsa Istanbul exchange, called for a system in which members of the public could invest in major projects.

“We need to exert effort to establish financial structures in which Turkey’s big projects in areas such as energy, communication, defense and infrastructure will be financed by people as profit is shared by them,” he said.

Ulussever said the 2008 financial crisis showed that conventional finance could not absorb volatility in global markets.

“There is a recent survey by the OECD that indicates financing through credit has a negative affect while economies that prefer stock exchanges for their financing needs grow faster and sustainably,” he said.

(Daily News  22 November 2015)

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Turkey shows progress in developing Islamic finance

Experts who attended at a G20 conference on Islamic finance in Istanbul have pointed to Turkey's progress in developing the sector.

Aysegul Eksit, executive vice chair at the Capital Markets Board of Turkey, said that the Turkish government is hard at work to create better enabling conditions for Islamic finance.

Islamic lenders now account for about 5.3 percent of Turkish banks' total assets, and this is more than twice the level a decade ago, Eksit said.

The value of Islamic finance assets in Turkey was $51.2 billion in 2014, making the country the eighth in the world. Only about 3.6 percent of global sukuk issuance comes from Turkey, according to World Bank statistics.

Sukuk are instruments similar to bonds, but in which asset growth provides income as opposed to the collection of interest which is forbidden under Sharia law.

“The Turkish legal framework for the issuance of sukuk is in the process of completion. Laws passed in 2012 and 2013 have established the use of these instruments,” Eksit said.

But there are still legal obstacles to the development of the sukuk market in Turkey, Eksit pointed out.

“There are still tax-related issues that limit the development of sukuk in Turkey. But there is work currently underway at the Ministry of Finance to overcome these obstacles,” Eksit said.

For now, almost all sukuk issuance in Turkey is made by participation banks and the Turkish Treasury.

In 2014, the Treasury has also created the basis for a wider range of Islamic finance instruments, such as “Mudarabah”, or investment based on profit sharing; “Murabahah”, in which a buyer purchases from a seller at a fixed profit margin; “Musharakah”, which allows each party involved in a business to share in the profits and risks; and “Wakalah”, which refers to a type of Takaful insurance contract.

“Corporates still do not issue sukuk, although there is no legal obstacle to their doing so,” Eksit said.

There are four private Islamic banks operating in Turkey for many years: Albaraka Turk, Bank Asya, Kuveyt Turk, and Turkiye Finans.

The sector employs about 16,000 people, and is growing at about 32 percent per year, relatively faster than the rest of banks in Turkey.

But on Oct. 15, the Banking Regulation and Supervision Agency (BDDK) allowed state-owned Ziraat Bank to establish an Islamic banking branch, and this opened on May 29.

State-owned VakifBank has also received a license for Islamic finance operations in Turkey.

“This is a game changer,” commented Khalid Howladar, global head of Islamic Finance at credit agency Moody’s.

“The market in Turkey has been small, but the entrance of these large state-owned banks, with thousands of points of distribution among them, should be a major step into growing the market. The large banks are also likely to involve corporates in the market for the first time,” Howladar said.

Turkey also boasts four Sharia-compliant pension funds, although assets under management remain low by global standards -- total value of investment in individual Turkish pension system is at about $14 billion, according to OECD statistics.

But the entire pension sector has invested in sukuk in the past, and is expected to show a considerable interest in sukuk as the instrument and the market becomes more mature in Turkey, Eksit said.

(Anadolu Agency / 21 November 2015)

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Turkiye Finans, Albaraka Turk apply for lira sukuk

Aug 31 Turkish Islamic lenders Turkiye Finans Katilim Bankasi and Albaraka Turk have applied separately to issue Islamic bonds, or sukuk, according to Turkey's Capital Markets Board.

Turkiye Finans, a sharia-compliant lender which has a focus on loans to corporate clients, has applied to raise up to 1.5 billion lira ($513.2 million) through its wholly-owned unit, TF Varlik Kiralama.

No tenor or details of underlying assets were given for the deal, which could be sold as a public offering or to qualified investors.

Last month, sources told Reuters that Turkiye Finans was planning a dollar-denominated sukuk to bolster its supplementary capital.

Albaraka Turk, a unit of Bahrain-based Al Baraka Banking Group, has also applied to raise up to 1 billion lira through its asset-leasing company, Bereket Varlik Kiralama.

Earlier this month, Albaraka Turk mandated banks for an Islamic syndicated loan with a total initial amount of $400 million.

(Reuters / 31 August 2015)

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Islamic Finance System In Turkey

The Islamic finance system has arisen due to various religious and economical reasons and, in general, it is a system where any and all kinds of financial activities and transactions are applied within the scope of Islamic rules. This market is established based on applying the principles and rules brought in by Islam to the financial transactions. Considered as an alternative field to the modern finance understanding, the Islamic finance quickly develops as an alternative field in the global finance markets in the light of the developments during the recent years. The framework of an Islamic financial system is being established in line with various rules and laws which the Islamic communities are subjected to in terms of economical, social, political and cultural aspects.

The basic difference of Islamic finance and traditional finance is that the "interest", located in the center of the traditional financial transactions, is prohibited in the Islamic finance. If the money paid for the debt instrument is different than its nominal value, then the difference between them is described as interest. The Islamic religion considers this difference as an unfair increase, therefore prohibits the trading of any debt instrument for a value other than its nominal value. With the interest prohibition in question, it's aimed to prevent any unfair capital increase at a loss of someone else. In addition to this, only partnering for profit without taking any risk and without partnering to loss is also a prohibited transaction in the Islamic world. Debt instruments issued without taking the abovementioned into account are not accepted as an Islamic debt instrument.

For the Islamic law, the provisions of the agreement should be definite for the legal transactions and particularly for the agreements putting both parties under an obligation. In other words, the subject matter of the agreement should be known and definite. Particularly the agreements with substantial uncertainties are not considered as suitable for sharia.

According to the Islamic rules, the activities based on making a gain from the loss of someone else such asgambling, betting and games of chance are also prohibited.

Within this scope, the financing methods developed by the Islamic financial institutions can be categorized in general as Mudaraba (labor capital partnership), Musharaka (profit-loss partnership), Murabaha (cost plus profit margin sales), Ijara (lease financing), Quard-Hasan (interest-free loan), Istisna'a (order based procurement) and Sukuk.

As one of these financing methods, Sukuk is an important financial instrument suitable to the interest-freebanking principles developed for increasing the financing in the international capital markets. The basic rule in Sukuk is that it has to be based on an asset different than the traditional debt instrument bonds. In the simplest term, Sukuk shows owning an asset or benefiting from that asset. According to this system, the main company assigns the properties subject to the Sukuk transaction to a company established for a special purpose, and this company securitizes and sells these assets to the investors. In the Sukuk system, the receivables are securitized based on the asset. As a result, it allows the buyer to get a share from the revenues obtained from the assets, in addition to the proceeds arising from the sales of the assets. Sukuk has become a global investment instrument and also defined as "interest-free bond". The Turkey version of Sukuk has entered to our legislation as lease certificates as a similar instrument and is regulated in the "Communiqué on Lease Certificates" no. III-61.1 (Communiqué) of the Capital Markets Board of Turkey. Lease certificate means thesecurity which is issued by the asset leasing company in order to provide financing to any kind of asset and right and allowing the lease certificate holders to be entitled for the revenues obtained from this asset or right, in the rate of their shares.

Carried out within the scope of the abovementioned rules and principles, the operation of the Islamic financial services and products vary from country to country, and recorded a significant improvement during the recent years. Examining and considering the other examples in the world, the Islamic financial system appears as an effective system in the fund transfer process as an alternative financial brokerage.

(Mondaq News Alerts / 22 July 2015)

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Islamic finance the focus of Turkey's G20 presidency

Islamic financial services are one of the top priorities for Turkey's presidency of the G20, a senior Turkish finance official said on Wednesday.

Speaking at a meeting of the Islamic Development Bank (IDB) in Mozambique's capital Maputo, Deputy Undersecretary of the Turkish Treasury Burhanettin Aktas said Turkey believed strongly in the vital role the Islamic finance industry had to play in infrastructure and small-medium-enterprise (SME) financing.

"The Turkish presidency aims to increase the awareness for Islamic finance among G20 members," Aktas said.

"We try to support the integration of Islamic finance with the rest of the global financial system. Certainly, there are various policy and regulatory implications of this new finance structure.

"The Turkish presidency is currently working on this and we have asked the IMF and the World Bank to prepare reports for us.

"In order to utilize this high potential, many countries are setting up an enabling environment for Islamic finance products after the 2008 global financial crisis," he said. "Some of the non-Muslim countries around the world are trying to position themselves as Islamic financial hubs. In addition, the IMF and the World Bank have a real interest in Islamic finance".

According to Aktas, Turkey has one of the highest growth potentials for Islamic financial services among the Organization of Islamic Cooperation countries and has an "ambitious strategic Islamic finance program with the aim of increasing the share of the Islamic financial assets in the banking sector".

Turkey has developed new products, established a state-owned Islamic bank and plans to open two more state-owned Islamic banks.

"I would like to express our sincere appreciation to the IDB for their significant support in promoting Islamic financial institutions and products in Turkey," Aktas said.

"The IDB has become a pioneer institution in promoting Islamic financial services and has a key role in further expansion," he added.

(Daily Sabah Economy / 11 June 2015)

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Turkey launches Ziraat Bank’s Islamic branch

Turkey’s largest state-owned bank, Ziraat Bank, has launched its first branch for Islamic finance in Istanbul.

“This is a historic step. Other state-owned banks should follow Ziraat’s move,” President Recep Tayyip Erdoğan said on May 29  during the opening ceremony in the Eminönü neighborhood, referring to Vakifbank and Halk Bank. 

The Banking Regulation and Supervision Agency (BDDK) allowed on Oct. 15, 2014 Ziraat and its sister companies - Ziraat Insurance, Ziraat Savings, Ziraat Investment and Ziraat Technology - to establish the new Islamic bank as main shareholders with a capital of $300 million.

Erdoğan underlined that Ziraat Bank should increase the share of Islamic banking in the country instead of taking a part of the current market.

Islamic banking comprises 5 percent of the total banking system, Erdoğan highlighted. The market share should increase to 20 percent by 2023, he said.

There are currently four islamic banks operating in Turkey: Albaraka Turk, Bank Asya, Kuveyt Turk and Turkiye Finans. Ziraat is the fifth bank entering into that sector.

Erdoğan and the government are at odds with Bank Asya, which is linked to U.S.-based Islamic scholar Fethullah Gülen, who they blame with attempting to topple the gıovernment. 

The Turkish government aims to see the establishment of three Islamic banks in total as subsidiaries of the current state-run conventional banks by the end of 2015.

Saying that London is an important center for Islamic banking, Erdoğan stressed that Istanbul should take “its deserved place” in Islamic finance. The Turkish government aims to establish Istanbul as a regional financial center and then as a global financial hub by 2023.

Ali Babacan, Deputy Prime Minister, said this is an important start for Turkey, adding that the new bank aims to open 20 branches with a total of 400 employees at the end of this year.

“In 2018, the bank aims to have 170 branches with 2,200 personnel,” he said. President Erdogan said the bank should have 500 branches in 2023.

Babacan stressed that Islamic finance is rapidly growing around the globe. “In 2003, the market was at $200 billion, but it will reach $2 trillion by 2014,” Babacan said.

Islamic banking is based on the principle that money should not simply be lent at interest, but rather invested in a productive process which produces returns.

(Daily News / 30 May 2015)

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Kuwait Finance House moves to Turkey for Islamic finance

Kuwait Finance House (KFH) is exploring the possible sale of assets including its Malaysia unit, as the Islamic lender looks for a leaner structure while seeking greener pastures through its Turkey franchise.

KFH, Kuwait's second largest lender and one of the world's oldest Islamic banks, is restructuring activities ahead of a planned divestment by its largest shareholder, the Kuwait Investment Authority (KIA).

Last week, KFH said it had hired Credit Suisse to advise on its options, including the potential sale of a Malaysia unit launched in 2005 that serves as a hub for southeast Asia. KFH did not give further details; a spokesman declined to comment.

A shift away from Malaysia, where KFH holds a valuable licence but lacks scale, would help it focus on Kuveyt Turk, the largest Islamic bank in Turkey with over 500 branches.

"With looking to leave Malaysia, our view is that KFH is reviewing all its investments outside of Kuwait and not just Malaysia," said Mahin Dissanayake, a director at Fitch Ratings.

"Certainly Turkey has a lot of trading links with the Gulf. There's an Islamic market there that hasn't been tapped that much. The opportunities are there, there's an entry point."

Kuveyt Turk, 62 percent owned by KFH, is in expansion mode: it plans to launch Germany's first full-fledged Islamic bank in July as a gateway to Europe and has applied to issue a 1 billion lira ($376 million) Islamic bond as it secures lower-cost financing.

It also plans to establish a wealth management unit to widen its product range, according to two sources with direct knowledge of the matter. Kuveyt Turk declined to comment, saying it would disclose expansion plans shortly.

KFH Malaysia is in better shape now than in 2009, when it incurred heavy losses in its corporate portfolio, although its impaired loan ratio remains higher than the industry average.

It holds a 1 percent share of total bank deposits, while the Malaysian Islamic banking sector has doubled its assets in the last four years. In April, KFH Malaysia appointed its fourth chief executive since 2005.

A source at KFH said the review of the Malaysia unit was at an early stage, with options ranging from an outright sale to retaining a presence focused on a few business lines.

The reorganisation could give parent KFH, rated A-plus by Fitch, a stronger position as its credit ratings are underpinned by support from the KIA, which said last October it would revive plans to sell its 24.1 percent stake in the lender. The KIA did not set a date for the sale.

An exit by KFH from Malaysia could reignite consolidation in the country's Islamic banking sector, after a proposed merger among three local lenders was abandoned in January.

"The current Islamic finance sector remains competitive with increasing pressures on banks' margins, and therefore any M&A deals would benefit smaller players," said Sharidan Salleh, assistant vice president of ratings at Kuala-Lumpur based rating agency MARC.

(Daily Sabah Finance / 15 May 2015)

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Kuveyt Turk sells debut ringgit sukuk, applies for 1 bln lira deal

Turkish participation bank Kuveyt Turk has sold a debut deal of ringgit-denominated sukuk, or Islamic bonds, and has applied for a new 1 billion lira ($376 million) deal, as the lender looks to secure lower-cost financing.

Kuveyt Turk, 62 percent owned by Kuwait Finance House , would sell the lira-denominated deal to qualified investors via its asset-leasing company, KT Kira Sertifikalari Varlik Kiralama, according to Turkey's Capital Markets Board.

In a separate statement, the bank said it had raised 300 million ringgit via a five-year sukuk, its first issuance under a 2 billion ringgit programme.

The ringgit sukuk pays an annual yield of 5.8 percent, with the proceeds swapped into dollars to reduce the bank's funding costs to 4.4 percent, the statement said.

This marks the lender's first foray into the Malaysian Islamic debt capital market, which has attracted a range of foreign issuers thanks to an accommodative tax regime and strong demand from local investors for ringgit-deonominated paper.

In July, Turkiye Finans became the first Turkish lender to issue ringgit-denominated sukuk in Malaysia when it raised 800 million ringgit from a 3 billion ringgit programme it set up in June.

(Reuters / 28 April 2015)

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Bank Asya Seizure Hastens Turkey’s Islamic Finance Drive

Turkey’s takeover of Bank Asya is making the government an even bigger player in the Islamic finance industry, just as state-owned lenders prepare to start Shariah-compliant units to challenge the privately-owned banks.

Ziraat Bank, Halkbank and Vakifbank are all starting arms that will adhere to the Islamic ban on interest. That’s part of a government goal to about triple the market share of Shariah-compliant banking to 15 percent within the next decade.

Turkey’s ruling party has its roots in political Islam and Recep Tayyip Erdogan, for 11 years the prime minister before winning presidential elections in August, has repeatedly stated his opposition to interest-based finance. Turkiye Finans, Albaraka Turk and Kuveyt Turk Karilim are the largest Islamic lenders who’ll be challenged by the government-backed entrants.

“The state’s involvement in participation banking would represent a fairly significant competitive pressure,” Cadgas Dogan, an analyst at BGC Partners in Istanbul, said in an interview, referring to Islamic banking. “The initial idea as announced by officials was that the newly-established banks would not chase existing participation banks’ clients but instead focus on rural areas and increase the total pie.”

The government has pushed for Islamic finance teaching in economics departments and almost all of the country’s population is Muslim. In 2013, the World Bank opened an Islamic finance center in Turkey.

President Erdogan’s government has repeatedly voiced the ambition of increasing the size of “participation” or Islamic banking, which accounts for about 5 percent of banking assets, up from about half that a decade ago.

Islamic Lenders

The three state deposit banks are all among the country’s seven largest. Bank Asya, one of two home-grown Islamic banks, had assets of 29 billion liras ($11.6 billion) in the third quarter of 2013, making it among the biggest of the Shariah-compliant lenders. A year later, those assets had slumped almost 50 percent after the lender became embroiled in a political feud and state companies withdrew their business.

The bank was founded by allies of Fethullah Gulen, a self-exiled Muslim cleric who is now Erdogan’s enemy after the President accused him of instigating a coup attempt.

Asya’s takeover is the latest in a yearlong regulatory campaign against the bank. Citing a “lack of transparency in ownership,” the government replaced the former management with a new board who entered the head office late on Feb. 3 accompanied by police, according to deposed Chief Executive Officer Ahmet Beyaz.

‘Under Banked’

A day before the seizure, Gulen criticized the ruling party in the New York Times. Supporters of Gulen and Erdogan have sought, by turn, to take measures that weaken or strengthen the bank in the last 12 months.

Finance Minister Mehmet Simsek said in an October interview he considered the Islamic finance industry in Turkey to be “under-banked” and that the government looked favorably on the idea of issuing new licenses to lenders.

Still, the prohibition under Shariah of mixing interest-earning and non-interest earning assets means the new entrants can’t just use their size to leverage growth and will instead need to build the businesses each year, according to Aykut Ahlatcioglu, an analyst at Oyak Securities in Istanbul.

Vakifbank will get a $300 million loan from the Islamic Development Bank to help fund its Islamic finance arm, while Halkbank plans a capital raising to finance its unit.

“The state banks have a high growth potential and they might squeeze out these private banks over time,” Ahlatcioglu said.

(Cathay Pacific / 09 Febuary 2015)

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Turkey's VakifBank eyes $300m loan for new Islamic bank

Turkey’s VakifBank’s board of directors has authorized a major loan procurement to set up an Islamic banking operation.

On Tuesday, the board confirmed that the bank’s general directorate office now has the authority to push ahead with the $300 million financing.

In early August deputy prime minister responsible from the economy, Ali Babacan said that the Turkish government wanted to see the establishment of three Islamic banks as subsidiaries of the current state-run conventional banks by the end of 2015.

VakifBank issued a statement on Tuesday: “On December 22, 2014 our Board of Directors licensed the general directorate office of our bank to procure a loan of $300 million under guarantee of treasury from the Islamic Development Bank (IDB) for the establishment of a participation bank.”

The Banking Regulation and Supervision Agency on 15 October issued a certificate giving permission to Ziraat Bank, the second largest in Turkey, to establish an Islamic operation with $300 million capital. Ziraat became the first state-run bank to open an Islamic branch.

(World Bulletin / 23 December 2014 )

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Turkey bank eyes Islamic finance unit

ISTANBUL: Turkish state-run lender Halkbank has decided to establish an Islamic finance unit, in line with a government effort to develop the sector and tap a pool of investors in the Gulf and southeast Asia.

The bank said its management would seek regulatory approval for the Islamic unit, known locally as a participation bank, but gave no further details on the plans.

'The Halkbank board has mandated the general management for the establishment of a participation bank, and to carry out the required processes for legal and administrative permissions,' it said in a stock exchange filing.

Islamic finance has developed slowly in Turkey, the world's eighth most populous Muslim nation, partly because of political sensitivities and the secular nature of its laws.

This changed in 2012, when the government issued its debut $1.5 billion Islamic bond and kick-started regulatory moves to allow wider use of Islamic finance contracts. The government has since issued dollar and lira-denominated Islamic bonds.

(Gulf Daily News / 01 November 2014)

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Turkey’s Aktif Bank gets approval for $91m in sukuk

Turkey's largest privately owned investment bank, has received regulatory approval to issue 200 million lira ($91 million) in Islamic bonds, the Capital Markets Board said.

The lender will sell the sukuk to qualified investors through its asset leasing company, Aktif Bank Sukuk Varlk Kiralama. It gave no time frame for the deal.

The emergence of corporate sukuk in Turkey is seen as a litmus test for efforts to develop Islamic finance by the government, which issued a maiden $1.5 billion sovereign sukuk in 2012 to encourage the industry's development.

The global sukuk market is growing fast, with year-to-date issuance up 16.3 percent from last year at $88.9 billion, according to Zawya, a Thomson Reuters company.

But the market remains reliant on sovereign and quasi-sovereign issuers, which represent a combined 77 percent of the total. Most corporate sukuk come from Malaysia, so issuers from Turkey could help deepen the market.

Last month, Turkish conglomerate Dogus Group received regulatory approval to raise $370 million via sukuk in what would be the first dollar-denominated corporate transaction of the kind in the country.

Until now, Turkey has only seen significant issuance of sukuk from the government and the country's four Islamic banks, known as participation banks.

Last year, Aktif Bank helped raise a small one-year 100 million lira sukuk for construction-to-energy firm Agaoglu Group using a sukuk structure known as mudaraba. 

The Capital Markets Board has outlined new regulations to allow a wider range of sukuk structures, as the initial rules focused on ijara, an Islamic sale-and-lease-back contract.

Ijara requires the issuer to have income from a leased asset such as real estate, a limiting factor for many companies.

(Al-Arabiya News / 12 September 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Erdogan Retooling Turkish Banks To Boost Islamic Finance

Turkey’s biggest state-owned bank is branching out from being a traditional lender to farmers to providing the country’s largest corporate loan as the government pushes an expansion ahead of an initial public offering.

TC Ziraat Bankasi AS, the Ankara-based lender founded in 1863 during the Ottoman Empire, lent a record $1.6 billion to Cukurova Holding AS in July. The bank is also planning an Islamic finance unit, it said in a public filing today, while it ended talks about buying shariah-compliant lender Asya Katilim Bankasi AS (ASYAB) as it said a deal “is not in line with our bank’s priorities.” Bank Asya would have pursued talks if Ziraat had made an official bid, it said in a public filing today.

Deputy 

Prime

 Minister Ali Babacan, also in charge of banks, said earlier this month the government would welcome Ziraat’s purchase of Bank Asya.

“We will be in all areas that we think will support Turkey’s growth,” Ziraat Chief Executive Officer Huseyin Aydin said in an interview Aug. 19. He declined to discuss concrete targets.

Turkey’s government, which has said it plans to eventually sell shares in the bank, has encouraged Ziraat and two other state-owned lenders to broaden their offerings and include Islamic banking. The move may increase the state’s sway over financial institutions’ strategy, said Apostolos Bantis, a credit analyst at Commerzbank AG in Dubai.

“While Ziraat remains 100 percent controlled by the government, these transactions will increase concerns about the bank’s corporate governance policies and the government’s influence on the Ziraat’s business strategy,” he said.

Planned Sale

Aydin took over the top job at the bank in 2011 from another state lender, Turkiye Halk Bankasi AS. (HALKB) He’s charted new territory with the loan to Cukurova, the biggest yet by a Turkish bank to a domestic company.

Cukurova used the money to repay debt to Russia’s Alfa Group to recover a 13.8 percent stake atTurkcell Iletisim Hizmetleri AS (TCELL), Turkey’s biggest mobile operator.

“Ziraat is in a phase of growing its assets as a prerequisite for its planned IPO,” said Bulent Sengonul, an analyst at Istanbul-based Is Yatirim, in a telephone interview Aug. 18. “It will be positive for the bank to grow its capital through profits and its subsidiary base through participation banking.”

Bank Asya was established by followers of Fethullah Gulen, a U.S.-based imam, who is at the center of a power struggle with President-elect Recep Tayyip Erdogan’s Ak Party that has accused Gulen and his supporters of illegal wiretapping aimed at plotting a coup to topple the party.

Bank Asya said on Aug. 8 that talks about a deal with Qatar Islamic Bank SAQ had ended while Ziraat said in today’s public filing that the lender is in discussions with investors for a possible stake sale. Several government institutions canceled contracts earlier this month for the lender to act as cash collector for them. Turkey’s capital markets regulator also didn’t approve the bank’s application for a sukuk sale, citing uncertainty over its ownership structure.

“There is a risk that the Bank Asya transaction, which reportedly has links with the Gulen movement, might be interpreted as a tool to assert political pressure on the government’s opponents,” said Bantis of Commerzbank.

(Bloomberg / 21 August 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Turkiye Finans raises $252 mln from first sukuk issuance in Malaysia

Turkish lender Turkiye Finans Katilim Bankasi has raised 800 million ringgit ($252.21 million) from an Islamic bond in Malaysia, its first issuance from a 3 billion ringgit programme announced last month.

The issuance by Turkiye Finans, in which Saudi Arabia's National Commercial Bank is the largest shareholder, is the first ringgit-sukuk done in Malaysia by a Turkish issuer.

Proceeds from the five-year sukuk will fund general corporate purposes and working capital requirements, according to HSBC Amanah Malaysia Bhd. HSBC Amanah and Standard Chartered Saadiq Bhd are jointly advising the Turkish bank.

"Following this debut issuance, we hope to see more cross-border sukuk issuances by Turkish issuers in Malaysia, giving the Malaysian investor community an opportunity to diversify their investments," said Wasim Saifi, chief executive of Standard Chartered Saadiq, in the statement.

Turkey Finance is one of four Islamic banks in the country, with a sole focus on loans to corporate clients. The bank in June established a 3 billion ringgit programme, with sukuk of one to 20 years. 

(Reuters / 21 July 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com