ISTANBUL, Sept 29 (AFP) - Islamic banks in secular Turkey, which presently represent a meagre two percent of the assets of local banks, are forecast to grow five times in the next decade, a top banker said here Wednesday.
"Assets of Islamic banks in the local market are 4.2 billion dollars now, or just two percent of the assets of commercial banks of 186 billion dollars," said Ufuk Uyan, president of the Union of Special Houses (Islamic banks) in Turkey.
"These assets are projected to grow to 26 billion dollars by 2014 and will form 10 percent of the market share," he told the sixth International Islamic Finance Forum which closed here Wednesday.
There are five Islamic banks in Turkey with a combined 239 branches, but in 10 years the number is expected to grow to 750 branches manned by some 12,000 staff, he said.
Adnan Buyukdeniz, general manager of Albaraka Turkish Finance House, said Islamic banks hold 3.5 percent of the deposits market and a healthy 6.5 percent of the credit market.
"They have already become indispensable in the Turkish economic system... They are offering competitive rates of return to depositors," Buyukdeniz said.
But he said their funds were still limited to production and investment activities.
Speakers at the forum said that the projected growth in Islamic banking is in line with a growing demand for financial services compliant with Islam in Turkey, where 99 percent of the population is Muslim but the country has strict secular traditions.
The first Islamic bank was set up in Turkey more than 15 years ago, but the industry picked up steadily in the last few years with the arrival of some Islamic investments.
Uyan said special finance houses have increased dealings in Islamic financial services recently with Murabaha (forward-dated sales) dealings amounting to 315 million dollars last year.
The amount does not include some 400 million dollars in Islamic-compliant syndications made by HSBC-Amana this year. HSBC Amana is not part of the Islamic banks union in Turkey.
Michael Baldwin, senior advisor of DH Consulting, Turkey, who deals in Islamic banking, predicted the Turkish government and leading corporations would emerge as major borrowers of Sukuk (Islamic bonds) in the near future.
But he warned that in order to "survive and sustain growth, Islamic banks must deliver products and services.
The Dow Jones Islamic Market (DJIM) Indexes, a subsidiary of Dow Jones, Tuesday launched the first Islamic Market Turkey Index.
The new index, which joins more than 60 Islamic idexes in other Arab and Islamic countries, was created for investors who wish to invest according to Islamic guidelines.