turkey islamic finance report 2014: fundamentals and the promise of growth

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Turkey today has very limited local participation banking activity — the country is home to four participation banks representing approximately 5.1% of total financial assets. However, growth within the participation banking sector outpaced the conventional financial sector in 2012, with the former increasing its assets by 25% as opposed to the latter’s 13%. FUNDAMENTALS AND THE PROMISE OF GROWTH TURKEY PARTICIPATION FINANCE REPORT 2014: FOR ANY ENQUIRES REACH OUT TO: islamic.finance@thomsonreuters.com SUBSCRIBE TO THE ISLAMIC FINANCE GATEWAY COMMUNITY: online.thomsonreuters.com/ifg READ MORE ABOUT OUR PRODUCTS AT: thomsonreuters.com/Islamic-finance THE REPORT INCLUDES: Political environment Macro-economic Environment Financial Market Landscape and trends Participation Finance demand and potential Participation Investment scenarios It gives you the overall economic and financial due diligence you need to broadly navigate investment directions. More significantly, unique to this report is an assessment of the participation finance potential in Turkey. This assessment is based on three key studies: 1. National survey with a focus on retail participation finance 2. Interviews with nine industry stakeholders 3. Data analysis of Turkey’s participation finance sector A MEMBER OF TR_Turkey_flyer_r1.indd 1 9/8/13 5:22 PM STRATEGIC PARTNER

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Thomson Reuters, Islamic Research and Training Institute (IRTI), General Council for Islamic Banks and Financial Institutions (CIBAFI), bring you the Turkey Islamic Finance Report, which provides substantive due diligence on the opportunities for Islamic financial services in the republic. To download your complimentary copy http://www.zawya.com/middle-east/landinglead/turkey/

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Page 1: Turkey Islamic Finance Report 2014: Fundamentals and the Promise of Growth

Turkey today has very limited local participation banking activity — the country is home to four participation banks representing approximately 5.1% of total financial assets. However, growth within the participation banking sector outpaced the conventional financial sector in 2012, with the former increasing its assets by 25% as opposed to the latter’s 13%.

FUNDAMENTALS AND THE PROMISE OF GROWTH

TURKEY PARTICIPATION FINANCE REPORT 2014:

FOR ANY ENQUIRES REACH OUT TO:

[email protected]

SUBSCRIBE TO THE ISLAMIC FINANCE GATEWAY COMMUNITY:online.thomsonreuters.com/ifg

READ MORE ABOUT OUR PRODUCTS AT:thomsonreuters.com/Islamic-finance

THE REPORT INCLUDES:

• Political environment

• Macro-economic Environment

• Financial Market Landscape and trends

• Participation Finance demand and potential

• Participation Investment scenarios

It gives you the overall economic and financial due diligence you need to broadly navigate investment directions. More significantly, unique to this report is an assessment of the participation finance potential in Turkey. This assessment is based on three key studies:

1. National survey with a focus on retail participation finance

2. Interviews with nine industry stakeholders

3. Data analysis of Turkey’s participation finance sector

A MEMBER OF

TR_Turkey_flyer_r1.indd 1 9/8/13 5:22 PM

STRATEGIC PARTNER

Page 2: Turkey Islamic Finance Report 2014: Fundamentals and the Promise of Growth

Our estimation is that the market share for participation banks will reach 15% in 2023, and this is in line with the govern-ment’s estimation.— Participation Banks Association of Turkey

SWOT Analysis Strengths: Weakness:

• Turkish banks are well-capitalized post 2000/2001

• Well-established monetary policy

• Enhanced banking regu-lations and supervision

• Banking supervi-sion needs further improvement

• National savingis considered tobe low

Opportunities: Threats:

• Relatively unbanked market

• Strong demand for SME sector financing

• Banking sectoris vulnerable toshocks from theEU

• Political instability• Recent deprecia-

tion of Turkish Lira

DEMAND AND POTENTIAL

• 4 participation banks, 5.1% market share• 2 more participation banks soon to be opened• Sector assets expected to triple within next

5 years

INVESTMENT SCENARIOS

Participation Investment consideration and key challenges:Opportunities:• Sukuk issuance maturity expected• Retail banking market set to expand• Domestic halal food and tourism sector

opportunities• Under-penetrated takaful sector opportunities• Nascent Islamic funds sector

Challenges:• Big gap in educating consumers about

participation finance• Existing socio-political climate could

affect rapid improvements in regulatoryenvironment

• Can the sector stimulate demand anddeepen offering?

Key insights from the survey concluded four main points:• Strong SME customer base but low 18-24 age

group customer base• A retail banking environment full of

opportunities• Major interest in participation banking with

key expectation around adherence to Islamicrules

• Target audience seeking better education onparticipation banking

MACRO-ECONOMIC

FUNDAMENTALS

The report summary Findings:• Strategic location• Learning from crises• Knocking on EU’s door• Impressive GDP growth• Diverse economy

Transport,Storage and

communication14.9% Wholesale and

Retail Trade12.6%

Agriculture, Hunting and

Forestry 14.3%

Manufacturing15.7%

Hotels and Restaurants 3.7%

Construction4.4%

Electricity,Gas andWater2.4%

Fishing0.1%

Mining and Quarrying1.9%

Other services 1.7%Health and Social Work 1.5%

Education 3.3%Public Administration andDefense; CompulsorySocial Security 4.5%

Real Estate3.9%

Ownership &Dwelling

10.0%

FinancialIntermediation5.0%

Source: Central Bank of Turkey – EDDS

DiverseEconomy—2012Q3—%ofGDPBYBRANCHOFECONOMICACTIVITY

FINANCIAL MARKETS

LANDSCAPE AND TRENDS

TR_Turkey_flyer_r1.indd 2 9/8/13 5:23 PM