By Aysu Bicer
ANKARA (AA) - Islamic banking assets in Turkey will double over the next five years from around 7.2% of total banking assets as of December 2020, according to a forecast by global rating agency Moody's.
In a report released Monday, Moody's said Turkish participation banks' total assets increased by 54% last year, outpacing total banking sector asset growth of around 36%.
The report noted that, despite the likelihood that the Turkish participation banking sector will grow rapidly, it is still far smaller than in members of the Gulf Co-operation Council, where Islamic banking assets average around 40% of total banking system assets.
According to the credit rating agency, Turkey's evolving regulatory and supervisory environment is the reason behind Islamic finance in the country.
"The government's increased emphasis on Islamic finance is credit positive for the country's Islamic finance sector, and in particular its participation banks," it noted.
On Feb. 8, Turkey declared the establishment of a new department within the President’s Finance Office.
The department within the Presidential Finance Office is to focus on raising awareness on participation finance and developing strategies in the field, said a presidential decree published in the Official Gazette.
It also aims to boost cooperation among public institutions, the private sector, universities, and non-governmental organizations so Islamic finance can be improved.
Introducing new financial instruments in the field of participation finance and developing financial products, Turkey is eager to strengthen its position in international financial markets.
Last year, Turkey completed a legal infrastructure on participation banks to help them provide services for their customers in line with interest-free finance principles.
Turkey has positioned itself as a hub for participation banking and Islamic finance.