1. IslamIc Retail BankIng In Turkey
Prague, March 22nd 2011
Sabri ULUS
Türkiye Finans Participation Bank A.S.

2. OUTLINE ISLAMIC BANKS ARE CALLED “PARTICIPATION BANKS” IN TURKEY
BRIEF HISTORY OF ISLAMIC BANKING IN TURKEY
NOTES ABOUT ISLAMIC BANKING
NOTES ABOUT RETAIL BANKING
ISLAMIC RETAIL BANKING PRODUCTS
SWOT ANALYSIS
GRAPHICS ABOUT THE BANKING SECTOR
TFKB s RETAIL BANKING VISION

3. PARTICIPATION BANKS IN TURKEY (ISLAMIC BANKS)
Established in 1985
Shareholder Structure
National Commercial Bank 64,68 %, Boydak Group 21,56 %, Ulker Group 13,76 %
Established in 1996.
Shareholder Structure
Public 50,89 %, Others 49,11 %
Established in 1989.
Shareholder Structure
Kuwait Finance House 62,24 %, Turkish Foundations General Directorate 18,72 %,
IDB 9 %, Social Security Inst. Kuwait 9 %
Established in 1985.
Shareholder Structure
Albaraka Banking Group 54,06 %, Public 22,10 %, IDB 7,84 %

4. BRIEF HISTORY OF ISLAMIC BANKING IN TURKEY
1983
Initiated under the title of “Special Finance Houses” with a governmental decree
with the aim of gaining THE conservative funds into the Turkish economy.
Taken under the regulatory umbrella of Turkish Banking Act which added a valuable legitimacy to their internal and external existence.
Deposit Insurance System was established to secure the savings at current profit/loss sharing accounts under certain terms.
Started being called as “Participation Banks” with a clarifying effect to their legal status.
Under the supervision of Banking Regulation and Supervision Agency (BRSA) ,
Central Bank of Turkey and other public financial authorities
like Turkish conventional banks.
1999
2001
2005
TODAY

5. NOTES ABOUT ISLAMIC BANKING IN TURKEY
TURKEY IS ONE OF THE FEW LUMINOUS COUNTRIES PROVEN SUCCESSFULL DURING THE GLOBAL CRISIS
WITH ITS DYNAMIC ECONOMY AND SUCCESSFULL FOREIGN POLICY.
TURKISH FINANCIAL SECTOR, DOMINATED BY THE BANKS (INCLUDING THE CENTRAL BANK) WITH A 91 % SHARE, IS THE BIGGEST SECTOR OF TURKISH ECONOMY.
TURKISH BANKS ARE AS COMPETITIVE AS THEIR GLOBAL COUNTERPARTS IN MANY RESPECTS.
ISLAMIC BANKING IS PERCEIVED AS A PROFITABLE OPPORTUNITY TO GENERATE NEW AND COMPLEMENTARY BUSINESS TO CONVENTIONAL BANKING.
ALTHOUGH ISLAMIC BANKING HAS BEEN OFFERED TO TURKEY FOR THE LAST 3 DECADES,
IT STILL REMAINS ON THE FRINGES OF A CONVENTIONAL BANKING SYSTEM AND
THERE IS A LONG WAY TO GO.
EXISTING PARTICIPATING BANKS ARE MAJORLY OWNED BY GULF AND TURKISH INVESTORS.
MUCH OF THE ISLAMIC PRODUCTS HAVE BEEN SOURCED FROM THE GULF.
THE GULF AND OTHER ISLAMIC BANKING HUBS CONTINUE TO GENERATE ROLE MODELLING FOR TURKEY.

6. NOTES ABOUT THE RETAIL BANKING IN TURKEY
ASSET VALUE OF TURKISH BANKING SECTOR IS 927 BILLION TL, TOTAL LOANS MAKE 51,3 % (2010/3Q)
THE MOST IMPORTANT GROWTH HUB OF BANKING SYSTEM IS RETAIL BANKING,
RETAIL BANKING PROFITS CONSTITUTE APPROXIMATELY 50 % OF THE TOTAL BANKING EARNINGS.
RETAIL LOANS ARE BEING MARKETED MAINLY BY BANKS, ALTERNATIVE DISTRIBUTION CHANNELS,
VEHICLE DEALERS, CONTRACTORS AND REAL ESTATE AGENTS.
RETAIL LOANS WITH MORE THAN 5 YEARS MATURITY IS 30 % IN THE OVERALL.
ALTERNATIVE DISTRIBUTION CHANNELS ARE BECOMING A BIG MARKETING POWER EACH PASSING DAY.
AN INTENSE COMPETITION IS OBSERVABLE IN THE BANKING SECTOR OVER THE HOUSING CONSTRUCTION PROJECTS.

7. ISLAMIC RETAIL BANKING PRODUCTS
PROFIT LOSS SHARING (MUDARABA)
TRADE WITH MARK UP (MURABAHA)
ELECTRONIC CARDs, INTERNET-MOBILE BRANCHs,ATMs, CALL CENTERs
REVENUE INDEXED BONDS
PERSONAL TAWARRUQ
EQUITY PARTICIPATION (MUSHARAKA)
PRECIOUS METAL ACCOUNTS
SECURITIES
ISLAMIC PENSION FUND
LEASING (IJARA)
SPOT AND FORWARD FX

8. S W T O SWOT ANALYSIS TURKEY - DYNAMIC ECONOMY
-WELL REGULATED BANKING SYSTEM
- EARLY RECOVERY FROM GLOBAL CRISES
- PBs ADDRESSING TO ALL POPULATION SEGMENTS
WITH NO SPECIFIC RELIGIOUS TONATION
- PBs OFFERING MORE TOLERANT WORKING CONDITIONS
ESP. DURING CRISES
- CUSTOMER SEGMENTATION-RELATION MANAGEMENT AND ADC WIDELY UTILIZED IN RETAIL BANKING
- DOMINANCE OF CONVENTIONAL RETAIL BANKING
- STILL A LONG WAY TO GO FOR INCREASING PUBLIC RECOGNITION OF ISLAMIC BANKING
- ABSENCE OF SOPHISTICATED ISLAMIC MONEY MARKETS
- NEED FOR NEW REGULATIONS FACILITATING ISLAMIC BANKING SERVICES
- NARROW PLAYING FIELD, IN COMPARISON WITH CONVENTIONAL RETAIL BANKING
- MATURITY MISMATCH AND HIGH LIQUIDITY RISK
- LACK OF INSTITUTIONALIZED TURKISH SHARIAH BOARDS
- NEED FOR PROPERLY EDUCATED STAFF
- YOUNG AND GROWING POPULATION
- UNBANKED POPULATION TO BE INTRODUCED WITH ISLAMIC FINANCIAL SERVICES
- LOW HOUSEHOLD INDEBTEDNESS
- TECHNOLOGICAL INVESTMENTS TO ADC
- GOOD REPUDIATION OF BANKING SECTOR PERFORMANCE
- INCREASING INTEGRATION WITH INTERNATIONAL MARKETS
TURKEY T O

14. %
Sector
Participation Banks
+29%
+52%
+32%
+57%
DEPOSITS AND LOANS
2008
2009
2010/3Q
2008
2009
2010/3Q
DEPOSITS
LOANS
Deposits have increased more than loans both at the banking sector and participation banks during the last 3 years.

15. %
Sector
Participation Banks
+36%
+127%
-22%
39%
+27%
+89%
RETAIL LOANS
HOME FINANCE
VEHICLE
2008/3Q
2009/3Q
2010/3Q
2008/3Q
2009/3Q
2010/3Q
PERSONAL FINANCE
Home and personal finance loans take the lead in the increase rate all over 2010.
Personal tawarruq and securities financing are taken to the agenda of participation banks nowadays. Personal finance loans, having a 30 % share in overall retail loans, offer attractive profit rates at short run maturities.

16. %
64 %
Sector
33%
UP TO 48 M
PBs
22%
SECTOR LOAN TERMS
RETAIL LOANS / TOTAL LOANS
48-60 M
6 %
TFKB
23%
61-72 M
10 %
2010/3Q
20 %
2009 M
2010/3Q 64 72
A pretty high percentage of time deposits have less than 1-3 months maturity and
because of the differences in the asset/liability structure, the sector may be subject to maturity mismatch from time to time. 6 10 18 20 7

17. +27 %
14,94
14,30
PBs
+21 %
12,70
CREDIT CARDS VOLUME
CREDIT CARDS LEGAL FOLLOW UP
10,96
TFKB
8,27
10,41
9,05
Sector
8,04
6,52
/3Q
Banking sector, with high investment volumes at electronic cards innovation and advertising, has a big competition stage while participation banks are close follower of conventional banks with lower NPL performance.

18. WHAT IS REVENUE INDEXED BOND?
1 ST ISLAMIC PENSION FUND BY TURKIYE FINANS
PENSION FUND COMPANIES ARE UNDER THE SUPERVISION OF UNDERSECRETARIAT OF TREASURY, CAPITAL MARKETS BOARD OF TURKEY, ISE SETTLEMENT AND CUSTODY BANK INC.,etc.
TODAY 100 % BACKED BY NON-INTEREST
REVENUE INDEXED BONDS
IN THE NEAR FUTURE WILL BE BACKED BY PROFIT/LOSS SHARING ACCOUNTS, PRECIOUS METAL ACCOUNTS,
SECURITIES,etc.
GREAT ELASTICITY IN THE ENTRANCE AND EXIT OF THE FUND.
1st Islamic Bond issued by Undersecretariat of Treasury in 2009
Based on beneficialownership of income streams generated by state entities.
WHAT IS REVENUE INDEXED BOND?
TAX ADVANTAGE !
UP TO 35 % OF MONTHLY INSTALLMENTS
ARE DEDUCTABLE FROM INCOME TAX