The Islamic Finance Handbook: A Practitioner's Guide to the Global Markets

Chapter 30TurkeyRebuilding the Foundations

Eser Sagar

Expert, Capital Markets Board of Turkey

Atila Yanpar

Expert, Capital Markets Board of Turkey

Despite Turkey's population of nearly 75 million Muslims, Islamic finance has not received the attention it deserves in the country until recently. For many years, Islamic banks have taken a backseat, primarily because of the strongly secular political environment in the country. However, as Turkey's political and economic structure evolves and transforms, a new chapter is opening for Islamic finance.

Turkey aims to turn its political and cultural capital, Istanbul, into a major financial center, with Islamic finance expected to be a major participant. As part of the efforts to develop the sector, the government wants to see the market share of Islamic finance increase to 15 percent in the next decade, and it is determined to support this through regulation as well as by encouraging unbanked rural residents to open accounts with Islamic lenders. Turkey's 2023 financial services vision is for the Islamic banking industry to triple in size to more than US$100 billion, approximately where Malaysia is today.

Islamic finance in Turkey is currently not a shining star in terms of the figures. The four banks that currently operate in the Islamic banking industry constitute 6 percent of the Turkish banking industry. Islamic funds and the takaful industry are still crawling. But while these numbers are unnerving, Turkey's expertise and innovation ...