Talking about Islamic Banking and Islamic Finance, the leader of The Republic of Turkey President Recep Tayyip Erdogan stated, “Istanbul’s newly built financial center will also make it a leader in the sector, given its geostrategic advantage” in the twelfth International Conference on Islamic sharia-compliant finance through videoconference.

Turkey’s job in Islamic Banking and Islamic Finance

During the 12TH INTERNATIONAL CONFERENCE on Islamic Economics and Finance between June 14 and June 20 and by means of videoconference, president Recep Tayyip Erdogan, underscored Turkey’s job in Islamic Finance.

Support Islamic banking and usage instruments of Islamic fund and financial aspects will give a strong, practical and auxiliary option in contrast to the current money related framework loaded down with crises, President Erdogan said. He included that Istanbul’s recently constructed finance center will likewise make it an innovator in the segment, given Istanbul’s geo-strategic location.

Erdogan said the worldwide framework that depends on close to home and budgetary intrigue, control and treachery, should be reshaped and supplanted with one that is more fair. Turkey, over the most recent 18 years has found a way to incorporate alternative models dependent on support, particularly with the ongoing activities by state loan specialists taking part money related lending.

As per a report by Fitch Ratings distributed in March, development in Turkish cooperation banking has outperformed the development of customary banks as of late, regardless of the expanding market unpredictability.

In an announcement, the worldwide FICO assessment office said that albeit “Turkish Islamic banks’ (cooperation banks) portion of part resources stays little and concentrated” it is developing and the “fragment development has reliably outpaced that of regular banks as of late notwithstanding elevated market unpredictability – however development has been from a low base – intelligent of the passageway of three state-possessed banks since 2014 and the section’s commonly better than expected hazard craving.”

“Islamic finance is our exit out of this framework,” Erdogan stated, focusing on the significance of interest free, participatory and accordingly an optional money lending framework.

Islamic banking and financial resources in Turkey are set to increase two fold within 10 years as government support drive the development in this segment.

What is Islamic banking or Islamic finance ( مصرفية إسلامية‎) or sharia-compliant finance

It is banking or financing activity that complies with sharia (Islamic law) and its practical application through the development of Islamic economics. Some of the modes of Islamic banking/finance include Mudarabah (profit-sharing and loss-bearing), Wadiah (safekeeping), Musharaka (joint venture), Murabahah (cost-plus), and Ijara (leasing).

The Qur’an prohibits riba, which literally means “increase”. Technically riba is the increase when liquid or fungible assets (cash, debt, grains, etc.) are exchanged other than at par value. The most prevalent example in today’s economy is lending money at interest, for example an exchange of $100 cash now for $110 payable in a year’s time, an increase of $10. (Some Muslims dispute whether there is a consensus that interest is equivalent to riba).^[2]^[3] Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam (“restricted, or excluded”).

These prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices. In the late 20th century, as part of the revival of Islamic identity,^[4]^{[Note 1]} a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.^[6]^[7]

How many banks are complying with Islamic banking and Islamic Finance?

Their number and size has grown, so that by 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles,^[8] and around $2 trillion was sharia-compliant by 2014.^[9] Sharia-compliant financial institutions represented approximately 1% of total world assets,^[10] concentrated in the Gulf Cooperation Council (GCC) countries, Iran, and Malaysia.^[11] Although Islamic banking still makes up only a fraction of the banking assets of Muslims,^[12] since its inception it has been growing faster than banking assets as a whole, and is projected to continue to do so.^[9]

The industry has been lauded for returning to the path of “divine guidance” in rejecting the “political and economic dominance” of the West,^[4] and noted as the “most visible mark” of Islamic revivalism,^[13] its most enthusiastic advocates promise “no inflation, no unemployment, no exploitation and no poverty” once it is fully implemented.^[14]^[15] However, it has also been criticized for failing to develop profit and loss sharing or more ethical modes of investment promised by early promoters,^[16] and instead selling banking products^[17] that “comply with the formal requirements of Islamic law”,^[18] but use “ruses and subterfuges to conceal interest”,^[19] and entail “higher costs, bigger risks”^[20] than conventional (ribawi) banks.