Islamic Retail Banking in Turkey: Overview and Progress
Explore the emergence and growth of Islamic retail banking in Turkey, covering its brief history, key players, and market insights. Learn about the unique position of Islamic banking within Turkey's financial landscape and its potential for future development.
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ISLAMIC RETAL BANKING IN TURKEY Prague, March 22nd 2011 Sabri ULUS T rkiye Finans Participation Bank A.S.
OUTLINE 1. 2. 3. 4. 5. 6. 7. 8. ISLAMIC BANKS ARE CALLED PARTICIPATION BANKS IN TURKEY BRIEF HISTORY OF ISLAMIC BANKING IN TURKEY NOTES ABOUT ISLAMIC BANKING NOTES ABOUT RETAIL BANKING ISLAMIC RETAIL BANKING PRODUCTS SWOT ANALYSIS GRAPHICS ABOUT THE BANKING SECTOR TFKB s RETAIL BANKING VISION
PARTICIPATION BANKS IN TURKEY (ISLAMIC BANKS) Established in 1985 Shareholder Structure National Commercial Bank 64,68 %, Boydak Group 21,56 %, Ulker Group 13,76 % Established in 1996. Shareholder Structure Public 50,89 %, Others 49,11 % Established in 1989. Shareholder Structure Kuwait Finance House 62,24 %, Turkish Foundations General Directorate 18,72 %, IDB 9 %, Social Security Inst. Kuwait 9 % Established in 1985. Shareholder Structure Albaraka Banking Group 54,06 %, Public 22,10 %, IDB 7,84 %
BRIEF HISTORY OF ISLAMIC BANKING IN TURKEY IN T ATED UNDER THE T TLE OF SPEC ALF NANCEHOUSES W TH A GOVERNMENTAL DECREE W TH THE A M OF GA N NG THE CONSERVAT VE FUNDS NTO THE TURK SH ECONOMY. 1983 TAKEN UNDER THE REGULATORY UMBRELLA OF TURK SHBANK NG ACT WH CH ADDED A VALUABLE LEG T MACY TO THE R NTERNAL AND EXTERNAL EX STENCE. 1999 DEPOS T INSURANCE SYSTEM WAS ESTABL SHED TO SECURE THE SAV NGS AT CURRENT PROF T/LOSSSHAR NG ACCOUNTS UNDER CERTA N TERMS. 2001 STARTED BE NG CALLED AS PART C PAT ONBANKS W TH A CLAR FY NG EFFECT TO THE R LEGAL STATUS. 2005 UNDER THE SUPERV S ON OF BANK NGREGULAT ON AND SUPERV S ON AGENCY (BRSA) , CENTRAL BANK OF TURKEY AND OTHER PUBL CF NANC ALAUTHOR T ES L KETURK SHCONVENT ONAL BANKS. TODAY
NOTES ABOUT ISLAMIC BANKING IN TURKEY TURKEY IS ONE OF THE FEW LUMINOUS COUNTRIES PROVEN SUCCESSFULL DURING THE GLOBAL CRISIS WITH ITS DYNAMIC ECONOMY AND SUCCESSFULL FOREIGN POLICY. TURKISH FINANCIAL SECTOR, DOMINATED BY THE BANKS (INCLUDING THE CENTRAL BANK) WITH A 91 % SHARE, IS THE BIGGEST SECTOR OF TURKISH ECONOMY. TURKISH BANKS ARE AS COMPETITIVE AS THEIR GLOBAL COUNTERPARTS IN MANY RESPECTS. ISLAMIC BANKING IS PERCEIVED AS A PROFITABLE OPPORTUNITY TO GENERATE NEW AND COMPLEMENTARY BUSINESS TO CONVENTIONAL BANKING. ALTHOUGH ISLAMIC BANKING HAS BEEN OFFERED TO TURKEY FOR THE LAST 3 DECADES, IT STILL REMAINS ON THE FRINGES OF A CONVENTIONAL BANKING SYSTEM AND THERE IS A LONG WAY TO GO. EXISTING PARTICIPATING BANKS ARE MAJORLY OWNED BY GULF AND TURKISH INVESTORS. MUCH OF THE ISLAMIC PRODUCTS HAVE BEEN SOURCED FROM THE GULF. THE GULF AND OTHER ISLAMIC BANKING HUBS CONTINUE TO GENERATE ROLE MODELLING FOR TURKEY.
NOTES ABOUT THE RETAIL BANKING IN TURKEY ASSET VALUE OF TURKISH BANKING SECTOR IS 927 BILLION TL, TOTAL LOANS MAKE 51,3 % (2010/3Q) THE MOST IMPORTANT GROWTH HUB OF BANKING SYSTEM IS RETAIL BANKING, RETAIL BANKING PROFITS CONSTITUTE APPROXIMATELY 50 % OF THE TOTAL BANKING EARNINGS. RETAIL LOANS ARE BEING MARKETED MAINLY BY BANKS, ALTERNATIVE DISTRIBUTION CHANNELS, VEHICLE DEALERS, CONTRACTORS AND REAL ESTATE AGENTS. RETAIL LOANS WITH MORE THAN 5 YEARS MATURITY IS 30 % IN THE OVERALL. ALTERNATIVE DISTRIBUTION CHANNELS ARE BECOMING A BIG MARKETING POWER EACH PASSING DAY. AN INTENSE COMPETITION IS OBSERVABLE IN THE BANKING SECTOR OVER THE HOUSING CONSTRUCTION PROJECTS.
ISLAMIC RETAIL BANKING PRODUCTS TRADE WITH MARK UP (MURABAHA) PROFIT LOSS SHARING (MUDARABA) SPOT AND FORWARD FX LEASING (IJARA) EQUITY PARTICIPATION (MUSHARAKA) ISLAMIC PENSION FUND PERSONAL TAWARRUQ SECURITIES REVENUE INDEXED BONDS PRECIOUS METAL ACCOUNTS ELECTRONIC CARDs, INTERNET-MOBILE BRANCHs,ATMs, CALL CENTERs
SWOT ANALYSIS S W - DOMINANCE OF CONVENTIONAL RETAIL BANKING - STILL A LONG WAY TO GO FOR INCREASING PUBLIC RECOGNITION OF ISLAMIC BANKING - ABSENCE OF SOPHISTICATED ISLAMIC MONEY MARKETS - NEED FOR NEW REGULATIONS FACILITATING ISLAMIC BANKING SERVICES - DYNAMIC ECONOMY -WELL REGULATED BANKING SYSTEM - EARLY RECOVERY FROM GLOBAL CRISES - PBs ADDRESSING TO ALL POPULATION SEGMENTS WITH NO SPECIFIC RELIGIOUS TONATION - PBs OFFERING MORE TOLERANT WORKING CONDITIONS ESP. DURING CRISES - CUSTOMER SEGMENTATION-RELATION MANAGEMENT AND ADC WIDELY UTILIZED IN RETAIL BANKING T TURKEY O - YOUNG AND GROWING POPULATION - UNBANKED POPULATION TO BE INTRODUCED WITH ISLAMIC FINANCIAL SERVICES - LOW HOUSEHOLD INDEBTEDNESS - TECHNOLOGICAL INVESTMENTS TO ADC - GOOD REPUDIATION OF BANKING SECTOR PERFORMANCE - INCREASING INTEGRATION WITH INTERNATIONAL MARKETS - NARROW PLAYING FIELD, IN COMPARISON WITH CONVENTIONAL RETAIL BANKING - MATURITY MISMATCH AND HIGH LIQUIDITY RISK - LACK OF INSTITUTIONALIZED TURKISH SHARIAH BOARDS - NEED FOR PROPERLY EDUCATED STAFF
Sector Participation Banks +29% +52% +32% +57% DEPOSITS AND LOANS 2009 2010/ 3Q 2009 2010/ 3Q 2008 2008 DEPOSITS LOANS Deposits have increased more than loans both at the banking sector and participation banks during the last 3 years.
Sector Participation Banks +36% +127% -22% 39% +27% RETAIL LOANS +89% HOME FINANCE 254 195 VEHICLE 156 11 17 25 2008/3Q 2009/3Q 2010/3Q 2008/3Q 2009/3Q 2010/3Q PERSONAL FINANCE Home and personal finance loans take the lead in the increase rate all over 2010. Personal tawarruq and securities financing are taken to the agenda of participation banks nowadays. Personal finance loans, having a 30 % share in overall retail loans, offer attractive profit rates at short run maturities.
RETAIL LOANS / TOTAL LOANS SECTOR LOAN TERMS 33% 64 % 33% Sector UP TO 48 M 22% PBs 19% 48-60 M 6 % TFKB 23% 20% 61-72 M 2010/3Q 10 % 2009 20 % 73-120 M 2010/3Q 64 72 A pretty high percentage of time deposits have less than 1-3 months maturity and because of the differences in the asset/liability structure, the sector may be subject to maturity mismatch from time to time. 6 10 18 20 7
CREDIT CARDS LEGAL FOLLOW UP +27 % 30000 15 14 25000 14,94 14,30 PBs 13 CREDIT CARDS VOLUME 20000 12 12,70 +21 % Sector 11 10,96 15000 10 TFKB Participation Banks 8,27 9 10,41 10000 8 9,05 Sector 8,04 7 6,52 5000 6 5 20082009 2010/3Q 0 2008 2009 2010 Banking sector, with high investment volumes at electronic cards innovation and advertising, has a big competition stage while participation banks are close follower of conventional banks with lower NPL performance.
1 ST ISLAMIC PENSION FUND BY TURKIYE FINANS PENSION FUND COMPANIES ARE UNDER THE SUPERVISION OF UNDERSECRETARIAT OF TREASURY, CAPITAL MARKETS BOARD OF TURKEY, ISE SETTLEMENT AND CUSTODY BANK INC.,etc. TODAY 100 % BACKED BY NON-INTEREST REVENUE INDEXED BONDS IN THE NEAR FUTURE WILL BE BACKED BY PROFIT/LOSS SHARING ACCOUNTS, PRECIOUS METAL ACCOUNTS, SECURITIES,etc. GREAT ELASTICITY IN THE ENTRANCE AND EXIT OF THE FUND. 1st Islamic Bond issued by Undersecretariat of Treasury in 2009 WHAT IS REVENUE INDEXED BOND? Based on beneficialownership of income streams generated by state entities. TAX ADVANTAGE ! UP TO 35 % OF MONTHLY INSTALLMENTS ARE DEDUCTABLE FROM INCOME TAX
