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4.5 TURKEY
4.5.1 OVERVIEW OF TURKEY’S CAPITAL MARKETS
In the last decade, the Republic of Turkey has made significant strides in developing its niche
Islamic finance landscape. The strengthening of Turkey’s interest-free finance sector was
announced by the government through its Tenth Development Plan (2014-2018) and Medium-
Term Programme (2016-2018) (refer to Boxes 4.11 and 4.12 respectively). Efforts have been
continuously expended to solidify the corporate and legal infrastructure as well as to foster a
more diversified range of interest-free financial products. Priority has been given to
establishing the Istanbul International Financial Centre Programme (IFC-Istanbul), which
identifies interest-free finance as one of its core components.
Box 4.11: Turkey’s Tenth Development Plan (2014-2018)
The Tenth Development Plan 2014-2018 is a roadmap to
advance Turkish society to high prosperity levels, in line
with its 2023 targets. For efficient implementation of this
plan, medium-term programmes, annual programmes,
strategic plans, regional development and sectoral
strategies will be prepared accordingly.
25 Priority Transformation Programmes have been
identified towards achieving the 2023 targets and meet the
objectives of this plan.
Priority Transformation Programme: IFC-Istanbul
The IFC-Istanbul was first initiated in 2009. Its
development is envisaged to contribute to the formation of
a financial sector that is integrated with the global markets,
collect funds and effectively allocate resources, coupled
with the exporting capabilities of international financial
services.
Programme components:
1. Establishing an administrative
structure for IFC-Istanbul.
2. Increasing the diversity of financial
products and services,
3. Enhancing the legal infrastructure.
4. Improving the physical
infrastructure in the clustering
areas.
5. Strengthening the technological
infrastructure.
6. Increasing qualified human
resources.
7. Strengthening interest-free finance
and participation banking
Source: Ministry of Development, Turkey (2014)
Following the MTP (2016-2018), a comprehensive tax reform was introduced in August 2016,
which significantly eliminated tax-related roadblocks and uncertainties vis-a-vis sukuk
issuance and transactions. To further support the development of Turkey’s Islamic finance
landscape, the Participation Banking Strategy Document (2015-2025) targets participation
banks’ contribution to the country’s total banking assets to increase to 15% by 2025, from 5%
as at end-June 2017. Looking back at its historical performance, the development of the
Turkish sukuk market is directly linked to the growth of its participation banks.
At present, 5 participation banks are in operation in Turkey. Based on the latest statistics
shown in table 4.18, they have made commendable progress in expanding their deposits and
asset bases since inception. Turkey’s first sukuk was issued by Kuveyt Turk via KT Sukuk
Varlik Kiralama A.Ş. in 2011, valued at USD350.0 million. The ijarah sukuk had a tenure of 5
years and was successfully subscribed by investors in the Middle East (69%), Asia (19%) and
Europe (12%).