Islamic Banking in Turkey Set for Medium-term Growth as Challenges Remain: Fitch Ratings

The Islamic banking industry in Turkey is expected to grow in the medium-term driven by its strategic relevance to the government, above-sector-average growth backed by the admission of three state-owned banks, and Turkey's favourable demographics. While a difficult operating environment coupled with low public awareness, restricted segment distribution channels, and a lack of product standardisation would limit expansion, according to Fitch Ratings.

Why it Matters?

Islamic banks account for 7.8%, 6.9%, and 10.5% of Turkey's banking industry’s assets, loans, and deposits, respectively, as of the end of 2021 (end-2021). The industry's low base and growth within state banks, whose market shares increased compared to participation banks, explain its consist...