Center of Islamic Banking and Economics

Turkey would be the Global Hub for Islamic Banking and Finance
Written by: Zubair Mughal
Zubair.mughal@alhudacibe.com

Touching the borders of Asia and Europe, Turkey is a splendid country full of God’s blessings that include
its amazing geographical location. Its shoreline is a bridge between Europe, Asia & African, 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%
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, Turkiye Finans, 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 1400 Islamic banks’ branches working in Turkey, where more than 20,000 people are

AlHuda Center of Islamic Banking and Economics

Head Office: P.O Box. 120867, Dubai - U.A.E, Ph: 00971 55 938 99 00
Pakistan: 117-G3, Johar Town, Lahore – + 92 (0)42 - 35913096 – 8, l: info@alhudacibe.com : www.alhudacibe.com
 Center of Islamic Banking and Economics

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 Int’l 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.

The writer is Chief Executive officer of AlHuda center for Islamic Banking and Economics (AlHuda CIBE); AlHuda CIBE
is an established name in the field of Islamic Banking and Finance worldwide. You may reach him at:
zubair.mughal@alhudacibe.com

For Media Contact:

Ms. Shaguftta Perveen
Manager Communications,
info@alhudacibe.com / Call: +92 42 35913096 - 8

AlHuda Center of Islamic Banking and Economics

Head Office: P.O Box. 120867, Dubai - U.A.E, Ph: 00971 55 938 99 00
Pakistan: 117-G3, Johar Town, Lahore – + 92 (0)42 - 35913096 – 8, l: info@alhudacibe.com : www.alhudacibe.com