WHY ARE WE AWAITING FOR TURKEY?

The drama Diriliş: Ertuğrul has reignited the romance that many Muslims around the world have with Turkey. In part, we want Turkey to be a fearless leader in many areas. Economically, Turkey is one of the most important OIC economies. Before COVID, Turkey had the third-highest GDP in the OIC, only recently has it trailed Indonesia, another country with currency challenges 

Nigeria and Indonesia are not compared because of their early-stage Islamic finance markets. Iran is not compared either due to its lack of global connectivity. By implication, Turkey has a more advanced Islamic finance market than Nigeria and Indonesia and is highly connected. Malaysia and Saudi Arabia now have two of the most sophisticated Islamic capital markets. Malaysia has the most comprehensive Islamic finance framework. Thus, we expect more from Turkey.

The Turkish diaspora has delivered one of the COVID vaccines. Turkish skills are well appreciated around the world. The depth of the Turkish economy stands out. Good education has allowed Turkey to emerge as a Newly Industrialized Country. Turkey has an excellent supply chain into Europe, and increasingly Africa, Eastern Europe and along the Silk Road. Turkish agriculture is a jewel of the MENAT (Middle East, North Africa, Turkey) region.

Every facet of leadership is there but the table of 2019 Islamic Finance Share reveals the areas that the country needs to improve itself. Let's take a look at the global distribution 

of Islamic finance this way: Malaysia has a non- Muslim population that is nearly 40%, but has economic leadership. As a result, the market share of 34.9% is spectacular. Saudi Arabia is virtually 100% Muslim, but IF presence is only 79%. The UAE is a global trading entrepôt. Like Saudi Arabia, the regulatory support for Islamic finance is relatively new. Hence, the UAE's 23% IF market share is not surprising. Indonesia, like Turkey, is a country with a strong secular past and many barriers previously inhibited Islamic finance in both countries. At 6.3%, Indonesia's participation industry is only recently enjoying the type of support that is now present in Turkey, which has a similar level of market penetration.

Behind the data, the thought leaders are Malaysia, and increasingly the UAE and Indonesia. In fact, a recent presentation at the Oxford Centre for Islamic Studies laid the claim that Morocco selected Indonesian style Shariah gov- ernance for its participation banking sector Think of that for a moment: Morocco was first inspired by Turkey to label the sector “participation banking”.

The global Muslim community would like to see greater prominence for Turkey and its IFIs. And, it seems that we will not be disappointed. The Presidential Finance Office has established a Participation Finance Dept. My predecessor as the Securities Commission (Malaysia) OCIS Visiting Fel

low for Islamic Finance Tarik Akin has been appointed the Head of this office.

If I had to give advice to Dr. Tarik and the newly established department, I would offer three suggestions:

1. Make a portion of the Istanbul International Financial Center a tax-free sukuk and cross border finance zone. Encourage international players to launch sukuk, structure syndica- tions, and list deals on Borsa Istanbul. Build it the right way, and we will come.
2. Take a page from the Malaysian book: level the tax playing field for Islamic finance transactions, and even consider giving tax encouragement for activities like sukuk issuance and trading that attract international players on the buy and sell sides.
3. Real estate investors say that location is everything. And, Turkey has an amazing location. No nation is better located to foster

trade flows between the EU, MENA, CIS, and down the Silk Road. Flying times from Istanbul to so many regions are convenient. The time zone is reasonably central. Turkey has it, and Turkey should flout it.

That really leaves us with a significant problem that plagues the entire Islamic finance industry: human capital shortages. This time take another lesson from Malaysia. The Malaysian central bank is providing widespread exposure to academicians across the board on Islamic finance policy regulation. Turkey is blessed with many strong universities and technical schools. Why not support a disperse and competitive environment for undergraduate courses, executive, master degrees and electives, and doctoral programs in Islamic finance. This may take some seeding and incentive, but it should give a boost to the human capital available in the Turkish market.

One is hopeful that the latest development in Turkey is the first step in the wider Islamic markets benefiting from Turkish business and thought leadership in Islamic finance.

CEO at SHAPE Information Services Abdulkader Thomas