A Memorandum of Understanding founded has been signed between The Participation Banks Association of Turkey (TKBB) and Islamic Development Bank (IDB) on 25th May, 2017 under the auspices of Mr. Nurettin CANİKLİ the Deputy Prime Minister and Mr. Bandar M. H. HAJJAR the General Director of IDB. The Chairman of the Board of Directors of TKBB Mr. Melikşah UTKU and the Regional Director, IDB Group Regional Hub in Turkey Mr. Saleh JELASSI, have signed the mou and extend best wishes in this kind of productive collaboration.
This MoU is a statement of intent setting out the framework agreed between IDB and TKBB and all its member Participation Banks regarding the cooperation in the areas listed below:
(i) In consultation with relevant Turkish regulatory and supervisory authorities, such as the Turkish Treasury, Capital Markets Board, Banking Regulation and Supervision Agency and Borsa Istanbul, work towards establishing Turkey as a center of excellence for Islamic capital market products including specialized securitized assets.
(ii) Develop and promote common innovative financing structures, finance, and market to the local and foreign investors, and will also develop strategic infrastructure projects under one Islamic umbrella.
(iii) Scale up participation of Islamic banks in the financing of strategic infrastructure projects in Turkey and create greater visibility for themselves and for Islamic Finance in the country.
(iv) Promote innovative Sukuk structures in order to mobilize funds from international and domestic capital markets for projects in Turkey.
(v) In consultation with IDB, with relevant Turkish regulatory and supervisory authorities work to ensure that the jointly developed structures are well designed, duly rated by a rating agency and the underlying instruments have reasonable liquidity in the market place.
(vi) Support resource mobilization for infrastructure projects in Turkey by partnering with and attracting international financial institutions to participate in the financing of infrastructure projects in Turkey, both as co-financiers as well as through IDB’s A/B financing structure.
(vii) Convert the Sukuks issued for projects into securitized assets that can then be offered to a wider investor pool, as secondary securitization, deposit mobilization through the branch network of Participation Banks and Borsa Istanbul to mutual funds, individual investors and private banking market, in both domestic and international markets.
(viii) Design and structure innovative Islamic capital markets products, will focus on the following critical areas:
(a) Concept of wakala, ownership and beneficial ownership of underlying assets under Sukuk structure.
(b) Stamp duty and taxation on assets.
(c) Withholding taxes on foreign earnings on investment.
(d) Rules governing Sukuk investment as portfolio assets by pension funds and insurance companies.
(e) Governing law and enforcement issues.
(f) Listing requirements of Borsa Istanbul.
(g) Standby liquidity arrangements.
(h) Dialogue with Rating Agencies.
(ix) Develop opportunities to exchange information, expertise and technical know-how, as well as providing consultancy or advisory services, pertaining to Islamic Finance, to third parties in order to contribute to the improvement of non-interest finance in Turkey and the broader region.