Professional Documents
Culture Documents
YAVUZ YETER
Vice President – Investment Banking
Kuwait Turkish Participation Bank
2. Islamic banking in the modern financial system & current trends and
areas of growth
4. KTPB experience
Global Existence
Market-driven proposition
− Retail demand has historically the backbone of the industry
− Sensitivities to principles more visible on retail deposit
− But corporates and even sovereigns showed appetite for the products
− Market-driven product development proved to be successful
− Self-regulating organisations accompanied global Islamic banking boom
Global scale
− More than 250 Islamic banks worldwide operating in over 75 countries
− A wide range of interest varying from U.K. to Singapore
− Widening customer base including sovereigns to top global corporates
to tap Islamic finance markets
Industry has developed a comprehensive product
offering over its young history
Development of industry Evolving richness in products
Worldwide (2003)
0.1%
Worldwide (2008)
funds funds
7.0%
2.5% 3.5%
Islamic
banking
86.9%
Deposits
Suppliers of capital
Profit, not interest,
Debt financing
becomes the basis for
financial intermediation
ijarah, murabaha, Productive
salam, istisna‘ economic actors
Liabilities Assets with capital
Equity financing needs
Investments
Islamic banking, a booming $US1 trillion global industry that prohibits speculation
and high levels of debt, has been relatively unscathed by the credit crunch.
Islamic banking model’s basic principles of
financing “real” trade and economic activities,
no financing of speculation
No engagement in debt trading
Asset backed and project-financing approach to help hedging risks
As a result, the lessons from the crisis;
Islamic banking is inherently stable
Islamic banks outperformed the conventional financial institutions
Interest-free Banking: Turkish Experience
Although interest-free banking was introduced as integral part of the Turkish financial system, it was
in 1999, and after the new Banking Act no. 4491, that Special Finance Institutions were officially
integrated into the Banking Law. Under the Banking Law, these institutions were brought under the
same umbrella of regulations covering conventional banks.
The Banking Act 4491 had taken Special Finance Institutions under the state guarantee scheme with
the so-called guarantee fund, alongside conventional banks, where ‘current’ and ‘profit/loss sharing’
participation accounts (local and foreign currency denominated) of up to TL50,000 and held by
individual customers were brought under state guarantee.
The regulatory framework for Special Finance Institutions was strengthened in the following years.
When the new Banking Law (no. 5411) came into effect in November 2005, the Special Finance
Institutions’ guarantee fund, (established in 2001) was merged into the Savings Deposits Insurance
Fund (SDIF). Of equal importance, ‘Special Finance Institutions’ were renamed ‘Participation
Banks’, with a more concrete definition of their interest-free characteristics with the introduction of
new Banking Law.
Participation Banking
CAGR: 35.4%
CAGR: 42.4%
9
Source: PBAT – The Participation Banks Association of
Turkey.
Kuwait Turk experience: New markets
including Dubai, Germany and Kazakhstan
Thank you