Turkish state-owned bank Ziraat Katılım seeks Islamic approval

Ziraat Katılım, a Turkish state-owned participation bank, obtained a ratification document from a religious advisory board saying its financial products were in accordance with Islamic principles, daily Evrensel reported on Thursday.

The document, also shared on the bank’s website, says the newly established deposit protection scheme complies with Islamic finance.

In the new scheme announced by Turkish President Recep Tayyip Erdoğan, banks are to offer a minimum interest rate equal to the central bank’s benchmark rate of 14 percent for Turkish lira deposit accounts. In case of a lira decline against the dollar, the government has pledged to pay the difference.

Ziraat Katılım, based on Islamic principles of avoiding interest, is offering exchange rate protected lira participation accounts and will offer a profit sharing ratio of 90 percent to 10 percent.

The new type of account “has been assessed within the framework of the Maslahat principle, keeping in mind public good due to extraordinary conditions, and found to be in compliance with Islamic Finance Principles and Merits”, Islamic scholars on the advisory board said in the document.

Maslahat, translated as Expedience, is an Islamic term that is defined as acting for the sake of the material and spiritual benefit of society and the individual.

“Of course Allah Teala (Exalted) knows the most correct way,” the document concludes.

One of the signatories, Süleyman Kaya, told reporters that the document would be revised.

“The final version will have more detailed explanations,” Kaya said.

On Sunday, Turkey’s top religious body Religious Affairs Directorate (Diyanet) issued a fatwa, an interpretation of Islamic law, saying the new scheme was also based on interest, and as such was not permissible.

“The fatwa on term deposit accounts pertains to the matter,” Yeni Asya newspaper cited Diyanet as saying. Diyanet added:

“The same religious rules apply. There is interest in term deposit accounts as well as exchange rate protected deposit accounts. In the end, the bank obtains surplus, i.e., interest is accrued. For this reason, such accounts are problematic and haram.”

On the same day, pro-government Yeni Şafak columnist Hayrettin Karaman wrote that the money made via the new scheme did not come from interest.

“Some scholars believe the state pay-out constitutes interest. I am not of this opinion. I say, the state pay-out is a donation.”

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