IFN Correspondent Report: Türkiye Steady progress towards ٢٠٢٥ strategic goals

In ٢٠٢٣, a significant part of the forecasts for the global economy were pessimistic due to the ongoing Russian-Ukrainian crisis, energy supply scenarios, the inability to stop the inflationary environment and the tightening financial conditions. However economic activity both in Türkiye and  the world has taken a stronger-than-expected path..Türkiyeentered into an important period with monetary policies and activities that will ensure development. Participation banks (PBs) has also actively supported economic development as an ecosystem memberwith its wide-range and sophisticated products and services by financing the real economy via diversified customer portfolios So,  demand for participation banking is gradually increasing with its potential. this  was crowned with joining of two new digital PBs to the sector in Türkiye at the end of ٢٠٢٣ and  a new full-fledged PB  started its operation in the begining of ٢٠٢٤.

Participation banking has gained significant momentum

As of February ٢٠٢٣, the number of PBs increased from ٦ to ٩ by the end of the same year and showed ٥٠% growth.   ٢٠٢٣ year-end figures show that the total number of domestic and international branches increased by ٥.٨% compared to the same period last year, reaching ١,٤٥٩. The number of branches of PBsconstitutes more than ١٣% of the total branch network of the banking sector and continues to increase day by day.

Total asset size of PBs also, grew by ٧٢.٢% compared to the end of the previous year and reached TRY٢ trillion (US$٦٩ billion). recorded growth above the traditional banking sector. 

In this respect, collected funds of the ٩ PB soperating in Türkiye, which were TRY٨٩١ billion (US$٤٧ million) at the end of ٢٠٢٣, increased by ٧٠.٢% to TRY١.٥ trillion (US$٥١ billion) at the end of ٢٠٢٢. 

When we look at the end of ٢٠٢٢, the net profit of PBs grew by ٧٩.٣% from TRY٢٩ billion (US$١.٥ billion) at the end of ٢٠٢٢ to TRY٥٣ billion (US$١.٨ billion) at the end of ٢٠٢٣. Total shareholders' equity increased by ٧٠.٦% to TRY١٤٣ billion (US$٤.٨ billion). 

Great support for SMEs from the participation finance ecosystem

Following a policy in line with the goals of sustainable growth and expansion of the Turkish economy on a solid base, participation banking continued to provide financing to SMEs in ٢٠٢٣. 

In March ٢٠٢٣, Katılım Finans Kefalet A.Ş. (Islamic Credit Guarantee Fund/KFK) is established in partnership with the Turkish Ministry of Treasury and Finance (HMB) and six PBs with the support of TKBB KFK provides access to finance for SMEenterprises within the framework of Participation Finance principles, and enable themto get competitive advantage in the sector. 

By the end of ٢٠٢٣, the total number of SME customers of PBswas ١٦٥,٤٩٩. Total cash and non-cash SME loans increased by ٤٤% from TRY ٢٩٥ billion (US$ ١٥ billion) in ٢٠٢٢ to TRY٥٢٣ billion (US$ ١٨ billion) at the end of ٢٠٢٣. As a result of that dedicated concentration for the SME financing, the total funds of PB sextended to SMEs is around ٤٣%.

Sukuk financing in participation banking

Turkish PBsalso play crucial role in Sukuk market. Sukuk issuances, exceeded market expectations in ٢٠٢٣ and recorded a rapid acceleration. PBsissued TRY ٣٩١ billion worth of Sukuk between ٢٠١٠ and ٢٠٢٣ and raised funds by issuing approximately US$ ٥ billion and MYR ٢ billion in foreign currency. 

The volume of Sukuk transactions made by the HMB has made significant contributions to attracting international investors and reached TRY ٢٩٤ billion between ٢٠١٢ and ٢٠٢٣. In addition, HMB supported national economy by successfully issuing US$٣ billion, EUR٤ billion and ٢٣٣ tons of gold-based Sukuk.