Islamic Banking Industry of Turkey: Challenges and Opportunities

Abstract

Islamic banks have a crucial role in developing any country's economy. In a country like Turkey with the majority of people are Muslim, Islamic banks could have a vital role in developing a country’s financial system. The Islamic banking industry in Turkey faces several challenges which affect Islamic banks negatively. Firstly, the lack of a proper Islamic banking legal framework which includes the lack of a special Islamic banking Act. This issue is considered a main legal challenge for Islamic banks in the country. Thus, enacting Islamic banking law and amending current financial laws is the main key to developing the Islamic banking sector in the country.  Secondly, the lack of qualified Islamic banking experts both staff and managers is another main challenge for Islamic banks in Turkey. Therefore, Islamic banks with the cooperation of the Central Bank of Turkey should have a special plan and program for educating Islamic banking staff. Thirdly, the Lack of public awareness is another challenge that faces Islamic banks in Turkey. The public of Turkey does not have sufficient information about Islamic banking principles. As a result, most of the people of Turkey invest in conventional banks rather than Islamic banks. Therefore, Islamic banks must provide information about Islamic banking products and use various methods to reach the public. In addition, the Central Bank of Turkey should have an important role in resolving issues of Islamic banks in Turkey.

Purpose of This Paper

This paper proposes to examine the Islamic banking industry in Turkey according to the modern Islamic banking system. In addition, the challenges facing Islamic banks in Turkey are examined to find solutions for these challenges.

Research Method

This research applies a qualitative descriptive method and analyzes legal cases related to Islamic banks in Turkey. The researcher describes the challenges of the Islamic banking industry in Turkey and then analyses the result of this paper. The data collection for this research is from primary and secondary sources. Hence, Acts, books, journals, conference papers, and online sites are the main sources for data collection for this study.

Findings

The research found that the Islamic banking industry of Turkey has various issues. These issues impact negatively Islamic banks in the country as a result, slow down the development of the Islamic banking industry. Lack of proper legal framework, shortage of manpower and experts in the industry, and lack of awareness are the main challenges facing Islamic banks in Turkey. Therefore, this paper found proper solutions for these issues which assist the Islamic banking industry in this country.

Keywords: The Islamic banking industry in Turkey, Islamic banking Law, Legal issues, Human capital issues, and Public awareness.

DOI: 10.7176/JLPG/147-02

Publication date: March 28^th 2025