Touching the borders of Asia and Europe, Turkey is a splendid country full of God’s blessings that include it’s amazing geographical location. Its shoreline is a bridge between Europe, Asia and African countries, considering multiple factors including its important role within the region and its geographical conditions, it’s not wrong to say that the prospects of Turkey to become Islamic banking and finance hub is very high, due to different financial, economic and other regional issues in emerging Islamic finance centers.
Turkish Banking and Financial Industry have a big influence in regional financial markets. Kyrgyzstan, Tajikistan, Azerbaijan, Uzbekistan and other central Asian countries are endorsing Turkish banking and financial system while in Balkan, Albania, Bosnia, Kosovo and rest of Balkan countries are also influence by Turkish Banking and Financial Industry. Turkey, being an EU member candidate state, holds a prominent position in Europe. More than 4 million Turkish native reside in Germany that consists of 4 percent of the total population of Germany, a European country with largest Muslim population. The statistics could lead the Turkish Islamic banking and finance image to grow in Europe. If we see the banking relations of Turkey with Arab countries, they are exemplary. There are various branches of the banking groups of Bahrain, Qatar and Kuwait in Turkey. Many UAE and KSA based Islamic financial institution already have good footprints in Turkey with having good investment in diversified sectors especially in real estate. All such figures and geographical facts led us to be convinced over to a fact that Turkey would be the hub of Islamic banking and Finance in near future.
There is no denying the fact that Turkey is late starter for Islamic Banking and Finance as a comparison with Malaysia and other Arab countries. Though, Islamic banking was introduced in the country by 1980 but it got popularity in 2005 after getting endorsed by the Government of Turkey and Political leadership. The demand of Islamic Banking and Financial services in the country is increasing day by day, and demand driven Islamic financial services and products are increasing at rapid pace. There are five Islamic Banks working in the country including AlBarakah, Kuvweyt Turk Bank, TurkiyeFinans, Vakif Katilim and Zirat Katilim. Meanwhile, couples of Insurance companies also have Takaful window operation and there is limited evidence of Islamic Microfinance as well in the country, but the need of Islamic Microfinance is emerging day by day due immense pressure of refugee’s in the economy.
This is noteworthy that Islamic banks operate as (participatory Banking) in Turkey. There are approximately 1,400 Islamic banks’ branches working in Turkey, where more than 20,000 people are employed. It is anticipated that Islamic Banking and Financial sector of Turkey would reach to 100 billion USD by 2020. This is worth noticing that there is a dire need for the trained and skilled workforce. Many national and international universities and colleges have introduced Islamic banking and finance program at graduation, Post-grad and Ph.D. degree level and Islamic Finance Education trend is rapidly growing by the passage of time.
The prominent factor of rapid increase in the trend of Islamic banking and finance is the establishment of Istanbul International Financial Center. The step would surely help to attract foreign investments within the country. After the black-listing of Dubai International Financial Center (DIFC) and Bahrain Financial tax-free zone by the European Union and due to 5% VAT application in UAE, it is predicted that capital and its ideal destination would be Turkey; it will be a big booster for Turkish Islamic Banking and Finance Industry to attract the Foreign Direct Investment (FDI). All these factors could raise the possibility of Turkey to become Islamic Financial hub.
Other financial products are also prominently raising it’s a value in Turkey including Islamic banking products; Takaful, Sukuk and other relevant are worth noticing. World Bank has established Global Islamic Finance Center in Istanbul which has gained the prominent importance in Turkey.
Apart from all the positivity, there are various limitations in the way of Turkey to become Islamic Banking hub i.e. lack of full-fledged Islamic regulatory frame-work, limitation of Islamic banking Products, Absence of Shariah governance structure, lack of skilled manpower, lack of training institutes in the country, Awareness among the masses and lingual problem etc. It is need of the time that Turkish government should introduce a strategic plan to address all the above mentioned high lights. It is dire need to address and overcome the problems. It is also important that there should be proper collaboration between International financial institutions. To overcome this, it is suggested to establish a project management unit (PMU) or Project Implementation Unit (PIU) to design a strategic plan to grow Islamic banking and other allied area’s such as Takaful, Sukuk, Islamic capital Market, Stock Market, Islamic Index, Islamic Fintech and so on. There should be streamlined cooperation and coordination between all such Islamic Finance components like all these products are inter-related and are must for each other like the beads of the rosary.