Turkey’s Islamic banking assets are set to double within a decade as government initiatives drive growth in the sector, credit rating agency Moody’s announced on Monday.
According to a Moody’s report published today, Turkey’s Islamic finance sector is currently smaller than other large Muslim countries, and its slow start means it has ample room to expand.
“The sector represented just over 5.8% of banking assets at the end of Sept. 2019, compared to Malaysia (33%) and Middle Eastern countries (15% – 77%),” it added.
Noting that the Turkish government has founded three new state-owned Islamic banks from 2015 to 2019, the report said the country will continue to broad access and increasing competition.
It added that a state-funded $2.6 billion International Financial Centre in Istanbul (IIFC) is scheduled to open in 2023, which will be “a new catalyst for growth.”
Underlining that the development of Islamic finance is a key pillar of the IIFC strategic plan, the report said that Turkey intended to establish Istanbul as global center for finance.
“Islamic banking is also benefitting from evolving regulation and supervision. Turkey’s stock market operator, Borsa Istanbul, launched trading in sukuk (Islamic bonds) in August 2018, deepening the country’s Islamic capital market activities,” it underline.
“The Participation Banks Association of Turkey (PBAT), which groups Islamic banks operating in Turkey, set up a Central Advisory Board in 2018 to ensure standardisation of Islamic banking products and alignment with international Islamic banking practices. PBAT targets an Islamic banking penetration of 15% by 2025,” the report noted.
Further momentum may be brought by plans to equalize tax treatment for equivalent financial activities of commercial and Islamic finance institutions, it said.