Ziraat Bank Opens Islamic Bank Windows Operation in Istanbul

Speaking at the opening of state-owned Ziraat Bank’s, first branch of its Islamic Banking window operation in Istanbul, Turkish President Recep Tayyip Erdoğan said “This is a historic step. Other state-owned banks should follow Ziraat’s move”.

The President further stated London is an important center for Islamic banking, and stressed that Istanbul should take “its deserved place” in Islamic finance. The Turkish government aims to establish Istanbul as a regional financial center and then as a global financial hub by 2023.

Ali Babacan, Deputy Prime Minister, said this is an important start for Turkey, adding that the new bank aims to open 20 branches with a total of 400 employees at the end of this year.

Expanding Islamic Banks and First Sovereign Sukuk in Europe

Turkey has an active and growing Islamic finance sector, with Islamic banks referred to as participation banks due to Turkey constitutionally being a secular country. In 2012 Turkey issued the first European Sovereign sukuk with a $1.5 billion 6 year issuance.

Turkey has four existing private Islamic lenders, Turk, Bank Asya, Turkiye Finans and Kuveyt Turk who jointly have a network of 1,000 branches employing more than 16,000 people. Two state banks, Halkbank and Ziraat Bank plan to launch Islamic windows later this year. A third state run bank Vakifbank will be the third new entrant after the Turkish banking regulator recently approved its application to offer Islamic banking services.

Growth within the Islamic banking sector will be boosted as participation in Islamic finance increases domestically. According to World Bank data 8% of Turks do not participant with conventional banks, viewing their interest based business models as haram (sinful). It is also likely some users of conventional banks will switch over into Islamic banks as the market develops.