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Turkeys islamic finance sector set for makeover study


Oct 30 Turkey's Islamic finance industry is being reshaped as banks widen their product range and new competitors prepare to enter the market, according to a Thomson Reuters study released on Wednesday. Promoting Islamic finance in Turkey, the world's 17th largest economy with a predominantly Muslim population of 76 million, is part of government plans to boost commercial ties with the Gulf and diversify the country's investor base. Turkey's Islamic banks, known locally as participation banks because of political sensitivies in the constitutionally secular country, have seen their assets grow six-fold over the last decade as their combined branch network has more than tripled. Last year Islamic banks reached a combined $36 billion in assets, representing a 5 percent share of total banking assets. This was a 25 percent rise from a year earlier, compared to 13 percent growth for conventional banks. The study estimates Islamic bank assets could reach between $80 billion and $120 billion by 2017; the lower estimate would give them a 9 percent share of total banking assets, on track to meet a government target of 15 percent by 2023. For this to occur, however, the industry will need to do more to educate customers, the study said. A nationwide poll of 2,759 Turks conducted for the study found that 41 percent said better education about Islamic finance was needed. Among existing Islamic bank customers, 39 percent said they had little understanding of industry concepts. Still, 38 percent of conventional bank customers would consider switching to Islamic banks, which follow religious principles such as a ban on interest payments, the study found. Of those interested in Islamic banking, a third would consider switching even if their capital was not guaranteed.

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PRODUCT For Islamic finance to develop, banks and companies would also need to take advantage of new rules that facilitate issuance of various types of Islamic bonds. So far, sukuk issuance has been limited to the government and Islamic banks; the country has yet to see its first corporate issuer. Growth in issuance may depend partly on whether a sukuk structure known as istisna, commonly used in project financing, is added to rules set by Turkey's Capital Markets Board (CMB). The study quoted the CMB as saying it was considering whether to add istisna, but felt Islamic banks were unfamiliar with the structure and expected most would use ijara, a leasing contract.

"If the market really advances and we see project finance deals, then that will be really helpful," the study quoted Is Investments, the investment banking arm of Isbank, as saying. In March, Deputy Prime Minister Ali Babacan said two state-owned banks might offer Islamic services, a move which could increase the sector's market share but also dent profitability because of the additional competition. The country now has 50 banks, four of which are Islamic: Al Baraka Turk, Bank Asya, Turkiye Finans and Kuveyt Turk, 62 percent owned by Kuwait Finance House."We may see a surge in interest in the short term due to the entrance of the two state-owned banks, but then again, some existing participation banks may lose some of their customer base," the study quoted Al Baraka Turk as saying. The state-backed lenders, which have not been officially identified, would have to establish Islamic operations that were separate from the parent banks since Islamic windows are not allowed in Turkey."There are two more banks that are planning to establish separate subsidiaries for Islamic banking," the study quoted the Banking Regulation and Supervision Agency as saying. The agency did not elaborate. In recent years, Turkish regulators have been cautious about allowing new entrants into the banking industry. The sector expanded aggressively during the 1980s and 1990s, peaking at 79 banks by the end of 2000, but a banking crisis eventually led to the closure of 30 of them. ; var median = (relatedItemsTotal / 2); var $relatedContentGroupOne = $('.related-content.group-one ul'); var $relatedContentGroupTwo = $('.related-content.group-two ul'); $.each($relatedItems, function(k,v) { if (k + 1 = median) { $relatedContentGroupOne.append($relatedItems[k]); } else { $relatedContentGroupTwo.append($relatedItems[k]); } }); } else { $('.third-article-divide').append($('div class="related-content group-one"h3 class="related-content-title"Also In Financials/h3ul/ul/div')); $('.related-content ul').append($relatedItems); } },500); } Next In Financials UPDATE 2-Britain's top EU diplomat quits with blistering attack over Brexit LONDON, Jan 4 Britain's top diplomat at the EU quit his post with a blistering attack on the government, giving voice to what several sources say is wider frustration among officials over Prime Minister Theresa May's Brexit strategy. Greece's NBG likely to sell its insurance unit this year -CEO SOFIA, Jan 4 National Bank of Greece (NBG) expects to sell its subsidiary National Insurance this year and plans other sales as part of its restructuring, its chief executive said on Wednesday. BRIEF-Ford Motor Credit files for notes offering * Ford Motor Credit Co LLC - files for notes offering; size not disclosed - SEC filing MORE FROM REUTERS window._taboola = window._taboola || []; _taboola.push({ mode: 'organic-thumbnails-a', container: 'taboola-recirc', placement: 'Below Article Thumbnails - Organic', target_type: 'mix' }); Sponsored Content @media(max-this site) { #mod-bizdev-dianomi{ height: 320px; } } From Around the Web Promoted by Taboola window._taboola = window._taboola || []; _taboola.push( { mode: 'thumbnails-3X2', container: 'taboola-below-article-thumbnails', placement: 'Below Article Thumbnails', target_type: 'mix' } ); window._taboola = window._taboola || []; _taboola.push

Your money me and my money jack bogle


NEW YORK, Sept 11 For a guy who helped create the modern investment-management industry as the founder of Vanguard Group, John "Jack" Bogle has an interesting relationship with money: He hates to use it. Bogle doesn't care for the fancy things people often buy, and he sure doesn't like how it has corrupted the financial system. He thinks that everyone should save for the future, of course, but he can't stand to spend on himself. He is happiest when he is at the family getaway in the Adirondacks with his wife, six kids and 12 grandchildren. Or at the office, where he still works at the age of 83. Bogle's famously hard-working and thrifty outlook is present in his new book "The Clash of the Cultures: Investment vs. Speculation," a scathing indictment of an economy that serves to enrich Wall Street types at the expense of Main Street shareholders. Bogle's own net worth is somewhere in the low eight figures, he estimates. So what exactly does he do with it - and what advice does he have for the rest of us? We sat down with him to find out. Q: Can we assume you're all in Vanguard funds? A: One hundred percent. My personal, non-retirement accounts are about 80 percent bonds and 20 percent stocks, reflecting my old rule of thumb that your bond allocation should roughly equal your age. It's spread across different bond funds, like the Vanguard Intermediate-Term Tax-Exempt (VWITX). I'm a pretty conservative guy. My retirement accounts are more like a 50-50 split between stocks and bonds, because of a longer time horizon and because yields on bonds are extremely unattractive right now. The equity side is mostly in Total Stock Market Index (VTSMX), but I still have a little bit in the Wellington Fund (VWELX), which I've been investing in for many decades. I don't ever want to sever that relationship. Bonds in my retirement accounts are about 30 percent Treasuries and 70 percent investment-grade corporates, like the Vanguard Intermediate-Term Corporate Bond Index (VICBX). Q: How about investments in other areas of your life, like real estate? A: My wife and I downsized our home in Bryn Mawr, Pennsylvania, as we got older. About five years ago we moved into a place that's about a third smaller and with much less property. I didn't take out a mortgage for it because at this point I don't have to borrow money, and I don't like to. We also have what I call our "big old Adirondack barn," which is a place that's been in my wife's family for more than 50 years. It's for ourselves and our six children and our 12 grandchildren; it's a nice refuge for them. Q: Do you set a little aside for those grandkids in 529 college-savings plans? (Vanguard has about $40 billion in assets in 27 state 529 plans.) A: I don't really like the idea of tying up your money in 529 plans, because of all the restrictions on withdrawals. I'm not against them, I just like having more flexibility than being required to use those funds specifically for educational purposes. We do save a little money for all my grandkids every year, but we just chose the Vanguard Balanced Index Fund (VBINX). It's about 60 percent stocks, 40 percent bonds, and it's been wonderful. We give them what we can within annual gift-tax limitations, and put it all into that very tax-efficient fund. Q: Have you had any medical expenses in recent years, resulting from your health scares? A: Thankfully, we have terrific health coverage here at Vanguard, and I've definitely used it in my 83 years. Because of my heart transplant 16 years ago and use of anti-rejection drugs, they estimated about a 50 percent fatality rate. I've been lucky enough to be in the good half. Anyone who's been given an extra 16 years of life, there's no point in going around bitching about anything. Q: Where do you like to give back? A: I tend to give to those who have helped me along the road of life: Blair Academy, Princeton University, our church, and several hospitals that got me here in one piece. On the community side, I've always been a big supporter of the United Way. The best rule for philanthropy is to give until it hurts, as much as you can, because none of us can get through life all by ourselves. As John Dunne wrote, 'No man is an island, entire of itself.' Q: Do you have any extravagances? A: Every winter my wife and I take a week off and go to a resort in Florida. But I really can't stand spending money on myself. I don't like going into stores, I don't like the whole process of buying things. I have everything I could possibly need. I grew up in a certain way. My father's money vanished in the Great Depression, and he had trouble keeping a job. So they were tough times, and I started working when I was 10 years old, delivering papers and eventually becoming a waiter. I learned you work for what you get, and I feel sorry for people who haven't had that upbringing. Q: Any advice for people about where they should invest going forward? A: Stock returns basically come down to dividend yield plus earnings growth. If you have a dividend yield of 2 percent, plus earnings growth of 5 percent, I think a 7 percent annual gain is a rational expectation for stocks. I think it's unwise to get out of the stock market, or the bond market, even though the economy is uncertain. The market is often stupid, but you can't focus on that. Focus on the underlying value of dividends and earnings. Invest as efficiently as you can, using low-cost funds that can be bought and held for a lifetime. Don't go chasing past performance, but buy broad stock index and bond index funds, with your bond percentage roughly equaling your age. Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.