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 Members of the governing council of the Islamic Financial Services Board (IFSB), the prudential and supervisory standard setting body for the global Islamic financial industry, and delegates have started converging here for the two-day board’s 9th annual summit starting Wednesday. Central Bank of Turkey is hosting the event for the first time. Add Comment  The Turkish government will press ahead with its first issue of Islamic bonds this year and the planned sale should encourage private companies to do likewise and boost Istanbul's role as a financial centre, Deputy Prime Minister Ali Babacan said on Tuesday. The government had said previously it could issue a sukuk in 2012, overcoming sensitivities about Islamic finance in the secular republic as it seeks to tap a rich pool of investors flush with oil money.  Turkey's government plans its first-ever issue of Islamic bonds this year, overcoming sensitivities about Islamic finance in the secular republic as it seeks to tap a rich pool of investors flush with oil money.
A sovereign sukuk issue from an economy regarded as one of the most progressive and successful in the Muslim world would signal intent on Turkey's part to play a bigger role in Islamic finance. The size of the global sukuk market is estimated at more than $100 billion.  While Kuwait has to date played a relatively small role in the fast-growing global market for sukuks, or Islamic bonds, this could change, should lawmakers develop and implement a more robust legal framework to regulate the issuance of sharia-compliant debt, Global Arab Network reports according to OBG. In the meantime, however, two entities with strong ties to the country – Kuwait-based Gulf Investment Corporation (GIC) and Kuveyt Turk participation bank, which is 62% owned by Kuwait Finance House (KFH) – have in recent months raised funds by selling sukuks.  The global debt crisis may help Islamic finance nearly double to $1.8 trillion in assets by 2016 as stagnant corporate lending pushes institutions to seek alternative financing to traditional methods, according to a report by Deutsche Bank.
The bank forecasts that there is over $2 trillion of deleveraging in the United States and Europe, creating a financing glut for both struggling countries and countries in developed markets.  The governors of central banks and monetary authorities of the Organization of Islamic Cooperation (OIC) member countries are convening Tuesday for a meeting hosted by Bank Negara Malaysia, the central bank, at its plush new conference centre in Sasana Kijang in Kuala Lumpur.
Officially the theme of the meeting is “Central Banking and Financial Sector Development”. But in the wake of the global financial crisis, the euro zone sovereign debt crisis and the fallout of the so-called “Arab Spring”, it is inevitable that discussions will concentrate on how these events are impacting on OIC member countries, and on some alternative solutions to coping or mitigating some of the impact of these developments.  Amid Turkey's turn away from strict secularism, Islamic banking practices in the country are gaining currency. But they still face significant obstacles as they strive to enter the financial mainstream.
Turkey at present has four Islamic banks -- three that are partially owned by companies based in the Persian Gulf -- which accounted for 5 percent of Turkey's 1-trillion-lira ($559 billion) banking sector in late 2010, according to data from the Participation Banks' Association of Turkey, a lobbyist group for Islamic banks.  Almost a year after we saw the first corporate sukuk out of Turkey, and in line with our expectations in "Sukuk set record in first 9 months" that Turkey might surprise the market with a series of sukuk issues in 4Q 2011, the market welcomed the second issuance by Kuwait Finance House's Turkish subsidiary.
The five-year USD 350 million sukuk, the second by the Turkish bank, was sold in the international markets and listed on London Stock Exchange. It pays 5.875% semi-annually.  The Islamic Development Bank (IDB) latest $75 million line of financing to Turkiye Finans Participation Bank, one of the four participation (Islamic) banks in Turkey and in which Saudi Arabia's National Commercial Bank has a controlling stake, underlines the proactive involvement of the multilateral development bank of the Muslim world in Turkey over the last three decades.
 One of the important issues to emerge from the second annual meeting of the Aman Union, the association of investment and export credit agencies in the Arab and Islamic world, which was held in Istanbul last week under the aegis of the Turk Eximbank, is the increased demand for political risk insurance especially insuring risks in post-conflict countries and those undergoing economic and political transformation. This is especially from those countries whose exporters are active in the OIC countries.
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