Turkey is committed to tripling the market share of Islamic finance, bringing it up to 15 percent by 2023. Deputy Prime Minister Mehmet Simsek said the Islamic finance market had been growing swiftly in Turkey and that the government aimed to further boost the sector. Simsek also pointed out the slowdown in global trade, saying there was a discontent against globalism after the recent global crisis. He urged countries to make immediate reforms, recalling the three main themes of the 2015 G-20 summit in Turkey, which were comprehensiveness, implementation and investment. The minister noted the income inequality in the world, saying 62 people’s wealth was equal to 3.62 billion people. He said Islamic finance could play a positive role in addressing this problem.
Deputy Prime minister in Charge of the Economy Mehmet Simsek said the size of the Islamic banking sector globally was projected to grow to $3.5 trillion in the next five years and Turkey aimed to manage a sizeable portion of this huge sector. He said the government was committed to help the sector thrive in Turkey. Furthermore, he indicated that the total size of assets of participation banks reached $183.93 billion by the end of 2015. Pointing out that the participation banks' share in the overall banking sector was 5.1%, he stressed the goal set by the representative of the sector was to attain 15% by 2025. The Turkish Treasury elaborated on the action plan called "Strengthening Interest-free Finance and Participation Banking" as a component of the Istanbul International Financial Center (IFC Istanbul) program. It was decided that the board would work on the issues raised at the meeting to develop the interest-free finance sector.
In the USD sukuk pipeline, DP World and Noor Bank have selected banks for a possible benchmark issuance. Turkey’s Deputy Prime Minister Mehmet Simsek mentioned plans of an issuance within 1H16. Bloomberg Malaysia Sukuk Ex-MYR Total Return (BMSXMTR) and Dow Jones Sukuk Total Return (DJSUKTXR) indices closed lower at 103.55 (-0.26%) and 159.18 (-0.44%) respectively. Malaysia’s revenue fell slightly to MYR1.54bn (-0.7%) in 2015 while income tax revenue increased by 7.8%. Turkey's unemployment rate declined to 10.9% and its government budget balance improved to TRY5.36bn in April. Indonesia’s trade balance rose to USD667m in April mainly due to the larger than expected decline in imports.
Deputy prime minister in charge of the economy, Mehmet Simsek, has said Turkey will hold meetings to increase sukuk exports in the first half of 2016. The country is preparing a draft law which would bring balance to the taxation of Islamic financial contracts and encourage long-term loans. Simsek said that the Ministry wants this system but implementation depends on investor interest. Regarding the establishment of a megabank in collaboration with the Islamic Development Bank (IDB), Simsek said the probable scenario includes two megabanks, one in Indonesia and the second in Turkey.
Turkey wants to set up a new Islamic megabank. Deputy Prime Minister Mehmet Simsek said the prime shareholders would be Turkey's Treasury and the Islamic Development Bank. Simsek prepares for talks with Indonesia in Jakarta next week on proposals to start a Shariah-compliant megabank that will lend to companies and infrastructure projects. Indonesia and Malaysia have long tried separately to establish a Shariah-compliant lender but faced obstacles until now. Turkey is ready to commit more than $300 mn for the lender as capital.
Turkey’s Finance Minister Mehmet Simsek said the government wants more foreign lenders to apply for operating licenses as the country’s pool of potential bank acquisition targets shrinks. The focus on licenses comes after Industrial & Commercial Bank of China Ltd. announced last month that it was buying Tekstilbank AS and Qatar Islamic Bank said on March 26 that was nearing the end of exclusive talks to buy a stake in Asya Katilim Bankasi AS. (ASYAB). While the acquisition field narrows, Turkey’s regulator said it will look favorably on applications for banking licenses as the government encourages foreign investment.
After almost a decade of preparation works, Turkey makes the next step in its Islamic bond plan. Citigroup, HSBC and Liquidity House of Kuwait are mandated to examine opportunities for sukuk issuance. The expectations are that the government will be able to gain a profit of up to $1bn through the sukuk. Also, the sukuk is likely to bridge the funding gap in the country's budget deficit target of 1.5 per cent of gross domestic product for 2012.