President Erdoğan: Interest system is cruel

Speaking at the opening ceremony of Vakıf Katılım Bank at Haliç Congress Center in Istanbul, President Recep Tayyip Erdoğan said that the interest rate system is unjust and that Vakıfbank is a product of a 20-year dream. He said: "We may be late, but I believe that we will soon make great progress in this sector regarding the participation of financial management." Explaining that there has to be a distinction between the concepts, Erdoğan said: "We must distinguish between what is a financial institution and what is participation, because when we refer to a bank, the current banking system comes to mind. We will support the improvement of an Islamic finance system."

Recalling that the number of banks working in this system has increased to six, he said: "The share of interest-free Islamic finance systems among all the other banking systems is nearly 5 percent. We are going through a period where the world needs interest-free financing options more than ever," he added.

He said that the interest system is unfair and cruel in his opinion, and continued: "If we are to jump forward we need to grow within a real participation system rather than this cruel one. Islamic financing is a completely different system from the current banking system in terms of its asset-backed structure, its reliance on risk share and its structure closed to speculation. I believe that this system will be the driving force behind the Turkish economy with its structure, inciting production rather than consumption, decreasing fragilities by providing resource usage opportunity without owing money from institutions," Erdoğan said.

Comparing Turkey's interest rates with those of other countries, he said: "The interest rate is 0.5 [percent] in the [United] States, negative in Japan and at zero in Europe while Turkey's is in the double-digits. Can Turkey produce with that interest rate, can it compete? Interest rate lobbying continues in cold blood."