PARTICIPATION BANKS
A Success Story of Financial Inclusion in Turkey
Mustafa Dereci
Group Manager Kuveyt Turk Participation Bank
March 2014 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?
Users of formal No Need financial services Voluntary self-exclusion Cultural / religious reasons not to use / indirect access
Population Insufficient income / high risk
Discrimination
Non-users of formal financial services Contractual / informational framework
Involuntary Price / product features exclusion Islamic Banking in the World
Islamic Takaful Funds 4.1% 1.0% Sukuk 14.5%
Islamic Banking 80.4% (1.45 Trillion USD) Size of Global Islamic Finance = 1.8 Trillion USD
Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013 Islamic Banking Assets in the World
1600 1.45 Trillion USD (2%) 1400
Billion USD Billion 1200
1000 CAGR = 21.53% 800
600
400
200
0
2007 2008 2009 2010 2011 2012 2013F
Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013 History of Islamic Banking in Turkey
SFH under Banking Turkiye Finans Kuveyt Turk Law acquired by National established Commerce Bank
Anadolu Finans and Government Decree İhlas Finance Family Finans for SFH established merged as Türkiye Finans
1983 1985 1989 1991 1995 1996 1999 2001 2005 2006 2008 2010 2014
Albaraka Turk and Asya Finans has TKBB established First Sukuk Faisal Finans established established
Faisal Finans Four participation becomes Family bank are in service Anadolu Finans Finans established - AlBaraka Türk - Bank Asya Ihlas Finans left the - Kuveyt Türk market - Turkiye Finans Participation Banks in Turkey (Assets)
2.000 120
1.800
Billion TL Billion 100 TL Billion 1.600 813 Billion USD 1.400 45 Billion USD 80 1.200 (5.5%, 2023 vision: 15%) 1.000 60
800 CAGR +19.85% 40 600
400 CAGR +32.78% 20 200
0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 BDDK, 2014 Participation Banks in Turkey (Deposits)
1.000 70
900 60 Billion Billion TL 444 Billion USD 800
700 28 Billion USD (6.3%) 50
600 40
500 30 400 CAGR +18.01% 300 20 200 CAGR +28.27% 10 100 - - 2005 2006 2007 2008 2009 2010 2011 2012 2013 BDDK, 2014 Participation Banks in Turkey (Loans)
1.200 70
Billions Billions 60 1.000 490 Billion USD 29 Billion USD (6%) 50 800
40
600
30
400 20 CAGR +28.03% CAGR +29.16% 200 10
0 0
BDDK, 2014 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Participation Banks in Turkey (Saving Deposits)
600 45
40 Billions
Billions 245 Billion USD 500 35 19 Billion USD (7.8%) 400 30
25 300 CAGR +12.89% 20
200 15
CAGR +20.92% 10 100 5
0 0 2007 2008 2009 2010 2011 2012 2013
BDDK, 2014 Participation Banks in Turkey (SME Loans)
Sector Participation Banks
300 TL 40 TL
Binler 133 Billion USD 35 TL Binler 250 TL 30 TL 16.4 Billion USD (%12) 200 TL 25 TL
150 TL 20 TL
15 TL 100 TL
CAGR +31.20% 10 TL 50 TL 5 TL CAGR +35.73%
0 TL 0 TL
BDDK, 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 Participation Banks in Turkey (Gold Deposits)
Non-Gold Deposits Gold Deposits
200K Gold Customers
6,14% 21,72%
93,86% 78,28%
Islamic Banks Conventional Banks
BDDK, 2014 Participation Banks (Scrap Gold Collection)
Conventional Banks Participation Banks
43%
13,000 Kg 56% New Customer 77,000 17,000 Kg New Customer 100,000 Participation Banks (ATM)
45000 2000 42K ATMs 40000 1800
35000 1600 1400 30000 CAGR +12.36% 1.9K ATMs 1200 25000 (4.5%) 1000 20000 800 CAGR +21.66% 15000 600
10000 400
5000 200
0 0 2009 2010 2011 2012 2013
BKM, 2013 Participation Banks (ATM per 1,000 km2)
60,0 3,0 53 Units 50,0 2,5
40,0 2,0
30,0 1,5 CAGR +12.36% 2.4 Units 20,0 1,0 CAGR +21.66%
10,0 0,5
0,0 0,0 2006 2007 2008 2009 2010 2011 2012 2013 BKM, 2013 Participation Banks (ATM per 100,000 People)
45 2
Binler 56 units Binler 40 1,8
1,6 35 2.5 units 1,4 30 CAGR +12.04% 1,2 25 1 20 CAGR +18.47% 0,8 15 0,6
10 0,4
5 0,2
0 0
BKM, 2013 2009 2010 2011 2012 2013 Participation Banks (Staff)
250 18
Binler 17 K (8.5%) 16 Binler
200 14
CAGR +4.10% 200 K 12 150 10
CAGR +11.31% 8 100
6
4 50 2
0 0
BKM, 2013 2006 2007 2008 2009 2010 2011 2012 2013 Participation Banks (Branch Network)
12000 1200
11,023 10000 1000 CAGR +6.13%
8000 966 800 (8.8%)
6000 600 CAGR +13.24%
4000 400
2000 200
0 0
BKM, 2013 2006 2007 2008 2009 2010 2011 2012 2013 Participation Banks (Branches per 1,000 km2)
16,0 1,4 14 Branch 14,0 1,2
12,0 1,0 CAGR +6.22% 10,0 1.2 Branch 0,8 8,0 0,6 6,0
CAGR +11.56% 0,4 4,0
2,0 0,2
0,0 0,0 2006 2007 2008 2009 2010 2011 2012 2013 BKM, 2013
Participation Banks (Branches per 100,000 People)
16000 1400 19.3 Branches 14000 1200
12000 CAGR +4.90% 1000 1.7 Branches 10000 800 CAGR +12.03% 8000 600 6000
400 4000
2000 200
0 0
2006 2007 2008 2009 2010 2011 2012 2013 BKM, 2013
Participation Banks (Debit Card)
120 6
Milyonlar 100 5 Milyonlar 100 Million 80 4
CAGR +8.16% 5 Million 60 3 (5%)
40 2 CAGR +28.70% 20 1
- - 2006 2007 2008 2009 2010 2011 2012 2013 BKM, 2013 Participation Banks (Credit Card)
60 3
57 Million
Milyonlar 50 3 Milyonlar
2.5 Million 40 CAGR +7.26% 2 (4.3%)
30 2
CAGR +20.55% 20 1
10 1
- - 2006 2007 2008 2009 2010 2011 2012 2013 BKM, 2013 Participation Banks (POS Terminals)
132 K (5.7%) 2.500 140
Binler 120 Binler 2.000
CAGR +7.54% 2.3 Million 100 1.500 80
60 1.000 CAGR +14.26% 40
500 20 - - 2006 2007 2008 2009 2010 2011 2012 2013
BKM, 2013 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 Thank You