Agricultural Policies Of Türkı̇ye And The Potential Of Participation Finance

The "participation finance" system is one of the leading alternative financial instruments that prioritise production, sharing, moral values and social justice.

If the actions in the Participation Finance Strategy Doc- ument, which was prepared with the aim of developing the interest-free finance system, increasing its share in the economy and contributing more to the real sector and announced by the Presidency of the Republic of Türkiye Finance Office, are implemented, this structure will differ from the classical banking system in terms of methods and will significantly support the agricultural policies of the "growth based on investment, employment, production, export and current account surplus" strategy in achieving the success of the "Turkish Economic Model". 

It will be of maximum benefit for the participation finance system not only to offer innovative solutions and services in the field of agricultural banking, but also to addressemployment in the agricultural sector and to focus on the expectations of entrepreneurial farmers in our country.

Appealing to agricultural banking areas such as sustainability in agriculture and animal husbandry, good agri- cultural practices, high agricultural technologies, agricul- ture-focused digital marketplace, and smart agricultural practices will increase financial inclusion. The most crucial goal of our country in agriculture for 2023 is the supply of accessible and sustainable agricultural products. This will be possible through domestic and national production. In this context, "food supply security" is one of our important national security issues. However, the agricultural sec- tor has not benefited sufficiently from the opportunities offered by participation finance so far. More than 98% of agricultural loans are offered by conventional banks, while the share of participation banks in our country in these loans remains around 2% as of 2020. This situation is a significant development area for participation banks to reach their strategic targets for 2025. There are alternative participatory products (Salam Contract) that meet the financial needs of producers such as financing production in the agricultural sector, working capital needs of producers, etc., and institutional structures such as non-bank institutions (Fiskobirlik, Turkish Grain Board and Agricultural Credit Cooperatives), participation banks and capital markets (Turkish Mercantile Exchange) can be further integrated into the system. Participation banks can play an active role in protecting the halal chain in production, processing, marketing and other processes from the farm to the table. (It is known that in 2018, a protocol based on a profit-loss partnership (musharakah) was signed between Vakıf Participation and Agricultural Credit Cooperatives for the almond processing plant in Adıyaman).

Concerning the topics of supporting initiatives, financing producers, halal (food) production, intermediation in government support, and agricultural (product) insurance, it is imperative to focus on risk sharing and cooperation for the expansion of participation banking and to bring it together with rural producers.

Erdal Özkaya

Agricultural Engineer