Turkish Islamic banks, Islamic Development Bank sign deal to finance giant projects

ISTANBUL

Officials from the Islamic Development Bank and the Turkish Islamic Banks’ Association (TKBB) signed a cooperation deal for financing infrastructure projects on May 25, Reuters has reported. 

The agreement was inked at a TKBB general assembly in Istanbul. No further details were immediately available.

In 2015, Turkey announced seven projects totaling a record $44.7 billion, data released by the World Bank Group’s Private Participation in Infrastructure Database said.

Speaking at the general assembly meeting, Turkish Deputy Prime Minister Nurettin Canikli said Islamic banks, dubbed as participation banks in Turkey, must create their own financial instruments and ways of doing so as not to be overshadowed by traditional banks. 

“Participation banks and interest-free financing must create their own financial instruments and methods in a bid not to be overshadowed by traditional banking system,” he said, as quoted by Reuters. 

According to him, such banks unfortunately do not develop anything new, but instead improvise ways from the traditional system. 

The Turkish government aims at raising the share of Islamic lenders in the banking system to 15 percent by 2023. The share of five Islamic lenders in the whole system is now around 5 percent in the country. Their share was 5.1 percent in 2015, 5.2 percent in 2014 and 5.5 percent in 2013, according to data compiled by Reuters.
 
Canikli noted that Islamic banks and the interest-free financial system must develop their own instrumentsm, and the public authority offers a “limitless” support to help them make this. 

At the same meeting, the head of the country’s banking watchdog BDDK said new Islamic lenders are expected to enter the Turkish market in the upcoming period. 

“We expect newcomers both from the private sector and the public sector to enter the Islamic banking sector in the upcoming period,” said BDDK head Mehmet Ali Akben.