We Have Focused On Preparing The Participation Banking Standards

Prof. Dr. Hasan Hacak, Chairperson of Central Advisory Board, talked about the Board's contributions to the participation finance ecosystem in "Katılım Finans" journal.

AS THE CHAIRPERSON OF THE CENTRAL ADVISORY BOARD, COULD YOU ELABORATE ON THE FUNCTIONING AND ACTIVITIES OF YOUR STRUCTURE?

Central Advisory Board, was established within TKBB (Participation Banks Association of Turkey) by the decision of the BRSA (Banking Regulation and Supervision Agency) and started its operations in May 2018. Our Board is just two and a half years old. I believe that Turkey has slightly been late in establishing such a significant institution which has systematic importance at the Turkish Participation Finance Ecosystem. Being formed with a communiqué, our Advisory Board consists of seven members. It consists of five Islamic law professors -one of them is also a member of the High Board of Religious Affairs-, and a member who has been a senior manager in the industry for a long time, and a law professor. Additionally, we have specialists affiliated with the Advisory Board that conduct secretarial works or do research and prepare reports on the issues raised. It is important to determine the legal limits of activities since the participation banking has a principle to comply with the permissible methods of Islamic law and present itself as a structure with certain assertions and arguments. In this direction, the primary founding purpose of the Advisory Board was to determine the professional principles and standards to be taken as a basis in participation banking activities in our country and provide a foundation for conducting these activities in accordance with these standards. In this way, we, as the Advisory Board, want to determine the standards for banks to take them as a reference in their practices and to increase society's trust especially in these institutions, as well as providing other benefits.

ARE CENTRAL ADVISORY BOARD’S DECISIONS LEGALLY BINDING?

"Legally binding" may not be the right phrase; however, our Advisory Board's decisions and standards are binding for participation banks. According to the "Communiqué on the Formation, Duty, Working Procedures, and Principles of the Advisory Board" accepted with TKBB Board's decision in 2018, it was decided that participation banks found to be violating the decisions taken by the Advisory Board in its realm of authority, and the professional principles and standards would be imposed to administrative sanctions by the TKBB Board of Directors within the scope of the provisions of Article 81 of the Law, and this situation will be notified to the BRSA. Here lies the strength and the importance of the Board. Another important strength of the Board is our independence. The opportunities for our Board to carry out its tasks and to express its own free opinions have been formed. In my opinion, the applications in the sector will be more standard, more regular, and transparent as the decisions and standards of our Advisory Boards come into force.

COULD YOU GIVE US INFORMATION ON THE PAST ACTIVITIES AND OPERATIONS OF CENTRAL ADVISORY BOARD ? WHAT IS THEIR COMMON PURPOSE?

Our Advisory Board is still relatively new, but I think that we have completed our formation and stability phase. In the past, we responded to many requests from the industry and took decisions. In addition to that, we have made great progress in preparing standards, which is actually our main job. We completed the tawarruq and share certificate standards and are about to finalise the murabaha standard. In this direction, our Advisory Board has primarily focused on preparing participation banking standards. The preparation process of the standards requires a long time and rigorous efforts. These standards are prepared through many activities such as meetings, consultations, and workshops. I can say that as we publish our standards one by one soon and add an official capacity to them, the participation banking in Turkey will move to a new stage.

WHAT COULD YOU SAY ABOUT THE INTERNATIONAL RELATIONS OF THE CENTRAL ADVISORY BOARD?

Our Central Advisory Board is still relatively new and works under a very busy schedule. We are gradually putting the issues on our agenda, which involves cooperation with similar institutions in the world. We have cooperation projects with institutions such as AAOIFI, IIFM, IFSB, and Islamic Fiqh Academy. Some of our members are also members of the IIFM Shari‘ah Board, and we will achieve a similar status with the AAOIFI. We are thinking about improving this cooperation through mutual visits and joint operations. As the Central Advisory Board, we aim to make our Board more active and well-known in the global Islamic finance industry as of 2021 by cooperating with the advisory boards of other countries which will enhance our international capabilities and network. We will conduct our activites in this regard together with the TKBB International Relations Department

WHAT COULD YOU SAY ABOUT THE CURRENT SITUATION OF THE PARTICIPATION BANKING ECOSYSTEM IN TURKEY? DO YOU THINK THAT THERE ARE SOME DEFICIENCIES AND POINTS REQUIRING IMPROVEMENT IN THE SYSTEM?

Although participation banking has been around in Turkey for a long time, its ecosystem has not been fully established or developed accordingly. In my opinion, the system has some radical and basic requirements. The ecosystem especially needs certain legal regulations to act more freely and transfer its principles into practice more openly. Those regulations and solutions should not remain on the local level but be permanent and planned with a universal perspective. This is not an easy process; it requires serious will and planning. Additionally, it is important to develop the participation insurance sector simultaneously with banking and work towards creating a participation index in the Stock Exchange. Studies are also carried out in these areas at undergraduate and graduate levels of universities. However, the academic community and the sector need to develop their existing communication further.

WE WOULD LIKE TO LISTEN IF YOU HAVE OTHER THINGS TO MENTION...

We want to set our own standards with our country's historical and scientific background in mind. The academic development in our country for this is quite sufficient. However, we need coordination, harmony, and support. I do not see why these standards cannot be a model and example for the whole world. We are close to completing some of our standards. With their publication and implementation, I believe that participation banking in Turkey will step into a whole new era.

Interview: Cem Eker