Istanbul, Turkey. Turkish President Recep Tayyip Erdogan announced plans to merge three state-owned Islamic banks and proceed with an initial public offering for Emlak Katilim as part of a restructuring aimed at expanding participation banking in the country’s financial system.
Merger plan announced
Erdogan said Ziraat Katilim, Vakif Katilim and Halk Katilim will be consolidated. He said during a speech at an Islamic economy event in Istanbul that the move would give “a different dynamic to the sector”.
Emlak Katilim IPO
Alongside the merger, Erdogan confirmed that Emlak Katilim, Turkey’s fourth state-linked Islamic lender, will proceed with an initial public offering, which he presented as another step in the sector’s expansion strategy.
Growing share in the financial system
Islamic banks operate under Sharia principles, which restrict or prohibit interest-based lending practices, and have steadily expanded their presence in Turkey’s financial system in recent years.
According to central bank data, participation banking accounted for 7.4 per cent of total commercial loans in the first quarter of the year, more than double its share in 2016.
Islamic lenders also represented 9.5 per cent of total banking assets, compared with 4.9 per cent in 2016, indicating a continued increase in market share.
Ownership structure
Ziraat Katilim is a subsidiary of TC Ziraat Bankasi AS, while Halk Katilim is owned by Turkiye Halk Bankasi AS. Vakif Katilim is overseen by the General Directorate of Foundations of Turkey, placing all three institutions under state-linked structures.