Islamic Financial Policy in Turkey

Abstract

Islamic finance has half a century long history worldwide. Islamic financial policies carried out during this period have played an important role in such development including the establishment of global Islamic finance institutions such as the Islamic Financial Services Board, promotion of regulatory policies regarding money markets especially in Malaysia, and so on. When it comes to Turkey, Islamic finance has a shorter historical experience due to various reasons. One of the main reasons is the lack of supportive policies. Turkish Islamic finance indusTL depends predominantly on Islamic banking or known as participation banking. Therefore, policies relate.Since the establishment of the first modern Islamic bank, Mit Ghamr in 1963, Islamic finance and banking indusTL has been expanding both outwardly and in depth. Turkey’s inclusion in such development is a more recent phenomenon, which started with the establishment of Al Baraka Turk in the mid-1980s. The main reason why Turkey was a latecomer in the development of Islamic finance is rooted in the counTL’s long-run secular tradition and economic and financial policies based upon this tradition since the foundation of the Republic of Turkey in 1923. Contrary to what it generally suggests, this ideology did not cause separation between ‘mosque’ and ‘state’ but established a state hegemony over religion and religion-based structures. 1 In this context, the ideological nature of the principle of secularism had shaped Turkish modern economy. In consequence, as a sub-branch of economic policy; financial policy of Turkey has also been shaped through the same ideology having the aforementioned idiosyncratic character. The 1980s was a turning point for many countries including Turkey as this era was marked with openness and liberalisation. Thus, making it possible for Turkey to pursue Islamic financial policy.