139
Table 4.19: Timeline of the Development of Turkey’s Islamic Finance Industry
Year Timeline description
1983  A Cabinet Decree was passed on ”Special Finance Houses (SFHs)”
1999  SFHs were covered in the scope of the Banking Law
2005  The Banking Law officially replaced ”special finance houses” with ”participation
banks”
2010  Guideline on Ijarah sukuk was established through the release of Communiqué
Serial III no: 43 – principles regarding lease certificates and asset-leasing
companies (ALCs). This regulated ijarah sukuk and the structures of a financial
institution as well as SPVs and their principles of incorporation and activities.
2011  Kuveyt Turk issued Turkey’s first sukuk
 Law no 6111 (known as the Tax Amnesty Law) - The Turkish National Assembly
passed tax and other legislation to facilitate the issuance of ijarah sukuk, reducing
the withholding tax on such sukuk to 10% and exempting sales from value-added,
stamp and corporate taxes. This facilitates the sale and transfer of the tangible real
estate to an onshore SPV combined with asset-based ijarah characteristics. Further
legislation includes tax exemption for revenue from sukuk certificates with a
minimum tenor of 5 years. Certificates with shorter tenors would still be subject to
tax ranging from 3% to 10%. However, since most corporate sukuk issues meet the
shorter-tenor profile, further adjustment would be needed to open the market
2012  Law no 4749 The Public Finance and Debt Management Law was amended to
enable the sovereign to access the sukuk markets
 Undersecretariat of Treasury issued the first sovereign sukuk
 Law no. 6362 (Article 61) – a new Capital Market Law (CML) was introduced,
which included provisions for lease certificates and ALCs
2013  Amendments to the sukuk law via the release of Communiqué III-61.1 no: 28670 –
introducing istisna’, murabahah, mudarabah, musharakah and wakalah sukuk
2016  Tax neutrality provided for all sukuk structures with a law amendment
Sources: Thomson Reuters, IRTI & CIBAFI (2014), CMB
Turkey’s Islamic finance landscape progressed in tandem with the growth of the country’s
economy. Chart 4.45 shows that GDP grew to USD857.0 billion end-2016 from USD732.2
billion recorded end-2010. As a percentage to GDP, representation of outstanding
loans/financing increased to 67% in 2016 from 48% in 2010. However, intermediation of
capital markets reduced denoting higher reliance on the banking system to fund the economic
sectors.