Turkish bank offers Islamic safe-haven

A Turkish sharia-compliant bank has launched a landmark Islamic loan in the hope that it will prove popular as investors seek greater security from non sub-prime issues.


The $100m (€72.5m) Murabaha syndication, one of the biggest of its kind and the biggest from Turkey, was issued by Turkiye Finans Katilim Bankasi.

Humphrey Percy, chief executive of Bank of London and Middle East, a specialist bank advising on the deal, said in a statement: "The completion of this transaction is particularly pertinent given the current climate of economic unease and market turbulence and sends a positive signal about the strength of opportunities available in Islamic finance.”

The Murabaha loan has a two year maturity. HSBC, Standard Chartered and Bank of London and the Middle East led the deal. A source said the pipeline for Islamic deals is healthy, with several more set to launch before the end of the year.

Analysts say the market’s uncertain climate could make Islamic deals more popular. Islamic bonds in particular are increasingly in demand because of their low-risk, high-yield structure and short maturity. On average, the bonds have a maturity of three years, compared with the average European convertible maturity of six years. The average yield on a sukuk, one type of Islamic bond, is 6.6%, compared with 3.5% for a normal convertible coupon.

Murabaha is a common method of finance in Islamic banking. It is a deferred sale of goods at cost plus an agreed profit mark up under which the seller purchases goods at cost price from a supplier, and sells the goods to the buyer at cost price, plus an agreed mark-up.

The first Islamic bank was founded only 32 years ago. However, over the last decade the Islamic banking and finance industry has experienced a period of sustained asset growth at around 10% to 15% per annum, and assets now total in excess of $500bn.

TFKB is the 12th largest private bank in Turkey and the largest in the country in terms of total loans, deposits and branch network, with total assets in excess of $6bn.
Source: efinancialnews.com