Mustafa DereciGroup Manager
Kuveyt Turk Participation Bank
March 2014
PARTICIPATION BANKS
A Success Story of Financial Inclusionin Turkey
PARTICIPATION BANKS
A Success Story of Financial Inclusionin Turkey
AGENDA
· Financial Inclusion: Definition and Facts
· Islamic Banking in the World: Facts and Figures
· Participation Banking in Turkey: Facts and Figures
· Conclusion
Financial Inclusion: Definition
· The delivery of financial services and products at affordable costs to sections of disadvantaged and low-income segments of society,
· The antonym of financial inclusion is financial exclusion where those services are not available or affordable.
Financial Inclusion: Facts
· Half of the World is unbanked
· Proportion of the Muslim population using financial services is less than their non-Muslim counterparts
· Financial exclusion rate is currently 47% in Turkey.
· Microfinace loans business is almost untapped in Turkey. The volume of microfinance loans is around USD 5 Million per annum.
Financial Inclusion: Why?
· There is a strong positive correlation between financial inclusion and GDP per capita
· It is a strong tool to alleviate poverty
· It is an important parameter for economic development and growth of a country
· It curtails unregistered economy
Financial Exclusion: Why?
Population
Non-users of formal financial services
Users of formal financial services
Voluntary self-exclusion
No Need
Cultural / religious reasonsnot to use / indirect access
Involuntary exclusion
Insufficient income / high risk
Discrimination
Contractual / informational framework
Price / product features
Islamic Banking 80.4%
(1.45 Trillion USD)
Sukuk 14.5%
Islamic Funds 4.1%Takaful
1.0%
Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013
Islamic Banking in the World
Size of Global Islamic Finance = 1.8 Trillion USD
2007 2008 2009 2010 2011 2012 2013F0
200
400
600
800
1000
1200
1400
1600
Billi
on U
SD
CAGR = 21.53%
Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013
Islamic Banking Assets in the World
1.45 Trillion USD (2%)
History of Islamic Banking in Turkey
1983 1985 1989 1991 1995 1996 1999 2001 2005 2006 2008 2010 2014
Government Decree for SFH
Albaraka Turk and Faisal Finans established
Kuveyt Turk established
SFH under Banking Law
Asya Finans has established
İhlas Finance established
Anadolu Finans established
Faisal Finans becomes Family
Finans
Ihlas Finans left the market
Anadolu Finans and Family Finans
merged as Türkiye Finans
TKBB established
Turkiye Finans acquired by National
Commerce Bank
First Sukuk
Four participation bank are in service
- AlBaraka Türk- Bank Asya
- Kuveyt Türk- Turkiye Finans
2005 2006 2007 2008 2009 2010 2011 2012 20130
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
1,600,000,000
1,800,000,000
2,000,000,000
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
45 Billion USD (5.5%, 2023 vision: 15%)
813 Billion USD
CAGR +19.85%
CAGR +32.78%
BDDK, 2014
Participation Banks in Turkey (Assets)
2005 2006 2007 2008 2009 2010 2011 2012 2013 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
28 Billion USD (6.3%) 444 Billion USD
CAGR +18.01%
CAGR +28.27%
BDDK, 2014
Participation Banks in Turkey (Deposits)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
29 Billion USD (6%) 490 Billion USD
CAGR +28.03%
CAGR +29.16%
BDDK, 2014
Participation Banks in Turkey (Loans)
2007 2008 2009 2010 2011 2012 20130
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
19 Billion USD (7.8%) 245 Billion USD
CAGR +12.89%
CAGR +20.92%
BDDK, 2014
Participation Banks in Turkey (Saving Deposits)
2005 2006 2007 2008 2009 2010 2011 2012 20130 TL
50,000 TL
100,000 TL
150,000 TL
200,000 TL
250,000 TL
300,000 TL
0 TL
5,000 TL
10,000 TL
15,000 TL
20,000 TL
25,000 TL
30,000 TL
35,000 TL
40,000 TL
Sector Participation Banks
16.4 Billion USD (%12)
133 Billion USD
CAGR +31.20%
CAGR +35.73%
BDDK, 2014
Participation Banks in Turkey (SME Loans)
6.14%
93.86%
Non-Gold Deposits
Islamic Banks Conventional Banks
21.72%
78.28%
Gold Deposits
BDDK, 2014
Participation Banks in Turkey (Gold Deposits)
200K Gold Customers
Conventional Banks Participation Banks
56%
43%13,000 Kg
17,000 KgNew Customer
77,000New Customer
100,000
Participation Banks (Scrap Gold Collection)
2009 2010 2011 2012 20130
5000
10000
15000
20000
25000
30000
35000
40000
45000
0
200
400
600
800
1000
1200
1400
1600
1800
2000
CAGR +21.66%
CAGR +12.36% 1.9K ATMs (4.5%)
42K ATMs
BKM, 2013
Participation Banks (ATM)
2006 2007 2008 2009 2010 2011 2012 20130.0
10.0
20.0
30.0
40.0
50.0
60.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
CAGR +21.66%
CAGR +12.36% 2.4 Units
53 Units
BKM, 2013
Participation Banks (ATM per 1,000 km2)
2009 2010 2011 2012 20130
5000
10000
15000
20000
25000
30000
35000
40000
45000
0
200
400
600
800
1000
1200
1400
1600
1800
2000
CAGR +18.47%
CAGR +12.04%
2.5 units
56 units
BKM, 2013
Participation Banks (ATM per 100,000 People)
2006 2007 2008 2009 2010 2011 2012 20130
50000
100000
150000
200000
250000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
CAGR +11.31%
CAGR +4.10%
17 K (8.5%)
200 K
BKM, 2013
Participation Banks (Staff)
2006 2007 2008 2009 2010 2011 2012 20130
2000
4000
6000
8000
10000
12000
0
200
400
600
800
1000
1200
CAGR +13.24%
CAGR +6.13%966
(8.8%)
11,023
BKM, 2013
Participation Banks (Branch Network)
2006 2007 2008 2009 2010 2011 2012 20130.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
CAGR +11.56%
CAGR +6.22%
1.2 Branch
14 Branch
BKM, 2013
Participation Banks (Branches per 1,000 km2)
2006 2007 2008 2009 2010 2011 2012 20130
2000
4000
6000
8000
10000
12000
14000
16000
0
200
400
600
800
1000
1200
1400
CAGR +12.03%
CAGR +4.90% 1.7 Branches
19.3 Branches
BKM, 2013
Participation Banks (Branches per 100,000 People)
2006 2007 2008 2009 2010 2011 2012 2013 -
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
CAGR +28.70%
CAGR +8.16% 5 Million(5%)
100 Million
BKM, 2013
Participation Banks (Debit Card)
2006 2007 2008 2009 2010 2011 2012 2013 -
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
CAGR +20.55%
CAGR +7.26% 2.5 Million(4.3%)
57 Million
BKM, 2013
Participation Banks (Credit Card)
2006 2007 2008 2009 2010 2011 2012 2013 -
500,000
1,000,000
1,500,000
2,000,000
2,500,000
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
CAGR +14.26%
CAGR +7.54%
132 K (5.7%)
2.3 Million
BKM, 2013
Participation Banks (POS Terminals)
Conclusion
· Without appropriate regulations and ethical approach to financial inclusion, undeserved consumer may become overdebted. Remember subprime mortgage crash in US.
· Financial inclusion is to create an environment for disadvantaged people to access financial services if they need, it is not to force them to become overbanked.
· Participation Banks in Turkey have great potential to embrace a big deal of unbanked people with solid and ethical Islamic Banking arguments
· The most ignored part of financial inclusion tools is microfinance loans in Turkey