Fitch Ratings announced that the recently strengthened relations with the Gulf countries are expected to support investments in Islamic finance in Turkiye.
Fitch Ratings Global Islamic Banking Group President Bashar Al-Natoor answered questions about Turkiye’s outlook and potential in the field of global Islamic finance.
“Turkiyemanaged to enter the sukuk market and provide the necessary financing even under difficult market conditions.” Al-Natoor stated that the strengthening relations between Turkiye and the Gulf countries are expected to contribute positively to the investment environment in the coming period.
Al-Natoor said, “We think that the development of relations between the Gulf countries (Gulf Cooperation Council) and Turkiye will help support this (increasing investments). In this area, there is a trend we are following (for Turkiye).”
“Sukuk issuance is an important part of external financing”
Al-Natoor stated that the Turkish government has received investment commitments of approximately $51 billion from the United Arab Emirates (UAE) to be realized in the next 3 years, and said: “Approximately $8 billion of this includes the purchase of sukuk bonds. This shows that sukuk issuance is an important part of external financing.”
Al-Natoor pointed out that financial and banking services in the Gulf Cooperation Council countries consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are mainly based on Islamic finance.
Stating that the share of Islamic banking is 85% in Saudi Arabia, 50% in Kuwait, and 30% in Qatar and the United Arab Emirates, Al-Natoor said, “Relations with these countries cannot be established by excluding Islamic banking in the field of finance. Because (Islamic banking) forms a significant part of the DNA of finance.”
Al-Natoor stated that the sukuk market, known as “lease certificate” in Turkiye and which is an interest-free financing instrument in accordance with Islamic rules, is extremely important on a global scale. “As of the end of the third quarter of this year, sukuk issuance in Turkiye increased by 19% compared to the previous year, reaching approximately $25.9 billion.”
Stating that the share of sukuk bonds in Turkiye’s bond market is 6.5%, Al-Natoor emphasized that the country has a great growth potential in this field. Al-Natoor continued:
“Last year, Saudi Arabia issued sukuk only in local currency. In Malaysia, 60% of the composition consists of sukuk and 40% of government bonds. This year, Turkiye has issued Sukuk worth $7 billion so far.”
Gulf banks enter the Turkish market
Reminding that Dubai Islamic Bank decided to invest in digital banking in Turkiye last month, Al-Natoor said, “We see that Gulf banks have entered the Turkish market to diversify their investments.”
Pointing out that the growth opportunities of Gulf banks have become increasingly limited as the sector has reached saturation in the region, Al-Natoor said:
“Gulf banks are now looking outside and looking for investment opportunities and trying to diversify their investments. Turkiye also falls into this category. The government in Turkiye aims to increase the share of participation banking to 15% by 2025. In recent years, we see that participation banking has a trend that contributes to the growth story.”
Al-Natoor said that according to World Bank data, approximately 26% of the population in Turkiye cannot benefit from banking services, and that approximately 15% of this segment cited their religious beliefs as a reason for this situation.
Al-Natoor stated that participation banking offers an opportunity to reach masses outside the financial system.
Source: Trthaber / Prepared by Irem Yildiz