Turkey’s Islamic Bank gets $75 million from IDB

The Islamic Development Bank (IDB) has assigned $75 million line of finance to Turkey’s Islamic Bank, Turkye Finans Participation Bank.

At the 27th meeting of the Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation, (COMCEC), in Istanbul, IDB Group President Dr. Ahmad Mohamed Ali signed an agreement with the one of Turkey’s largest Islamic Banks.

The agreement, counter-signed by CEO of the Turkish bank, Mr. Derya Gurerk, provides long term financing opportunities to small and medium enterprises in Turkey through Installment Sale, Ijara and Istisna’a modes of Islamic finance. It aims to further develop key targeted sectors, i.e. agriculture and food security, transport, energy and manufacturing and is expected to positively contribute towards job creation.

The financing facility is part of the IDB Group’s Member Country Partnership Strategy (MCPS) Program for the Republic of Turkey. The MCPS, which covers 2010-2013 period, envisages a total financing envelope of US$ 2 billion from IDB Group to Turkey. The IDB Group has long been supporting the development of the Turkish private sector through project and trade finance as well as insuring export and import operations.

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Turkish institution seeks M'sian cooperation on Islamic finance

One of the biggest Turkish financial institutions has indicated its interest in forging cooperation with Islamic banks in Malaysia.

"Although Turkey was once an Islamic superpower, it now needs our assistance in implementing the system of Islamic finance," said Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah.

He said this in his speech while officiating the 6th Kuala Lumpur Islamic Finance Forum here on Monday.

At a press conference later, Husni named the Turkish bank as Asya Bank, which had expressed an interest in collaborating with Maybank and CIMB.

Asked whether the collaboration would be in terms of expertise or a joint venture, he said it could be one or both.

"It depends on the rules and regulation of the Turkish banking industry," he said. - BERNAMA

Link: http://biz.thestar.com.my/news/story.asp?file=/2009/11/2/business/20091102130217&sec=business

Turkey should think about Islamic banking, says Lord SheikhWhile the global financial system still has not found a departure point for itself, alterna

Lord Mohamed Iltaf Sheikh

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.

Link: http://www.todayszaman.com/tz-web/detaylar.do?load=detay&link=180666&bolum=101

Islamic finance limited without new laws

ISTANBUL - 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.

Link; http://www.hurriyet.com.tr/english/finance/11806456.asp?scr=1