Diversification of Islamic Financial Insturments
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PBs in Turkey, have applied Murabahah in different businesses and have been able to develop
few products with this mode of financing.
Here is a summary of some of the products under Murabahah financing in Turkey:
 XYZ Commodity Murabahah: It is fixed payment investment based on the profits
earned from first buying and subsequently selling the goods in London Metal Stock
Exchange. It is short term investment with low return as return is fixed (Ulus, 2012),
Customer has to sign an additional Murabahah agreement with the bank for tracking
of its operations;
 XYZ Twin Currency Unit Murabahah: It is similar to XYZ commodity Murabahah, but it
allows transactions in other currencies. It allows flexibility if currency types for
investment and more profit. The capital is not guaranteed in this case.
The process of the XYZ Commodity transaction involves several steps. First, the potential
customer will determine XYZ as an agency to both sell and buy the commodity, and signs legal
agreement. Second, XYZ facilitates the purchase of the good from the potential
supplier/vendor, and sells the same good at cost plus profit to the bank, with a maturity period
(from one week to six months). Third, at the time of maturity of the contract, the bank pays the
capital amount invested and profit to the customer through XYZ agency, which only gives some
pre-determined commission for the transactions. This is a low risk investment product with
low return, in which the initial capital is secured at the time of the maturity of the contract.
The concept of XYZ Commodity Murabahah has also been extended as XYZ Tawarruq, for
short-term financing of liquidity requirements of private enterprise. In this extension, XYZ
buys certain commodity in London and sells the same commodity to the customer
immediately. XYZ buys the commodity at cost and sells at cost plus profit as forward price.
Customer pays both the cost and profit with an agreed schedule of payments.
Performance, Outlook and Future of Islamic Banks in Turkey
The total assets of PBs showed remarkable growth during post-2001 era. During 2002-2014
the growth in the asset size has been exponential. Almost on average of 29% annual growth
has been achieved by the PBs compared to 18% average annual growth in the overall banking
sector of Turkey (Sakarya 2016). However, with this significant growth in assets the share of
the assets of PBs could reach around 5.2% of the total assets of the sector in 2014 (Table on
Shares of Participation Banks).
The improved regulatory environment, removal of restrictions on operations and integration
of Participatory banks in the main stream banking after the introduction of deposit insurance
set the level filed foe these banks to grow.