A Memorandum of Understanding (MoU) has been signed between the Participation Banks Association of Turkey (TKBB) and Islamic Development Bank (IDB) on 25 May, 2017 under the auspices of Mr. Nurettin Canikli, the former Deputy Prime Minister, and Mr. Bandar M. H. Hajjar, the General Director of IDB. The former Chairman of the Board of Directors of TKBB, Mr. Melikşah Utku, and the Regional Director of IDB Group Regional Hub in Turkey, Mr. Saleh Jelassi, have signed the MoU and extended best wishes for the important step taken in this 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:
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, working towards establishing Turkey as a centre of excellence for Islamic capital market products including specialized securitized assets.
Developing, financing and marketing joint innovative financing structures to local and foreign investors, as well as developing strategic infrastructure projects under one roof.
Increasing the role of participation banks in the financing of strategic infrastructure projects in Turkey and creating greater visibility for themselves and for the Islamic finance sector in the country.
Promoting innovative Sukuk structures in order to mobilize funds from international and domestic capital markets for projects in Turkey.
In consultation with IDB, working with relevant Turkish regulatory and supervisory authorities 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.
Supporting 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.
Converting the Sukuk used in projects into securitized assets that can then be offered to a wider audience, domestic and foreign, individual and interbank investors to obtain funds from the branches of participation banks and mutual funds in Borsa Istanbul.
Designing and structuring innovative Islamic capital markets products, focusing on the following critical areas:
Concept of wakala, ownership and beneficial ownership of underlying assets under Sukuk structure.
Stamp duty and taxation on assets.
Withholding taxes on foreign earnings on investment.
Rules governing Sukuk investment as portfolio assets by pension funds and insurance companies.
(e) Governing law and enforcement issues.
Listing requirements of Borsa Istanbul.
Standby liquidity arrangements.
Dialogue with Rating Agencies.
Developing opportunities to exchange information, expertise and technical know-how, as well as providing Islamic finance consultancy or advisory services to third parties in order to contribute to the improvement of non-interest finance in Turkey and the broader region.