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PARTICIPATION BANKS

in TURKEY
: An Economic and Social Reality

Presented By:
Dr. Adnan Büyükdeniz
General Manager /
ALBARAKA TURK
Participation Bank Inc.

Istanbul, 29 August 2006


I. WHY PARTICIPATION
BANKS?

• Already an indispensable and


complementary element of the
financial system in Turkey
• A clear expression of “equality
of opportunity” in a
pluralistically democratic
society
II. LEGAL FRAMEWORK FOR
PARTICIPATION BANKS

• Operate under the Banking Act


• Regulated and supervised by
the Banking Regulation and
Supervision Agency (BRSA)
• A tripartite system
TRIPARTITE SYSTEM

BANKING ACT

Investment &
Commercial Banks Development Participation Banks
Banks
III. ACTIVITIES OF
PARTICIPATION BANKS

• Fund Collection
– Special Current Accounts
– Profit and Loss Participation Accounts
• Fund Utilisation
– Corporate Finance
– Financial Leasing
– Retail Finance
– Participation in Business Projects
III. ACTIVITIES OF
PARTICIPATION BANKS

• Other Activities
– Cheque book services
– Money remittances
– Letters of guarantee, performance
bonds
– Credit cards, POS terminals
– Foreign currency transactions
including foreign trade banking
– Alternative distribution channels
• Internet and Telephone Banking, ATM’s
IV. THE PLACE OF
PARTICIPATION BANKS IN
THE TURKISH BANKING
SYSTEM
FUNDS COLLECTED
(Equivalent in Thousand US $)

Share in the
Funds Banking
Growth in Year Collected Growth System
YTL terms
is 18 % 2002 1,961,000 47.2% 2.20%

2003 2,936,000 49.7% 2.65%

2004 4,462,768 52.0% 3.04%

2005 6,208,572 39.1% 3.33%

2006/II 6,316,677 1.7% 3.39%


FUNDS COLLECTED
(Equivalent in Thousand US $)
7.500.000
6.208.572 6.316.677
6.500.000

5.500.000
4.462.768
4.500.000
2.936.000
3.500.000
1.961.000
2.500.000

1.500.000

500.000

-500.000 2002 2003 2004 2005 2006/II


FUNDS UTILISED
(Equivalent in Thousand US $)

Share in the
Funds Banking
Year Utilised Growth System
Growth in
YTL terms 2002 1,285,109 72.53% 3.59%
is 23 %
2003 2,200,595 71.24% 5.88%

2004 3,645,390 65.65% 5.16%

2005 5,495,177 50.74% 4.94%

2006/II 5.841.726 6,31% 4,52%


UTILISATION RATIOS
(Credit / Deposit)
Commercia
l Participation
Banks Banks
Year (%) (%)

2002 40 66

2003 42 75

2004 47 82

2005 59 89

2006/II 69 92
TOTAL ASSETS
(Equivalent in Thousand US $)
Share in
the
Total Banking
Year Assets Growth System
Growth in
YTL terms
2002 2,424,000 47.53% 1.83%
is 23 %

2003 3,722,000 53.55% 2.01%

2004 5,435,764 46.00% 2.34%

2005 7,377,916 35.73% 2.44%

2006/II 7.847.925 6.37% ~ 2.50%


GROWTH
in Branch Network and Workforce

Branch
Year Network Workforce

2000 110 2,182

2003 188 3,520

2004 255 4,789

2005 291 5,732

2006 /II 310 6,348


V. EXPERIENCE WITH
PARTICIPATION BANKS
• Mobilising unproductive funds in the
economy
• “Profit motive” not to be undermined
• Funds availed only to production and
investment activities
• Successfully going through crises without
creating any burden on taxpayers
• Potential for further growth
• A broader product suite
• Participation accounts as a potential capital
market instrument
• Role of regulatory bodies and international
acceptance
• Unification of principles and standards
THANK YOU
FOR YOUR
KIND PATIENCE

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