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Attending the "New Horizons in Alternative Finance" program at Marmara University, President and ruling Justice and Development Party (AKP) Chair Recep Tayyip Erdoğan has stated that "alternative financial transactions are becoming more widespread in the world" and added:
"I believe that, in future's world, the system based on interest will be replaced with a new financial architecture."
He has also indicated that "the rate of preference for new financial models is gradually increasing" and pledged, "We will take bold and determined steps in terms of alternative finance in the forthcoming period."
CLICK - Erdoğan: We will Take Bold Steps in Alternative Finance
Speaking to bianet about the statements of Erdoğan, economist Ali Rıza Güngen has indicated that what President Erdoğan meant by "alternative finance" is, in fact, Islamic banking.
Informing us that the current rate of Islamic banking in the sector is around 5 percent, Güngen has stated that Erdoğan is trying to increase the share of Islamic banks in the sector and made the following remarks in brief:
"After the capital inflow to Turkey stopped in 2008 and 2009, the efforts of financial deepening have become more urgent. In the meanwhile, the efforts for an Islamic financial deepening, which is the occupation of the AKP from the very beginning, have also intensified.
"Following the İstanbul Financial Center Project, the government had completed the regulations on capital markets to a great extent in 2012.
"In order to increase the share of Islamic banking, certain steps were taken by using public banks in 2015 and 2016. The reason for initiatives such as Ziraat Participation and Vakıf Participation was that.
'He wants to attract Middle Eastern capital to Turkey'
"The rate of Islamic banks, which is also known as participation banks, in the sector is around 5 percent.
"What Erdoğan government wants is first the increase of this rate to 15 percent, a deepening of Sukuk market and spread of various Islamic financial contracts. Behind this desire lies the intention to attract the Middle Eastern capital to Turkey in the event of a credit collapse.
"The biggest weakness here is that global financial centers are also the centers of Islamic finance. However, as a government that is unable to see it, they are trying to make all kinds of attempts.
"We understand from Erdoğan's speech that new steps will come and participation banking and Islamic tools will be supported by new regulations."
'A new financial architecture is something else'
Güngen has also commented on Erdoğan's statement of "I believe that, in future's world, the system based on interest will be replaced with a new financial architecture". Güngen has stated that a new financial architecture is something else and added that Islamic financiers use the concept wrong. (HA/SD)
