PUBLICATIONS - A new approach to derivatives : financial engineering with Islamic Rules (Atila Yanpar - SPK)

A NEW APPROACH TO DERIVATIVES: FINANCIAL ENGINEERING WITH ISLAMIC RULES

ATİLA YANPAR

Capital Markets Board of Turkey, Expert

Despite their importance in financial sector development, derivatives are still not generally accepted as legitimate products in Islamic finance. Conventional derivatives and the world of Islamic financial products has chasm between each other as they have different approaches in important issues like interest and ambiguity. While recent events in the world economy have sparked a global debate on derivatives and the damage caused by them, strict Sharia rules saved Islamic finance institutions from the worst of the crisis. On the other hand, due to lack of sufficient instruments for protection against volatility in currency, interest rate and commodity prices, the ability of Islamic finance institutions to survive future shocks is in question. As the Islamic banks are struggling to develop hedging tools with regard to doubt on their usage casted by religious differences, this article explores the validity of derivatives in accordance with basic legal principles of the Sharia and summarizes the key objections of scholars that challenge the permissibility of derivatives under Islamic law. In conclusion, the article delivers suggestions for Sharia compliance of derivatives and Turkish Derivatives Exchange future contracts. (access here)

PUBLICATIONS - Islamic Finance News GUIDE 2012

Turkey: A bumper year for Islamic finance 

 Aytug Buyukatak and Burak Gencoglu

The Turkish financial market maintained its constant development in 2011 and recent reports from reputable international financial institutions project that this development will continue in 2012. In 2011, Sukuk was introduced to the Turkish market by a participation bank, Kuveyt Turk Katılım Bankası, based on the new communiqué on lease certificates which entered into force for the first time on the 4th April 2010. Another significant development for the Turkish legal and financial system is the new Turkish Commercial Code (TCC) and Code of Obligations, which will both enter into force on the 1st July 2012.

Full Guide
Turkey article

ARTICLES - TURKEY: A Special Dynamic to Islamic Finance

As the direction of world trade once again shifts, Turkey, on the borders of Asia and Europe, stands to reap the rewards. SCOTT WEBER looks at a possible Ottoman economic resurgence.

Participation banking in Turkey originates from a 600-year history of raising capital utilizing traditional Islamic contracts, networking and subcontracting. Islamic financing emerged as the result of Muslim entrepreneurship, SMEs and traditional business networks� desire to raise capital in a closed, centralized Turkish market.(source)

ARTICLE - Ahmet Bicer - Private banking potential for Turkish participation banks

2011 Islamic Turkey Article Bicer Ifn
Source : http://www.tkbb.org.tr/download/Ahmet_Bicer_IFN_July.pdf

ARTICLE - Osman Akyz TKBB Secretary General - Banking What would it mean for Turkey?

Interest-free banking in Turkey with 637 branches and 13,000 employees who carry out activities 4 contributions bank, on the successful model showed that a robust and reliable banking system and has set an example to the whole world.

Participation in our country's financial and banking system in 1985, including the Banking (interest-free banking), nowadays it is an integral part of the banking sector. In 1985, "Private Finance Agency as" establishments that started operations in the world, the legal infrastructure developments in the Turkish banking sector, completed the establishment and development. These organizations themselves over time, better able to express and participate in the profit and loss participation accounts in order to evoke the essence of the isimlendirildiler participation banks.  (full story and source)

INTERVIEW - Hussain Erkan - Turkey strives to build closer links with GCC stock exchanges

Turkey has been building capital market bridges to GCC and South East Asia, and chairman of the Istanbul Stock Exchange, Hussain Erkan, has been a leading architect in establishing dialogue, hosting events, and facilitating cooperation and coordination with his counterparts for both Islamic and conventional finance. In this interview, Erkan shares his thoughts on the challenges and progress of Islamic finance in Turkey, among various other issues. He is hopeful that the improvements made should be able to attract investors from the GCC. 

 

Gulf News: Would you kindly explain the role of Istanbul Stock Exchange in providing opportunities for those interested in Islamic finance?

Hussain Erkan: Islamic countries have a huge potential to create wealth in the economy with their rich resources and are capable of achieving more by improving their capital market structure. Since 2005, under the activities of Standing Committee for Economic and Commercial Cooperation of the Organisation of the Islamic Cooperation (COMCEC), Istanbul Stock Exchange (ISE) has been working on creating this awareness and developing the exchange industry in Islamic countries by acting as the coordinator of the Organisation of Islamic Cooperation (OIC) member states’ Stock Exchanges Forum. We also cooperate with other international institutions such as IIFM (International Islamic Financial Market)? on developing an appropriate structure to create solutions for increasing the liquidity of Islamic capital market instruments. (source)

ARTICLE - Talking Turkey

theislamicglobe.com - In quiet corners in the established Islamic finance hubs of the GCC and Malaysia, jittery Islamic bankers whisper tales of a great power rising in the west.

The fear is not the old crusaders and imperialists of Europe and America, but a modern, democratic, secular nation at the bridge between Europe and Asia: Turkey.

Although the development of c, known in Turkey as participation banks, is no secret, there is a definitive pique in interest from the established powers in Islamic banking in doing business with and doing business in Turkey.  (source)

ARTICLES - REGULATIONS - The future of participation banks and new banking licences in Turkey

The market share of participation banks in Turkey has increased since the 2001 crisis. Ali Ceylan and BURAK GENCOGLU delve into the banking laws in the country and discusses how it may affect the Islamic finance industry. (full article - 19-Oct-2011- Volume8.Issue41)

ARTICLES - Forbidden fruit: Turkey’s tempting Islamic banking sector

IFN.COM - Cover Story - 29-Aug-2011 - Volume8.Issue34

Forbidden fruit: Turkey’s tempting Islamic banking sector economic powerhouse

Turkey has been one of the few economic success stories emerging from the recession, with the highest economic growth rate in the world (11%) in Q1 2011. Despite a dip in 2008 with GDP contracting 14.6%, the economy rapidly returned to growth and GDP grew by 8% in 2010 with a 5% expansion predicted for 2011. Turkish banks were largely unaffected by the global financial crisis, with limited exposure to toxic securities and high retail deposit levels providing a liquidity buffer. The regulator maintains firm control with a focus on preventing excessive credit growth and a ban on foreign currency retail lending, meaning that banks have experienced little funding stress.  Fitch Ratings recently changed Turkey’s ‘BB+’ sovereign rating outlook from stable to positive suggesting that a future upgrade could be on the cards, which will only enhance Turkey’s attractiveness to foreign investors. (source)

BANKING - Articles - Turkish participation banks should enter Europe

sharingrisk.org - S&P recently suggested that Turkish participation banks, as Islamic banks are known in the country, could sustain their recent growth (they accounted for 5% of assets in the country at year-end 2010, compared with 2.8% in 2005) if they leverage their international ties further (three of the four participation banks have GCC-based owners).  I would take this one step further and suggest that they could provide a lead in continental Europe for Islamic banking with financial support from their owners. It is already underway with Kuveyt Turk, the Turkish subsidiary of Kuwait Finance House, opening a branch in Germany and Bank Asya planning an acquisition in the Balkans. (source)

BANKING - Article - Turkish nascent Islamic banks can sustain growth

twentyfoursevennews.com - Turkey’s Islamic banks could continue their recent strong growth if they can cultivate stronger ties with their international owners and create a sustainable brand image, according to Standard & Poor’s Ratings Services’ view.

The country’s Islamic banking sector has grown strongly over the past five years, with total sector assets accounting for about 5% of total system assets as of year-end 2010 compared with 2.8% five years earlier.

Other developments in this sector over the past 18 months have included; a law conferring tax neutrality on sukuk products; a $100 million debut sukuk by Kuveyt Türk (not rated); the launch of several Sharia-compliant funds; and the creation of a domestic index of Sharia-compliant banks and companies by the Istanbul Stock Exchange. (source)

MALAYSIA - PUBLICATIONS - ISRA Research Papers 25 and 26

Analysis Of Legal Disputes In Islamic Finance And The Way Forward: With Special Reference To A Study Conducted At Muamalat Court, Kuala Lumpur, Malaysia Hakimah Yaacob	Pioneering Thoughts On Commodity Hawalah: Facilitating The Trading Of Debt?  Prof. Dr. Ashraf Md Hashim & Eqhwan Mokhzanee Muhammad
Summary and download links here under

ARTICLE - The Behavior of Conventional and Islamic Bank Deposit Returns in Malaysia and Turkey

Author/Editor: Cevik, Serhan ; Charap, Joshua

Authorized for Distribution: July 01, 2011

Summary: This paper examines the empirical behavior of conventional bank deposit rates and the rate of return on retail Islamic profit-and-loss sharing (PLS) investment accounts in Malaysia and Turkey, using monthly data from January 1997 to August 2010. The analysis shows that conventional bank deposit rates and PLS returns exhibit long-run cointegration and the time-varying volatility of conventional bank deposit rates and PLS returns is correlated and is statistically significant. The pairwise and multivariate causality tests show that conventional bank deposit rates Granger cause returns on PLS accounts. These findings have policy implications in terms of price stability and financial stability.

Access here. 

PUBLICATIONS - ARTICLES - Determinants of Corporate Social Responsibility Disclosure: The Case of Islamic Bank

Sayd Farook, Roman Lanis and Kabir M. Hassan

Determinants of Corporate Social Responsibility Disclosure: The Case of Islamic Bank 

May 201, 36 p.

Abstract:     
Islamic banks offer distinct financial services and as such have grown significantly in Bahrain, Bangladesh, Jordan, Kuwait, Malaysia, Qatar, Turkey and U.A.E over the past two decades. They are unique in the sense that they are accountable to fulfil a social and ethical role inherent in their character as an ‘Islamic’ institution. They also have a duty to discharge their accountability through disclosing corporate social responsibility (CSR) information consistent with the principles of Islam. However, recent anecdotal evidence finds that Islamic banks may not be fulfilling their social role in accordance with the prescriptions of Islam because they disclose less CSR information than expected. It has been suggested that disclosure may also be driven by the extant economic incentives. Hence, the exact nature of the CSR disclosure process by Islamic banks remains unclear due to a paucity of a priori research and statistical analysis of extant data. In light of that, this study develops an a priori model linking CSR disclosure to socio-political influences and corporate governance factors. Then resultant hypotheses are tested using regression analyses on a sample of 47 Islamic banks’ annual reports from 14 countries. 

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ARTICLES - Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey

Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey

Etem Hakan, Ergec and Bengul Gukumser, Arslan

Abstract : Identifying the impact of the interest rates upon Islamic banks is key to understand the contribution of such institutions to the financial stability, designing monetary policies and devising a proper risk management applicable to these institutions.

This article analyzes and investigates the impact of interest rate shock upon the deposits and loans held by the conventional and Islamic banks with particular reference to the period between December 2005 and July 2009 based on Vector Error Correction (VEC) methodology.

It is theoretically expected that the Islamic banks, relying on interest-free banking, shall not be affected by the interest rates; however, in concurrence with the previous studies, the article finds that the Islamic banks in Turkey are visibly influenced by interest rates. (full article)

ARTICLES - Union of Arab Banks Magazine - Albaraka Participation Bank - Over 25 years of contribution to the Turkish economy

An article has been published and can be accessed HERE.