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Building the Turkish sukuk market: One step at a time

Turkey ambitiously aims to win a bigger slice of the global sukuk market, steadily building its own book of sovereign, corporate and financial institutions issuances.

Turkey, with its unique geostrategic position as the bridge between Europe, the Middle East and Asia, is ideally placed to become one of the most prominent players in the global sukuk market. Having recently implemented significant regulatory and infrastructural reforms in the banking sector, Turkey's government aims to triple the share of participation banks—banks that operate in accordance with Islamic law—in the country by 2025.

In its medium-term program for the years 2016 - 2018, the Turkish government announced its intentions to continue to strengthen the corporate and legal infrastructure for interest-free finance and to foster a more diversified range for interest-free financial products. In this context, a comprehensive tax reform was introduced in August 2016, significantly eliminating the tax-related roadblocks and uncertainties on sukuk issuances and transactions.

Fostered by sovereign issuances and the government's drive, issuers and investors in Turkey are displaying significant appetite for sukuk, as Islamic finance continues to gain additional footholds both within and outside of the Islamic world. In 2014, the UK government became the first non-Muslim sovereign to issue sukuk, followed by the governments in Hong Kong, South Africa and Luxembourg, tapping into the fast-growing global sukuk market.

It is clear that sukuk will be taking on an ever-greater role as a financial instrument of economic development, and Turkey is set to be one of the key players that will shape the future of the sukuk market globally.


Please follow the links below to read articles in our report, or read the full report here.



Sukuk: The cornerstone of Islamic finance

Sukuk have emerged as one of the most significant financing tools in Islamic finance.  These securities form a bridge between issuers—primarily sovereigns and corporations—and investors located in the Middle East and Southeast Asia.

Common sukuk structures compared

There is no one-size-fits-all sukuk structure. Although some structures are used more frequently than others, different structures serve different commercial purposes and are suited to different circumstances.

Sukuk vs. bonds

Sukuk typically represent an undivided beneficial ownership interest in certain tangible assets (save for certain receivables, such as zhimam or duyun), the usufruct of an asset or certain projects or investment activities.

The sukuk experience in Turkey

Turkey's government is determined to make Istanbul a financial hub for Islamic finance, regionally and globally. With a GDP of US$733.6 billion in 2015 according to the IMF, Turkey is the 18th largest economy in the world, and is well placed to become one of the major players in the global sukuk market.

The road ahead

Bolstered by its recent tax and legal reforms, Turkey is expected to reinforce its role as one of the prominent global sukuk players. Supported and incentivized by such reforms, pioneers in the Turkish corporate sukuk market will benefit from the "first-mover advantage" but will also face a number of challenges unique to "first movers".


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© 2016 White & Case LLP