Turkey Should Think About Islamic banking

While the global financial system still has not found a departure point for itself, alternative financial structures seem here to stay, says a renowned expert on Islamic banking.

Lord Mohamed Iltaf Sheikh, the founder of the Conservative Muslim Forum who visited Sunday's Zaman, said that the Islamic banking system, which is based on religious ethics, continues to generate business in many countries, particularly in the Middle East.

Lord Sheikh has set up an advisory and consultancy company to advise interested parties on Islamic banking and Islamic insurance. Sheikh observes that Muslim communities in Europe already constitute a significant economic realm not only by dint of their population but also because of their cultural assets. For this reason, he gives great importance to establishing Islamic banks in Europe based on principles such as transparency and neutrality. He states that in the United Kingdom the Islamic way of doing business has been bolstered as a government policy. The UK is the eighth largest country in the number of Islamic finance and insurance companies it hosts. The British government has already adopted several concessions meant to encourage Islamic banking not only for Muslims but also for the general public. Lord Sheikh pointed out that anybody who acquires a property using Islamic banking principles is exempted from the stamp tax while signing over the property. Lord Sheikh's vision of Islamic banking is not only about elimination of “riba,” or usury, but also about cooperating and investing in socially and environmentally responsible projects.

Though Islamic banking is the fastest growing financial market in the world, with 30 percent annual growth in banking and 20 percent in the insurance sector, Sheikh believes that Islamic banking will not become a substitute for the conventional banking system. “It is due to the lack of capacity,” he says. “Islamic banks cannot afford to handle huge transactions, for the time being.” But this could change in the near future, given the massive growth in the sector. Sheikh noted the fact that the Vatican has praised the Islamic banking system as an alternative to the conventional understanding of the financial markets. Sheikh thinks that with its population of 70 million Turkey should encourage and invest in Islamic banking, more so than any other country in the region.

Lord Sheikh is not only lobbying for Islamic banking within the capitalist West, but also among Muslim communities themselves. In the realm of insurance, Muslim communities are fairly reluctant to purchase a life or health insurance policy because of a religious belief in destiny. Sheikh has been trying to educate Muslim communities about the kind of input human will should provide for divine destiny to take care of human beings' needs. He says that their professional advice and expertise in Muslim countries is important for spreading the idea of insurance in those countries.

Thanks to the development of Islamic economies throughout the world, the term “Islamic banking” has gained significant meaning in today's financial system. Islamic banking activity connotes a typical financial system that operates in harmony with Islamic principles and modes of life. For example, the payment of fees for the renting of money, or “riba,” is strictly prohibited according to Islamic principles. Despite many commonalities shared with conventional banking system, Islamic finance is based on equal sharing of profits and alternatives to riba.

Islamic banks have grown recently in the Muslim world but remain a very small share of the global banking system. Micro-lending institutions founded by Muslims, notably the Grameen Bank, use conventional lending practices and are popular in some Muslim nations, especially Bangladesh, but some do not consider them true Islamic banking. However, Muhammad Yunus, the founder of Grameen Bank and microfinance banking, and other supporters of microfinance, argue that the lack of collateral and lack of excessive interest in micro-lending is consistent with the Islamic prohibition of riba.

Lord Sheikh, chairman of the Conservative Ethnic Diversity Council, started his career by joining Sun Alliance Insurance Company in London. Sheikh has been the president of the Insurance Institute of Croydon and a member of the National Council of the Chartered Insurance Institute. He was regional chairman of the British Insurance Brokers Association.

From Sunday's Zaman

Islamic bank To Be Set Up In Turkey

The prospects of setting up a joint venture Islamic bank in Turkey with the involvement of some prominent Qatari investors were discussed at a high-level meeting held in Ankara.

The proposal is to have Qatari and Syrian investors in the proposed Islamic bank in Turkey. The discussions are at the initial stage. Prominent Qatari investor, Dr Sheikh Khalid bin Abdullah bin Thani al-Thani was in Ankara for talks on establishing the Islamic bank. He was welcomed in Ankara by Tevfik Bilgin, chairman of the Turkish Banking Regulation and Supervision Agency.

The high-level meeting discussed the potential of establishing a full-fledged Islamic bank in Turkey. The prospects for Islamic banking in Turkey came up for discussions.
The possibility of involving prominent Qatari and Syrian investors, with expertise and skills in Islamic banking, in the proposed project figured at the meeting. It was mutually agreed upon to continue with follow up meetings on setting up the proposed Islamic bank.

Bilgin assured Dr Sheikh Khalid of all possible co-operation and support in establishing a joint venture Islamic bank in Turkey, which is one of the fastest growing economies in Europe. He also provided an overview of the investment opportunities available in Turkey and the country’s competitiveness as an ‘investment-friendly’ destination.

From Gulf Times

Turkey Fail To See Advantage

Turkish agriculture as well as health and education are key areas that may draw Gulf capital to the country, according to a Turkish representative of the Islamic Development Bank. Defining Turkey as a ’sleeping giant’that is unable to see the advantages it has, Ahmet Tıktık says trade and industry chambers should be more active in the effort to draw foreign capital into the country.

Turkey still ’unable to see its advantage’ Capital from the Persian Gulf may invest in the areas of agriculture, education and health in Turkey, said Ahmet Tıktık, vice president of Islamic Development Bank, or IDB, and former undersecretary of the State Planning Organization, or DPT.

"Gulf capital may undertake great investments in Turkey, particularly in agriculture. education and health are also among important investment areas," Tıktık said yesterday responding to the questions from the Anatolia news agency during the annual IDB meetings in the Turkmenistan capital of Ashgabat.

Turkey needs foreign capital, Tıktık said, urging more promotion. Chambers can undertake more responsibility in this respect, he said. "Gulf capital may invest in various areas in Turkey. É The country may become a base for neighboring countries in health and education," he said.

IDB provides resources worth $500 million to $600 million to Turkey annually, Tıktık said, adding that the total contribution reaches $700 million to $800 million with its subsidiaries. Turkey is the IDB’s seventh-largest investor, he said.

The IDB has made a restructuring decision by which the country and sector-focused structure will replace the country-focused structure, Tıktık said. The World Bank is a model in the restructuring. "This is, in a sense the World Bank of the Islamic countries."

The bank will focus on four areas in the upcoming 10 years, he said, listing "financing of infrastructure investments of the countries, funding for development of human resources, including education and health, as well as reducing poverty, increasing the share of Islamic banking in overall banking sector, and economic-commercial cooperation."

"Turkey is in a very good position abroad,"he said. "If only we could bring all Turks abroad to make them see the country from outside." He defined Turkey as a country "that is unable to see its advantages," calling it "a sleeping giant."

Noting that Turkey has fulfilled many responsibilities since 2002, Tıktık said: "The reform process has reduced Turkey’s vulnerability. Today, our banks’ capital adequacy is far better than those in Europe and the United States. Moreover, there is also a good supervision system." But, he noted, there was a long way to go. Criticizing Turkey’s education system, which "victimizes students," he stressed the need to deal with a comprehensive education reform.

Noting that unemployment is a tough problem, Tıktık said Turkey is usually forced to hit the brakes after a growth period of three to five years. It is crucial to orient toward products with high added value in industry, according to Tıktık, who requested the Turkish Employment Organization, or İşkur, be reformed to reduce unemployment. The Danish system, which spends around 2 percent of the national income on unemployment and closely monitors its jobless population, can be a model for Turkey, he said.

"The service offered in education and agriculture should cure the problems citizens face in the market. We face tough times in this field," Tıktık said.

From Hurriyet Daily News

Islamic Finance Limited Without New Laws

Turkey is ready to jump onto the Islamic finance bandwagon that has flourished in the past few years, according to a participant of the Turkey Infrastructure and Green Investment and Finance Summit 2009.

First there are necessary regulatory changes that have to be made and meanwhile the Treasury has a lot of work to do, said Selim Kervancı, head of investment banking at HSBC Turkey and the official representative of the International Capital Market Association of Britain. "There are special financial products created exclusively for the Gulf region, but these can be used everywhere right now.

In Turkey, we need new regulations to establish a presence for Islamic finance," Kervancı said. Recalling that HSBC is active in using Islamic financial products such as murabaha and ijara, Kervancı said these products are in line with the rising demand for infrastructure funding.

Sanjeev Kathpalia, country head of TAIB Bank, which has a presence in Istanbul and Bahrain, the so-called "participation" banks in Turkey are "the beginning of Islamic finance in Turkey."

"They introduced [Islamic finance] to banking laws and regulations," Kathpalia told the Hürriyet Daily News & Economic Review on Friday. "Since then, one can observe the expansion of these products. There has been a consolidation within participation banks. The growth rates of these banks are more than other commercial banks."

"There is a long way to go in terms of regulation and Turkey is moving in that direction," Kathpalia said. "But lots of technical work that would support Islamic finance is done in the West. In fact, the West is leading the growth [of Islamic finance]."

Kerim Alain Bertrand, general manager of ISI Emerging Markets, said the company has a special database just for Islamic finance. "Our clients are mainly from Asia, the Gulf region and Britain. I think this sector is growing slowly in Turkey, whereas it is developing rapidly globally. In Turkey, retail banking system is really limited and institutional banking is only for trade finance possibilities."

Bertrand said Islamic finance, with its rapid growth, can be an alternative source of financing for Turkey, but first legislation should be changed.

From Hurriyet Daily News

Scholars Stop In Istanbul To Analyze Islamic Finance

Islamic Finance News, a global provider of information and news regarding the field of Shariah-compliant financing, will be holding a “roadshow” today in Istanbul.

With Islamic finance practices sprouting in various parts of the world, particularly after the onset of the ongoing global financial crisis, the level of competition is rising and participation banks in Turkey have to step up their pace to meet customers' needs, a formidable task as Islamic financial institutions are becoming adept at innovating market-creating products and providing quality delivery services. To top it off, players from other countries are moving into Turkey, either opening their own firms or buying into existing Turkish entities.

As such, the Islamic Finance news Roadshow 2009 is being held at a perfect time for Turkey. Its objective is to help Islamic financiers get new perspectives and ideas on how to expand their business, strengthen their platforms and seek new or different ways of undertaking their activities.

Turkey, being touted as a vital link between East and West not only in the geographical sense but also economically and politically, is also of special interest to those who observe the principles of Islamic finance. It is only to be expected, therefore, to find financial institutions that bank according to Islamic principles doing well in Turkey. In particular, these participation banks are becoming a significant conduit for funds from the Middle East seeking better returns in Europe through Shariah-compliant financial arrangements.

Islamic finance is no longer only a form of mutual assistance among Muslims; rather, it is being readily embraced by much of the rest of the world. In the midst of so many opportunities, time is of the essence, be it to venture into Islamic finance for the first time or to consolidate and increase one's market share in this sector. The roadshow is designed to be of assistance to those in either of these circumstances.

A particularly useful feature of this roadshow is opportunity for interaction and discussion. Not only is the audience invited to ask questions of the panelists on their discussions at each session, there are also networking sessions where business contacts can be established.

The roadshow will begin with an overview of what's happening in Turkey from the perspective of Islamic financial practice, especially in the context of the region and beyond. The discussions will then move on to developments in particular aspects of Islamic finance, delving into issues such as regulations and ratings. The session on making the business environment in Turkey and the region conducive to the development of Islamic financial products is another highlight of the roadshow. Islamic Finance News' objective is to facilitate the continued nurturing of the industry. It provides a strong and steady stream of news and views, in addition to inviting participants to interact and share experiences and knowledge.

Over 150 key market participants have already registered to attend the event. Organized by the REDmoney Group, the forums will span Asia, the Middle East, Europe and Africa. Upcoming roadshows will be held in the UK (Sept. 16), Japan (Oct. 6), Brunei (Oct. 20), India (Nov. 3) and Pakistan (Nov. 5).

From Today's Zaman Istanbul