Deputy PM Şimşek: Turkey to found Islamic ‘megabank'

Deputy Prime Minister Mehmet Şimşek said yesterday that the country will found an Islamic "megabank" within the year. "We have been in contact with the Islamic Development Bank to found a megabank in Turkey. Indonesia has made a similar request," Şimşek said in an address at an Islamic finance meeting in Istanbul. He added that Indonesia, Turkey and the Islamic Development Bank, which is based in Saudi Arabia, had decided to set up committees to look into the matter during a visit to Washington in April.

"Turkey will found a[n Islamic] megabank that will serve this region. Indonesia will have one as well. They will either be specialized or territorialized," Şimşek said, adding that the bank will be based in Istanbul. Speaking to the media after his address, Şimşek said the Treasury would become a partner in the bank. He also said that the Islamic Development Bank is expected to be a partner as well. The government has long aimed to turn Istanbul into a finance center.

In his address, Şimşek said that Islamic finance is of "critical importance." Islamic finance entails interest-free transactions in accordance with Islamic sharia law. "Islamic finance has potential for growth, but we need to mobilize this potential," Şimşek said, calling for Islamic banks to offer more products to their customers.

There are currently six Islamic banks operating in Turkey: Albaraka Turk, Bank Asya, Kuveyt Türk, Türkiye Finans, Ziraat Bank and VakıfBank. State banks Ziraat and Vakıf have recently launched Islamic branches. Halkbank, another state-run conventional bank, is expected to begin its own Islamic operation. Islamic banking comprises 5 percent of the total banking system in Turkey. The government aims to increase the share to 15 percent by 2023. At least 16,000 people have been working in Islamic finance at 1,100 branches across Turkey.

Meanwhile, Development Minister Cevdet Yılmaz said Islamic finance should expand at a more accelerated pace. During a meeting on sustainable development in Istanbul yesterday, Yılmaz said the size of Islamic finance assets in Turkey had reached TL 120 billion ($40 billion). "On a global level, Islamic finance's current assets have totaled around $2 trillion. In 2020, however, this volume is expected to reach $4 billion. There is a serious chance of development in the near future," Yılmaz said.