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Mustafa Dereci Group Manager Kuveyt Turk Participation Bank March 2014

PARTICIPATION BANKS A Success Story of Financial Inclusion i n 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

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Mustafa Dereci Group Manager Kuveyt Turk Participation Bank March 2014

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  1. PARTICIPATION BANKS A SuccessStory of Financial Inclusion in Turkey Mustafa Dereci Group Manager Kuveyt TurkParticipation Bank March 2014

  2. AGENDA • Financial Inclusion: Definition andFacts • Islamic Banking in the World: FactsandFigures • Participation Banking in Turkey: FactsandFigures • Conclusion

  3. Financial Inclusion: Definition • The delivery of financial services andproductsat affordable costs to sections of disadvantaged and low-income segments of society, • Theantonym of financialinclusion isfinancial exclusion where those services are not available or affordable.

  4. Financial Inclusion: Facts • Half of the World is unbanked • Proportion of theMuslimpopulationusingfinancialservices is lessthantheirnon-Muslimcounterparts • Financial exclusion rate is currently 47% in Turkey. • Microfinaceloansbusiness is almostuntapped in Turkey. Thevolume of microfinanceloans is around USD 5 Millionperannum.

  5. Financial Inclusion: Why? • There is a strongpositivecorrelationbetweenfinancialinclusionand GDP percapita • It is a strongtooltoalleviatepoverty • It is an importantparameterforeconomicdevelopmentandgrowth of a country • Itcurtailsunregisteredeconomy

  6. Financial Exclusion: Why? No Need Users of formal financial services Voluntary self-exclusion Cultural / religiousreasons not touse / indirectaccess Population Insufficientincome / high risk Discrimination Non-users of formalfinancialservices Contractual / informationalframework Involuntary exclusion Price / productfeatures

  7. Islamic Banking in the World Size of Global Islamic Finance = 1.8Trillion USD Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013

  8. IslamicBanking Assets in the World 1.45 TrillionUSD (2%) Kuwait Finance House, IFN Turkey Roadshow Borsa Istanbul Stock Exchange Report, 2013

  9. History of Islamic Banking in Turkey • SFH under BankingLaw • TurkiyeFinans acquiredbyNational Commerce Bank • Kuveyt Turkestablished • Anadolu Finans andFamily Finans mergedas Türkiye Finans GovernmentDecreefor SFH • İhlas Finance established • Albaraka Turkand Faisal Finans established • Asya Finans has established • TKBB established • First Sukuk • Faisal Finans becomesFamily Finans • Fourparticipation bank are in service • - AlBaraka Türk • - Bank Asya • - Kuveyt Türk • - TurkiyeFinans Anadolu Finans established • Ihlas Finans leftthe market

  10. ParticipationBanks in Turkey (Assets) 813 BillionUSD 45 BillionUSD (5.5%, 2023 vision: 15%) CAGR +19.85% CAGR +32.78% BDDK, 2014

  11. ParticipationBanks in Turkey (Deposits) 444 BillionUSD 28 BillionUSD (6.3%) CAGR +18.01% CAGR +28.27% BDDK, 2014

  12. ParticipationBanks in Turkey (Loans) 490 BillionUSD 29 BillionUSD (6%) CAGR +28.03% CAGR +29.16% BDDK, 2014

  13. ParticipationBanks in Turkey (SavingDeposits) 245 Billion USD 19 Billion USD (7.8%) CAGR +12.89% CAGR +20.92% BDDK, 2014

  14. ParticipationBanks in Turkey (SME Loans) 133 Billion USD 16.4 Billion USD (%12) CAGR +31.20% CAGR +35.73% BDDK, 2014

  15. ParticipationBanks in Turkey (Gold Deposits) 200K Gold Customers BDDK, 2014

  16. ParticipationBanks (Scrap Gold Collection) 43% 56% 13,000 Kg New Customer 77,000 17,000 Kg New Customer 100,000

  17. ParticipationBanks (ATM) 42K ATMs 1.9K ATMs (4.5%) CAGR +12.36% CAGR +21.66% BKM, 2013

  18. ParticipationBanks (ATM per 1,000 km2) 53 Units 2.4 Units CAGR +12.36% CAGR +21.66% BKM, 2013

  19. ParticipationBanks (ATM per 100,000 People) 56 units 2.5 units CAGR +12.04% CAGR +18.47% BKM, 2013

  20. ParticipationBanks (Staff) 17 K (8.5%) 200 K CAGR +4.10% CAGR +11.31% BKM, 2013

  21. ParticipationBanks (Branch Network) 11,023 CAGR +6.13% 966 (8.8%) CAGR +13.24% BKM, 2013

  22. ParticipationBanks (Branchesper1,000 km2) 14 Branch CAGR +6.22% 1.2 Branch CAGR +11.56% BKM, 2013

  23. ParticipationBanks (Branchesper 100,000 People) 19.3 Branches CAGR +4.90% 1.7 Branches CAGR +12.03% BKM, 2013

  24. ParticipationBanks (DebitCard) 100 Million 5 Million (5%) CAGR +8.16% CAGR +28.70% BKM, 2013

  25. ParticipationBanks (CreditCard) 57 Million 2.5 Million (4.3%) CAGR +7.26% CAGR +20.55% BKM, 2013

  26. ParticipationBanks (POS Terminals) 132 K (5.7%) 2.3 Million CAGR +7.54% CAGR +14.26% BKM, 2013

  27. Conclusion • Withoutappropriateregulationsandethicalapproachtofinancialinclusion, undeservedconsumermaybecomeoverdebted. Remembersubprimemortgagecrash in US. • Financial inclusion is tocreate an environmentfordisadvantagedpeopletoaccessfinancialservicesiftheyneed, it is not toforcethemtobecomeoverbanked. • ParticipationBanks in Turkeyhavegreatpotentialtoembrace a bigdeal of unbankedpeoplewithsolidandethicalIslamicBankingarguments • Themostignoredpart of financialinclusiontools is microfinanceloans in Turkey

  28. ThankYou

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