Three new non-interest Islamic bonds on the way

ISTANBUL- Hürriyet Daily News

The chairman of Turkish Capital Market Board, Vahdettin Ertaş, speaks at Sabancı Center in Istanbul in this file photo. AA photo

The Turkish Capital Market Board (SPK) has prepared three new Islamic-compliant, non-interest financial instruments to supplement existing sukuks, the chairman of the board has told daily Zaman.

The board is set to adapt the necessary regulations regarding the three non-interest financial instruments that are used in international markets, Vahdettin Ertaş, the incoming chairman of the SPK, announced.

Turkey has been trading only sukuk certificates indexed on rent certificates as a kind of Islamic banking vehicle since last August.

A sukuk is an Islamic bond that complies with shariah and its investment principles, which prohibit the charging or paying of interest. Turkey is a new player in the sukuk market.

After raising a substantial amount in lira-denominated sovereign sukuk issuances, the Undersecretariat of the Treasury began issuing dollar-denominated sukuks in September. The second issuance came as a success after the government diversified its sources of financing by tapping into the global Islamic bond market.

Participation banks in the country, which claim interest rate-free banking operations, welcomed the government’s sukuk move.The volume of the global sukuk market is estimated at around $100 billion.

Code to enhance brokers

The chairman also shared his projections and roadmap for the institution’s upcoming period.

The Turkish stock exchange needs a fresh impetus for revival as the number of investors trading on the bourse has declined in the past 10 years, he said, claiming the number of investors in the bourse was 1.097 billion in 2002 but fell by 12,000 investors in 2012 when it should have increased.

He also touched upon the problems of brokers, saying 47 out of 93 brokers went into the red last year, but the board is working on a new system that enables brokers to conduct investment banking.

The brokers will be able to deal with everything except mediation of public offerings, finding loans, company finance and mergers and acquisitions, according to the new regulation in the SPK code.“The aim is to strengthen the brokerage sector but it can be [through] mergers, leaving the sector or switching operational fields,” he said.