Amid Turkey's turn away from strict secularism, Islamic banking practices in the country are gaining currency. But they still face significant obstacles as they strive to enter the financial mainstream.
Turkey at present has four Islamic banks -- three that are partially owned by companies based in the Persian Gulf -- which accounted for 5 percent of Turkey's 1-trillion-lira ($559 billion) banking sector in late 2010, according to data from the Participation Banks' Association of Turkey, a lobbyist group for Islamic banks.
The banks are known as "participation banks," since, in keeping with Islamic tenets, depositors and borrowers share the risk of financial transactions with the banks themselves. Interest is not charged.
Kinda like a credit union? Maybe a good idea but, if the bank goes broke you could lose all of your money.
Until sharia-compliant banking was introduced to Turkey in the 1980s, many such individuals kept their money "under the mattress," both because of mistrust of traditional banking...
I don't have a problem with banking. I have a problem with banks that are "too big to fail".
...their desire to avoid breaking religious tenets regarding the payment of interest, said Osman Akyuz, secretary-general of the Participation Banks' Association of Turkey.
Not for me. I don't make my investing decisions on a 1,000 year old book.
As some financial experts see it, the growth rate in Islamic banks hasn't matched expectations, taking into account the AKP's prolonged tenure in power. One Islamic finance expert cautions that the sector's growth, in fact, has been "very sluggish."
Investors reportedly are concerned that Turkey's slowing pace of economic growth will hurt the banks' ability to turn a profit on its lending. That becomes even more critical for Islamic banks since they do not charge interest, and share the profit and loss risks of their customers.
I kinda like the the idea of some insurance on my bank account.