Islamic banking system in Turkey and its prospects

Abstract

The coming to power of R.T. Erdogan at the head of the Justice and Development Party, which is called the party of moderate Islam, displayed a return to a number of traditional Islamic views on the economic theory and concept of public administration in Turkey. In this regard, the development of Islamic financial banks in the country is seen as a continuation of the trend towards the partial desecularization of society and the revival of traditional socio-economic institutions. In the case of Turkey, Sharia financial institutions are not labeled as “Islamic”, a term that is being avoided in both national laws and regulations governing the activities of those institutions.

The Turkish economy has been facing issues of the inflation and high interest rates in banks for decades, which are caused by market conditions. The widespread introduction of Islamic banking, including the development of ambitious projects, for example, the creation of another large single financial center in the East, may speak of some “imperial” ambitions of the country’s leadership rather than the creation of anti-crisis management mechanisms.