Islamic Banking Struggles to Find Market; Interest-Free Bonds Taking Root among Muslims beyond Istanbul

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Byline: Nicholas Birch, THE WASHINGTON TIMES

ISTANBUL - Turkey is missing out on an opportunity to profit from Arab oil wealth as tensions between its secular government and religious authorities prevent it from issuing interest-free Islamic bonds that have become popular throughout the Muslim world.

Government ministers had promised to push legislation through parliament during this legislative year. But with lawmakers now on vacation until September, the future of the measure is not clear.

Islamic bonds would have offered investors a cut of the cash flow of projects financed by the bonds, thereby avoiding the interest payments on conventional bonds that are in breach of Islamic practice.

Banking analyst Saduman Okumus blamed the delay on the nature of Islamic finance in this staunchly secular Muslim country. "Those who say money has no color don't know Turkey," she said.

For a country that set its heart on Western modernity 150 years ago, trade here is heavily weighted westward, with about 70 percent of exports going to European Union countries.

Just as Turkey's founders saw the Middle East as a morass of religious ignorance, so some Turks today tend to see investment from their Muslim neighbors as a potential Islamic threat to their secular system.

This issue of so-called "green capital" surfaced again last week with secular opposition politicians renewing calls for the firing of a businessman and close aide of the Turkish prime minister.

In the 1990s, Cuneyt Zapsu was in partnership with a Saudi millionaire who Washington now thinks had financial links to al Qaeda.

Opponents of the government also have called on the state banking watchdog to seize accounts of the Turkish interest-free bank Zapsu, which reportedly have been used to transfer money.

It is hardly an atmosphere conducive to Islamic banking, which remains marginal in Turkey two decades after its introduction. …