The head of the Participation Banks Association of Turkey said Friday that the Islamic economy cannot be defined as capitalist or socialist, but should be considered a “third way” without the negative features of both systems.
Osman Akyuz told Anadolu Agency the coronavirus pandemic showed the world once again how fragile the debt-based economic system is following the 2008 global financial crisis.
He defined the Islamic economy as promotion of an economic order compatible with Islamic religion and traditions and said the concept can be expressed as a system of values that guides the economic behavior of individuals in society.
Akyuz said human beings are not absolutely free in Islam.
“Man has to comply with the limits set by Allah in his activities related to the economy as in other fields,” he said, adding that Islam prohibits interest and making money without taking risk, gambling and deception in trade.
Interest-free banking sector developed rapidly in 20 years
Akyuz said the participation banks were established to gain funds that do not go to traditional banks due to the anxiety of interest and it helps savers store and safely evaluate funds.
He said “participation” in the banks names indicates it is a type of banking based on the principle of participating in profit and loss.
“The interest-free banking sector has developed rapidly in the world in the last 20 years,” he said, and has attracted the attention of not only Islamic countries but multinational banks of Western origin such as Citibank and HSBC.
Banks created special departments or funds for investors who want to use their savings in an interest-free system, he said.
“Globally, interest-free financial assets reached a size of more than $2.5 trillion by the end of 2018 is an important indicator of market development,” he said.
Considering the size represents less than 2% of financial assets in the world, he said the sector has great development potential.
Participation banks in Turkey
He said six participation banks’ share of the banking sector is 6.6% in Turkey.
“When we look at the first 4-month period of 2020, we see that the participation banks have continued their previous development and have increased their assets by 21.8% since December 2019 and reached 346.5 billion liras ($50 billion),” he said.
The sector’s net profit in 2019 increased 16% compared to the previous year.
Earlier this year, the Moody’s credit rating agency announced that Turkey’s Islamic banking assets are set to double within a decade, as government initiatives drive growth in the sector.
Turkey has positioned itself to be a hub for participation banking and Islamic finance.
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