The government founded three new state-owned Islamic banks since 2014/Shutterstockby Kudakwashe Muzoriwa
Moody’s expects Turkey's Islamic banking assets to double over the next 10 years from 5.8 per cent currently to 10 per cent of the country’s total banking assets as the government injects new momentum into the sector.
Turkey’s Islamic banking sector is benefitting from evolving regulation and supervision. Borsa Istanbul, Turkey’s stock market operator, launched trading in Sukuk in August 2018, deepening the country's Islamic capital market activities.
The International Financial Centre in Istanbul (TKBB) also created a Central Advisory Board to ensure standardisation of Islamic banking products and alignment with international Islamic banking practices.
According to Moody’s further momentum may be created by Turkey’s tax administrators, who intend to equalise tax treatment for equivalent financial activities of commercial and Islamic finance institutions.
The government founded three new state-owned Islamic banks since 2014, which has broadened access and increased competition.
Furthermore, the launching of a state-funded $2.6 billion International Financial Centre in Istanbul (IIFC) which is scheduled to open in 2023 is projected to be a new catalyst for the Islamic banking sector growth.
According to Moody’s, the IIFC is expected to establish Istanbul as a global centre for finance to rival New York, London and Dubai.
Participation banking sector, as Shari’ah compliant banks are called in Turkey, had a slow start in Turkey which means it has ample room to expand.
According to Moody’s, Islamic banking sector represented just over 5.8 per cent of banking assets at the end of September 2019, compared to Malaysia’s 33 per cent and between 15 and 77 per cent in the Middle East.