Sustainable Development And Participation Finance in Turkey

In 2020, participation banks continued to provide financing in line with the needs and demands of SMEs in particular, with the policies aiming to achieve sustainable growth and sound expansion of the Turkish economy. The total SME financing volume of participation banks increased by 79.75% from TRY39.5 billion (US$4.64 billion) in 2019 to TRY71 billion (US$8.34 billion) in 2020.

By signing an MoU with the United Nations Development Programme () Istanbul International Center for Private Sector in Development in the first quarter of 2021, the Participation Bank Association of Turkey (TKBB) aims for cooperation and partnership initiatives benefiting from Islamic finance for the UN Sustainable Development Goals (SDGs).

As part of the collaboration and using Islamic finance to realize the SDGs, the TKBB aims to act jointly to support the initiatives already in place and discover new cooperation opportunities. This cooperation aims to bridge the gap between Islamic finance and impact investment while supporting the development of Islamic finance in new markets by leveraging practices, data and technical knowledge. Impact investment and participation finance seek a positive social impact as well as financial return and have proven to be an essential source in financing projects supporting the SDGs The participation finance principles and impact investment, with shared moral and social values, draw investors' attention as a valuable example of innovative financing for the SDGs.

This high synergy between impact investment and participation finance has the potential to accelerate progress toward the SDGs. There is strong potential in deploying Islamic finance instruments to promote inclusive growth, reduce inequality and accelerate poverty reduction. Emphasizing the importance of the said interaction and value, the TKBB has achieved important developments in 2021. The TKBB is a member of the

Impact Investment Advisory Board, which was established in May 2021 in Turkey. The TKBB and UNDP organized a joint training program on impact investment and participation finance for SDGs that provided comprehensive information to participation banks. Such training programs will become more widespread in Turkey and abroad in the coming period.

For the first time, climate crisis and sustainability were featured as a separate section of the TKBB 2020 Annual Report, highlighting the activities of the participation banking sector. As the pioneering institution in the participation banking industry for sustainability, Albaraka Turk published its Sustainability Report in 2019 which highlighted its activities and projects for sustainable development. While the 2020 pandemic proved to be a wake-up call for humanity, it also strongly reminded us that sustainability is not a preference but a mandatory concept.

In this regard, it outlined the need for all economic players to cooperate and review their short-term trade targets for a sustainable future.

The TKBB emphasizes that it will continue to take a decisive role in constructing a sustainable future by focusing further on domestic and international collaborations, as expressed in SDG 17 (partnerships for the goals).

Sustainability, which has become a necessity of being present in the local and global financial markets, will be a part of the growth strategies of participation banks and will significantly affect the sector's development in the coming period.

Fatma Cinar is the head of international relations at the Participation Banks Association of Turkey. She can be contacted at [email protected].

Source: IFN